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Edited on Wed Aug-24-05 06:34 PM by Jon8503
This is so obscene, "Viva Chavez"
Developers Launch New Tier
Of Vacation Properties;
A $10 Million Membership
By ROBERT FRANK
Staff Reporter of THE WALL STREET JOURNAL
August 24, 2005; Page D1
The race to build the most exclusive resort club has reached a new extreme: a $10 million membership fee. In the next few months, the Montana-based Yellowstone Club, a private ski and golf community, will start marketing what's believed to be the world's most expensive resort club. For a one-time fee of between $4 million and $10 million, depending on the sign-up date, members will get to stay for a set period of time at a castle in England or Ireland, a villa in Tuscany, a private golf course in Scotland and several other beach, spa and golf properties around the world. They'll also get to use one of the club's two mega-yachts and a fleet of private jets. The launch of the club, called Yellowstone Club World, ratchets up the competition for the world's wealthiest vacationers and adds a new twist to the fast-growing business of destination clubs. The clubs, akin to high-end time shares, offer members a choice of dozens of private homes around the world, along with concierge and travel services. The clubs have surged in popularity among wealthy travelers who want the privacy and luxury of their own vacation mansions without having to buy and maintain them. This 157 foot yacht is available to members of the Yellowstone World Club.
There are now about 30 destination clubs, with total membership dollars expected to more than double this year to about $1 billion, according to Ragatz Associates, a resort-industry consulting firm. Most clubs charge membership fees of between $300,000 and $500,000 and annual dues of between $10,000 and $20,000. The new Yellowstone club's annual dues are expected to be between $60,000 and $100,000.
While the industry started out catering to single-digit millionaires, it's now expanding both to higher and lower demographics, targeting, on one hand, the super-wealthy and, on the other, those willing to pay membership fees of less than $150,000. The industry is also launching lower-priced products to wealthy travelers who have less time to vacation. Exclusive Resorts, for instance, recently launched a new Affiliate membership, which costs $195,000 to join -- less than half of its regular membership fee -- and allows customers to use the properties for up to 15 days a year.
At the bottom of the lower end is Fort Collins, Colo.-based Private Escapes, which calls itself the "only affordable" destination club. Its least-expensive offering costs $95,000 for membership and $7,200 in annual dues. Members can stay in homes that are valued between $500,000 to $600,000 in locales such as Las Vegas, California's Napa Valley and Colorado.
The most coveted market segment, however, is the super-rich, who are willing to pay membership fees of $1 million or more to separate themselves from mere millionaires. The number of people in the U.S. with more than $30 million in financial assets grew 10% last year to 30,000, according to a report by Merrill Lynch & Co. and Capgemini.
PRIVATE RESORTS CLUBS
See various price ranges for destination clubs that have exploded in popularity among travelers who want the privacy and luxury of their own vacation places without having to buy them.
Tanner & Haley, the Westport, Conn.-based company that operates the Private Retreats and Distinctive Retreats clubs, is about to open a new club for its richest clients. The club, called Legendary Retreats, will charge a membership fee of $1.5 million and annual dues of $67,500. While the average value of the homes in the Distinctive and Private clubs are $2.5 million and $1.1 million, respectively, the homes in the Legendary club will be valued at $7 million to $8 million and include a 7,200-square-foot log mansion on the ski slopes of St. Anton, Austria, and a 6,800-square-foot mansion on a bluff in Maui with a private beach and infinity pool.
Rob McGrath, the Tanner CEO who is credited with creating the industry in 1998, said demand is stronger than expected despite the high fees. He has 50 applications for the 35 "founder's circle" slots in the club, which offer lower membership fees and other benefits. He expects to sign up 100 members this year for the club, which officially opens for business in September.
"When I started in 1998, I thought $100,000 in membership fees was too much," says Mr. McGrath. "Now look at the demand for $1 million."
Each of the clubs has its own formulas for how long members can stay and who gets first dibs on reservations for prime dates, although most operate on a first-come, first-served basis. The two leaders, Exclusive Resorts -- owned by former AOL chief Steve Case -- and Tanner & Haley together control about 80% of the industry.
Yellowstone Club World marks the boldest bet yet on the upper end of the market. The membership fees are more than 10 times the industry norm and cost more than buying a vacation home in even the toniest resorts. Even after paying the membership fee and dues, members still pay for a portion of their own food and beverages once they arrive at their homes.
Some industry experts say Yellowstone is proof that the resort-club market is reaching its upper limits and that some clients are bound to be disappointed based on the price.
"We've hit the ceiling in terms of the level of luxury you can deliver," says Russ Alan Prince, a consultant to luxury travel companies and wealth managers. "These companies are running out of fanciest things to differentiate themselves. The challenge is to transform all these mansions and boats into some phenomenal, ongoing experience that will justify the fees."
Yellowstone says its model is vastly different from the rest of the industry. The company, owned and run by timber magnate Tim Blixseth and his wife, Edra, plans to spend up to $500 million to buy ultra-lavish properties around the world. The aim is to create the perfect global playground for the super-rich, including golf courses, spas and beach clubs. But rather than simply having properties near the beach or golf clubs, the club will own the beaches and links.
Mr. Blixseth has already purchased a golf course and development in St. Andrews, Scotland. Guests will be able to stay at one of 40 stone cottages around the course, which can be used only by Yellowstone members. He also bought 1,600 acres of beachfront property in Cabo San Lucas, Mexico, where members will get their own beach club and seaside villas.
For the outdoorsy rich, the club bought a fishing lodge in Alaska, where guests can catch a seaplane to one of six remote salmon-fishing rivers.
Mr. Blixseth says he is also in talks to buy a villa in Tuscany, a castle in Ireland or England, an island off Vancouver, Canada, an island in the Caribbean and perhaps a property in Australia or New Zealand. He plans to have a total of 10 properties when he's done, including the current Yellowstone Club in Wyoming.
Members will also get to motor around the world in one of the club's two yachts -- a 157-foot Picciotti, which will spend winters around Mexico and summers in Alaska and Canada, and a 180-foot to 200-foot Feadship, which will spend summers in southern France, Italy and Croatia and winters in the Caribbean. To shuttle them around, members will have access to the club's jet fleet of Gulfstream G Vs and G IVs and Citation Xs. Members will still have to pay hourly operating costs for the jets and boats (they don't have to pay for the ownership equity).
Mr. Blixseth says he plans to sell 150 new memberships, raising $1 billion in fees. The first 25 new members will pay $4 million, the next 25 will pay $5 million, and on up to $10 million (he's skipping $9 million). He also expects about half of the existing 225 members of the Yellowstone Club to join. Those members, who paid $250,000 to join Yellowstone and bought property for at least $1 million in the community, will pay about $2 million to upgrade to the World Club.
Write to Robert Frank at robert.frank@wsj.com
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