How To Reduce Destination Club Spending

By: Destination Club News
Date: February 2, 2010

Over the past year, a vigilance has been placed on responsible spending and aligning annual revenue with annual costs across the destination club industry. While virtually all of the sector's leading clubs have made demonstrable steps to reduce overhead, running a destination club is a costly venture. The costs of a global collection of vacation properties, including HOA fees, taxes, maintenance, and other associated costs typically make up the largest annual club expenditure. Staffing these properties with local hosts to assist members as they arrive and including a centralized service team to help members arrange their travel details also represent significant figures, not to mention the pay to executives who outline the vision and the future of the club. And in a highly competitive industry, courting an affluent group of individuals adds to each club's sales and marketing costs. To make their club's run more efficiently, how are the leading destination clubs in the industry reducing their costs without compromising the membership experience?

"One of the club's constant priorities is to contain and reduce costs, while maintaining our distinctive service standards," Exclusive Resorts, the world's largest destination club, wrote members late last year. One of these cost reducing measures included "competitive bidding processes" to secure preferential pricing through the renegotiation of many of their service contracts, including housekeeping, landscaping, and other general property maintenance elements. During 2009, Exclusive Resorts closed a limited number of properties during slow travel seasons where historical occupancy data showed little to no impact on member travel. Proving successful in reducing the ongoing costs of these properties, the club is planning on implementing the same philosophy in 2010 in underutilized destinations.

Nearly all of the clubs in the destination club industry significantly reduced their staffing expenses in 2009. Exclusive Resorts has reduced their employee count by 30% over the last two years. Ultimate Escapes, the second largest destination club in operation, reduced their costs by $15 million last year, with pay cuts at the executive level contributing to the reduction. Quintess, The Leading Residences of the World would restructure their operational chart by moving the travel planning services to their local hosts. "At the beginning of (2009), we decided to move travel planning," club President Greg Eure told us earlier this year. "Previously, this was done by a centralized group in Colorado. We decided to move this out to our local hosts, which is something that our members had asked for for a long time. Now as a member when you are traveling to Napa, Aspen, or Tuscany, you have contact with someone who has their feet on the ground. They know the hot restaurants and festivals so we can now provide a better member experience in how members interact with the club on a more cost efficient level."

Quintess would also align their sales and marketing costs with the non-refundable portion of members' deposits, contributing to their selection as our 2009 Destination Club of the Year. Exclusive Resorts reduced their sales and marketing costs by over 50% from 2008 and nearly all of the club's are looking at other more efficient marketing options, including referral initiatives and trial memberships to let travelers explore the destination club experience prior to joining. Equity Estates, one of the fastest growing destination clubs in the world, announced a 20 city tour to help promote their equity based club, marketing the benefits of their club directly to their target audience.

To top it all off, all of the industry's leading destination clubs continually evaluate their position to see how they can run even more efficiently. "We do monthly, hourly, P&Ls," Ken MacLean of M Private Residences told us last year. "We dedicated one guy to focus solely on the best practices and operations of our homes. We’re looking at everything from telemetry and remote operating of our facilities, to the proper temperature to heat the pools."

These programs have all contributed to helping these clubs weather one of the worst economic conditions in recent history. Hopefully, the silver lining to market downturn that has claimed the lives of once successful clubs such as The LUSSO Collection and High Country Club is that the clubs still in operation will maintain this dedication to efficient spending once the economy recovers.