Luxury Living A New Type of
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Destination clubs offer the use of multimillion-dollar houses around the world, without the burdens of ownership. While Residence Clubs offer the chance to own a fraction of the home and a fraction of the upkeep. Simon Turner looks at both clubs and other trends changing the vacation-home world.
roucho Marx once said, “I don’t care to belong to any club that will have me as a member.” Frankly, I’m with Groucho—with a possible exception for destination clubs. After a freak accident trashed my family’s weekend home, resulting in frustrating battles with an AWOL contractor and a recalcitrant insurance adjuster, I started to flirt with the idea of dumping my bricks and mortar for the latest carefree-vacation real-estate concept. The first destination club was launched in 1998, when Connecticut-based Private Retreats, subsequently renamed Tanner & Haley, enticed affluent buyers with the promise of multimillion-dollar houses in settings from Cabo to Cannes. Instead of owning a single property, members would share
East Residences, Miami
a portfolio of residences; in addition to a hefty one-time fee (generally refundable, at least in part, if a member leaves), there would be annual dues to cover upkeep, mortgages, homeowners’ association charges, housekeeping, and concierge services. The concept’s originators speculated that investors would be willing to pay $200,000 or more for membership—far less than the cost of one luxury dwelling—even though their investment wouldn’t give them the equity stake they’d get with a fractional or condominium. They were right: The idea took off like a house on fire and continues to gather steam as more and more clubs entered the market. So is the destination club model really a viable alternative to second-home ownership?
Nothing remains constant in the real estate market except the old saying, Location, location, location. Know what $4 million gets you on Maui these days? Hint: the Pacific won’t be visible from your front door. Many of the great Destination Clubs have some tempting stand-alone residences, such as a fresco-filled apartment in Florence and a two-story flat on the Île St.-Louis in Paris. But most clubs include the safety of cookie-cutter luxury developments in key locations. On the plus side, resorts offer value-added services—spa, golf, tennis, pools, restaurants, security— that would be prohibitively expensive for a club to provide independently. Joining doesn’t guarantee I’ll be staying in my dream house, however, especially during major holidays. Tiered membership also means there is no level playing field—some entry-level plans black out key holiday periods. Effectively, the more you pay, the more choices you’ll have during Christmas week. Despite being targeted to a new generation of time-starved people who crave bonding experiences in fabulous locations, I still wonder whom destination clubs are really targeting. The super-wealthy don’t share homes. Couples don’t need that much square footage. Independent travellers rarely sit still in one place. So it seems those accustomed to leasing jets will find the concept appealing. Owning a multimillion-dollar home means
always working on your property. Many consumers think it’s great not to have to worry about the costs associated with ownership. This is not designed purely to be an investment, it’s supposed to be a lifestyle return.” Some people actually prefer to vacation in the same weather-beaten cottage every year, but sumptuous Destination Clubs continue to attract the interest and capital of others. The value of second homes can go up and down which depends on the state of the market which varies from location to location where Destination Clubs invest to build their portfolio. In some of the most popular areas, where second homes simply aren’t available - like Beaver Creek or Bachelor Gulch - you won’t see dips. In some other, less expensive vacation markets, its different so there are more opportunities; it’s a buyer’s market. Consumers familiar with Fractional Clubs or Residence Clubs know these are more exclusive communities, venue dependent destinations where the cost and maintenance fees can be high. Investors have the comfort that they are only gambling on the state of the market in one location. If you’re looking for six weeks skiing each year in a specific destination, a Destination would be wrong. While you may not be able to guarantee exactly which weeks skiing you’ll get (as these change on a rotor) you can be sure you will get your six weeks.
Port Ferdinand Residences, Barbados