On the heels of an active spring for the destination club industry, including the merger of two club giants, the entrance of Abercrombie & Kent into the industry and the Portofino club’s involuntary bankruptcy filing, Adam Wegner, president of the Destination Club Association (DCA) spoke to Halogen Guides about the latest industry developments and the organization’s goals for the second half of 2008.

While the destination club industry grows, the DCA is moving to expand its footprint to educating potential members, serving more as a marketing arm for the industry rather than an organization purely focused on consumer protection and sweeping up the remnants of the bad press following the bankruptcy of Tanner & Haley.

The DCA currently consists of seven members: Exclusive Resorts, Ultimate Escapes, Quintess LRW, High Country Club, the Lusso Collection, Solstice and the latest entrant, Abercrombie & Kent Residence Club. Wegner explains that smaller clubs often opt not to join because of time and the requirement to have financial statements independently audited. “The third party audit has become a stumbling block,” said Wegner. Small clubs, he said often don’t have the resources to invest in an audit. Additionally, membership in the DCA runs $20,000.

The next focus? Education and industry growth

The DCA had its genesis in consumer protection, but as the destination club industry grows, the focus is moving towards education. “Competitors don’t come together unless there is a need,” said Wegner. “There was a need for this industry to confront consumer protection concerns. Now that we are together, we are focusing on awareness.”

While the trade association has never purported to be an industry watchdog, it did start out by focusing on bringing some basic standards to club business practices that, in turn, were ultimately seen as consumer friendly initiatives. Next up, the DCA plans on working with the American Resort Development Association (ARDA), and, later this year, launching the DCA consumer website, which will include the organization’s best practices, code of conduct and a consumer glossary. The glossary will define everything from refundable deposit to equity, a term that with the launch of Abercrombie & Kent Residence Club, has been increasingly difficult to clearly decipher to potential club members. “It’s taken a long time to agree on definitions and we aren’t 100 percent there,” said Wegner. “On the one hand we don’t want to stifle anyone’s ability to use a term, but we don’t want to lead people to a misinterpretation of what [a club] means. Look at ARDA. They’ve been fighting for years over the definition of ‘timeshare’. Branding, image and marketing get in the way.”

The DCA membership is not a seal of approval

As a condition of membership in the DCA, clubs must pass a net asset test and have their financial statements audited by a third party. However, the organization’s reach into the financial status of a club stops there. Clubs do not pass any financial statements on to the DCA and, not surprisingly, the association does not review any hard numbers that would detail a club’s financial footing.

Consumers should also note that while the DCA requires clubs to pass its net asset test, the association considers that financial yardstick met if a club can cover at least two-thirds of its membership deposit obligations. However Wegner said many clubs including, “Exclusive Resorts, Quintess and High Country Club, among others exceed that amount, meeting the entire deposit obligation.” Lusso Collection also exceeds the DCA benchmark.

Additionally, such financial transparency and adherence to the code of conduct is a requirement of the organization, but Wegner points out that any club can certainly follow the DCA requirements without being a member. That said, some clubs that have not been a member of the group have not fared well. The Portofino bankruptcy filing was hardly a surprise to the DCA. Though the club was not a member of the DCA (Portofino executives did attend some early meeting with the DCA), Wegner said the DCA had kept track of the growing number of lawsuits facing the club that culminated in the bankruptcy filing. All attempts by the DCA to reach Portofino executives have been unsuccessful. “We have heard nothing from Portofino,” said Wegner.

While the DCA’s net asset test sets the benchmark below 100 percent, Wegner says that the test as a standard in the industry has brought the financial realities of operating a club front and center for current and new entrants. “There is need to have a lot of assets and equity backing a club operations. It takes a lot money. The net asset test puts that in front of you,” said Wegner. The end result, he said is ultimately good news for consumers. “More clubs have gone out and raised money.”