PRIVATE RESIDENCE CLUBS REVOLUTIONIZE VACATION HOME INDUSTRY

Private residence clubs are quickly becoming the vacation real estate of choice among affluent buyers and resort developers throughout North America. According to Ragatz Associates - a market research and feasibility consultant in Eugene, Ore. - existing and planned residence club projects nearly doubled from 1999 to the first quarter of 2002. Hobson Ferrarini Associates reports that in the first half of 2001, 365 fractional shares sold contributing to an estimated $450 million in sales for the entire year. While these statistics pale in comparison to the National Association of Realtors reported 359,000 second home sales in 2001, affordable price points and a largely untapped market suggest that the residence club industry will continue to expand.

The country's first private residence club, Deer Valley Club, at Deer Valley Resort in Park City, Utah, was conceived and launched by residence club pioneers Destination Club Partners (DCP).

"We designed Deer Valley Club as an alternative to the multi-million dollar real estate in Deer Valley," said DCP principal Steve Dering. "By purchasing at Deer Valley Club, owners evaded the stress of ownership, benefited from a ski-in, ski-out location, enjoyed hotel amenities and services, received abundant and flexible use, and had much less invested."

Private residence clubs are owned much like equity golf country clubs, only members reserve lodging rather than tee times (however, at The Residence Club at Teton Pines, The Residence Club at Tucker's Point and similar clubs, members reserve both). Members jointly own the club residences, clubhouse and other facilities. Club ownership is typically evidenced by a real estate deed, which is recorded and guaranteed by a title insurance policy. As with other forms of real estate ownership, the deed may be sold, transferred or willed.

Use of the club throughout the year is unlimited, subject to club reservation policies, and members may make reservations well in advance and on a short-notice basis. Membership usually ranges from one-tenth to one-sixth ownership, equating to a minimum of 36 days and 60 days of annual use, respectively.

For those needing more annual use, whole ownership may be a better fit. In addition to coming and going as you please, whole ownership provides freedom to govern the property as you wish (in compliance with any homeowner's association rules) and the potential to reside full time. But residence club ownership also has opposing benefits.

Residence club owners have access to amenities and services similar to those provided at fine hotels. Amenities typically include clubhouses with reception lobbies, members' lounges, heated outdoor pools, jetted spas, steam rooms, saunas, fitness centers, and game rooms. Club staffs commonly provide year-round storage for clothing and sports equipment, in-town and airport transportation, pre-arrival grocery shopping, bellmen, concierge, housekeeping, landscaping, maintenance, and accounting services.

In a June 2002 article, Business Week Magazine stated that "[residence clubs are] for people who want the comfort and convenience of a luxurious second home without the hassle of maintaining and staffing one."

The appeal of all benefits and no hassles continues to motivate club developers. In addition to the United States, residence clubs are in planning, under construction or already selling in Mexico, Canada, the Caribbean, Fiji Islands and Europe. While Ragatz reports that ski (66%), beach (18%) and golf (14%) properties represent the majority of existing club locations, urban (2%) locations like The Phillips Club in Manhattan are also growing.

For example, at the Christie Club in Steamboat Springs, Colo., $249,000 affords a one-seventh ownership of a fully furnished, 2,000 square-foot, three-bedroom residence, featuring a fully equipped kitchen, bedroom suites with personal baths, private balconies or patios, ski resort views and direct ski-in, ski-out access.

Most club accommodations are similar to those at Christie Club. Hobson Ferrarini research shows that 85% of constructed club units have either two or three bedrooms, ranging from 1,773 to 2,326 square-feet. The remaining 15% accounts for one-bedroom and four-bedroom residences. For buyers seeking 6,000 square-feet or more, whole ownership may be the only option.

Of the 61 projects accounted for in the first quarter of 2002, Ragatz states that 1,900 residences are constructed and another 960 units are under construction or planned. This compares to only 30 units at Deer Valley Club less than 10 years ago.

"High-end real estate developers, luxury hotel owners and affluent buyers are embracing the residence club concept and the industry's rapid growth is a testament to that," said DCP principal, Greg Hadley. "Increased awareness of residence club advantages over traditional ownership, coupled with a large influx of baby boomers into the vacation home market, bodes well for the industry's future."

So who is buying all these memberships?

A recent article in USA Today stated that people ages 37 to 56 - middle class baby boomers - are sustaining the demand for vacation homes. In the past three years, the largest segment of the baby boom, 53 year-olds, increased by 28%. In the next 10 years, forecasts call for an additional 22% growth.

Hobson Ferrarini found that 79% of U.S. households with annual incomes above $175,000 do not own a vacation home, totaling approximately 3,000,000 income-qualified prospects. And Ragatz reports that less than 12,000 households currently own a residence club membership, meaning more than 95% of the potential market is untapped.

Developers will seek to educate this untapped market about residence club ownership - premier resort locations, hotel amenities, comprehensive services, hassle-free ownership, and a price that's proportionate to use - as the residence club industry emerges among vacation real estate products.

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