The Discovery Club Discusses Their No Ownership Model

By: Destination Club News
Date: October 4, 2010

Last week, we spoke to The Discovery Club about a custom offer they had created for members of the now bankrupt Ultimate Escapes. For $3,500, members can join via a trial membership offer that will give them one week of travel to any of the club's 2,700 affiliates.

Unlike other destination clubs, The Discovery Club is structured so that none of their properties are owned by the club. Rather, the club partners with resorts, hotels, and other luxury travel providers to give members access to a global collection of options. We spoke with Tyrone Lingley, the club's Director of Sales, about this design.

Destination Club News (DCN): How does The Discovery Club compare to the a non-equity destination club?

Tyrone Lingley (TL): "We are a luxury travel club not a real estate investment. The majority of traditional destination clubs aspire to own real estate, while we seek to own exclusive access agreements with our affiliate properties."

"The problem with owning real estate is that there is a huge cost associated with doing so. Things like maintenance, taxation, paying wages, and servicing debt. These are heavy pressures placed on traditional clubs. Unfortunately, when you decide to own this type of asset you are accountable for all of these burdens, and this has spelled huge trouble as we have seen recently for many traditional destination clubs."

"We are not interested in owning assets. The Discovery Club is interested in providing a premium service to our members that allows them to travel exactly how they want to, without any burdens of owning real estate. We remove this risk and focus on what people really want, an exceptional travel experience. What we do own is exclusive access agreements with the world’s finest hotels, resorts, cruises, and tours which ensures that our members are guaranteed the best value for their dollar, while not having to worry about the financial health of real estate assets. Add our personal concierge service and money-back guarantee, and we believe we have a product that is second to none."

DCN: What does the club do with members' deposits and how are annual dues used?

TL: "Unlike many clubs that put all of their eggs in the real estate basket we diversify our members deposits in a variety of industries. This way if one sector hurts the other picks up the slack. Sophisticated investors understand the importance of diversification, yet traditional clubs have ignored this concept and paid the price."

"A third party oversees our member’s money. They ensure that there is always enough cash to buy-back every single membership according to our money-back agreement. This money is audited quarterly to ensure that this requirement is met, and we welcome all of our members to contact this third party should they wish. There is almost zero risk involved with our members money, and they have the option to receive the majority of it back should they ever decide to leave."

"We have seen Canadian banks thrive through this recession while their American counterparts have struggled or gone bankrupt. We have taken a more conservative approach like our banks have done to ensure that all our members have to worry about is which travel destination they would like to go to next."

Next week, we will profile Lingley's thoughts on the future of the destination club industry. The only certainty is that the sector will look radically different no matter how the Ultimate Escapes bankruptcy plays out. Check back soon for more breaking destination club news.