Oceanfront homes in the Caribbean. Slope-side retreats in tony Colorado ski towns. Multi-million dollar homes that can accommodate three generations of the same family in luxury. Destination clubs can promise, and deliver, big vacations. But beyond those glossy brochures, remember that joining a destination club is nothing less than a major financial commitment, typically requiring a deposit of more than $100,000 and dues topping $10,000 year.

While the destination club industry continues to mature and stabilize, joining a club does carry some risks. As outlined in our Decision Guide to Destination Clubs, there are a handful of pitfalls that potential club members should be aware of. The good news is, with proper due diligence and close consideration of the full range of club options, these risks can be easily avoided.

Risk 1: You can’t get the ski house you want over Christmas week.
How to avoid it: Suss out a club’s reservation track record before joining.

Destination clubs face the most reservation pressure over the holidays. Most families with school-aged children want to travel at the same time. And who doesn’t want to ring in the new year curled up in front of a fireplace in Aspen or lounging poolside in Cabo San Lucas?

Clubs typically offer more holiday reservations to members with higher-priced plans, but some clubs take different approaches to managing reservation demand. Exclusive Resorts now sells holiday reservations as an à la carte extra. The Lusso Collection aims for a geographically disparate membership group, and even has a cap on members with school-aged children, to better ensure availability during school holidays.

The best way to evaluate a club’s holiday availability, however, is to talk to current members about their experiences. If slots during peak times are consistently tough to book, you’ll hear about it. Asking clubs you’re considering for provisional access to their booking database is another smart route.

The best advice of all, however, may be to remain flexible. It is unrealistic to expect to get the same ski home each President’s Day week. If it’s one location you are after, you might be better off with fractional ownership.

Risk 2: The club’s property portfolio isn’t growing as fast as you expected.
How to avoid it: Look carefully at the destination club’s planned roll out of properties.

Many clubs are quick to tout the locations in their development pipeline, but remember that it can take years for a club to acquire new residences (especially if new construction is part of the plan) and open their doors to members. While you should look at what a club has in the works in the near future, make sure you are joining a club because you like the current mix of homes it has to offer.

Risk 3: You think you are paying too much in annual dues.
How to avoid it: Look at the annual increase cap on dues before joining.

Annual dues typically cover a club’s operations, from insurance to property management fees. These fees can, and frequently do, rise yearly. Before you join a club, ask how much annual dues have gone up each year. Ask if there is a cap placed on the amount that dues can rise each year. Then, do the math. Assume that such dues will rise to that maximum each year.

Risk 4: You are underutilizing your plan.
How to avoid it: Consider membership plans with a limited number of days.

Most destination clubs now offer a suite of plans, many with as few as seven or 10 nights per year. Even the Lusso Collection introduced a 21-day plan to compliment its unlimited offering. These plans are one way to get into the destination club market with a smaller upfront commitment.

One key factor in the cost-per-night of a destination club plan is whether or not you actually use all of the nights allotted. For instance, a member with Exclusive Resorts’ 60-night plan will effectively see a cost-per-night of $2,384 if they only use 30 nights. If that member uses all of their nights, the cost drops by nearly $1,200 a night to $1,192. The key is to be realistic about your travel plans—destination clubs are always more than willing to upgrade members to a plan with more nights.

Risk 5: You can’t get your deposit back.
How to avoid it: Conduct proper financial due diligence before joining.

It’s the doomsday scenario in the destination club world, and the Tanner and Haley bankruptcy filing in 2006 brought the risk to the forefront of the industry.

We saw the formation of the Destination Club Association and the beginning of calls for more financial transparency among clubs. Halogen Guides has always advocated for full financial disclosure among destination clubs. We recommend you look for clubs that are members of the Destination Club Association, which requires that a club pass an annual net asset test as a condition of joining.

Consider how willing a club is to open its books to members and potential members. If a club is unwilling to answer your questions on how it runs its business, detailing how it will be able to return your deposit upon departure, consider looking elsewhere.

For a closer look at club options, other risks and tips on how to conduct proper due diligence, download our Decision Guide to Destination Clubs.