Destinations Clubs vs. Private Residence Clubs

Recent developments in the vacation industry have made us pause to examine the ways in which the lines between destination clubs and private residence clubs have blurred. It is crucial that today's consumers understand the similarities and differences between the two so they can make an educated decision about their vacation home purchase. Below, we've outlined some of the basics of destination clubs and private residence clubs.

Similarities:

According to the Sherpa Report, "both offer alternatives to fully owning a luxury second home and both offer impeccably furnished, luxurious accommodations." Both also provide five-star hotel levels of service to their members and owners. (Think along the lines of concierge, travel planning, your own personal chef, ski valets, access to the world's best golf courses, luxurious spas, etc.) Both models also "require an initial upfront payment to purchase a membership or share and then both have annual dues or maintenance payments," adds The Sherpa Report. (Though we want to make it clear that "the initial upfront payment" for a private residence club is the actual purchase of a fractional share of real estate--not the cost of joining a club.)

Differences:

1. Location vs. Locations. You might consider destination clubs akin to country club membership. Destination clubs own a portfolio of luxury homes and provide access to all the properties within the club. Members in destination clubs have a variety of locations to choose from each time they go on vacation. When you become a member in a private residence club, on the other hand, you are typically buying a fractional share in one property in one location. However, some private residence clubs, like The Élan Collection, offer the opportunity to exchange your time and location with other locations within their group.

2. Equity. We covered this topic last week--and it's a big one. Typically, destination clubs are considered "non-equity" based, i.e. members are purchasing access to, or use of, a vacation home or resort property. That’s a completely different proposition from directly owning real estate. Some destination clubs have shifted to an equity model. But even with an equity-based club, a member buys into a company and the company’s management, effectively taking on the financial risk of that company. With The Élan Collection, the owners carry an individual deed in their name. It also means they can gain or lose as the real estate values move with the market.

The Élan Difference:

While we named only two main differences between destination clubs and private residence clubs, what makes The Élan Collection unique is that it is a hybrid of both vacation concepts. It combines the flexibility, exclusivity and multiple locations of a destination club with the equity potential of a private residence club. It is an alternative to destination clubs, fractional private residence clubs and full ownership vacation homes. The beauty of going Élan is that they are single private residences owned solely by the owners. Each Élan property is hand-picked for its luxurious location, spectacular amenities and excellent security, while the company takes care of all aspects of property management.

Since research has consistently shown that vacation home owners typically only use their home four to six weeks per year, they can enjoy the same realistic they would with a comparable whole-ownership residence--but at a fraction of the price. And not to mention, they can retain appreciation potential and enjoy all of the club-level services and amenities that come with a five-star resort. That's the Élan distinction.

Can you think of other differences between destination clubs and private residence clubs? Do you have questions you'd like to ask us about The Élan Collection, specifically? Please don't hesitate to leave us a comment below, ask us via @reply on Twitter (@elancollection) or email Stan Tonkin privately at stonkin@elanprc.com.

Why Buy a PRC: An Elan Q&A With Stan Tonkin

The mainstream media is finally catching on to the fractional real estate industry’s renaissance this year. Inman News, Smart Money, and MSN recently ran articles on the subject, yet misconceptions still remain about the advantages of shared ownership. We asked Stan Tonkin, Vice President of International Marketing and Sales for The Élan Collection, to clarify a few points. Here is a snapshot of our interview with him:

The Élan Report: What are the benefits of joining a private residence club like The Élan Collection?

Stan Tonkin: Private residence clubs, or PRCs, are a loosely configured co-op of fractional owned properties. Many PRCs offer trade use rights and other benefits, but differ widely in type of ownership, ownership costs, and periods of use. Research shows that typical owners of vacation residences only use their properties four to five weeks out of the year on average. Keeping that statistic in mind, a PRC owner-member can experience the same realistic use of a vacation residence at a fraction of the price.

ER: How do PRCs differ from timeshares and destination clubs?

ST: Private residence clubs are often confused with timeshares and destination club membership, where an owner-member typically buys a non-equity membership with a company that provides access and use to a wide range of vacation properties. In general, a private residence club provides its owner-members with actual ownership rights in a specific property—not a company. This owner-member status offers reciprocal use rights in either other properties owned by the PRC or through share agreements with other similar properties. By definition, The Élan Collection is a PRC that offers shared-interest ownership in an exclusive collection of luxury vacation residences. However, affiliation with The Élan Collection offers its owner-members amenities managed by Élan and the reciprocal use of spectacular properties within The Élan Collection worldwide, through our exchange network.

ER: Ok, bottom line: what’s the number one reason why people buy into a PRC?

