We recently interviewed the man at the head of the BelleHavens destination club, Darin Gilson, and asked him some of the tough questions prospective members should be asking their destination clubs of interest. Here are Darin’s answers, and some of his thoughts about the industry. For more details on the company, please check out the Luxury Reporter profile of the BelleHavens destination club.

LR: Hi Darin - let’s get started. For whom is BelleHavens a natural choice, do you think, and why? Feel free to describe a ‘typical’ scenario, if you like.

DG: BelleHavens is the logical choice for anyone looking for a more sensible alternative to second home ownership. Someone who doesn’t want the hassles or costs that come with upkeep and maintenance. Moreover, membership in a destination club is for someone who wants a broad choice of vacation destinations, yet seeks the comfort and amenities of a home, rather than the limitations of a traditional hotel. BelleHavens members also recognize the value. If you consider that the initial deposit will be returned because of the protections in place with BelleHavens’ equity model and look at the annual fees over the number of nights you get and the larger groups of people that can be accommodated, it’s clear that this is far more cost effective than staying at a luxury resort for the same number of nights. For these reasons, our members tend to be families, savvy professionals or empty nesters taking multi-generational vacations. The spacious layouts of the multi-million dollar homes, many of which are in top resort locales, are a big draw. A typical scenario is a family with a few children, who enjoy the ability to travel with grandparents on an extended family trip, or with another family who also has children. We also see couples who enjoy traveling without their children sometimes, possibly to celebrate an anniversary or other special occasion.

LR: Can you explain for us the differences in your plan levels, and the reasons people choose each of them? Can you tell us which is the most popular?

DG: Currently, there are four different membership plans. Members tend to select their plans based on the average number of nights they anticipate using the club each year and whether they intend to travel over holidays. The Adventurer plan is currently the most popular. It includes one month of travel in the Club as well as the use of one holiday each year. In addition, for a nominal annual fee, Adventurer members can send friends and family unaccompanied to enjoy BelleHavens vacations. Here is a snapshot at BelleHavens’ four equity membership plans:
• The Traveler plan includes 15 nights of Club use per year
• The Adventurer plan includes 30 nights per year. This plan also includes one holiday and the option to purchase unaccompanied use for friends and family.
• The Voyager plan includes 45 nights per year. This plan also includes two holidays and the option to purchase unaccompanied use for friends and family.
• The Explorer plan includes 60 nights of club use per year. This plan includes two holidays, unaccompanied use by friends and family (already included in the price) and the ability to reserve two homes simultaneously.

LR: What do you think are the most important questions a prospective member should ask of a destination club? Any questions that people tend to forget?

DG: Most prospective members have a long list of really great questions, as they should - this is an important and expensive lifestyle decision. The initial inquiries are usually about the nuts and bolts of how membership works and where they will be able to travel to. As the sales process deepens, prospective members start asking about the financial aspects of the club – does the club provide an equity or non-equity membership, will they get their deposit back if/when they decide to exit, how is their deposit protected, is the Club financially viable? Because the industry is still maturing and some clubs with less viable business models have dropped out as is typical in any new industry, it is very important for prospective members to do their due diligence on the economics of the clubs before joining. Availability of homes is also a big question. After all, you join a club to use it – and there have been stories throughout the industry of members who struggle with being able to make reservations. So we recommend that prospective members ask:
• How exactly are deposits protected? Does the Club use debt when purchasing the homes and will my deposit refund be affected if the Club owes a lot of debt?
• What does the Club use my deposit and annual dues for? (If the answer includes servicing debt – then prospective members should be concerned about increasing annual dues and a deposit that is not backed by wholly owned real estate)
• How does the Club manage availability? Do you have a one year or two year reservation window and if I join in the middle of the year, will I still be able to make reservations for the end of the current year?
• What are the homes like and where are they located?
• What services and amenities come with the membership?
• What are your plans for growing the Club?

LR: How do you respond to the very common (and important) question ‘What guarantee do I have that I will always be able to receive a refund of my membership deposit?’

