Ultimate Escapes Charges Members Special Assessment

By: Destination Club News
Date: January 16, 2009

During 2008, the Dow dropped over 30%, real estate values plummeted, and unemployment soared. Within the destination club sector, The LUSSO Collection filed for bankruptcy, High Country Club drastically restructured their offering, and numerous new destination clubs have ceased operations prior to even launching. To help weather the current market conditions, Ultimate Escapes has reached out to members for $22 million in the form of a one-time membership assessment.

Citing low consumer confidence and weak credit markets, Ultimate Escapes began to see the affects of the financial market at the beginning of 2008. Reacting to these difficult economic times, the club has reduced its staff costs by 30% through salary reductions and layoffs in recent months but have realized that these cost saving measures would not be adequate to insure the stability of the world’s second largest destination club.

Members will be required to pay four monthly installment payments at the end of January, February, March, and April of this year equal to the amounts they paid in annual dues and nightly fees in 2008.

Other options considered by Ultimate Escapes included the route that Quintess, The Leading Residences of the World implemented with dues increases or an option closer to High Country Club with a reduced property portfolio, services, and amenities. Instead of these more permanent changes, Ultimate Escapes believes this one time assessment is the best option for both members and the club.

Based on the participation by members, the club has set three different thresholds, each with their own subsequent plans.

• Maximum Assessment Proceeds - $22 Million: The amount received by the club if 100% of the members elect to pay the assessment. For any amounts above the Target Assessment Proceeds, Ultimate Escapes will credit paying members the additional proceeds on a pro-rata basis against next years annual dues.
• Target Assessment Proceeds - $16 Million: The conservative estimate outlined by Ultimate Escapes and the amount the club has budgeted for the current year, the Target Assessment Proceeds level effectively will keep the membership benefits fully intact outside the selective liquidation of excess real estate assets during the year.
• Minimum Assessment Proceeds - $11 Million: The base level at which Ultimate Escapes will move forward, any proceeds less than $11 million will require the club to determine if they wish to operate as a smaller club with less properties, destinations, and services. If the club does elect to move forward, paying members will be surveyed to determine if the club would advance. If more than 66.7% approved the reduced format, the club would move in that direction.

No matter what level of support is contributed by members, 100% of the assessment proceeds will be used to pay 2009 operating costs and paying members will receive additional benefits that won’t be available to non-paying members. Depending on their membership plan, members will receive between three and seven nights of additional space available access each year for the next three years.

Ultimate Escapes has set up an assessment specific e-mail account, will update frequently asked questions every 48 hours, and will be hosting a members only conference call next week to provide additional details to members.

The past quarter has been difficult for the destination club sector, with nearly every club responding to the economic climate in one way or another. While the coming months may be difficult for both clubs and members alike, hopefully these changes will help position the industry's leading players in a more sustainable position.