Ultimate Escapes Releases Frequently Asked Questions To High Country Club Members

By: Destination Club News
Date: November 15, 2008

Yesterday, Ultimate Escapes Destination Club made an offer to members of the struggling High Country Club that would allow them to continue the destination club experience for a substantially discounted cost.

In late October, High Country Club restructured their business model after a difficult year that included a failed destination club merger, an ever-growing inability to secure new capital for the club's ongoing expenses, and decreasing consumer confidence following the financial crisis. High Country Club developed a Success Plan that would allow the club to exist solely on the annual dues of current members rather than selling new destination club memberships.

The restructured business model consisted primarily of increasing and prepaying annual dues by members and greatly decreasing the number of properties available to members. By doing so, the club would no longer be affected by swings in the real estate or financial markets.

Roughly 75 percent of High Country Club's members would need to sign new addendums agreeing to the new terms for the plan to be implemented. During the course of the past two weeks, High Country Club conducted two preliminary votes to gauge interest. Each fell short of the 75 percent threshold leading High Country Club to delay the Success Plan to "evaluate our options and opportunities."

Following these votes, Ultimate Escapes offered High Country Club members discounts of up to $40,000 if they wanted to continue the destination club experience with their club. With both Abercrombie & Kent Residence Club and Distinctive Holiday Homes also courting High Country Club's members, Ultimate Escapes released a Frequently Asked Questions of the offer they are making exclusively to High Country Club's members.

1. Please clarify the offer that Ultimate Escapes is making to HCC Members?

Until December 12, 2008, the first 200 HCC Members who join Ultimate Escapes will receive a substantial $20,000 to $40,000 credit toward a lifetime membership in any Ultimate Escapes club at any plan level (Platinum Plus, Platinum, Gold, Silver or Bronze).

The specific membership credits include:

a. $20,000 credit toward joining Premiere Club
b. $30,000 credit toward joining Signature Club
c. $40,000 credit toward joining Elite Club

In addition Ultimate Escapes has also introduced a new 7-Day Premiere Club Affiliate Membership ($35,000 membership fee and $4,000 annual dues) that is currently only being offered to HCC Members.

2. Why did Ultimate Escapes make an offer to HCC Members?

First, we waited until AFTER numerous HCC Members contacted us and also until a variety of HCC “Success Plans” failed to achieve sufficient HCC Member support before making any offer to HCC Members, out of respect for HCC Members and the restructuring process initiated several weeks ago by HCC management.

Our foremost goal now is to avoid further pain and loss to HCC Members and to extend a helping hand to hundreds of HCC members and their families through a very difficult time, by offering an attractive opportunity for HCC members to join Ultimate Escapes. Our offer provides HCC Members with a significant $20,000 to $40,000 “credit” to join Ultimate Escapes, representing a significant credit that offsets (and potentially recovers upon redemption) much of the likely loss of their previous HCC membership fee. As importantly, our offer allows Ultimate Escapes to grow our business in a financially prudent manner while also providing hundreds of HCC members and their families the immediate and unique opportunity to continue to enjoy great vacation experiences for their lifetime and their children’s lifetime by joining one of the industry’s largest and most successful destination clubs.

We would like to help create a “soft landing” and generate a positive outcome for hundreds of HCC members that will otherwise likely suffer an immediate and total loss of both their HCC membership fee and all their travel privileges if HCC shuts down and files for bankruptcy. Over the last 2 years, Ultimate Escapes has successfully converted almost 700 members from failing clubs (Tanner & Haley and Ventures Equity Vacation Club) into valuable and enjoyable Ultimate Escapes memberships, leading to very high member satisfaction and high annual renewal rates within Ultimate Escapes.

3. What was the logic behind the structure of the HCC Offer?

Fortunately, Ultimate Escapes was able to offer a fair and financially attractive deal to HCC Members as a result of our size and scale, as we currently operate three distinct clubs with over 1,300 club members, 140 club properties in 50 global club destinations. In particular, our Premiere Club, with 35 club properties in 26 destinations, has great availability (52% occupancy in 2008 and under 30% occupancy so far in 2009) and is the perfect fit for HCC Members. UE can comfortably add hundreds of HCC Members to our Premiere Club and continue to maintain great Member services and good availability for our existing Ultimate Escapes club members.

Unfortunately, some other clubs, including Tanner & Haley, operated their clubs with unrealistic and unsustainable business models, including promising features and services that could not realistically be delivered long-term, including promising 100% “guaranteed refunds”, 100% availability, basing their business models on strong real estate appreciation continuing forever (which it never does), charging artificially low membership fees and annual dues, and offering excessive or expensive membership services and amenities at no cost or low cost. Clearly anyone with good common sense understands these attributes create a fundamentally flawed and unsustainable business model and eventually leads to business failure.

In our opinion, while the recent economic crisis has certainly impacted all businesses, including real estate and fractional developers, resort and timeshare operators, and even destination clubs, we believe a more fundamental cause of the failure of HCC was a flawed and unsustainable business model; one based on highly leveraged real estate, extremely low membership fees and low annual dues; a model that required continued and rapid membership grow, and a model that assumed real estate values would continue to appreciate strongly over many years.