DG: Great question, and this is the biggest strength of our equity ownership business model. Should a member want to exit the Club, he/she may do so after two years of membership, on a three-in-one-out basis. The exiting member will receive 90% of the then current value of the membership. Our members’ deposits are held in escrow until used to purchase real estate, free-and-clear of debt. Because the properties are debt-free and because our members own these debt-free properties - our members, not creditors, have sole claim to these real estate assets – thereby ensuring that the deposit can be returned.

[For other thoughts on this point, please check out http://www.luxuryreporter.com/leaving-a-destination-club/]

LR: Equity-based destination clubs seem to be gaining popularity. Do you think the trend will continue, and what do you see as the strengths and weaknesses of that model compared with the options you offer?

DG: Yes, I certainly see the trend toward equity clubs continuing and I believe BelleHavens will continue to benefit from the fact that we were the first equity destination club. I strongly believe that it’s a better model because it contains more protections and benefits than a non-equity club. We worked hard to innovate the equity model for the destination club industry. Other private clubs–like golf country clubs–have adhered to the equity membership model for decades. The strengths lie in the protection of your deposit and the ability for members to play a greater role in the growth of the club. Also, because the members own the assets, the management company must adhere to stringent guidelines to managing members’ money. The equity model has the members’ best interests in mind.

LR: Service is a huge part of what destination clubs offer their members, but it’s not always clear to prospective members just what they might be able to expect. Can you give us any examples of times when your staff have been able to go the extra mile, or help out in unusual situations?

DG: Sure – let me first provide you with background on our philosophy on service and how we provide service at BelleHavens. We believe that service is the key to an outstanding vacation and therefore excellent personalized service is a hallmark trait at BelleHavens. We are not just a club of big beautiful homes – we are a club that facilitates amazing travel experiences. To do so – we take a very personal and proactive approach to managing memberships. Here is how we do that:

We employ a centralized BelleHavens Member Services team, staffed by Member Experience Managers – all of whom are professionals with luxury hospitality backgrounds. Upon joining the Club, each new member is assigned to a dedicated Member Experience Manager who will remain the member’s main point of contact at BelleHavens throughout the membership. The Member Experience Manager gets to know each member that is assigned to them and can therefore take a proactive approach to suggesting vacations and activities while on vacation. In addition, the central HQ employs a team of Member Communication Specialists, who are responsible for communicating important club information to members as well as developing proactive travel ideas. Each time a member travels to a BelleHavens destination, they receive the services of a destination concierge local to each BelleHavens destination. The Destination Concierge knows the best restaurants and activities at their particular destination and can arrange everything for the member prior to their arrival. The Concierge will also shop for the grocery list you’ve requested so that the fridge is stocked when you arrive, and meet you at the home for your home tour. The Concierge is available throughout your stay for anything you may need. Members also receive daily housekeeping during each stay.

Here are two great stories off the top of my head from among the many that our members have shared with us. One member likes to tell the story of his first ever experience at Jackson Hole, WY at the BelleHavens home in Teton Village. This member was anxious to see a popular show at a nearby dinner theater. The Destination Concierge in Jackson went several hours before the show started to save the best seats in the house for the BelleHavens member. Another example from a different member was from a trip to New York City with the entire family. While they sat in the car on the way to a Broadway play – the member realized that they had left the tickets for the show in their hotel room. Because there was not enough time before the play to return to the hotel to grab the tickets – the member called the destination concierge, who in turn called the theater and had the tickets reprinted and waiting for the member and his family by the time their car arrived.

In addition to the human service component we provide, each home is stocked with every amenity to make life comfortable, including coffee, tea and spices, outstanding electronics and luxurious linens, robes and toiletries. Members receive a welcome basket upon arrival that contains items specific to that member’s interests.

These services are far more personal and proactive than anything one would find at a five-star resort.

