Exclusive Resorts Reduces Costs and Remains Below Budget

By: Destination Club News
Date: August 23, 2010

Last week, Ultimate Escapes closed their Fort Collins branch in a cost cutting measure that will save the club an estimated $3 million per year. Exclusive Resorts has reduced their costs through less extreme measures over the course of the year and is at or below budget for all major cost categories.

As one can assume, the property costs of running and operating the hundreds of residences available to members account for much of the club's expenses. Representing 60% of their operating expenses, homeowner association fees, rent on leased residences, and housekeeping are the club's three most costly property expenses, followed by member services and support, concierges, fees related to beach clubs, resorts and onsite amenities, property taxes, insurance, and others. Through the club's diligence, operating expenses are approximately 45% below 2007 levels on a "per member basis."

Continuing their work to further reduce costs, Exclusive Resorts is undertaking several other "cost containment initiatives."

In three "test" destinations, Exclusive Resorts is evaluating an energy efficiency program to lower utility costs, particularly when the residences are vacant. So far, the club has seen "meaningful savings" and will continue to monitor these tests and expand their efforts where appropriate.

While Exclusive Resorts has proactively created their own savings, they are also asking for them. In 2010, the club has reduced property insurance costs by 10% and are targeting similar reductions for 2011. In addition, Exclusive Resorts has won several property tax assessment appeals, resulting in property tax refunds.

This year has also seen the reduction of administration and support costs, all without affecting the membership experience. Exclusive Resorts has been able to reduce costs in several departments, including legal, risk management, information technology, member reservation systems, tax, human resources and accounting. The world's largest destination club has also subleased a portion of their square footage in their Denver office space to a third party. The combination of these efforts have led to a near 30% reduction in costs compared to 2007. Even with these savings, the club is planning and is on track for an additional 10% reduction this year.

Responsible spending has been a hot topic for the destination club industry since the economic downturn. With members asking more financially pointed questions about financials and granular details about the inner workings of the model, every club has become more focused on long term sustainability. As the leader in the destination club industry, let's hope that Exclusive Resorts efforts trickle down through the rest of the sector.

If you are considering joining a destination club, you should ask every club you are evaluating a number of questions regarding their economic position as well as the vacation experience that is provided to members. For a list of suggested due diligence questions, request a free copy of our Destination Club Guide.