So, the bottom line is that while we want to be helpful to HCC Members (and also help our business as well), we will not make any offer that doesn’t make good business sense to Ultimate Escapes. We hope and believe that most HCC Members can understand and appreciate our position. We have worked hard over many years to earn the trust and support of our 1,300 Ultimate Escapes club members and built a successful and growing club business and we will not put that trust and support at risk by making HCC Members an offer that does not make good business sense. As we have said many times over many years, “if it sounds too good to be true, it probably is.” Clearly HCC Members understand this now more than ever as the HCC business model was too good to be true and the result was failure…so we would respectively suggest that any HCC Member should only consider joining another destination club that charges a realistic upfront membership fee and annual dues and has a demonstrated and sustainable business model and sufficient size and scale to deliver on a lifetime of great vacations for your family.

4. Why did you not offer a structure that consisted of “annual dues only”?

We cannot and will not make any offer, including our offer to HCC Members, that is not fair to our existing UE Members or that is not financially sound. Some HCC Members have suggested we should just offer them a “free” UE membership, based on the concept that UE will somehow benefit over time by having additional HCC dues paying members join Ultimate Escapes. Frankly, we cannot and will not consider such a financially irresponsible offer, and we think that HCC Members, more than anyone should understand our position.

When we offered 800 Tanner & Haley members the opportunity to join our club in 2006 and get a free Bronze Membership (14 days of annual use) as long as they agreed to pay our then current annual dues, that deal made sense only because we also acquired over $100 million in real estate assets from Tanner & Haley at the same time with substantial built-in real estate equity. That is not the case with our HCC Offer, as this offer does not involve us acquiring any HCC real estate (although we may look at this possibility separately over the next few weeks and months). We will use our existing excess capacity in UE real estate assets to meet the immediate travel needs of HCC Members who join Ultimate Escapes, and we will likely look to also acquire new homes if needed to maintain proper club capability and maintain reasonable availability for our club members.

5. Would you consider offering financing for the HCC Offer?

Ultimate Escapes has two financing options available for HCC Members, including long-term financing for HCC Members with FirstAgain, our strategic financing partner, which offers multi-year, fixed rate loans for up to $100,000 for HCC Members with excellent credit. Alternatively Ultimate Escapes will offer short-term (90 day), no interest financing, requiring an initial payment of 33% of the membership fee and 100% of the annual dues paid at contract signing, 33% of the membership fee paid 45 days after contract signing and the final 33% of the membership fee paid at the end of 90 days. If you are interested in our financing options, please speak to our Membership Directors for more details.

6. Why would I consider the UE offer versus the DHH offer?

Ultimate Escapes has been operating a growing and successful club for more than 5 years and is a true market leader in the destination club market with 1,300 members, 140 club residences and over 130 affiliated luxury hotels in more than 150 of the world’s top resort and metropolitan destinations (50 club destinations and over 100 affiliated Ultimate Collection destinations). Ultimate Escapes is headquartered in the United States and is run by a seasoned management team with a unique and proven track record in the industry of integrating hundreds of members from previously failed clubs (700 members from Tanner & Haley and Ventures Equity Vacation Club). Jim Tousignant, the President and CEO of Ultimate Escapes, and Rich Keith, the Chairman of Ultimate Escapes were both founding members and officers of the Destination Club Association (DCA), which has worked for the last two years to create a regulatory framework for the destination club industry and establish industry best practices and we continue to be active in the industry’s growth and evolution.

DHH is a new and very small club headquartered in New Zealand with only 60 members and 12 homes, according to Halogen Guide. Of the 12 homes, only 2 are actually located in the United States with the balance located in Europe and the South Pacific. In fact, DHH has no current homes in the “entry level” category, while Ultimate Escapes is the market leader with 35 Premiere Club homes in 26 destinations in the United States, the Caribbean, Mexico, and Europe. DHH is not a member of the Destination Club Association and would likely be challenged due to lack of club experience, size and scale to quickly bring on the large number of new “entry level” homes and staff required immediately to satisfy the vacation needs of hundreds of HCC Members. DHH’s “unofficial” offer seems like it may be “too good to be true” and should raise questions as to long-term sustainability. Remember, if it seems too good to be true, it probably is.

7. How may UE Premiere Club homes and destinations are currently available?

Please download and review the Ultimate Escapes Overview for Premiere Club, which provides details on our growing portfolio of 35 current Premiere Club residences in 26 destinations, featuring Premiere Club homes with:

• Average value of $1,000,000 per residence
• Average of 2,000 square feet in size
• Two to four bedrooms in most locations
• The dedicated services of our Escape Planners, who will help you choose and reserve a property, coordinate air and ground transportation and book activities
• Five-star personalized concierge services—your on-site Ultimate Local Host will handle every detail of preparing your residence, offering “in-the-know” views of local activities and area attractions
• Extended family privileges (up to 10 family members can travel unaccompanied at no extra cost)

8. What is the current occupancy in UE Premiere Club?

Ultimate Escapes properties overall had an actual Annual Occupancy rate of 57% in 2008, with 52% actual Annual Occupancy for Premiere Club, 56% actual Annual Occupancy for Signature Club, and 62% actual Annual Occupancy for Elite Club. Our actual Annual Occupancy rate of 57% is better than our target Annual Occupancy rate of 70-75% and is favorable as compared to Exclusive Resorts, which we believe operated in 2008 at a higher 75% overall Annual Occupancy rate.

