Destination clubs allow members to vacation at a variety of properties at various places in the world—like time shares for several properties, but without the ownership or the maintenance. Large refundable deposits, sometimes to $3 million dollars or more, are required in addition to annual dues to cover operating expenses. The deposits are used to purchase the real estate, which helps to protect members' deposits. The company profits by taking some of the deposit as income and from real estate appreciation. Some companies give their members a stake in the real estate and some of the appreciation, and, thus, are sometimes known as equity clubs.
However, the companies that run these clubs are unregulated, and people could lose their hefty deposits if the company goes bankrupt, especially if the company rented properties instead of buying them, as Tanner & Haley Resorts did. People would be wise to investigate the company thoroughly before depositing any money, and to make sure that the company is buying real estate with the money. Avoid companies that refuse to provide financial statements or cannot provide verification of the company's ability to refund deposits. To protect members, Ultimate Resort is putting deposit money into a trust and makes the members secured creditors, and Quintess is planning on making members secured creditors to the real estate, and is giving members access to its quarterly, audited reports. In both cases, if the company does go under, the members claims will only be subordinate to the mortgages on the real estate.
Find out more about fractional ownership here: Luxury Fractional Guide - Info on Fractional Ownership Real Estate and Fractional Vacation Ownership