Exclusive Resorts CEO Jeff Potter Comments On Market Developments

By: Destination Club News
Date: September 28, 2010

It is a surprise to no one that the luxury travel industry has been severely affected by the downturn of the economy. Resorts have closed, new developments have ceased construction, and destination clubs have filed for bankruptcy. To ease the minds of their collective members, Exclusive Resorts' Chief Executive Officer Jeff Potter has contacted members to discuss two recent bankruptcies in the luxury travel space: those at Ultimate Escapes and Sea Island Company.

"First, earlier this week Ultimate Escapes filed for Chapter 11 bankruptcy protection," wrote Potter. "For those of you less familiar with Ultimate, they operated three destination clubs (one lower end, one medium tier, and a higher end club more similar to Exclusive Resorts) and were about a third of our size. They grew mostly through mergers with smaller clubs. While unfortunate, this situation should have little to no impact on us. We have created a ten day one-year trial offer for a limited number of Ultimate Escape's former members so they have the opportunity to "test drive" and experience our club firsthand. We structured this limited offer to be consistent with our financial requirements, club availability considerations, and our collective approach to long-term excellence and stability."

Potter is correct that the Ultimate Escapes bankruptcy won't have a direct impact on Exclusive Resorts, but it will likely have an indirect impact on every destination club in the industry. When Tanner & Haley, the world's first destination club, filed for bankruptcy in 2006, nearly every club saw several months of slow sales as prospective members re-evaluated their decision to join, looking for assurances that the clubs they were considering wouldn't suffer a similar fate as Tanner & Haley. Combining the instability of the economic climate with the Ultimate Escapes bankruptcy means that new membership sales across the sector will likely see a similar decline during the upcoming months.

"In August, Sea Island Company also filed for Chapter 11 bankruptcy, and earlier this month the primary lender foreclosed on Maui's Ritz-Carlton Kapalua hotel resort," Potter continued. "We do not expect either of these actions to have any meaningful impact on our residences in either Sea Island or Kapalua Bay, where operations are expected to continue unchanged. It's worth noting that we are not involved with The Ritz-Carlton Kapalua hotel resort, which is a completely different property, with a different owner, than The Ritz-Carlton Residences Kapalua Bay, where our residences are located."

Even with these obstacles, Exclusive Resorts is enjoying a rather successful year. At the beginning of the year, Exclusive Resorts Chairman Steve Case appeared on CNBC to give an outlook for the club during the coming years. "New sales have slowed," Case said when discussing how the club fared in current economic climate. "In the last five years, we have sold about $1 billion in memberships and 2009 was definitely our slowest year. We are seeing a bit of an uptick. December actually was pretty strong and I think some of it is the psychology. A year ago people would say 'The sky is falling. I shouldn't spend my money on anything. Maybe I should put my money in a mattress.' Now they are saying 'Maybe I should be a little more confident about the future, but I don't really want to go buy a home for $3 million and spend hundreds of thousands of dollars using it and only use it a few times a year. This Exclusive Resorts idea is a better idea.' My guess is we will have a decent year in 2010 and probably accelerate from there." The "decent year" mentioned by Case has turned into over 100 new membership sales and roughly 70 upgrades to higher membership plans from existing members.

These bankruptcies may give hesitation to those considering destination clubs, but membership can still present a strong value proposition to you and your family. If you would like to read more about the benefits, and risks, of joining a club, request a free copy of our Destination Club Guide and we will be happy to assist you as you conduct your evaluation.