London – Twenty years ago, Steve Case foresaw a time when traveling a global information superhighway would be as central to people’s lives as phones or television.
The co-founder of America Online – which wound up introducing tens of millions of Americans to the Internet – was on to something.
But after a disastrous merger with Time Warner in January 2001, Case was forced to step down as the company’s chairman in 2003.
Now, the 46-year-old hopes to build on – or perhaps rehabilitate – his reputation as chairman of Revolution LLC, a Washington-based group that seeks controlling interests in companies appealing to the needs and wants of baby boomers.
One of those companies is Exclusive Resorts in Denver, a high-end vacation club with a burgeoning membership.
Once again, Case – who’s investing $500 million of his own money in Revolution – could be on to something.
Exclusive Resorts is capitalizing on one of the hottest new trends in the luxury travel industry. A variation on “time shares,” fractional ownership of properties that usually are limited to specific weeks each year, vacation or “residence” clubs let members travel whenever they want to a vast number of upscale destinations.
“When I first heard about Exclusive Resorts and the luxury- residence-club concept, I just loved the idea instantly because it really gives consumers more control, more choice and more convenience,” Case said in written remarks.
“At the first meeting I had with the founders, I agreed to buy half the company on the spot, based on an instinctive feeling that it had the potential to grow into a very significant company,” he said.
Putting a price on luxury
Exclusive Resorts was founded in 2002 by businessman Brent Handler and his brother Brad, who worked as the first in-house lawyer for eBay.
Howard Nusbaum, president of the American Resort Development Association in Washington, said the spread of vacation clubs owes much to the spirit behind time shares.
But unlike a time share, “a vacation or residence club works similarly to a country club in that members pay a refundable membership fee and annual dues,” said Rachel Neumann, an Exclusive Resorts spokeswoman.
“Our members are not assigned any specified time period that they can use our properties,” she said. “They have essentially first-come, first-served access.”
If a member wants to quit the club, they merely resign, with no need to sell their ownership piece to another owner.
Nusbaum called Exclusive Resorts the leader in nonequity vacation clubs. Other major non- equity clubs include Private Escapes, Ultimate Resorts and Abercrombie & Kent.
So far, Exclusive Resorts has amassed 1,300 members, who can have the keys to 200 luxury vacation homes (another 150 are in development) in 33 destinations around the world during periods of their choice.
Exclusive Resorts’ homes average $3 million and generally are close to five-star resorts or hotels. Many are beachfront estates in locations including Naples, Fla., and Costa Rica. Other homes are in the mountains of France, Colorado and California.
But what’s billed by the company as the “ultimate in vacation experiences” isn’t cheap: A full membership costs $375,000, plus annual dues of between $15,000 (for 30 days’ access to the homes) and $25,000 (for 60 days). Case recently introduced a lower-priced affiliate membership for $185,000 plus annual dues of $9,500 for 15 days’ access.
Despite the price, there’s no question that vacation clubs are catching on, especially with baby boomers seeking alternatives to owning a second or third home.
Ragatz Associates, a market research firm in Eugene, Ore., estimates that sales of fractional ownership properties and at private residence clubs shot up by 109 percent to $1.07 billion in 2004.
Nearly 60 percent of the sum was derived from the sale of fractional, or equity, property while the remainder was nonequity arrangements.
“The nice thing about fractionals and also residence clubs is that they are growing in popularity worldwide,” said David Hehman, chief executive of www.escapehomes.com, a San Francisco-based online operation.
“Time shares had gotten a bad reputation” from pushy sales efforts, he said, “but now higher-end companies are coming in and giving a whole new level of credibility to the concept.”
Indeed, many well-known names in luxury have jumped into the fractional marketplace.
Memberships with perks
Ritz-Carlton, for example, operates four properties and is planning to open several more. Two are in Colorado ski resorts; the others are in Jupiter, Fla., and St. Thomas, Virgin Islands.
Ownership at a Ritz-Carlton property allows members and their guests to use an allocated number of days within the prime season each year, based on a rotating calendar. Membership prices range from $152,000 to $525,000, depending on the location and the type of residence.
Again, unlike with a vacation club, in a fractional the investor owns a share of a unit and is able to build up equity and later sell his interest in the property.
Ed Kinney, the Orlando, Fla.-based vice president of corporate affairs for Marriott Vacation Club International, which includes Marriott and Ritz-Carlton club brands, said fractionals are more suited for those looking for a second-home alternative, whereas vacation-club members are more in a “vacationing mode.”
“Members of residence clubs are more transient travelers likely to visit a lot of different places, whereas our members are looking for a place to call home – or at least a series of locations they enjoy going back to again and again,” he said.
Kinney said fractional owners enjoy special perks such as high-quality staffs that recognize them each time they visit.
“There’s a certain sense of comfort and familiarity our members enjoy,” he said.
Besides fractionals, Case believes the vacation-club concept also will continue to catch on because people like the idea of joining a club that gives them access to hundreds of homes in dozens of destinations.
“My experience with AOL was of relatively slow growth before it really took off,” he said. “The surprise to me with Exclusive Resorts is that it’s taken off like a rocket.”
