Private Luxury Vacation Rental Clubs Bilk Vacationers Out Of Millions

The recent bankruptcy announcement of the Ultimate Escapes private luxury vacation rental club proves that vacation and destination clubs are a risky investment and offer disappointing vacation experiences.

The private luxury vacation rental industry typically remains under the radar as far as the news is concerned. Lately, however, corruption and poor service has begun to affect luxury vacationers on a level that even the press is taking notice. Last month, we reported on how a Russian billionaire was frauded out of thousands of dollars by an concierge and luxury vacation rental provider in St. Tropez who charged  their client for a fireworks show that was put on my the city. While this is an isolated case, it sadly has become indicative of many luxury vacation rental providers throughout the world.

But the level of corruption and incompetence in the luxury vacation industry has finally gone global.

Today, Business Week reported that worldwide luxury vacation giant Ultimate Escapes is filing for bankruptcy, after only a 6-year tenure as a luxury vacation provider. In a press release, Ultimate Escapes CEO Jim Tousignant sought to blame the failure of the company on the 2008 financial crisis and recession, saying, ‘When your cash stops flowing, your expenses don’t stop. You’ve got staff, you’ve got properties, you’ve got fees, property taxes, mortgages that have got to be paid.'” In addition, Tousignant also cited a failed public offering as well, raising only $10 million when the company in fact needed a minimum of $30 million to cover managing its debt, which currently ranges between $100 and $500 million.

The real problem, however, is not limited just to Ultimate Escapes, but the entire private luxury vacation club business model as a whole.

Companies such as Ultimate Escapes offer private luxury vacation rentals via a “vacation club” format, which is similar to timeshare: all of these companies have a hefty one-time payment — usually well above $50,000 —  plus extremely high annual dues for a set number of days’ access to million dollar-plus luxury vacation rentals worldwide. Typically, however, the entrance packages for these clubs offer a nominal number of vacation days — 14 or so — which means that the average high-end club member typically pays upwards of $250,000 or more a year for the level of luxury and number of days that they are accustomed to.

With all of this revenue, one would think that private luxury villa rental clubs like Ultimate Escapes would have plenty of operating capital to stay afloat. The problem, however, is that these clubs use their revenues to purchase the properties in their network. and since they typically are $1 million-plus properties, cash quickly dries up.

In addition, there is a “bait and switch” factor with many of these private luxury vacation rental clubs as well: while their brochures, websites, and marketing materials all feature ultra-exclusive luxury vacation properties that exceed $10 million in value, the vast majority of available properties are not nearly as large, exclusive, and luxurious as these featured properties. Because of this, upper-crust luxury vacationers end up spending hundreds of thousands of dollars each year, only to be disappointed with the level of luxury they receive from their luxury vacation rental club. On top of this, if the club goes out of business, its members have no recourse to recoup any of their initial membership fee; they don’t really own anything.

And this is exactly why companies like Ultimate Escapes are hurting. Word has gotten around to the world’s most exclusive luxury travelers that private luxury vacation rental clubs simply are not worth the money.

So, what are the alternatives?

Private luxury vacation rental companies do exist that do not use the “vacation club” format. Rather than spending the money to actually own properties, instead, they hand-select the finest properties in the world’s most exclusive destinations, and work with the owners to transform them into lavish, luxurious “VillaHotels.” Because these companies do not have the burden of carrying the mortgages of luxury vacation rental properties, they are able t concentrate on offering a higher level of service, as well as a higher level of property as well.

Corruption and incompetence exists everywhere in industry, which means that wealthy people are just as likely to get ripped off as the average person. The good news is that alternatives now exist for the discerning luxury traveller, allowing them to get the level of luxury they are searching for without the risk of wasting their money on a vacation and vacation club that cannot live up to their expectations.

To learn more about Villazzo and its industry-leading VillaHotels and brand of luxury vacation rental services, click here.

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