Luxury travel operator Abercrombie & Kent purchased destination clubs Crescendo and BelleHavens, combining the two ventures into the Abercrombie & Kent Residence Club, a new equity-based destination club.

The purchases were funded in part through private equity funds managed by affiliates of the Fortress Investment Group. Members of Crescendo and BelleHavens have been folded into the new club, which now ranks as the sixth largest destination club, just ahead of the Lusso Collection. Prices for new membership plans will be announced this summer, when the club plans to begin the push for its initial round of new members.

Jarvis J. Slade, president of the Abercrombie & Kent Residence Club said in a recent interview at our offices where he announced the club, that the equity foundation ensures that the homes in the property portfolio are owned without the cost of a mortgage. “The club will carry no real estate debt and aim for full financial transparency,” said Slade. The new club, however, will differ markedly from Crescendo’s equity model of ownership, where members were essentially purchasing a real estate investment. Because of their chosen model, Crescendo was required to register with the Securities and Exchange Commission and was limited in how it could market the club to potential members. Instead, the Abercrombie & Kent Residence Club will more closely mimic the BelleHavens model of a so-called equity club, where homes are purchased debt-free with member deposits, with members potentially securing a deposit refund greater than their initial outlay when they exit the club.

The Ghost of Tanner and Haley

Any destination club early adopter will recall that this is not Abercrombie & Kent’s first foray into destination clubs. The luxury travel brand lent its name to one of the first destination clubs, an entity that later morphed into Tanner & Haley, the club that entered into bankruptcy in 2006. The flame out turned the industry on its head, caused a public relations nightmare for the destination club sector and prompted the formation of the Destination Club Association, which has pushed for greater financial disclosure among clubs.

Slade, who recently arrived at Abercrombie & Kent from American Express, where he headed up travel services for Centurion and Platinum card members, said that the smudge on the company’s history was the result of a poor choice to simply license the brand without any direct involvement in the club’s operations. “Licensing the brand was not the best idea,” said Slade. However with the launch of Abercrombie & Kent Residence Club, the luxury company is directly involved in both the management and ownership of the club. “We’re getting back into running the business, not licensing the brand,” he said.

Equity as the Chosen Model

As Abercrombie & Kent aimed to dive back into the destination club business, it began to look closely at the existing equity clubs. It acquired Crescendo first, and followed up with the purchase of BelleHavens. The majority of members at both clubs have opted to roll their membership into the new venture. In addition to owning the homes without any debt, two of the five board member seats will go to club members. The challenge for the club will no doubt be explaining to potential new members how this flavor of equity differs from a standard destination club offering from, say, Exclusive Resorts.

Annual dues will go towards the formation of a capital reserve fund to cover property maintenance, and the club aims for full financial transparency with audited financial statements given to members.

The new club membership plans will be announced this summer, but Slade expects the offering to be multi-tiered, with a varied number of vacation days. In addition to the 18 homes, averaging four bedrooms and $3 million in value, in the property portfolio, Abercrombie & Kent Residence Club will have 12 villas that it has secured with long term leases, as well as a partnership with 13 Stein Hotels and Resorts in Europe brought over with the BelleHavens acquisition. The inclusion of leased villas, which Slade said tend to be larger properties ranging from four- to six-bedrooms, is an effort by the club to offer prime properties in European destinations like Tuscany that can be used in the summer months, without the outright purchase of such homes, which are likely to sit empty for the rest of the year. The club plans on purchasing four to six additional homes this year. Once the membership campaign kicks off later this year, members can expect that the club will add one new home for every eight to ten members.

More Luxury Travel Options for Members

The destination club will also leverage the larger Abercrombie & Kent travel brand, offering members the option of swapping weeks for a luxury safari or other tour package under the operator’s umbrella. Members, said Slade, can “trade a couple of weeks to go on any Abercrombie & Kent trip in the world.” But the additional travel options also help the club deal with the growing issue of snagging those prime holiday reservations. “It eliminates the availability problem at the holidays,” he said.

But even though Abercrombie & Kent has tagged the club with an equity model, with its inclusion of this travel program it is fully embracing, and in fact counting on, members (perhaps many existing Abercrombie & Kent aficionados) approaching the club with recreation as their prime objective. “Destination clubs are moving away from owning a second home,” said Slade. “It’s much more about the lifestyle and travel.”