Actual ownership of the shared interest in a property, as well as the fact it is sellable or transferable are key advantages. Sharing the cost of operating a property is also beneficial, notwithstanding the benefits of real estate ownership.

MarketWatch: Sales of Vacation Homes Rose Last Year

APRIL 6, 2010 UPDATE: Compare these MarketWatch numbers to the numbers from the 2010 The Shared Ownership Resort Real Estate Industry report by Ragatz Associates released last week, and it's interesting to note that the sales volume for the fractional ownership industry was still an impressive $860 million in 2009. In general, experts in the resort real estate industry believe that shared ownership resort real estate will rebound more rapidly and strongly than whole ownership as the economy recovers.

According to MarketWatch today, sales of vacation homes rose 7.9 percent in 2009. It was the first uptick in sales in the vacation home sector since 2006, reported the National Association of Realtors' Lawrence Yun, chief economist for NAR, in a news release:

"The typical vacation-home buyer is making a lifestyle choice, with nine out of 10 saying they intend to use the property for vacations or as a family retreat," said Yun.

These numbers underscore The Élan Collection mantra: buyers who are in the market for a vacation home value their experience and their time just as much as their money. Fortunately for them, The Élan Collection is not only committed to creating memorable vacations, but also redefining the luxury vacation home ownership experience by bringing the benefits of shared interest home ownership to the exclusive world of private residence clubs.

Are you encouraged by the 2009 sales numbers from NAR? Why or why not?

A Piece of the Vacation Real Estate Pie: Top 3 Take-Aways from Fractional Summit 2010

Fractional Summit 2010 recently wrapped its annual delegation of the biggest and brightest stars in the international fractional industry. What were the key take-aways from the event?

1. Fractionals are resilient in the current market. We’ve been saying it all along. Fractionals, or shared ownership opportunities (as we prefer to call them), are “the smart buy” when it comes to purchasing luxury vacation properties in today’s real estate climate. Rather than hassling with the headaches of typical home ownership, the affluent can own a piece of the ocean, a slice of the good life in wine country, or a share of the mountain. It’s due to the fact that “fractionals have win-win appeal as both a lifestyle buy and an investment"; while Piers Brown, founder of the UK’s Fractional Life, noted: “Despite the economic slowdown, there are green shoots starting to appear and a week doesn’t seem to pass without Fractional Life featuring news of a fractional real estate launch somewhere in the world.” Where Piers sees green shoots, we see the glimmer of élan… but we both agree that the future looks bright.

2. Fractionals have high levels of consumer satisfaction. The delegation also found that fractional owners in a variety of price points are happy with their investment. It’s easy to see why. When you look at the offerings at fractional private residence clubs such as The Élan Collection, owner-members will have more than their fair share of benefits (forgive the pun): luxury amenities, services, affordability, flexibility, reduced running costs, stress-free management and the potential for capital appreciation.

3. Fractionals are a natural upgrade from a timeshare. Fractionals often get compared to timeshares, but they exist in a league all their own, says Stan Tonkin, Vice President of International Marketing and Sales for The Élan Collection. “Shared ownership private residence clubs like The Élan Collection offer a rare opportunity to own a luxury vacation residence for a fraction of the price,” he said. “It’s vacation home ownership at its best.” According to the delegation, shared ownership "is a viable solution to second home ownership as it fills the gap between timeshare and whole ownership. As Bryan Lunt, Chairman of the Absolute World Group of Companies, commented during Fractional Summit, “Fractionals have lower management fees, more benefits and feel like more of an asset.”

What do you think of the Fractional Summit panel’s findings? Are you seeing more enthusiasm for shared opportunities verses whole ownership opportunities? Are affluent clients embracing the fractional concept in your market?

A Vacation with a View

If a picture is worth a thousand words, what would an oceanfront home in La Jolla be worth? For 13 member-owners of The Élan Collection, $1.25 million per share, to be exact.

Earlier this week, The Élan Collection welcomed yet another vacation property to its luxury private residence club: a 4,000 square-foot architectural residence called "Casa del Mar." The property offers the ultimate Southern California vacation retreat: unimpeded ocean views, a private gated entry, exquisite custom detailing, furnishings and artwork, four bedrooms, four bathrooms, lap pool, spa, oceanfront patio and a dramatic wood and glass balcony off the master suite for taking in a romantic sunset or two.

The residence will certainly appeal to those with an eye for detail, says Stan Tonkin, vice president of international marketing and sales for The Élan Collection.

"There are few experiences in life that rival watching the tide change or the sun dipping behind the horizon from your patio," he notes. "Casa del Mar is the epitome of the Southern California vacation."

