Clubs help wealthy maintain lifestyle when traveling

January 07, 2007|By Jim Buchta | Jim Buchta,Minneapolis Star Tribune

MINNEAPOLIS -- A car at the airport, a private concierge and a sleek new Manhattan penthouse awaited Scott Jagodzinski and his family when their plane landed in New York for Thanksgiving weekend.

Same thing when they go to Cabo San Lucas next spring, where they'll bed down at a beachfront house in a gated community.

"The kids just love it -- they open the fridge, and there are their favorite things," said Jagodzinski, who belongs to the Eden Prairie, Minn.-based Lusso club, which charges members a one-time fee of $350,000 and annual payments of $25,000 for unlimited use of its multimillion-dollar getaway houses. "If I live this way at home, why wouldn't I want to travel this way?"

As the ranks of the wealthy grow, destination clubs are becoming a popular option for affluent second-home buyers who want all the comforts of home -- from a bar stocked with their favorite gin to a car in the garage or even a Diaper Genie -- without being tied down to just one place.

When the Lusso club reaches its limit of 550 members, it will have 100 houses worth an average of $3 million in locations around the world. So far, it has 50 members, who are also entitled to free evacuation from anywhere in the world should they fall ill, thanks to a partnership with a company called MedjetAssist.

Steve Greer founded Lusso, which is Italian for "luxury," after several years as the chief operating officer for Rapala, a Finland-based fishing lure company with offices in 23 countries. The idea came to him after a travel meltdown while on vacation with his 5-month-old son.

It took two weeks to find a rental property, and there were hassles renting baby equipment and a car.

"Within five minutes we thought, we're going to buy a house in Scottsdale," Greer said, then quickly added: "But do we always want to come to Scottsdale?"

He rounded up 30 investors to help buy the company's first properties and quietly launched the company about two years ago.

At the time, there were only one or two such clubs, he said. Today, destination club sales are expected to top $750 million. There are at least 24 clubs, including several that target specific kinds of vacations or themes. There's one for people who love wine, another for golfers, and one for those who want to be close to fly-fishing streams.

There's even one for people who don't like to travel.

Greer is quick to point out that the concept differs from a time share, which usually offers limited use for a year of a particular property and the limited right to swap those shares with others. It's unlike fractional ownership resorts, too, where ownership of a specific house or condo is divided among several owners.

The business model is most similar to a country club, where members do not own the real estate, but the value of their membership grows as demand increases while supply is tightly controlled.

Greer said his target market is baby boomers who like to travel, busy executives who don't want to take the time to plan trips and people who have an annual income of $300,000 or more.

According to the U.S. Census Bureau, there were more than 2 million U.S. households with an annual income of $250,000 or more last year.

Destination clubs are one of the fastest-growing sectors of the travel industry, in part because there were 8.7 million millionaires worldwide last year, a 6.5 percent increase over the previous year, according to a report from Merrill Lynch.

Many such buyers include Wall Street bankers, entrepreneurs and retirees who don't want the responsibilities and financial obligations that come with a traditional second home.

Greer compares the cost of owning a high-end vacation home to a club membership, saying the Lusso initiation fee would barely be enough to make a down payment on a $3 million vacation home.

And it's a virtual bargain, he said, if you regularly travel to expensive hotels that still may not offer much elbow room.

Jagodzinski, the former chief executive of Novus Print Media, said that in addition to the fully refundable initiation fee, he bought into Lusso after too many disappointing stays at four-star getaways, including the Ritz-Carlton and Four Seasons hotels, where room rates easily top $1,000 a night.

"Everybody has a lifestyle, and when you're on vacation you don't want to take a step down," he said.

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