Rich Keith, a pioneer in the private residence club industry, has started the Lifestyle Asset Group, which he hopes will eventually have 200 members and 24 homes. The houses, he said, will have an average value of $2.5 million and be owned debt-free, and the members and the homes will be divided equally between the East and West Coasts.
At the same time, Jeff Potter, chief executive of Exclusive Resorts, one of the best-known destination clubs and backed by Steve Case, the co-founder of AOL, said that the first quarter of this year was its best quarter ever for sales or upgrades of memberships.
Even as the market for second homes started to rebound, sales remained sluggish in the so-called second-home alternative market, a catchall phrase for a varied industry in which groups collectively own properties for their members to use several weeks a year. What makes these different from time-share properties is the flexibility to book the days and weeks you want and the amenities that take the properties to the level of luxury homes, not fancy hotel rooms.
Sales of fractional and private residence club properties fell 38 percent from 2009 to 2010, to $530 million, according to a report published by Ragatz Associates, a real estate consultant. At the height of the bubble in 2007, sales topped $2 billion. But the same report found that 71 percent of resorts said sales had either increased or been steady in the second half of 2010 compared with the first half.
The problem is that the industry has been marred by scandal. One of the bigger players, Ultimate Escapes, filed for bankruptcy protection last year, and others, including Exclusive Resorts, have long waiting periods for people who want to sell their shares.
But that has not deterred aficionados from sticking with them.
By his own estimate, Mark Tavill, a Sacramento entrepreneur who sold his check-cashing business in 2006, will probably lose all of the $300,000 he paid to be a member of Private Escapes, a company started by Mr. Keith that was acquired by Ultimate Escapes in 2009. But that has not stopped Mr. Tavill from being one of the first to buy into Mr. Keith’s new project.
“It didn’t sour me on these types of vacation experiences, but I’m certainly not going to hand my money over to someone else to have them do what they want with it,” said Mr. Tavill, who also owns a second home near Lake Tahoe.
Mr. Keith said that he was no longer involved with Ultimate Escapes when it went under and that Private Escapes was only 8 percent of the company. But he said the experience had taught him the value of owning the properties outright.
The allure of any real estate purchase is a blend of financial sense and romance. So which one is winning out here?
HISTORY The industry, according to David Disick, a lawyer and president of the Fractional Consultant, started with cabins in the 1940s.
“You and a couple of buddies would buy a cabin in New Hampshire and you’d share everything,” Mr. Disick said. “That morphed into condos and that morphed into condo hotels. That morphed into timeshares to chop up the pieces more. And that morphed into fractionals because people wanted more than a week and the phrase timeshare got a bad name.”
In their last iteration, he said, fractional properties become private residence clubs. These are different from destination clubs, where you have a membership but not an actual stake in the properties. Given the number of names, it is no wonder that consumers can get confused.
“All of these things are timeshares in a legal sense,” Mr. Disick said, using a term the high-end industry shuns.
UPSIDES The big upsides are the exotic locations, the size of the properties and the hotel-like amenities. Financially, the pitch has always been based on comparable costs.
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