Destination Club News Recap: September 2010

By: Destination Club News
Date: October 1, 2010

September started out with a storm, both literally and figuratively, for the destination club industry. Hurricane Earl was bearing down on the East Coast, causing evacuations throughout the region, disrupting many members' travel plans. Fortunately, Earl caused less damage than predicted, but the crisis at Ultimate Escapes, the world's second largest club, surpassed nearly everyone's expectations.

Ultimate Escapes had failed to make interest payments to lender CapitalSource in June, July, and August, and quickly were unable to make their September payment. With few options available, Ultimate Escapes CEO and President Jim Tousignant reached out to members. "We are in crisis," Tousignant began. In a roughly 40 minute presentation, Tousignant outlined an option that he felt made "a lot of sense" for saving the struggling Ultimate Escapes.

Under the club's "Equity Conversion Option," members would pay a one-time "Equity Club Conversion Fee" of between $15,000 and $50,000 per member, giving Ultimate Escapes between $15 million and $30 million. Members immediately voiced their dislike for such a plan. To begin, much of the new capital would go towards repaying the missed interest payments incurred over the previous months with little going towards the large debt obligation still owed to CapitalSource. Secondly, the conversion rates seemed beyond perplexing. Members would be able to convert their membership into stock ownership at $3.87 per share. At the time, the stock was only trading at $0.60 per share and has since decreased to as little as $0.10. Lastly, several members contacted us saying that they would not move forward with any plan that included the retention of the current Ultimate Escapes executive team, showing the continual erosion in membership support. Not surprisingly, roughly two out of every three members voted against this proposal.

With nowhere else to turn, Ultimate Escapes filed for bankruptcy, estimating between $10 million and $50 million in assets and $100 million and $500 million in liabilities. This news would dominate the sector throughout the month and will continue to do so for the foreseeable future.

Below, please find what we believe are the most notable news story from the previous month, including news on Exclusive Resorts, the Abercrombie & Kent Residence Club, The Discovery Club and the new Second Home Destinations.

• Ultimate Escapes Enters Into Forbearance Agreement
• Exclusive Resorts VIP Chicago Cubs Experience Kicks Off
• Details Regarding Ultimate Escapes Appointment of Chief Restructuring Officer Sheon Karol
• CRO Sheon Karol And His Plans For Ultimate Escapes
• Abercrombie & Kent Introduces 2011 Roster of Extreme Adventures
• Ultimate Escapes Seeks To Become Member Owned
• Abercrombie & Kent Residence Club Gives 15 Complimentary Nights To New Members
• A Second Look at Demeure: A Second Interview With Its Founder, Peter Schwartz
• Ultimate Escapes Members Join Together To Form Member Only Group
• Ultimate Escapes Members Vote Down Member Owned Option
• Abercrombie & Kent Residence Club Executive Discusses Availability Impact Of New Promotion
• Ultimate Escapes Files For Bankruptcy
• Exclusive Resorts Makes Trial Offer To Ultimate Escapes Members
• The Phoenix Club Rebrands As Second Home Destinations
• Demeure Founder Peter Schwartz Compares His Model To Destination Clubs
• The Potential Buyers Of Ultimate Escapes
• The Discovery Club Crafts Custom Offer For Ultimate Escapes Members
• Ultimate Escapes Bankruptcy Q&A With Sheon Karol
• Exclusive Resorts CEO Jeff Potter Comments On Market Developments
• Jim Tousignant Out At Ultimate Escapes
• Holly Felder Etlin Comments On Her Philosophies For Restructuring A Destination Club
• Ultimate Escapes CRO Sheon Karol Updates Members On Tousignant Departure

October will likely also be a month dominated by Ultimate Escapes related news, as other clubs will assuredly craft offers for their 1,200 members and more details will continue to be revealed as they continue through the bankruptcy process. Check back frequently for more information.