NeilGoBlue

I've been intently watching the UE forum and some of the 'upset' regarding the new plans.. I don't know anything about UE, but I think what they are going through could happen to other DCs...

If the business model doesn't work under the current pricing structure, and the club can't grow fast enough, then a merger to survive is the likely outcome with somewhat changed service levels or substanial increased yearly dues. (assuming a bankruptcy or winddown is avoided). This is a potential risk that has to be considered when joining a new club.

ER Traveler

Members really dislike losing amenities and I for one would rather pay the cost to maintain or improve amenities and to maintain the business model. My DC is such a bargain compared to buying a second home, I'm sometimes amazed at the great value. Members in general are on the look out for any wasteful spending at our DC and tend to want the club to be successful.

LTTravel

I was at a meeting with a DC executive and an important comment was made. Whether a DC has 50 or 5000 members, most members are selfish and want what's best for them. The concept and business model of a DC will not work if members do not realize that a DC is a shared entity and that being selfish hurts the entire club because then everyone will get selfish. If you want daily maid service, or free wine, or free airport transfers, etc, you will have to pay for it. If you think that membership dues are increasing rapidly, you must either accept them or cut back on some services. A DC can't print money or continue to run a deficit like our government does.
When I am at a DC home with just my wife, I often tell the maids not to come in. I wish that I could tell them beforehand to try to save the DC some money to keep the business running. I often have no need for a concierge and wish they could send them on vacation when I am there. I still think that those options should be available to those who need or want it, but I would prefer to save the DC some money when I can to keep this thing going, which, at least for now, I think is great.

TarheelTraveler

I think we're going to see more and more of this going on, as members with great original contracts are encouraged, cajoled or forced (i.e., as part of a merger in lieu of a winddown) to take new, less favorable contract terms. As LTTravel points out what's good for one member is probably not good for the membership as a whole, particularly if replicated with hundreds of memberships. The math of certain DCs is just not workable - you can't over the long haul have $4M houses, low deposits, low dues, low member to home ratios, and fantastic amenities and service. Some of the DCs that have a lot of early members with ridiculously good pricing remind me of underfunded pension plans.

I think that an upshot of the entry of some "brand name" players to the field with undoubtedly higher and more realistic pricing is a good thing for the industry, because it allows others to price their offerings more realistically. I think the DCA could do the industry a favor by really working with members on increasing financial transperancy and financial strength. If you could take the financial issue off the table, sales would be even better, the product could go mainstream, and people could really focus on the amazing vacations and experiences.

DestiFan

Since I am going through the process, I wanted to chime in.

First, I do not believe PE needed this merger whatsoever. I cannot say the same for UR, as I was not a member, but the PE business plan was fine without this merger. The reason for it, which we can all debate the merits of, was scale. This was not a "wind down prevention" maneuver. Management at PE truly believed that scale was the only way to LT be a winner in this industry - hence, the move to consolidate the only other player at the Signature level.

Regarding the new plan issues we are going through....it is a tough situation. As a recent entrant, it does not hurt me as much as others, but nonetheless was a surprise. UE and its members have an agency problem - shareholders, management and members are all a bit at odds in this process. Members want to keep everything the same, but gain new houses and experiences. Management wants to consolidate 800 different plans and get pricing to industry standards - but are veery wary of isolating legacy members and shareholders want to firm up the membership base before executing a growth plan. This will be a hard transition, but the Club will be better for it in the end.

We have all speculated about this for months...there is about to be a shakeout in this industry. Sound financials are key, as the credit markets (remember this debate) have not gotten better for any of these guys. Ultimately, I believe the industry will look quite different 12 months from now - and I am glad I will be at UE - which I do believe will be one of the survivors.

With all that said - yes it sucks to go through this - but in the end - I will convert to the new plan, as I think the Club is at the beginning of a fantastic growth opportunity. There will be additional grumbling on these boards - and I will probably participate - but converting to the new plans will be the overwhelming response from most members, as it is in the best interest of all.

star1000

I don't think this is really about being selfish. There are a lot of things better for me than the club that I could want or complain about. My overiridng concnern is that clubs make a deal with early members. They give us favorable terms, knowing they will reduce benefits for new mmebers. We given them early capital, name recognition, referrals and legitimacy. That's a deal. Yes, it may be burdensome later on, but then offer an incentive for giving soem of that up.
No Wine, soda, no big deal, buut hey when DC's that tout luxury start trying to save $10-20 its not a good sign. As an example, UE is raising reciprocity two fold. Those fees are not tied to costs. They pay the same regardless of what club the occupant belongs to and there is a cap on reciprocity by member and property. Its about eeking out more money from people you should be building a long term base from and who you depend on for referrals.

