Private Escapes and Ultimate Resorts to Merge

[LTTravel]

An announcement was made that Ultimate Resorts and Private Escapes plan to merge. The details are not clear yet but this is definately NEWS in the Destination Club Industry.

 

[Steamboat Bill]

This is HUGE news and in the best interest of both clubs.....wow!

 

[GOLFNBEACH]

LTTravel, thanks for the heads-up! Is this rumor or confirmed?

I guess it is inevitable that there will be mergers in this business. It seems that they will need to find a way to merge the PE "all you can eat" plan, with the UR "specified number of days" plan.

 

[Bourne]

If this is true, the news is huge.

Private Escapes had been struggling for a while to add members at the fast clip as HCC was effectively eating into its core market.

It is a merger between two of the top five i.e. ER, UR, QN, PE & HCC. Also, it solidifies the need for a lite version of the club in the 1000+ member bracket. As HCC is the ONLY viable LITE version of Destination club remaining, this puts pressure on the big three to be a HCC suitor if ( and the big IF ) HCC is willing to merge.

I see a few things happening in the future...

HCC remaining independent - 9.0/10
HCC merging with UR - 7.0/10 - if UR and PE merger is successful.
HCC merger with ER - 5.0/10 - would increase to 8.0/10 if UR and QR merge.
HCC merging with QR - 3.0/10 - HCC management is way to smart to merge with a big three wannabe that it would surpass soon.

Let the party begin.

 

[Kagehitokiri]

what the heck? so which model are they going with?

and how are they breaking down the home values, because PE had 3 and UR had 2?

where was the announcement? email to members? any more info at all?
(i find it absolutely bizarre it takes months for DC sites to actually have updated information/news online...)
(and theres no helium or sherpa coverage)

 

[Steamboat Bill]

I see a few things happening in the future...

HCC remaining independent - 9.0/10
HCC merging with UR - 7.0/10 - if UR and PE merger is successful.
HCC merger with ER - 5.0/10 - would increase to 8.0/10 if UR and QR merge.
HCC merging with QR - 3.0/10 - HCC management is way to smart to merge with a big three wannabe that it would surpass soon.

I fully agree with you and would only add the possibility of another non-DC player like Marriott getting into the action. Buying HCC would give them a running start into the DC business.

 

[Kagehitokiri]

ultimate resorts recently had a hotel alliance too..

http://www.sherpareport.com/destination-clubs/ultimate-resort-collection.html

so if completed this will be pretty large.

 

[Bourne]

what the heck? so which model are they going with?

and how are they breaking down the home values, because PE had 3 and UR had 2?

where was the announcement? email to members? any more info at all?
(i find it absolutely bizarre it takes months for DC sites to actually have updated information/news online...)
(and theres no helium or sherpa coverage)

I would assume that PE Premiere and Platinum would be merged with Lite and Pinnacle with UR's top tier.

The merger would have to address two major questions.
1. Does the Reciprocal model gets carried over for UR members.
2. Does the equity model get carried over for PE Members.

 

[Kagehitokiri]

id also think they would have to be getting rid of the nightly fees..

dont the upper tier UR members get reciprocity to lower tier? or am i thinking of portofino?

seems like portofino would be another good merger/acquisition, based on the current standing of PE and UR.

if this goes through, i would think it would have to cause somewhat of a shakeup in the DC market.

 

[LTTravel]

what the heck? so which model are they going with?

and how are they breaking down the home values, because PE had 3 and UR had 2?

where was the announcement? email to members? any more info at all?
(i find it absolutely bizarre it takes months for DC sites to actually have updated information/news online...)
(and theres no helium or sherpa coverage)

Initial plans are for three tiers, $1 million, $2 million and $3 million homes with five membership plans at each level (UR's going into the top two of PE). Which model they will use, PE or UR, is not clear yet. But it sounds more like the UR model. Maybe with some modifications. They plan on running independantly for a 75-90 period before there is a complete merge. They have plans to go ahead imminently but as they say, "It ain't over till the fat lady sings". I guess we are faster than Helium or Sherpa. I could use a side job.

 

[LTTravel]

I see a few things happening in the future...

