Many of you may already own interests in Residence Clubs. These clubs include golf courses, a combination golf and residence facilities, skiing resorts, yachts, airplanes, and other entities that offer their members rights to use club owned property.
Grand Luxxe owners are members of the Grand Luxxe Residence Club Nuevo Vallarta.
So, what is the difference? Well, we checked Wikipedia to provide us with a general definition of the characteristics of being a Residence Club Member.
After looking through a number of definitions, a close approximation of what we own is defined as a Destination Club in Wikipedia. Luxxe owners do not have an equity ownership in the facilities, even though a sales person will claim our ownership in the Grand Luxxe Residence Club is a "fractional ownership". Our contracts are perfectly clear - we have no equity interest in any tangible property.
Instead, we have the right to use facilities owned by the club. These facilities are in one location now, and perhaps the club will own facilities in other locations as well. But, the club is under no obligation to build any additional facilities, or complete the ones under construction, for that matter. However, if Vedanta meets their own expectations and builds more Luxxe residences, then we owners will have more destinations to visit.
Of course, we already have the right stay in any of the other Vedanta locations, so it is not as though Luxxe Residence Club members have no other destination options at this time. We do and they are quite satisfactory.
If you feel like reading more, then please consider the following from Wikipedia:
Destination Clubs were "invented" in 1998, when Rob McGrath,
a veteran of the luxury timeshare development business, launched
Private Retreats. Since then over 20 companies have launched clubs (and
more are being launched every month) targeting affluent families that
want the benefits of second home ownership, but with more flexibility
and choice. Experts estimate that there are less than 10,000 people
These clubs tend to have the same basic structure: in exchange for a
one-time upfront membership fee, and annual membership dues, a member
gets access to a roster of luxury vacation homes around the world,
which can be booked based on availability and reservation priorities.
Here's a typical rundown:
Access to 3-5 bedroom homes (smaller condos in city locations),
either on resort properties or near key locations (ski resort, beach
Homes are owned and managed by the club or leased by the club, and are for the exclusive use of club members
14 - 42 days of home usage at different homes across multiple locations.
The ability to book homes in advance and on a ?space available?
basis, as well as a system to handle the demand for holiday or peak
High service levels including: pre-departure planning, on-location concierge services and daily home cleaning service.
Furnishings, appliances and audio-visual equipment that would be
considered ?luxury class,? such as Viking stoves and flat-panel TVs.
Additional membership privileges and benefits, including special club events.
Destination clubs are often compared to other ?fractional? real
estate programs like timeshares or private residence clubs. The
destination club model gives the consumer more choice and less
overhead, typically without deeded ownership of the underlying real
estate. There are some exceptions. Below is a summary of how the
destination club model compares:
Luxury Hotel - Though appealing for a couple?s getaway, lux
hotels are less optimized for kids and multi-family groups. These
hotels often provide exquisite service and plush amenities, but have
inflexible room configurations, limited privacy and pricey services.
Luxury Rentals - With this alternative, vacationers simply
rent a house. Though you may choose the house you want, where you want
it, the research and cost can be significant. In Cabo San Lucas, 5-star
resort Las Ventanas charges $4,000 a night for a three-bedroom
residence suite. A single five-night vacation would exceed the annual
dues for most destination clubs ($20,000 at Las Ventanas vs. $18,000
average annual dues).
Private Residence Clubs - These clubs combine the services of
a luxury hotel chain with the partial ownership of a second home. The
residences are typically smaller than destination club residences:
750 sq ft (70 m2) city apartments to 3,000 sq ft (300 m2) resort villas.
Second Home Ownership - This option provides the benefit of
full asset appreciation with a home that is uniquely suited to and
customized for your family. The downside is lack of destination
flexibility, and the cumbersome reality of owning a home. Taxes,
maintenance, utilities, neighbors can become a disproportionate burden
for a four-week-per-year residence. Destination club membership can be
less expensive than home ownership, even factoring in ownership
Destination clubs are especially well-suited for families or groups
who are looking for larger residences ? three or more bedrooms and at
least 2,000 sq ft (200 m2), and can manage their travel schedule within the availability structure of a club.