Finally – BelleHavens has negotiated partnerships with multiple travel partners to make getting to each destination easier. For example, all BelleHavens members are automatically Gold level status with Hertz for rental car needs. Our members receive special discounts with Luggage Forward, a company that ships your luggage so that you do not have to drag it with you to the airport. And at most destinations, our members can enjoy special access privileges to other private clubs like fitness and spa clubs, private golf country clubs, yacht clubs and social/business clubs.

LR: What’s on the horizon for the company?

DG: We are always evolving and striving to keep ahead of the fast-paced industry curve. In the future, members can look for enhanced services, more fabulous homes in more exciting destinations around the world and a broader array of member benefits for all types of travel.

LR: What’s on the horizon for the industry as a whole?

DG: I think we’ll continue to see consolidation in the industry with fewer but stronger Clubs like BelleHavens remaining. Thanks to our business model and asset protection, we have longevity and that means our members do too. It’s what attracts them to BelleHavens in the first place. More importantly, it’s what keeps them with us over the long run.

OUR ANALYSIS

Darin gives a good summary of the typical arguments for destination club membership, and it’s certainly true that destination clubs make good financial sense for those who would otherwise be staying frequently in large suites in exclusive hotels and resorts. There’s also a sense of ownership that doesn’t really come with the use of upscale hotels. However, the financial argument is conditional on members using the properties frequently. Prospective members should be realistic when estimating their use of the properties, and do the sums to be sure that destination club membership does make more sense.

Darin makes some good points about the strength of the equity-based destination club model, and we believe that more and more clubs will go this way as increasingly savvy (and wary) customers demand it. It may be that other aspects of a club are more important to you than its equity / non-equity status, but there’s not really a downside for members when a club offers true equity rather than ownership of a membership. If you’re talking with an equity-based destination club, be sure that you understand the details of the equity they offer. If you’re talking with a non-equity destination club, ask some serious questions about the security of your membership deposit, their reasons for not functioning as an equity-based destination club, and the restrictions on sale or transfer of your membership. In both cases, it’s critical to know when you will receive your refund in the event that you leave the club. Darin has explained this clearly, but not everyone has come across the ‘X-in, 1-out’ phrasing before: Darin’s answer means that a refund of the membership deposit will be given to an exiting member after three new members have joined the club. This is not out of the ordinary, though other clubs may have higher or lower ratios, and some do not include this kind of clause at all. Those clubs without this clause, incidentally, should be asked what would happen in the event that an exodus of members caused a ‘run on the bank’.

Gilson’s comments about ensuring you can get reservations when you want them highlight another point we emphasize here at Luxury Reporter - really understanding how a club functions before handing over your money. Delivering consistent service at the level promised by the destination clubs is not a trivial challenge, so make sure you’re completely comfortable that the club you choose can deliver on the promises it’s made. See if you can stay in a property before signing; be sure to talk with several existing members; ask direct questions of the sales staff; and generally get a sense of how the company does business. Fortunately, the industry seems to be operating at a high level, and disappointed members are not common.

One of Darin’s answers makes passing reference to the specter of increasing membership dues. This is a critical thing to understand before joining a club. How are membership dues increases justified, approved and capped? It’s not wise to join a club without knowing how often and how much the membership dues may be increased, and with what justification.

We like the financial security of the BelleHavens model, with no debt against properties. Instead, membership deposits are aggregated and new homes added when sufficient funds are available. The potential downside, of course, is slow property acquisition (especially in comparison with some of the debt-funded clubs that are expanding very quickly), as the addition of new homes is tied directly to membership sales. However, this doesn’t seem to have slowed BelleHavens’ growth, and it’s very easy to understand how your money is secured.

Warren Buffet generally doesn’t go in for luxury (although he does like the fractional business model), but we think BelleHavens displays the kind of financial prudence and common-sense that would appeal to ‘the Oracle from Omaha’.

OTHER ARTICLES THAT MAY BE OF INTEREST

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• Destination clubs - an overview
• BelleHavens membership incentive
• BelleHavens goes green