Luxury--With No Strings
When it comes to vacation homes, Joel Liffmann, a hedge-fund partner from Greenwich, Conn., says he has tried them all. Liffmann has rented homes and condos but wasn't happy with the lack of maintenance. He bought a few weeks at a high-end Beaver Creek (Colo.) time-share, but they didn't always match the kids' ever-changing vacation schedules. Still, he shied away from buying a vacation home because of the cost, responsibility, and commitment to one location. So when he heard about Private Retreats, a vacation club with a collection of upscale residences in several resort areas, it hit the spot. "It solved my vacation dilemma," says Liffmann.
The latest twist in the vacation home industry doesn't center on ownership, unlike the luxury time-shares Ritz-Carlton and Four Seasons started marketing three years ago. Working from a country club business model, these plans offer access to million-dollar-plus resort homes for an up-front membership fee that ranges from $150,000 to $475,000 and annual dues from $8,000 to $17,500. You can get a guarantee of up to six weeks a year at club properties from Hawaii to Colorado to Mexico, but you can get more depending on availability. Private Retreats currently has just three competitors: Exclusive Resorts, Mirabella Estates, and Odyssey Club (table).
Are these clubs worthwhile? It depends on how you use them. If you want to vacation for just two weeks a year, they're probably too expensive. But if you have more time to spend, have a large family to accommodate, or would like to invite other guests, the considerations change. BusinessWeek looked for several upscale rentals in Colorado and Hawaii, posh homes with a minimum of four bedrooms. A two-week rental would run from $15,000 to $25,000 -- about the same as the annual dues at some of the vacation clubs.
But with a club, you get guaranteed access in peak seasons and quality assurance. If you're not satisfied, most clubs offer a full or 80% refund of the initiation fee. Another benefit is the service. The clubs' staff will take care of everything from rental cars and groceries to ski equipment rentals and restaurant reservations. So all you have to do is show up and kick back.
How do these clubs guarantee access when there are so many more members than properties? With the help of Dartmouth College mathematicians, Private Retreats CEO Rob McGrath figured that if he capped the membership at 400 and had at least 70 homes in different locations, everyone would likely get what they wanted, and overbooking would take place only about 4% of the time. On those rare occasions when demand exceeds supply, Private Retreats rents homes from other owners within the resort area.
McGrath also made sure his membership was geographically diverse. That way, families from Boston or New York might want warm-weather vacations during the winter, but those from Florida or Southern California would seek other areas. He also limited the pool of members with school-age children, so as not to overwhelm vacation destinations during school holidays.
Private Retreats, which was the first in the market in 1999 with only 30 members, recently reached its maximum capacity of 400 and is planning to launch a second club, where the homes will cost an average of $2 million and the initiation fee will be $450,000, as opposed to the current $250,000. Some attribute the success of the concept to the post-bubble sense of fiscal responsibility. "During the bubble, people would go out and buy one or two vacation homes, but what we offer is a defensive investment where for a portion of the cost, they can enjoy the benefits of the second home," says Thomas Gottlieb, Odyssey Club's CEO.
Liffmann, who joined Private Retreats in February, 2002, hasn't looked back. "The desirable locations and having a local host who takes care of everything would be hard for me to put together at any cost," he says. As someone who has tried it all, he's hooked on this concept.
By Pallavi Gogoi