Wealthy pay big bucks to join luxury travel club

updated 5:42 p.m. ET Oct. 17, 2007

MIAMI - Why are thousands of millionaires queueing up for the right to plunk down as much as $459,000, plus annual dues of up to $35,000, just for a few weeks of access to vacation homes?

The answers might be found in the 6,000-square-foot villas in Tuscany with infinity pools overlooking the countryside, the Miami Beach oceanfront condos with balconies overlooking the Atlantic and Intracoastal Waterway, and the private chefs whipping up gourmet dinners.

Exclusive Resorts, a venture led by AOL co-founder Steve Case, is the largest player in a growing segment of the travel industry that a few years ago was essentially nonexistent — the luxury destination club.

The clubs have not been without problems: The first, Tanner and Haley, filed for bankruptcy last year, leaving hundreds of members fighting in bankruptcy court to try to reclaim some portion of their membership deposits.

Despite the recent tumult, Denver-based Exclusive Resorts has grown 50 percent in the last 12 months, from 2,000 to 3,000 members, said company Chairman Donn Davis, a longtime associate of Case from their days at AOL. The club has a waiting list of more than 100.

"Our members are some of the wealthiest, most discerning consumers out there," Davis said. "They've done their homework on us" and decided the investment is worth it, he said.

Pricey initiation fee
It works like this: A member pays an initiation fee of several hundred thousand dollars, plus annual dues in a range of $15,000 to $35,000 a year. In return, the member gets access to the club's roster of more than 300 properties in 34 destinations around the world.

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At Exclusive Resorts, a deposit of $239,000 plus annual dues of $14,000 gets you 15 vacation days. A $459,000 deposit plus annual dues of $35,000 gets you 45 days. Members who quit the club are refunded 80 percent of their initiation fee.

Case's company operates with a different business model than that of the defunct Tanner and Haley. While Tanner and Haley leased properties, Exclusive Resorts owns the majority of its homes, which it says gives the company sufficient assets to back members' deposits.

In addition, Exclusive Resorts members never own a piece of the properties, as they would in the vacation time-share model. Instead, they are buying into what more closely resembles a country club, Davis said.

Jan de Roos, a tourism and real estate professor at Cornell University's School of Hotel management, said the comparison is valid.

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"I like the business model," de Roos said. "You don't own the real estate. You own the right to use the company's real estate. Trust is a huge piece of how the business model works ... and I think people trust Steve Case."

Davis said the club's biggest challenge is managing peak demand, particularly among its ski properties. The sales team is upfront about the club's limitations.

"If you say 'I want to go to Vail for Christmas every year,' we tell you that's not how it works," Davis said.

To pull demand away from peak times, Exclusive Resorts offers similar properties — such as Deer Valley, Utah — and works hard at offering unique vacation opportunities throughout the year. In the offseason, it offers popular family cooking classes with personal chefs in Tuscany. The club also has a rotating menu of "once-in-a-lifetime" options, like members-only Mediterranean cruises or tours of Buddhist monasteries in Bhutan.

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