The Veras Group Speaks With Distinctive Holiday Homes' CEO Nick Wood About The Destination Club Industry

This past weekend, The Veras Group spoke with Nick Wood, CEO of Distinctive Holiday Homes, a destination club with arguably the broadest international reach of any club. Hours before boarding a plane to the United States from New Zealand, Nick shared with us his vision for the industry, his firm, the current economic crisis, an upcoming offer to High Country Club members, and other thoughts of interest.

The Veras Group: What is the future of the destination club industry in your mind, over the next few years? What changes and consistencies will there be?

Nick Wood: There is going to be a general consolidation, I would think. In this particular economic climate there will be a few people caught with the tide out and no swimming trunks on.
Everyone expected there to be a downturn, and when we built up Distinctive Holiday Homes, we steered away from purchasing properties in America because we didn't think it would be a wise investment to purchase stuff that would be worth quite a bit less only months later.
And that is going to be a big problem for the industry to swallow. Much of the equity in properties has been eroded and most of the clubs have less than $1 in equity per $1 in member deposit.

All in all, there is also a positive side. There will be people who normally invest in property who will now think of new options, like holiday clubs. There will also be people who downsize and take a destination club or a timeshare over what they may have done before. Those things will drive customers to the product.

Right now, we seem to be getting a significant amount of traction, people making inquiries again. I think the wheels will start turning again toward the end of the year, and into the first quarter of next year. I don't think you will see the same volume of growth as in late 2007 early 2008, but I do think there will be a constant flow of new business. I also think there will be consolidation, which will make those companies stronger.

Many other countries are affected, but they don't have the property glut that the US does. And reality is what is going to be the key thing. People are going to be paying the real cost of what it costs to offer the service. It has to be financially viable.

People should be cautious. People should be looking at the structure. If things look too good to be true, they probably are.

The Veras Group: Does Distinctive Holiday Homes have an operating structure that insures members will join a stable club? What structures insure this?

Nick Wood: One of our strategies is to buy revenue generating businesses for the business. We own the resort in Fiji, which generates millions in revenue and profit each year. I've just been negotiating on another resort property at the moment. We have club member facilities at these properties. It also gives us free land, because it gives us space on these properties to build club homes. That also averages down our cost for building houses. We don't want to have a huge development. We are running a destination club, but we are also running a tourism business. This tourism business is not a property development business. We reverse the traditional club goal (of being a property development business) and put this all together with a complete service and tourism focus with a development component as part of that.

So, we are most focused on making sure that people have a holiday of a lifetime, and if we make some money on the property after a while, that’s great too. But, we want to have a property that blows your mind when you get there. We have a one staff to one house ratio (not one staff member looking after 2 or more homes), so in that sense they are more of a butler. They are making your breakfast and preparing your cocktails and can be on site as much as you need them, or not if you don't want them around. They are also real people, connected to the community, and a great asset.

Fundamentally, I took a pragmatic approach to the business. As soon as Tanner & Haley went splat, we changed our business model the day after. Previously, we had approached it similarly as everyone else. But after that changed, I decided the most important thing to have in the company to give people peace of mind, is a substantial capital base. We have made sure that we had extensive assets in the business, so everyone knows we had them cover. We would only have to sell one property to cover all of our obligations to members.

If we devaluate everything worldwide, we still have 8-9 times coverage on member deposits, plus the cash flow from our other businesses. We're not immune to the global economy, but we're not spending money like it goes out of style. We are relatively lightweight and mobile, so we can turn things on as fast as we can turn them off and we just wait for the right time to do that.

We are very cautious about things. We have to protect our members' deposits.

The Veras Group: How can Distinctive Holiday Homes support this structure?

Nick Wood: We don't have reservation services in an office to make their holiday vacations. Our members book on line, and once they book they are connected directly to the person in the destination, to start planning their destination. And for every "x" number of those people, we have a manager who keeps them doing their job. This keeps us lean and mean so we don't have to duplicate lots of staff.

Our resort in Fiji turns over $6 million per year. Several million dollars profit. This goes toward the operating costs of all of our other homes. This also gives us a slight advantage over other clubs which rely on members and their dues and deposits only.

The Veras Group: How much are your members traveling right now?

Nick Wood: I think we did 150-200 extra days in our first year of operation, on top of the allocated days. Many of our customers are European and from the Pacific, and so they don't plan as far in advance because they have lots more vacation time than our US-based members. So they don't plan super far in advance. We are usually chasing them down the week before they arrive to get their flight details because they are very relaxed! Plus holiday times are at different times. We also don’t have people fighting for homes at the same time, because everyone has different holidays, our properties are very well spread, and you're not all trying to fight for the school vacations. That is why our availability is so good.

The Veras Group: What advantage is there for a member to join Distinctive Holiday Homes today, versus waiting 6-12 months?

Nick Wood: I don’t honestly think there is one. The price increases will not be possible, because that’s what most of the clubs were doing, to raise prices to get people to jump in and make a decision. I think the momentum these days is really when people want to take a vacation. We see most of the time when people join it’s because they have to take a vacation.

We’ve lowered our prices recently, because we reevaluated our needs and we simply didn’t need as much as we were charging. I don’t think we will be lowering our prices any more, but we don’t need to be greedy.

The Veras Group: You’ve mentioned making a special offer to former High Country Club members who may like to join Distinctive Holiday Homes. What is the specific offer to HCC members?

Nick Wood: We'll make some offers in the not to distant future. I think in the next 30-45 days we'll have something put together. It may be possible to put 10-12 destinations together immediately for a group to use, and that's what I’m going to spend the next 2 weeks working on in the US, to put it together quickly and efficiently and have something by the end of the year or sooner.

Unfortunately, High Country Club has way too much debt to equity, and what you're doing is picking up a whole lot of credit. You'll have to leverage it out in court for cents on the dollar, and that would be quite a long headache. It's much easier for us to pick up 12 new places that we've already done due diligence on, which are in very similar locations as High Country Club’s properties.

The beauty of our plan is that the membership deposits we will start collecting from former High Country Club members will allow for another 10-20 homes over time, which gives the correct number of properties, and everyone should be a happy little camper. And unfortunately they will just have to face the fact that they lost money somewhere else. I think it’s a fair offer, a reasonable one, and we won't put their money at risk for a second time. And if they don't like it at the end of the year, they would have only paid $600 per night of travel, or if it all went to hell in a hand basket at the end of the year, which it won’t.

Will the members join us is another question. We just have to make the offer and see.

The Veras Group: Any final thoughts?

Nick Wood: I'm still pretty positive about the industry. It has a long term future because it makes sense. The reality of what it is, is combining people's money to buy a property without debt--or that’s what it is supposed to be. So you can get the best economies of scale for the user. We do it for a lot less cost than what it would cost members by themselves.

We have also had massive positive feedback about the product, many, many emails almost every time someone stays, that it is the best investment they have made for their family, time and time again.

The Veras Group Speaks With Distinctive Holiday Homes' CEO Nick Wood

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