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How Destination Clubs Fare in a Slow Real Estate Market

According to the National Association of Realtors, new-home sales are projected to drop to 464,000 in 2009, down 8.8% from their 2008 mark of 509,000. While real estate experts remain unsure when the real estate downturn will again move positive, equity and non-equity destination clubs both welcome and fear the decrease in luxury real estate prices.

Most destination club business models revolve around the clubs’ real estate holdings. Destination clubs typically fall into three rather broad categories:

Bond-like Memberships

The most common destination club model, a member receives a fixed amount when (if) they resign their destination club membership. Members have a fixed amount that they receive at the conclusion of their membership period, generally between 75 percent and 100 percent of the membership deposit they to join the club.

Future Value Memberships

This increasingly popular membership option provides members with a refund based on the ideally higher initial fees a club is charging when a member exits the club. Under this format, members may receive even more than they what they paid in. Although models vary, members typically receive between 70 to 80 percent of the future value of their membership, upon exiting the club.

 

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