Risk Analysis
The destination club industry is a young one and not without risks. There are four categories of risks associated with a destination club membership. While these categories explain the basic risks, a more detailed report is in Halogen Guides’s free http://realestate.halogenguides.com/register/info_request?s=dclubsorgDecision Guide to Destination Clubs
Reservation Risk
With club members vying for the same homes at peak-season, securing a reservation may be problematic. Some clubs include guaranteed access days with membership plans to alleviate uncertainties. Reservations can sometimes be booked several months or a year in advance – which tends to be the most reliable way to secure your preferred weeks at a location.
Membership Deposit Appreciation Risk
Some destination clubs offer to share in real estate appreciation. Programs like these are created to offset concerns that the club – rather than the members – is enjoying all the profits of a growing real estate portfolio. Deposit appreciation programs are, however, relatively unproven.
Resignation Risk
If a member wants to resign, the club should be able to cover the refundable portion of that member’s deposit. While many clubs require two or three new members to sign on before refunding another member’s deposit, a 12-18 month time-limit should guarantee the deposit’s return.
Halogen Guides found that destination clubs should own 70-80% of their real estate to better offset member deposit liabilities.
Business Risk
The wave of consolidation last year indicates competition within the industry remains high. Several destination clubs found it difficult to expand beyond the initial charter members. As a result, clubs combined forces to better compete with industry leader, Exclusive Resorts.
Smaller, new entrants usually need outside capital to acquire a portfolio of residences (usually at least six) in order to meet the diverse travel needs of prospective members. These clubs often find it difficult to compete with larger clubs who offer more homes in more locations.