As we would expect, destination clubs are communicating with their members, attempting to assure them that their club’s business model is solid given last week’s announcement by Tanner & Haley.

Exclusive Resorts sent a letter to its members last night which it provided to Helium Report for publication (click here for full text; 394kb PDF). The industry leader discloses information it has never released before, including the value of its portfolio and its low member attrition rate.

What’s striking is the difference between Exclusive Resorts’ ownership ratio and Tanner & Haley’s. Based on their recent bankruptcy filing, it appears Tanner & Haley leased more than 65% of their homes (estimated 194 homes in portfolio; only 67 owned). Exclusive Resorts, in contrast, cites a lease ratio of 25%, a figure that will decrease as they bring an additional 140 homes in development on line. Helium Report recommends clubs lease no more than 30% of their homes in order to ensure an asset base to support refund obligations.

Exclusive Resorts’ real estate portfolio has a reported value of $800 million. The club confirms refundable member deposits are used only for real estate acquisitions (or held in cash), implying it has sufficient assets to meet all refund obligations at any and all times. A statement from their CFO with an independent audit by Ernst & Young further assure members of refund protection.

Exclusive Resorts also notes a resignation ratio of less than 4% a year, with refunds paid in less than 30 days. Helium Report assumes successful destination clubs will experience natural attrition rates in the 5% per year range. The “time-to-refund” is one of the Top 20 questions we recommend you ask any club that you’re considering.

We consistently cite “Transparency, Disclosure, and Assurance” as three key criteria in evaluating destination clubs. Exclusive Resorts’ letter to members covers all three points:

Transparency

• $800M real estate portfolio, no more than 50% debt
• Owns 225 homes (75% of portfolio), with 140 more in development
• 4% resignation; deposits refunded in less than 30 days
• Co-founded industry trade organization

Disclosure

• Annual audit by “Big 4” firm Ernst & Young
• CFO signs off on finances, similar to Sarb-Ox
• Perry Capital is largest minority investor; $13B real estate fund
• Board of Directors is an all-star list of executives

Assurance

• Refundable member deposit goes to real estate only
• Assets meet obligations for refunds
• Strength of management team and BOD
• Over 20,000 reservations executed

Our sense is that the letter is just the beginning in terms of greater transparency and disclosure from all destination clubs, as executives realize that statements made by marketing brochures or commissioned salespeople will need to be backed up by verifiable data.