I was asked last week by a reporter if the destination club industry needed regulation – my immediate reaction, being a fan of smaller government, was no. The second part of my answer was that what was needed right now was disclosure and assurance.

Disclosure during the sales process, so that the prospective member could make a very informed decision – on the big issues, such as home values and availability, member satisfaction and the financial stability of the club.

Assurance, in terms of a member, at any time, being very confident that at any time, he/she would be able to get back the non-refundable portion of their membership deposit.

A large, growing club should be able to handle a handful of people that decide to leave the club each month – in fact, Exclusive Resorts confirmed that there is no waiting time for them to be able to refund a membership deposit. That’s impressive and good to know – but perhaps not unexpected in a robust economy, such as we are in now.

The question for all clubs is what would happen in a tougher economic environment, or worse yet, an economic meltdown. Of course that is harder to predict, but you can get an impression now of how a club is managed financially. Ask to see audited financial statements that show the value of the real estate portfolio (minus debt) when compared to membership refund obligations. Ask about operating deficits and their access to capital to fund that. Ask for a list of members, from which you will call three or four to discuss their club experiences.

The best hopes for this industry are informed consumers who are thoughtful enough to consider all scenarios, even in the best of times. If certain clubs aren’t willing to provide the assurances and transparency necessary, then we’re all best served by avoiding them. If a “run-on-the-bank” scenario ever materializes, it’ll be too late for any government oversight. This industry is too small to attract any after-the-fact bailout. Who’s gonna cry for Joe Millionaire’s vacation flameout?

Clubs should realise that a membership deposit is a big vote of trust in that club – they will have to earn it to keep it. If they don’t, then perhaps they do need some oversight.