In our 2008 destination club outlook, we noted that the industry was ripe for the entrance of a major hotel company. Certainly a hotelier like Ritz-Carlton or Starwood make a splash in an industry that has been framed by an increasing number of mergers and the entrance of start-up clubs that often struggle to make it off the ground. But perhaps even more significantly, these hotel companies are also in a prime position to tap their own real estate assets at a time when marketing a second or third home to buyers is only getting tougher.

We thought we would take a closer look at how a hotel company might actually enter the destination club space, using the example of Ritz-Carlton. The grand hotel company has made a huge dive into real estate in recent years, offering both whole ownership condominiums and fractional properties through its brand the Ritz-Carlton Club.

With whole ownership residences in 15 states (there are some 31 locations open or under development now) and fractional properties in four states, the Virgin Islands and the Bahamas, Ritz-Carlton already has a diverse property portfolio. The Ritz-Carlton Club also has some very destination club-like features, including on-site concierge services and the option for travelers to swap their weeks for stays at other Ritz Club properties, effectively giving the owner of, say, a fractional in St. Thomas, the chance to trade their time there for a week of skiing at the Ritz Club in Aspen.

Of course there are several approaches Ritz-Carlton could take to getting their foot into the destination club door.

Add a destination club feature to its fractional residences

Ritz-Carlton could create a separate entity that buys fractional properties and operates a membership club. The good news is that there is plenty to buy. In this real estate market slowdown, developers have been holding a bag of fractional inventory, and pushing hard to sell it. A few unavoidable questions arise. Would a destination club harpoon Ritz’s fractional sales efforts? Or would the destination club concept fail because fractional owners can already swap weeks for stays at other Ritz Club properties? The real selling point of the destination club option would be guaranteed access to other fractional properties; the Ritz’s current exchange system isn’t a sure thing.

Crafting membership plans that won’t cannibalize fractional sales could be done by aiming for member deposits with a lower price-point than those of fractional units. Clubs like Exclusive Resorts have started such entry-level plans for fees as low as $129,000. Of course Ritz could offer a breadth of plans a various prices, but they should eschew the ultra-high end price bracket that is currently dominated by clubs like Solstice.

Start a destination club with a portfolio that includes more Ritz-Carlton real estate

Ritz-Carlton’s fractional property portfolio is dwarfed by the number of whole ownership condos developed by the brand. Some of the Ritz-Carlton developments, such as the new San Francisco property have both whole and fractional residences. Others of the newest and most lavish properties in the Ritz portfolio, like the waterside Deckhouses in Grand Cayman and the beachfront Molasses Reef development in the Turks and Caicos, are whole ownership-only properties. Stocking the Ritz destination club with a selection beyond fractionals would give members access to a host of city properties in New York, Miami, Chicago and Toronto, and many of those beach and mountain destinations that are destination club staples. The club could forgo including whole ownership residences at destinations that really only appeal to business travelers, such as Baltimore and New York’s Westchester County.

Throw hotels into the mix

Exclusive Resorts launched a travel program last year allowing its members to swap a number of days for high-end trips to locations where the club doesn’t have properties. Often these trips command an extra fee. Ritz-Carlton is in a prime position to add this as an option to its destination club plan. The offering could be a feature on a certain level of membership plan, and give the added appeal of allowing members to use their nights at exotic locations that simply aren’t served by a residence or fractional property. For instance the company doesn’t have any ownership options in Europe or Asia. Giving club members the option to use their nights for hotel stays in Bali, Istanbul or Santiago (and charging them reduced nightly fees to do so) would give the club a status that no other destination club can claim: a true global reach.