HCC remaining independent - 9.0/10
HCC merging with UR - 7.0/10 - if UR and PE merger is successful.
HCC merger with ER - 5.0/10 - would increase to 8.0/10 if UR and QR merge.
HCC merging with QR - 3.0/10 - HCC management is way to smart to merge with a big three wannabe that it would surpass soon.

Let the party begin.

I think that the options are really either
1. HCC remains independant
2. HCC merge with UR at the lowest level ($1 million)
3. Marriott buys them out

ER- not a chance, they will not start a two tier club unless they start a completely new one, completely seperate, but I doubt it.
QR- I think they are a great club, but more likely to merge with Lusso, which is more at their level. They do not want a lower level club either. They just announce a $50 million development in Cabo (Why? they already have a bunch of homes there. I think that they are making some bad choices. ?Bend Oregon? How much of a national/international draw is that? Maybe locally it is popular but no one from the northeast is dying to go there.)

 

[Kagehitokiri]

i highly doubt lusso will merge with a non-unlimited use club. thats their main marketing focus. as opposed to LRW which included it, but reservations were max 7 nts, i believe had less advanced reservations, and didnt market that feature as heavily.

quintess will be second after ER to have their own private development. steve case is also planning some ridiculous eco dev in costa rica, with $800MM being thrown around as the development cost. who knows with the carbon neutral craze, maybe itll be a good investment for him. but its separate from ER. although i would imagine there could easily be some shared properties/resources.

 

[puffpuff]

As a UR member, I got this today:

This week we will be announcing that Ultimate Resort®, the industry’s 2nd largest destination club, and Private Escapes™, the industry’s 3rd largest destination club, have signed a definitive agreement to merge and create the industry’s fastest growing and top destination club by number of club locations, with 1,200 combined club members accessing 140 club properties located in nearly 50 of the world’s best resort destinations in the US, Mexico, the Caribbean and Europe. For Ultimate Resort and Ultimate Resort ELITE Members, this transaction greatly enhances the number of club destinations and homes available, adding 18 new club destinations immediately upon closing.
New Destinations Added at Closing:
Belize
Big Island, Hawaii
Cap Cana, Dominican Republic
Charleston, SC
Chicago, IL
Copper Mountain, CO
Fox Acres, CO
La Buscadora, BVI
La Costa, CA
Lake George, NY
Lake Las Vegas, NV
OuterBanks, NC
Punta Cana, Dominican Republic
Punta Mita, Mexico
Reynolds Plantation, GA
Turks & Caicos
Tuscany, Italy
Watercolor, FL
The combined company will have a global resort real estate portfolio with a fair market value of $200 million, and will also have one of the strongest and most seasoned management teams in the industry. The combined company will operate 3 distinct destination clubs targeting the $1 million, $2 million and $3 million average home value club categories. The specific name of the combined business and the names of the 3 destinations clubs will be finalized prior to closing.
The signing of this agreement begins a formal 75 day due diligence process with an anticipated closing by the end of November 2007. While senior management from both Ultimate Resort and Private Escapes have spent a substantial amount of time discussing various topics regarding organizational structure, staffing, sales, marketing, operations, IT, member services, field operations, etc., there are still many details that need to be clarified and, therefore, we certainly do not have all the answers to questions that our employees or members may have today. We, of course, will continue to keep everyone updated and informed on our collective progress, including finalizing our go-forward plans and clarifying more of the details.
With the closing of this milestone agreement, the combined company becomes:
• The fastest growing club in the $1 billion destination club industry
• The #1 club by number of global destinations
• The #1 club in the $1 million home value club category
• The #1 club in the $2 million home value club category
• The #2 club in the $3 million home value club category
• The #2 club by total number of members
• The only destination club that operates 3 distinct clubs and 5 flexible membership plans
Ultimate Resort and Private Escapes will maintain current club operations in parallel during the 75 day due diligence period while the two companies work on integrating all phases of club operations, technology, member services and field operations. During the first 90 days after closing, Rich Keith (founder and CEO of Private Escapes) and I will both serve as co-CEO’s of the combined company to ensure a seamless transition. Thereafter, I will serve as the CEO of the combined company and Rich will serve as Chairman of the Board. The combined company will continue to embrace the same sustainable and scalability business model that have proven successful for both Ultimate Resort and Private Escapes, ensuring our members have flexible access to the world’s broadest array of club destinations. The combined business is committed to providing great club availability and flexibility, while also maintaining a low equivalent member-to-property ratio, a winning strategy that has led to strong growth and member satisfaction over the last few years.
The combined company will operate its corporate and operational offices in Orlando, FL, Fort Collins, CO and Kansas City, MO and is committed to maintaining operational offices in both Ft. Collins and Kansas City until the end of 2008. I will be scheduling a member call in the near future to provide you with more details and answer any questions you have about the value and benefits of the merger. Please do not hesitate to contact your Membership Director, Member Services Specialist or the Senior Management team if you have any questions or concerns in the meantime.

