Destinations are a very important factor in making the right decision. There are six key categories to consider:

(1) Breadth vs. Depth
Each club has a different strategy. Some clubs offer many destinations, but fewer homes in each. For example, some of the high-end clubs like Solstice follow this model, especially if member totals have a cap at 100 or less. Other clubs feature fewer destinations, but with many homes in each location, making it easier to get a home in that venue during busy holidays. A private residence club such as Exclusive Resorts pursues both dimensions, as they need to satisfy their large member base (currently 1,800 and growing)

If you are willing to be very flexible in your travel and like the sense of adventure, then more destinations is a great option. However, if you are a 4 to 6 person family and try to limit the travel time to get to your vacation home, then you might prefer your club to offer several homes in one destination. You know you will get availability there every year, which also allows you to get to know a destination or home intimately.

(2) Geographical Empahsis
Another factor to consider is the “east coast” vs. “west coast” nature of the destination club. If you are joining a club with the majority of the members on the east coast but you are on the west, then you should expect that in the first 1 to 2 years of your membership, the club may not have that many west coast accessible homes (e.g., Mexico, Hawaii or Lake Tahoe). Check with the club and ask to see their destination plans or review the maps most offer online.

(3) Homes
Especially in the destinations that you think you will use, thoroughly study all the information you can about the homes the club operates – the quality, location, and access to activities when you are staying in the home. Remember – if the club has only two homes in Cabo San Lucas and that destination is one that you think you will use every year for several years, you want to get a sense that their homes there will suit your needs.

(4) Real Estate Strategy
There is a shift happening, in that the larger clubs (and presumably some of the new ones yet to be announced) will start to develop their own real estate – meaning they will buy land and build. This will give them cost advantages that could make the business/club more viable (which is critical to you), but does mean houses take longer to become available. Ask your club about their home acquisition strategy and how they handle situations where they can’t purchase the home they want. Do they rent or lease in a destination until the right home or building site becomes available?

(5) Urban Destinations
Some clubs are buying condos and apartments in cities like New York, Chicago, and London. There is the impression that they can be used for business travel. However, we are getting lots of anecdotal feedback from members that they are often booked in advance for vacation travel and not that available for last minute business trips. We do not think you should rely on the city locations as a replacement to your business hotel, unless the club can convince you otherwise.

(6) Member to Home Ratio
Most residence clubs publish their Member-to-Home ratio – often 6:1. There are two important aspects to this metric:

First – Does the ratio include members, membership agreements, or parties that can book a home at any one time? The last number is the most relevant figure to consider since it encompasses the total potential volume of demand on homes.

Second – Is this ratio maintained in the first two years, when the club is still building the home portfolio? In other words, is the club buying enough homes to keep up with new member demand? This is particularly important during the charter member phase so members can get access to properties. We think clubs should be VERY disciplined about keeping that ratio intact as they ramp their member marketing efforts.

We’ll analyze Member-to-Home Ratio in more detail in an upcoming article.

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Critical due diligence questions
• How many destinations does the club currently have?
• How many destinations are planned?
• Are there multiple homes at destinations?
• What is the process for choosing destinations and homes for the club?
• How many residences are owned and opened?
• How many residences are under construction for 2006?
• How many residences are under construction for 2007?
• What percentage of the homes in the portfolio leased/rented and owned?
• Is this percentage going to change over time?
• Do members have any say in where and which homes are purchased?
• How do you decide when to sell homes at a destination?
• Have you sold homes and if so, why?
• Where are the homes located? (General description of regions or geographic areas sufficient.)
• What urban (city) locations are currently available?
• Are any sailboats are houseboats available? If so, where?
• Does the club own the boats?
• Who operates the boats?