While there are several variations, the basic choice is between
equity and non-equity clubs. This is similar to the membership model
choices at country clubs.
In both models, club members provide a large up-front sum and an
annual fee. In non-equity clubs, they enjoy the hospitality benefits of
the club, but don?t own an interest in the homes and do not participate
in any of the real estate appreciation of the portfolio of homes. The
up-front payment is a deposit, and when they resign from the club,
members receive 80% (sometimes up to 100%) of that deposit back,
typically with no adjustment from the initial sum. There are some
exceptions as noted below with the "hybrid" model.
With equity clubs, the up-front payment can be considered an
investment of sorts (or at least a reduction in the opportunity cost of
making the up-front payment). When exiting the club, the refund of that
fee is adjusted to reflect the value of the home portfolio or the
increases in the fee for new members. Various clubs have different ways
of providing this benefit. Also, with an equity club, the members own
the club's real estate portfolio, which provides additional security of
the membership deposits. The Abercrombie and Kent Residence Club,
formed by a combination of two leading equity clubs, Crescendo and
Bellehavens, is the current leader with this benefit.
A somewhat popular variation is the ?hybrid? model, which combines a
non-equity club with an upside benefit that is tied to the value of a
Although the equity model has obvious appeal, a prospective member
should consider numerous factors in making the decision to join a
destination club. Members are making both a financial and a vacation
lifestyle decision, and should consider each aspect in turn.
Private Retreats launched the industry in 1998, with one club, Private Retreats, under the company name Preferred Retreats. The company was later renamed Tanner and Haley,
with over 900 members in 2006. Exclusive Resorts entered the business
in 2003 and with the backing of AOL founder Steve Case, became the
industry leader in terms of members, locations and homes. By the end of
2006, the club claimed over 2,500 members with 300 homes in 30
locations. Following the success of Exclusive Resorts, from 2003 to
2004 entrepreneurs launched competitive clubs such as Quintess, Dream
Catcher, Private Escapes, and Ultimate Resort. Specialty clubs joined
the mix as well, for instance The Markers Club for golf. In 2005, a
Fortune 200 company, Cendant
Corp. entered the market in partnership with Leading Hotels of the
World and Destination Club Partners, a pioneer in fractional resort
development. Together, they launched Leading Residences of the World.
In 2006 the industry grew substantially, but also suffered a high profile failure. Tanner & Haley Resorts, still a significant player at the time, entered Chapter 11 bankruptcy proceedings. As a group, members lost more than $200 million in the bankruptcy.
However, the real estate and members of Tanner and Haley were acquired
by another destination club, Ultimate Resort. Ultimately, this led to
the creation of several entities focused on consumer protection. The
Destination Club Association was created to help govern the industry by
the leading clubs and supported financial transparency by clubs and an
increase in truth in advertising. Halogen Guides and SherpaReport serve
as media outlets focusing on destination club coverage.
DestinationClubForums.com provides a forum for detailed member postings
on their experiences with various destination clubs. And the Veras
Group serves as an independent, third party advisory firm focused on
guiding prospective destination club members to the club that fits them
The Destination Club (DC) industry has an Achilles Heel - the
refundable portion of the membership fee of many destination clubs has
no assurances that it will be returned. If the club is deluged with
members wanting to exit there may be no new members wanting to join.
The members are captured and can't exit the club with the industry
standard of 3 in 1 out rule. However, many destination clubs would
liquidate after a certain period of time if not enough new members have
joined to offset those resigning. Additionally, the DC may find itself
in financial trouble and not be able to repay the membership fee as it
has guaranteed. Equity destination clubs are designed to reduce this
risk significantly by providing members with ownership and priority
over other creditors.
There are no destination club specific real estate laws to protect DC members, although agreements are covered by all other aspects of law including contract law. In contrast, timeshares are more strictly regulated.
We think the Luxxe Residence Club more closely fits the Destination Club model than the others. If Vedanta builds more Luxxe facilities, then the number of destinations increases.
Also, we Luxxe owners do not have an equity interest in anything but the right to use the facility. Therefore, we must maintain confidence in Vedanta and its financial condition. We hope Vedanta will complete the new facilities they plan and maintain the ones they own. So, stay tuned.
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