A new website, an updated membership program, an industry-first warranty, and a recent price increase are some of the many changes Jim Tousignant, CEO of Ultimate Resort, shared with us in a call today about his destination club. To round out the list, the firm also recorded its “best selling month ever” in September.

At the beginning of this month, membership fees for the Platinum, Gold, Silver, and Corporate plans increased $20,000 (Affiliate plan increased $10,000; see chart, below). Existing members were given the option to convert their memberships to the new “Lifetime Membership” model, which offers three key features, according to Tousignant:

1. Membership is for your and your spouse’s lifetime and not limited by a maximum number of years.
2. New members (and past members who converted) will receive 80% of the current value of the deposit, not 80% of your original deposit, as had been the previous club policy.
3. 10-year “Warranty” on the membership, which ensures services are available to members and places real estate assets in a trust (more on the warranty, below).

Tousignant made a point that any increases in fees are not guaranteed and the membership is not sold as an investment vehicle. Nonetheless, the company’s website provides a hypothetical scenario of potential to explain the new refund model:

For example, the current fee is $185,000. If you decide to redeem your membership after seven years when the fee is, say, $275,000, you would receive $220,000, a $35,000 gain on your original membership deposit.

Helium Report has cautioned consumers that membership appreciation programs that suggest a refund of a higher, future membership deposit are still unproven. Tousignant points out that some early charter members of Ultimate Resort joined at $100,000 a year ago and chose the option to convert their membership, effectively “locking in” a gain since they would now receive 80% of $205,000 under the new terms rather than 80% of $100,000.

Members who converted paid the difference between their original deposit and new pricing, which also provides Ultimate Resort with additional working capital. All members are still subject to a “3 in, 1 out” clause which states that 3 new members must join before 1 can resign.

Warranty Details

Tousignant compared the 10-year Warranty to the warranty on an automobile, saying the club will “work as promised or we’ll fix it.” The intent of the warranty is to provide downside protection and complement the upside opportunity of the adjustable membership deposit. refund. Deeds to the club’s real estate portfolio are placed in a trust managed by an independent trustee. If 25% of the membership base makes a “warranty claim” citing occupancy rates lower than promised, the trustee must liquidate assets to refund deposits.

The trust acts as a backstop in case Ultimate Resort’s growth slows or service level erodes. Tousignant based the model on a similar concept he says exists for “right-to-use” timeshares. He states members effectively become secured creditors that are “subordinate to the senior debt [of bank loans], but ahead of all other creditors.” Members become “beneficiaries” of the trust.

The Warranty is pro-rated over a 10-year period, starting at 100% in year one, and declining 10% each year until the 10th year. In that sense, the analogy to an automobile warranty is not a perfect fit, since it’d be like a car that has a warranty for 30,000 miles in year 1, 27,000 miles in year 2, and then 3,000 miles in year 9.

In that respect, the trust does not ensure there are sufficient net assets for the entire membership deposits to be refunded at any and all times, since the percentage guaranteed to a member declines over time. However, it is an industry leading model that Tousignant believes has precedence in timeshares and will address prospective members’ concerns about the destination club’s long-term commitment.

Ultimate Resort continues to demonstrate a focus on offering the most value to consumers. With strong summer sales and some innovative new changes, Helium Report expects the club to reach the “century milestone” by year-end from its current base of 78 members.

Next week, we’ll provide details about Ultimate Resort’s trial membership program, another unique concept that allows 7-day and 14-day test visits of the club’s 8 homes.