The question is, who wouldn't mind spending four weeks out of the year with a view like this?

Haute Living: Wave of Yacht Sales A Boon for Luxury Fractional Private Residence Clubs?

The Haute Living blog today reported that European yacht-making companies like Princess Yachts and Beneteau SA are rolling out their most expensive models yet. According to the post, "Princess Yachts received their first $19.5 million order to build its largest boat ever (a 130-foot vessel)" while "Beneteau, the world’s largest maker of sailboats, and HanseYachts AG, Germany’s largest yacht maker, are also predicting higher revenues."

What's the hook? It could mean that the affluent "are beginning to spend again, as the demand for larger and more modern vessels picks up," Haute Living concludes. We find this news encouraging on a number of fronts. Wealthy buyers seem to be riding a wave of confidence as everything from yacht sales to high-end jewelry sales have been up recently. Additionally, experts say that high-end yacht purchases are almost always paid for in cash--which is also true for the majority of fractionals in ultra luxury private residence clubs.

What's your view on Haute Living's post?

A Case of Snow Brain: Vail, Big Sky, and Whistler Coming Soon

If you're an avid skier or snowboarder, you might have fresh powder on the brain right now. After all, it IS January and Mother Nature has already showered us with "affection" this year. In Colorado, Vail reported 10 inches of news snow this morning (following the 9 inches reported yesterday), while Aspen reported as much as 8 inches in some areas over the last few days. Latest count at Lake Tahoe was 32 inches in the last 2 days, while Mammoth just added 4.5 inches last night to its recent 8 feet. Another popular ski town farther north, Big Sky, Montana, also welcomed 2 feet on th upper mountain over the past 2 days. But all eyes are on Whistler in British Columbia, with the 2010 Winter Olympics just 25 days away: 8 inches have fallen in the last 24 hours.

If that isn't an impressive base of good news, pack this fact on for size: The Élan Collection will soon be adding several new luxury ski-in, ski-out vacation properties in some of the United States' most sought-after mountain retreats. How does a lavish penthouse at The Arrabelle--Vail's premier ski-in, ski-out residential destination--sound? Or a five-star residence that blends old western charm, modern luxury, and a location just minutes from Big Sky Ski Resort in Montana? What about an ultra private retreat perched on a bluff in one of Whistler Valley's most prestigious ski-in, ski-out locations?

As an Élan Owner-Member, you'll enjoy the best views, slopes and world-class ski locales, plus an A-list of services ranging from valet parking to concierge services, daily housekeeping, luxury spa services, fine dining, and more. Check back here to find out more details about these exciting new fractional shared ownership properties coming soon.

A New Year, A New View on Luxury Vacation Real Estate

With the real estate roller coaster of 2009 nearly behind us, it's hard not to breeze into 2010 on a cloud of optimism, excitement and new intelligence. Even as Inman News predicts that "the 2010 market will be different than any real estate professional has ever seen," the future still looks bright for the private residence club industry. After all, NAR's Chief Economist Lawrence Yun forecasted earlier this year that more international buyers will enter the market in 2010 due to favorable exchange rates against the US dollar. That's welcome news for shared interest private residence clubs like The Elan Collection, which appeals to elite buyers from all over the world.

Here are four other "signs" that point to a smoother New Year:

1. Growth. The US shared interest real estate market has grown to a 1.6 billion dollar industry, according to Fractional Life.

2. Jumbo Loan Trouble. The lack of available financing in the luxury real estate market is not exactly good news, but it does mean that there are more opportunities for cash buyers to purchase the most prized vacation properties at a lower cost. The end result could be that shared interest properties will see more play in 2010.

3. The Value of Vacation. According to The Affluent Shared Ownership Buyer: A Market Profile, nine out of 10 affluent leisure travelers say that vacationing is important to their well-being and the health of their personal relationships. Affluent consumers today still value their time, yet they realize the need to diversify their assets as they balance the lifestyle choices they view as important. Shared interest private residence clubs like The Elan Collection provide a more sensible way to acquire some of the most exclusive properties in the most renowned vacation destinations in the world.

4. Influx of Smart Buyers. Regardless of net worth, buyers are thinking about the value of all of their real estate purchases. Elite buyers are facing the reality that the actual use and maintenance costs of a vacation property does not support the sole-ownership investment. Shared-interest ownership in a luxury property of their choice provides the same realistic use and enjoyment as sole-ownership--yet at a fraction of the price. After all, who doesn't like a 'smart-buy'?

While none of us can predict the future, it's wise to keep our eyes on the present. In just two days, we'll ring in 2010 with new properties, new destinations and new opportunities to lead a haute life. Happy New Year to all!