9. How is UE Premiere Club different than HCC?

• UE Premiere Club has more homes and destinations than HCC
• UE Premiere Club Members also have “reciprocity” access to over 100 Signature and Elite homes
• 80% of future value on redemption
• Family Access included with club membership
• Signature Club and Elite Club Members have access to 130 Ultimate Collection luxury hotels in 100 additional global destinations, and UE is working to add a selection of luxury hotels that Premiere Club members could also access in the near future at no extra cost.

10. As a UE Premiere Club Member, do I have access to other UE Club properties?

Ultimate Escapes Clubs Reciprocity

Reciprocity is available for all Ultimate Escapes Members with Silver, Gold, Platinum, Platinum Plus and Corporate Membership plans. Reciprocity allows Members the ability to make reservations in affiliated Club properties of Ultimate Escapes, and is subject to certain club restrictions and daily fees. Any reciprocity reservations made by Members will be deducted from the Member’s allotment of Included Days and will also be charged a reciprocity fee as noted below. Ultimate Escapes limits overall reciprocal usage to no more than ten percent (10%) of Space Available nights in each destination each calendar quarter, ensuring that each destination is not unreasonably impacted by reciprocity use. Reciprocity reservations are subject to availability and reservations will not be accepted for any Holiday or “blackout” periods as periodically determined by Ultimate Escapes.

Please note the following relating to reciprocity:

• Members may book up to 7 Included Days of reciprocity per year.
• Reciprocity is not available for any of the ten (10) Club specified Holiday Weeks.
• Each respective Club Residence allows no more than 10% (9 days) of reciprocity bookings per calendar quarter, thereby maintaining high availability for core Club Members in each respective Club offering.
• Silver, Gold, Corporate, Platinum and Platinum Plus Members have access to reciprocity privileges (Bronze Members do not have reciprocity privileges).

The Club will deduct from a Member’s allotment of Included Days for any reservation relating to reciprocal Club access and additional daily fees apply for Members wishing to make reservations using reciprocity as follows:

Reciprocity Fees for Premiere Club Members

• Signature Club Use: $ 750 reciprocity fee per day (plus Included Days deducted)
• Elite Club Use: $1,250 reciprocity fee per day (plus Included Days deducted)

Reciprocity Fees for Signature Club Members

• Premiere Club Use: $ 0 reciprocity fee per day (plus Included Days deducted)
• • Elite Club Use: $500 reciprocity fee per day (plus Included Days deducted)

Reciprocity Fees for Elite Club Members

• Signature Club Use: $0 reciprocity fee per day (plus Included Days deducted)
• Premiere Club Use: $0 reciprocity fee per day (plus Included Days deducted)

11. What is the membership redemption terms relating to the HCC Offer?

The UE membership plan terms for the HCC Offer include:

• 18 month minimum membership term (standard)
• If an HCC Member resigns within months 19-36, upon 3-in, 1-out, the HCC Member will be entitled to a redemption amount equal to 80% of what the HCC member actually paid at joining.
• If an HCC Member resigns after 36 months, upon 3-in, 1-out, the HCC Member will be entitled to a redemption amount equal to 80% percent of the proceeds from the resale of their membership.

No, we do not need to buy additional properties to make the HCC Offer, as our current occupancy in Premiere Club is a low 52% for all of 2008 and currently less than 30% for 2009. However, we will likely look to add some new Premiere Club properties depending on the number of HCC Members who join UE.

13. Are you considering adding new properties, including possibly HCC properties, as part of the HCC Offer?

We are adding new destinations and properties on a regular basis, based on membership growth. The timing and need to add new properties relating to new HCC Members joining UE will be somewhat dependent on the number and timing of new HCC Members joining Ultimate Escapes, as well as based on the club and membership plans selected. However, Ultimate Escapes does not need to acquire any new homes to satisfy the first 200 hundred new HCC Members that may join Ultimate Escapes.

The fate of High Country Club members will be decided in the coming weeks. Will members join together and support a new version of the club's Success Plan? Will members jump ship and take Ultimate Escapes, Abercrombie & Kent Residence Club, or Distinctive Holiday Homes up on their offers? Will High Country Club members even look at another destination club if High Country Club is forced to close? Or will more offerings from other clubs interest members?

To learn more about the Ultimate Escapes, Abercrombie & Kent Residence Club, and Distinctive Holiday Homes offers and the differences between each, please contact Destination Club News, your complimentary destination club advisors.