DCTraveler

Well, said, Star1000 -- espcially that part about reciprocity. It's not that we can't buy our own bottle of wine, but it's scary that THEY feel they can't spend $10 for a bottle of wine, which is worrisome when we gave them $200k or more! If you consider the PE legacy forced UE update, you can see the bigger "cash call" for them is in the relatively small upgrades. In the scheme of things, say the average member in the UE legacy conversion contributes $10,000 more with 450 members that's an instant $4.5 million in 30 days -- no small chunk of change. That's a 20% downpayment on almost 12 homes -- do you think they will use it to add to the portfolio or payoff some executives. I'm skeptical.

Quintess Michael

Great Thread Neil (Go Spartans)

The service can't change. Not at this level.
The service at a DC is why you join. A decrease in service will equal a decrease in continuity, and a drastic, unfavorable change in the differences that make DCs a potentially lifechanging choice....and that is a downhill slope that ends in a dark place.

If you start cutting amenities...what do you start with?
I think DCs will start to tighten their belts, and that "low use" homes will get the axe a little quicker. No club wants homes hanging around, holding equity that could be used to make more members happy.

But everything else in our lives as gotten more expensive in the last year, so it has to trickle up to your DC.

Another question is : Will clubs increase thier Full Member Equivalents in order to compensate, in essence giving less availability to existing members for the same money?

__________________
Michael Aumock
Director, Membership Development
Quintess, The Leading Residences of the World

ER Traveler

How much of the reduction in amenities is made with an eye to what the competition provides? For example, ER has never had wine, free airport transport, free vehicles, free friends and family usage or multiple units usage yet some clubs have provided these amenities and more "free" of charge. It's easier for those clubs to eliminate or charge for than for ER to add those benefits. In fact, ER has added some of those benefits only after charging for them because they didn't provide them up front. It was smart on ER's part to do so and now members of other clubs feel something is being taken away and their club is somehow making a killing. But management sees other clubs like ER can still attract plenty of members without those extra free perks.

If a club is realistic in the beginning as to what is a meaningful benefit or amenity that works within the business model then there's less disappointment down the road.

DC Skeptic

I'm not so sure that is the case. Were they cash flow positive by any measure? Was net worth improving? The Pinnacle roll-out was hardly a success and the market was likely eroding the already likely negative net worth. You can lose a lot of ground before you have to face a wind down. Are you sure RK didn't just get tired of trying to make this work? It doesn't seem that he has much of a say in the successor club. My only point is that all was not necessarily as well as you represent. As I stated in one of my first posts, these clubs only exist because principals think they can profit. If that dream becomes too remote what's to keep them from bailing? Not much. And what protects you if they do? Even less (as legacy PE is now learning). But the amenity/cost question is an attempt at a solution.

DC Skeptic

And as I have argued previously, that original deal was very equity-like from the member standpoint. You took a lot of risk to be an early adopter; you were the equity capitalization. Your only return was the potential of being a member on favorable terms in the future when the club stabilized. (In fact, PE marketed that very way, as do all of them: "Get in now before the rates go up." They knew they were giving more to the early adopters than they planned in the future). For the club to take that favorable membership away because they have reached a more stable point where your membership is no longer important is in my opinion a profound betrayal of the original arrangement.

DCTraveler

You are 100% correct in this.

DestiFan

Can't argue with these points....agree 100% on early risk adoption.

Kagehitokiri

daily housekeeping is a service...

LTTravel

A friend was staying at the HCC Stowe and wanted daily housekeeping. The add on cost wsa $35/hr and 4 hr for a "full" clean, so $140 per day for daily housekeeping. Though it may sound high, I am sure that is the cost in most destinations if not higher in some, especially in four or five bedroom homes.
I, personally, would give up daily housekeeping to keep dues lower. Mid week cleaning or every three day housekeeping would be fine by me. I would love to lower my yearly dues at ER if that were an option. 45 days x $140/day is $6300 per year.
You will all say that is crazy, they don't pay nearly that much for daily housekeeping. That is the whole point of ER enclaves, this type of service can be done by full time employees in enclaves and save lots of money. However, I am sure that in the condo-hotel type destinations, you hands are tied by the condo-hotel association and fees for cleaning are very high.

Steamboat Bill