 

[puffpuff]

My take on the bottom line:

a. PE is being absorbed by UR. Simple. UR CEO to be the CEO of the merged company.
b. There will be 3 -tier at the end of the day, consistent with current UR model whcih is here to stay.
c. HCC will eventually be absorbed as a matter of time at a premium and will blend into the lowest tier.

 

[puffpuff]

Those who are thinking about HCC may want to be more practive. Given the merger trend and HCC's current undervalue play, its a matter of time before HCC is absorbed into the lowest tier of UR/PE combine entity . Bear in mind that PE lowest tier is current about twice the price of HCC.

 

[puffpuff]

Based on how UR absorbed members of Tanney and Halley which went well, this is how I see the merger will develop:

Existing PE Platinum Members ( 200000 to join, 11500 dues, 135 per night) will be converted into Ultimate Silver ( 215000 to join as of Sept 15, 14500 dues, 21 days) with a coupon to upgrade to higher level within the same tier or to different tier.

Existing PE Premier Members ( 100000 to join, 7700 per year, 80 per night) ) will likwise be converted into a new low tier silver , with 21 days usage and about 9500 dues). This will open up a bronze level within this tier with lower entrance fee ( 60,000) and 14 days to compete with HCC. Compare this to HCC's current price of private memebrshp at 60,000 with dues of 8400 for 45 days, HCC is offereing twice the number of days .

Of course I could be totally wrong.

 

[TarheelTraveler]

I agree with LTTravel. I could see some mergers among ER, Quintess, Lusso and possibly Crescendo and Bellehavens (although the last two have very different structures than the first three), but I doubt they would merge with HCC, for example. The portfolios are too different, and they wouldn't really be adding any scale, which is driving these mergers. I could see HCC being merged into Portofino or the UR/PE combination someday, so might not be bad to get in with HCC.

ER probably doesn't need to merge, as they seem to have incredible growth, regardless of the economics. They are almost mainstream at this point. I've met a lot of people who've heard about Exclusive Resorts, but know nothing about clubs or the DC industry as a whole.

 

[PerryM]

3 into 2 sounds an alert...

When company #3 merges into #2 then they know something we don’t know – 1) poorly run #3, 2) Softening of the DC market 3) New player entering the market that will challenge them for #2 slot or even #1

I can only guess, but I’d guess a major player is getting ready to enter the market – a Marriott or Westin or both. Once they enter the DC market it will forever change and the change will be instantaneous and have broad repercussions to companies with a few hundred members or less – mainly #5 and below.

Let’s see if more mergers happen this year and we will have our answer.

I was leaning to joining a DC but have now shelved that idea – I’d rather have a major player handle my money; I'd bet many others will also.

P.S.
What would happen if Ritz-Carlton entered with 25 eye popping destinations/units with 10 memberships each or 250 in total. How long before those 250 sold out - 1 week? A unit would be in the $4 M range so each would be $400k membership with $40k MF for 4 weeks. 1 week sounds about right.

What would they do in week #2? 50 more units?

What would that do for the entire industry? Try to sell your membership and roll it over to a Ritz? Good luck.

 

[GOLFNBEACH]

Those who are thinking about HCC may want to be more practive. Given the merger trend and HCC's current undervalue play, its a matter of time before HCC is absorbed into the lowest tier of UR/PE combine entity . Bear in mind that PE lowest tier is current about twice the price of HCC.

Interesting thought. Let's assume I join HCC as an Associate Member ($30K, $3,500 annual, 15 nights) and they are sold to UR/PE. What level would I be at in the new club? I'm guessing they kick me down to the PE "trial" status that is based on 14 nights and $4,600. Bottom line I would lose a night and have my annual dues increased over 30%.

