Bankruptcy of Leading Vacation Club is Bitter Lesson for Those Seeking Luxury Vacations
August 6, 2006. In recent years, the travel press has been full of articles and advertisements extolling the virtue of vacation clubs, a new concept in which vacationers are asked to plunk down sums ranging from hundreds thousands to over a million dollars for a membership. Typcially, members are promised that they can get their money back if they want out. An article in yesterday’s Wall Street Journal (subscription required) describes the dismay felt investors in Tanner & Haley Resorts when the company filed for Chapter 11 bankruptcy protection on July 23.
The bankruptcy of Tanner & Haley was especially surprising because the company’s CEO is Rob McGrath, who pioneered the concept of vacation clubs. Mr. McGrath started the first-ever destination club, Private Retreats, in 1998. It offered houses in a handful of destinations, including Vail, Telluride and Steamboat Springs, Colo.; Jackson Hole, Wyo.; Scottsdale, Ariz.; and Cabo San Lucas, Mexico.
As the Wall Street Journal Article reports, “Tanner & Haley offered a novel twist on the time-share concept for the very affluent: It would buy homes in desirable locations around the world, then charge membership fees for access to them. The model is more akin to a country club than a time-share. Members own no property at all; they just have the right use an array of homes for a set amount of time each year.�
This new vacation concept caught on, and a new industry took shape. There are now more than 20 such destination clubs, including Denver-based Exclusive Resorts LLC, which is controlled by America Online co-founder Steve Case.
Certainly, not all vacation clubs will turn out to be the bad investment that this one has. However, it does serve to point out the danger of spending large sums of money on schemes like this. In the end, you are totally dependent on the integrity and business acumen of people you don’t really know for the security of you investment. The promise to refund your money is only as good as the financial soundness of the company.
We favor the ownership of vacation property over any arrangement such as this. If you want the benefit of vacationing in different locations there are thousands of luxury vacation rentals around the world that can meet your needs without the financial risks of joining a vacation club. They are easily acessible on VacationRental.org and other directories. For those vacation property owners who want to swap time with other owners, web sites that specialize in home exchanges are another option.
