Combined club looks stronger with more properties

Two of the destination club industry’s leading players turned heads today as they announced a merger to create the the second-largest luxury destination club. With 1,200 combined members, Ultimate Resort and Private Escapes’ new entity will be second only to Exclusive Resorts. The $200 million club merger is the largest one to date, and the combined real estate’s fair market value will be second only to Exclusive Resorts’ $1+ billion portfolio.

Ultimate Resort has been moving quickly this past year. They acquired the assets of bankrupt Tanner & Haley for nearly $100 million, and subsequently signed on 650 of T&H’s bewildered members. More than 50 percent of those members upgraded to more expensive plans with Ultimate Resort, according to CEO Jim Tousignant.

The merger will give both Ultimate Resort and Private Escapes members access to over 140 properties, as well as over 60 luxury hotels around the world. Club management believes that the combined entity will have enough homes to meet planned and last minute travel for all its members – with occupancy levels of 60% or less.

Tousignant said in an email that “the merger is a big benefit as we gain more critical mass and density in common overlapping locations, providing the combined firm with better operating cost efficiencies, stronger buying power, and improved amenities.”

According to Tousignant, there will be no change to existing memberships, but there will be adjustments to plans going forward, as they tweak the five different plans that the new club will offer. He also stated that the club did not need to raise capital at this time, and that the combined entity would be on a very firm financial footing. Tousignant also confirmed that the combined club would be compliant with all of the DCA’s best practices and disclosure requirements from day one after the merger.

Tousignant will be leading the merger with Private Escapes co-founder, Richard Keith. Keith will eventually serve as the merged club’s Chairman of the Board, and co-CEO with Tousignant until 90 days after the transaction closing.

Helium Report’s Take

Consolidation has been an industry theme for the past twelve months, as clubs realize the strategic value of size – more members fuel faster growth via referral, provide capital for new home development or acquisition, and enable operating efficiencies. With just under 5,000 members across all clubs, the industry is still young with lots of room for growth as it moves past the early-adopters to consumers who are less risk tolerant.

While size alone does not ensure financial stability – small clubs can have very strong balance sheets as well – the growth of a few larger clubs will signal to prospects that the industry is starting to mature. Common questions such as “How many homes will you open next year?” or “How will I get my deposit back if I want to resign my membership?” can be more readily answered when the club is large enough to demonstrate growth and financial strength. Mergers are a fast way to get to that size.

Download Helium Report’s free Decision Guide to Destination Clubs for more background.