If I were to join HCC as a Private Member ($60K, $8,400 annual, 45 nights) what level would I be at under UR/PE? Based on property values I would probably fall into something like the PE Premier. Since PE Premier has no set days the club needs to work something out.

Lot's of questions and uncertainties.

 

[vineyarder]

Is this rumor or confirmed?

where was the announcement? email to members? any more info at all?
(i find it absolutely bizarre it takes months for DC sites to actually have updated information/news online...)
(and theres no helium or sherpa coverage)

Yes, confirmed... Internal notifaction to members was yesterday; public release is today, hence no online info or coverage yet...

Private Escapes had been struggling for a while to add members at the fast clip as HCC was effectively eating into its core market.

Actually, this is not true; the pace at which PE has been adding members has remained the same during the period of HCC's dramatic growth... The number of members per month joining PE Premiere has been very consistent over the past 2 years...

a. PE is being absorbed by UR. Simple. UR CEO to be the CEO of the merged company.

I disagree. The UR CEO will be the CEO of the combined entity, but the PE CEO will become the Chairman of the Board (higher on the org chart) and the PE COO will be the COO of the combined entity... and operations will be consolidated in Ft. Collins, at the PE office building, not in UR's home base of Orlando. It is really being treated as a merger of equals.

Those who are thinking about HCC may want to be more practive. Given the merger trend and HCC's current undervalue play, its a matter of time before HCC is absorbed into the lowest tier of UR/PE combine entity . Bear in mind that PE lowest tier is current about twice the price of HCC.

Agree; consolidation = less competition = higher prices. Whichever DC you are considering, this is probably a good time to join. Once the PE/UR merger is complete, the deposit and annual dues will be 30% higher than PE is now. I also agree that HCC would make an attractive parter to be merged into the lowest tier of the PE/UR combo...

Based on how UR absorbed members of Tanney and Halley which went well, this is how I see the merger will develop:

Existing PE Platinum Members ( 200000 to join, 11500 dues, 135 per night) will be converted into Ultimate Silver ( 215000 to join as of Sept 15, 14500 dues, 21 days) with a coupon to upgrade to higher level within the same tier or to different tier.

Existing PE Premier Members ( 100000 to join, 7700 per year, 80 per night) ) will likwise be converted into a new low tier silver , with 21 days usage and about 9500 dues).

This will be treated totally differently than the T&H deal. With T&H, the members were 'up a creek', as their club was ceasing to exist, so they could be shoehorned into an existing UR plan. That is not the case with this merger. Existing PE members will be grandfathered into a special class of membership in the new entity, that will preserve the terms they signed up under (unlimited usage, annual fee structure, etc.). Of course, this will not be offered to new members of the combined entity, so it will not be on the website, etc. (just like peopel who joined HCC prior to rule changes wrt holiday bookings are grandfathered into the rulkes they joined under).

ER probably doesn't need to merge, as they seem to have incredible growth, regardless of the economics.

agree...

When company #3 merges into #2 then they know something we don’t know – 1) poorly run #3, 2) Softening of the DC market 3) New player entering the market that will challenge them for #2 slot or even #1

Disagree completely. While there certainly may be a major new player entering the market, it is very reasonable for the #2 & #3 players to merge in order to compete effectively against the #1; happens all the time!

Bottom Line: Is this a good thing for the members of UR & PE?
Answer: Only time will tell... I certainly hope that the PE style reservation flexibility remains, and I hope that the UR home quality is as good as PE's; I'm a little worried looking over the UR site, as some of the non-elite homes appear to be lower in quality/location than PE, but it is very difficult to assess, as there aren't alot of photos... Certainly the Naples home being 45 minutes from the beach is a turn-off, as are the lack of ocean views on the non-elite home in Hawaii... I am certainly hoping that I am wrong, and would love to hear from UR members on their experiences!

 

[TarheelTraveler]

My understanding from those in the industry is that PE is very well run and that there has been softening in the DC industry probably in connection with the overall real estate market. A lot of clubs are just beating each other up with various introductory offers that are not sustainable long term.

I do think that we'll see a major player enter the market, but that ER and UR may be big enough at this point to fend off a major player. We did see one major player enter the market and fail, having to essentially merge into Q. Cendant and Leading Residences of the World entered with a big splash, good size portfolio ahead of demand and good pricing terms, but could never get the traction that they needed to make it without a merger. I think at this point if a major player enters the market they will need a great name like Ritz and have to commit major dollars or, more likely, merge with an established player.

