Solstice Collection Changes Membership Plan and Prices

Ultra-luxury destination club and Robb Report's Best of the Best winner, Solstice Collection has announced that they will suspend sales of their Signature Membership, lower their member-to-property ratio, increase their membership deposit, and reduce their debt to 35% LTV all beginning January 1, 2009.

Since their launch in 2004, Solstice has maintained near total market control of the ultra-luxury destination club sector. With the recent Yellowstone Club World closure, Solstice once again asserts their presence at the top of the destination club industry.

While each of the changes planned by Solstice may independently effect your decision to consider Solstice as a destination club option, each works together to ultimately raise membership satisfaction in the long run.

Suspend Signature Membership Sales
Nearly every destination club in the industry now offers multiple membership tiers for different price points and usage levels. The long standing occupancy metric "member-to-property" ratio has been used nearly since day one, showing how many homes a club has in relation to their membership base. The addition of these new membership plans with differing and usage rules diluted the member-to-property ratio metric.

The idea of a "full-member equivalent" was created to decipher the impact every member had on occupancy. A club sets a number of nights that their typical member would travel per year and uses that to weigh the member-to-property ratio. For example, if the club sets a full-member equivalent at 35 nights, it would take five members with seven nights of usage to equal one full-member equivalent. In the past, each of those five members would have counted as a member and subsequently made the member-to-property ratio seem higher than it actually was.

Solstice Collection's lowest plan, the Signature Membership, offered members 14 nights of annual travel for a $615,000 membership deposit and $34,000 in annual dues. Traditionally, the lower the amount of annual usage, the higher percentage of nights will be used. A member with 14 nights of usage is far more likely to use all of their nights than a member with 40 nights. With Solstice discontinuing their Signature Membership, occupancy rates will decrease as the membership with the highest percentage of use will be limited to current members.
By discounting their Signature level program, Solstice can more accurately publish their true member-to-property ratio and properly relay their true availability to prospective and current members.

Lower Member To Property Ratio
By more accurately stating their member-to-property ratio with the suspension of their Signature Membership and being able to count every member as a member, Solstice will also move to a targeted 5:1 member-to-property ratio. Solstice and Founder Graham Kos said "Over the last two years, many destination clubs have adopted the practice of fractionalizing memberships into even smaller increments. While this trend indeed drives membership volume, it negatively impacts a club's calendar due to a greater number of individuals competing for peak time." At this new ratio, Solstice will be the most exclusive club available and club properties would be available approximately 50% of the time. Graham stated that members want to be able to plan their luxury vacations in advance but also want the flexibility to enjoy the club's properties at the last minute.

Increased Membership Deposit
Providing for superior availability does come at a cost.

With the suspension of the Signature level on January 1, Platinum will increase from $975,000 to $1,125,000 and Sky will increase from $1,950,000 to $2,250,000. Solstice members can elect between two different membership options. Members can choose between receiving 100% of their initial membership deposit when they elect to resign or 80% of the future value of their membership. Other than the suspension of the Signature offering and a slight increase in annual dues, all other terms and usage will be unaffected by these changes.

Reduced Loan To Value Debt
Through the increase in membership deposits, Solstice is able to decrease their targeted level of debt from 40% to 35%. Currently they are operating at 33% but plan to acquire eight new homes in the next two years in Miami, St. Barts, and Rome to name but a few and will likely increase slightly with the new property additions.

By decreasing the debt on new home acquisitions, Solstice effectively strengthens the backing of their members' deposits. From Solstice's perspective, it also makes them less reliant on the credit markets for financing.

The Veras Group Perspective
These are bold moves by the Solstice Collection but are all positive steps for both short term membership satisfaction and long term business sustainability. We are glad to hear that Graham Kos and Jeff Scult both spoke with Solstice members multiple times prior to implementing these changes. At the Solstice Collection Advisory Board meeting on Monday of this week, members agreed that these were positive steps forward.

Any time a destination club can lower their debt and use more of your membership deposit towards the purchase of an appreciating asset, the better the position the club is in. Modeling their real estate acquisition model to 35% debt will be the least discussed component of the Solstice changes, but will be the most significant to the prosperity of the club.

Solstice Collection Announces Price Increase and Changes Membership Plans