Destination clubs are the fastest growing segment of the luxury travel market. From jet setters to baby boomers, affluent households are increasingly joining destination clubs as their primary vacation option.

Members share a portfolio of fully-furnished, multi-bedroom homes in locations around the world. They travel to beach, mountain, and city residences on a scheduled basis, paying an upfront deposit and annual dues for exclusive access and five-star service.

Background

Originally launched in 1998, the industry has expanded rapidly in the past few years. Today, over twenty destination clubs manage approximately 600 homes with an average value of $3 million each. Helium Report estimates total fees of over $1.0 billion in 2005. (Click here to view a current list of clubs.)

Benefits

High net worth families are drawn to the benefits of destination club membership as a cost-effective alternative to luxury hotels, villa rentals, private residence clubs, and second home ownership.

Families forego the hassle and expense of maintaining their own vacation residence while gaining the flexibility and high-end service of luxury resorts. They have access to single family residences that accommodate larger groups in the comforts of a home, rather than separated hotel rooms.

Destination clubs offer a blend of privacy and intimacy well suited to families traveling with friends or children. Ranging from 2,000 to 6,000 square feet in size, homes are typically outfitted with top-of-the-line furnishings, gourmet kitchens, and state-of the-art audio/video equipment.

Hybrid solution

Destination club memberships are essentially a hybrid solution that combines the best aspects of the four primary high-end vacation alternatives. The chart below illustrates the unique value proposition of destination clubs compared to other hospitality accommodations: the ability to access multi-bedroom homes in multiple locations.

In the upper left quadrant, 5-star hotels provide upscale accommodations in many destinations. Private residence clubs, or PRCs, offer a similar product in a single destination. Both are typically 1-3 bedroom options. Second homes and villa rentals, in the bottom right quadrant, provide more bedrooms but share the PRC’s limitation of a single destination.

Destination clubs are the only luxury travel alternative that provide 3-5 bedroom accommodations in many destinations. As one of our readers concluded, “It’s all about the extra two rooms.”

Structure

Destination clubs typically aggregate member deposits to acquire or develop residences in popular locations and provide turnkey availability. Annual dues usually cover the operating costs of the homes.

Often confused with timeshares and private residence clubs, destination clubs provide members with access to multiple locations and usually do not offer ownership in the real estate portfolio. Recently, new clubs have begun innovating on the membership model and created “equity”

Destination club membership and vacation home ownership are not mutually exclusive. Many members also own second homes and have benefited from strong asset appreciation over the last twenty years. Destination clubs can be a complement as much as a substitute.

Growth

The industry is still in its infancy and business models are constantly evolving. There are currently an estimated 4,000 member households across all destination clubs, representing a small fraction of the total potential market. Over the next ten years, estimates range widely from 50,000 to as many as 500,000 member households.

To learn more about destination clubs, visit our News Archive or request a copy of our free 50-page Decision Guide to Destination Clubs.