 

[vineyarder]

What would happen if Ritz-Carlton entered with 25 eye popping destinations/units with 10 memberships each or 250 in total. How long before those 250 sold out - 1 week? A unit would be in the $4 M range so each would be $400k membership with $40k MF for 4 weeks. 1 week sounds about right.

What would they do in week #2? 50 more units?

What would that do for the entire industry? Try to sell your membership and roll it over to a Ritz? Good luck.

As a member of a Ritz-Carlton managed property, I have utmost respect for the company, and if they decided to enter the DC market, they would 'do it right'. However, if the Ritz did this (and I know that they have had these discussions), it would be a strong competitor for ER, but would not be competing for the same people that join PE Platinum, PE Premiere, UR (non-elite), bellehavens, or HCC... And even if they sold out ina week or two, and no one joined any other destination club during those 2 weeks, that would just be a blip on the sales charts of the other DCs... and it might increase awareness such that people who never heard of DCs start shopping around.

 

[Kagehitokiri]

i am not particularly interested in FS or RC... i want homes. (unless they open up residential condo penthouses..)

i WAS very interested in Setai Club back when they were planning unlimited use at Amanresorts, but that has apparently been shelved.

Banyan Tree Private Collection works like a DC, except its ~$100K / $3K per week. (CAN be a great value, but not particularly appealing to me)

PE tiers >
Average Purchase $800,000 $1.5 Million $3 Million
so bottom is SAME as HCC... therefore i agree it seems like a sure thing that HCC will eventually be acquired/etc. could be a great thing for HCC members, depending on how they do it.

personally, i am interested in lusso and ciel(if new plan is half the price of original plan) because they offer unlimited use, and are IMHO better than portofino and solstice (same price) respectively.

im also watching DHH (cheap, better fit than HCC for me) and WPR (no annual fee)

unfortunately seems like WPR is having trouble getting initial investor/members, since they launched with 3 homes, and now appear to have sold one. 2 homes means they have less than 20 members.

 

[Steamboat Bill]

I think this merger is GOOD for the DC industry as it converts two moderately strong players into one very strong player.

Thus, ER will be the king of the hill for now and UR/PE is closing on them fast!

HCC is still UNIQUE in the DC industry as they focus on $1m or less properties and offer memberships that directly compete with high-end timeshares. HCC is NOT in competition with the other DCs, they are in competition with the high end timeshares like Four Seasons, Hyatt, Marriott, DVC, Hitlon, etc.

HCC is also targeting the largest group of potential members (people with upper middle class incomes) vs targeting the wealthy and going after $3-4m homes. Thus, HCC has the BEST long term growth opportunities. This is why timeshares did so well...they were able to sell vacation homes to average people for 1/52 the cost of buying one themselves.

I have posted dozens of threads on this forum outlining how HCC is CHEAPER to join and maintain than any of those top-tiers timeshares and offers a far superior recommendations.

Even if the Ritz, Marriott, etc enters the DC market, it will be good for the entire industry as it would give instant credibility to this new travel concept.

Remember that there are only 5,000 or so DC members compared to the 1m or more timeshare owners and multiple millions of second home owners.

I can only say this for myself....joining a DC is far BETTER than any timeshare or second home/condo/townhome ownership.

There is only one exception to this statement - If you love to go to only one location and stay there for extended periods of time during multiple seasons of the year, then you should BUY a second home/condo etc. Otherwise, DC offers a hassle free vacation in a property that closely approximates second home ownership with ZERO hassles of ownership.

 

[vineyarder]

The merger will give both Ultimate Resort and Private Escapes members access to over 140 properties, as well as over 60 luxury hotels around the world.

Quote from the Helium Report story on the merger; does anyone know anything about the hotel deal? Which hotels, how does it work? I don't see any mention of it on their website...

Also, does anyone know how many homes UR has in each of their 2 clubs? The website doesn't seem to have that information... and it is even more confusing because the home page states "members have access to dozens of spectacular residences" whereas another page says "enjoy close to 100 luxurious vacation homes"... Certainly 'close to 100' is about 8 dozen, but one usually wouldn't use the term 'dozens' to mean more than 24 - 36...