Homes Away from Home

Destination clubs offer more space, more choices, and more luxuries to entice and pamper world travelers

Rick Richards felt that there had to be a better way to travel. In 2006, Richards, 50, took his wife, Karen, and their five children for a vacation at a posh hotel in Maui — and he was floored by the bill.  “We had to get three rooms, and by the time we checked out and I looked at the cost, it was unreal how much we had to spend to travel,” says Richards, a Houston-based health care entrepreneur. In addition to the cost, Richards was put off by the fact that hotel travel, in general, doesn’t foster the kind of family interaction he wanted. “When you travel to a hotel everyone has dinner together, and then they go to their room and you don’t see them again until breakfast,” he says.

After exploring a variety of options, Richards and his family decided to join Quintess, one of a burgeoning number of destination clubs. The clubs give members access to luxury homes around the world along with the kind of service one would find at a five-star resort — including access to personal chefs, masseuses, and a 24-hour concierge to make dinner and golf reservations or set up outings to go scuba diving or horseback riding.

To be sure, destination clubs aren’t an inexpensive way to travel. Exclusive Resorts, for instance — the largest company in the industry, with more than 3,000 members and a billion-dollar-plus real estate portfolio — charges initiation fees that start around $40,000, plus annual dues that are pegged to the number of days the member wants at a club property. (There’s also a deposit, fully refundable, starting at $105,000.) Generally, costs after initiation average about $1,000 per night, and the plans range from 10 to 60 days per year.

But given the current real estate market, destination clubs are arguably a better alternative financially than buying a second home. Plus, the myriad destinations, high-level service, and luxurious lodgings make the clubs an extremely appealing vacation option, particularly for couples with a lot of kids, like Rick and Karen Richards.

The Safe Road

In the past, destination clubs had to contend with the belief held by many affluent people — and middle-class folks, for that matter — that second homes were a can’t-miss investment opportunity, guaranteed to continually appreciate. Now that the real estate market has softened, many people are far more open to an option that doesn’t involve investing in real estate. Meanwhile, for destination clubs, the housing slump provides an opportunity to acquire and build homes more affordably. “People don’t have to deal with the roller coaster ride of the real estate market,” says Jeff Potter, CEO of Exclusive Resorts. The major impediment to the growth of companies such as Exclusive Resorts, Potter says, is a general lack of awareness about what exactly they are. Indeed, there seems to be a fair amount of confusion about the difference between fractional ownership — which involves deeded interest in a home — and membership in a destination club, which is akin to a country club membership.

“If you look at the potential audience for destination clubs, there could easily be 100,000 members,” says Jamie Cheng, co-founder and chief analyst at Halogen Guides, which provides objective consumer information on the luxury market, including destination clubs. “There are 10 million time-share owners right now and only 5,000 destination club members across all the clubs. I would say it’s very much in its infancy.”

A World of Options

Even in a strong real estate climate, vacation homes are hardly a steal in sought-after locations where — as the destination clubs have discovered themselves — properties typically go for millions of dollars. Just to afford the down payment on a home in a place like Jackson Hole, Wyo., or South Beach in Miami could cost a good deal more than the initiation fee at Exclusive Resorts or Quintess. For example, to put a 30 percent down payment on a $4.25 million home — the average home value in the Quintess portfolio — would run over $1.3 million.

“If you want to get a bank to lend you money for a second home today, you are probably going to need to put 30 percent or 40 percent down. Then you have to furnish it and finish it and pay all your taxes,” says Ben Addoms, a co-founder of Quintess. “So by the time you do the math, the amount of money it costs to enjoy a portfolio of homes with a destination club versus a single home is radically better, on the order of four or five times better.” That, Addoms points out, doesn’t even take into account the headaches that come with maintenance and repairs of a second home, which is something destination club members don’t have to worry about.

What’s more, members of destination clubs also get their choice of plush accommodations in some of the world’s most bucolic destinations, as well as bustling hot spots. For example, one of the Quintess homes in London is a two-bedroom penthouse flat with a rooftop terrace in the city’s West End, within walking distance of Piccadilly Circus and Buckingham Palace.

Exclusive Resorts, whose 350 plus homes average 3,500 square feet and have an average value of more than $3 million, has homes on the beach in places like Los Cabos (in Mexico), the Bahamas, the mountains near Beaver Creek, Colo., and the French Alps, as well as urban centers like Paris and New York, among many other locales.

One Lifestyle to Live

To Addoms, the main draw of destination clubs is what he terms the “lifestyle” component. When club members visit a new place, he explains, they don’t have to spend a lot of time trying to determine which sites and activities are worthwhile.

“The first time you go somewhere it’s like a research project,” he says. “You have to figure out what is really good to do there.” Being part of a destination club, however, means that all the activities and service providers — be they sailing instructors, chefs, or nannies — have been vetted by club staffers as well as other members.

That level of comfort with the accommodations and service at the far-flung homes of Quintess — which has properties in seven different countries — is one reason Michael Poujol has traveled so extensively since becoming a member in 2006. Poujol, 47, has covered a lot of ground, with trips to Los Cabos, New York, London, Paris, Florence, South Beach, Maui, Jackson Hole, and other places. For him, being able to wander the world and stay in nice homes is far superior to owning a second home in one location. “We weren’t ready to spend a big chunk of money and be tied to one spot,” he says. And to Poujol, there’s definitely no worry about running out of new places to see. “We won’t live long enough to see every home. It would take 40 years to see them all.”

Destination Clubs Versus Fractional Ownership

Jamie Cheng, co-founder and chief analyst at Halogen Guides, which provides objective information on the luxury market, describes how destination clubs differ from fractional ownership:

Ownership. Probably the biggest difference is that fractional owners can receive deeded interest in the real estate that they purchase, while members of destination clubs do not. “Fractionals are real estate purchases. You are buying a deeded portion of a property,” says Cheng.

Options. Destination clubs give members the opportunity to travel to multiple destinations, while fractional ownership typically means returning to the same location. “Typically, the buyer [of a fractional] has an affinity for a particular location,” he says. “Fundamentally, the difference is favoring one destination that you want to go to.”

Size. Although there can be exceptions, Cheng says one big difference between fractional homes and destination clubs is the size of the homes. By and large, destination clubs offer members two to four bedrooms, while fractionals usually have one to three bedrooms.