Fractional ownership has become a new trend in the luxury vacation industry. Fractional homes are being developed in prime travel destinations around the world. Even as the general real estate market is slowing down, the trend for fractional ownership stays strong.
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As family travel has grown in popularity, so have destination clubs, which offer affluent vacationers a relatively new way to travel. The major selling point: destination clubs offer both the space and privacy of private homes as well as all the services that come with staying at a luxury resort.
Unlike fractional residences or timeshares, destination clubs for the most part do not give members an ownership stake in real estate. Rather, the typical destination club is structured more like a country club, with members on average paying anywhere from $200,000 to $400,000 in the form of a membership deposit (usually 80% refundable), and annual dues that range from around $15,000 to $30,000 on top of that. This sizeable investment allows the use of whatever properties the club owns for a set number of days in a year, with locations from the Bahamas to Tuscany. Clubs typically offer concierge services such as stocking the fridge, housecleaning and helping with travel arrangements.
The industry was launched in 1998, with a company called Private Retreats that is no longer in existence (more on that later). Now there are more than 20 clubs, according to industry consulting firm Helium Report. The largest club by far is Exclusive Resorts — chaired by America Online co-founder Steve Case — which boasts about 2,500 members and more than 300 properties, for about a 65 percent share of the destination club market. The membership fee to join Exclusive Resorts is $475,000, and annual dues are $27,500. The second-largest club, Ultimate Resorts, has 775 members and 105 homes in 26 locations (membership deposit $215,000; annual dues $22,000).
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For families who are really likely to use the month or six weeks of time they can expect from many destination clubs (there are several that offer unlimited use options), they may even be able to save money compared with the cost of staying in a five-star resort. For a luxury destination club, the cost per night —based on annual dues—would typically work out to about $1,600 for a three-to-five bedroom home, said Greg Shove, chief executive of Helium Report. Booking a 3-bedroom suite at Las Ventanas in Cabo San Lucas, would cost about $4,000 a night, he said, while a three-bedroom suite at The Peaks in Telluride, Colo., would run about $2,700 a night.
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