Residence Club Pioneer DCP International Revolutionizes Second Homeownership

Steve Dering, DCP Founder and Consultant to Developers Reflects on the Growing Industry

Multitudes of luxury second homes rarely used by their owners are a common staple of most resort destinations. Every year, these homeowners spend tens of thousands of dollars on taxes, maintenance and security on properties that sit vacant the majority of the time.

In the late 1980s a Park City, UT advertising executive and former marketing director of the town’s prestigious ski area Deer Valley Resort, sought to develop a more sensible form of vacation homeownership. Steve Dering, a Maryland native, moved to Park City in 1973 when it was a near dormant ski town – long before the Olympics and the Sundance Film Festival propelled it into an internationally known destination.

Dering noticed a plethora of luxurious vacation homes in Deer Valley being used an average of four weeks a year. Finding this an expensive ski vacation when he calculated the cost per day that owners use their homes – not to mention a wasteful practice – he reasoned that developers could sell properties as fractions, allowing buyers to pay considerably less while affording them the same amount of use they
would get from whole ownership homes. Moreover, Dering realized that these properties could offer hotel-style services and amenities since the costs would be spread over a significantly larger owner base, allowing for more enjoyable and carefree vacations.

“My goal was to develop a way for people to improve their vacation experiences by eliminating the
maintenance headaches that second home ownership typically entails,” Dering explains. “In a place like Deer Valley, you have to deal with snow removal, broken pipes, and cosmetic repairs following harsh winters, and summer landscaping. My vision was to have all of this taken care of for owners by property staff.”

After introducing the product to various ski areas, it occurred to me that luxury fractional ownership could be a successful endeavor in any type of resort destination where second home real estate is very expensive.

From these ideas, the Deer Valley Club was born in 1992, a decade following the ski area’s inaugural season. The Deer Valley Club would serve as a prototype for what would become known as private residence clubs, a luxury form of fractional ownership. As the first development of its kind, the Deer Valley Club offered on-site storage for its owners, allowing them to travel to their residences without the excessive baggage ski vacations require. Prior to owner arrival, club staff had ski gear placed in owner lockers and clothing laid out in the residence. Other convenient services included airport pick-up, pre-arrival grocery shopping, on-site concierge, and housekeeping.

One of the challenges this new vacation ownership concept faced was the comparison to timeshare when in fact it is completely different. Private residence clubs have only six to eight owners per residence, are more luxurious properties, and offer deeded real estate ownership that can be sold, willed or transferred like any other form of real estate. Timeshare is the purchase of a specific week of vacation time hence 50 owners per residence. Residence club owners enjoy greater flexibility in that they can reserve planned weeks
in advance and may also reserve on a short-notice or space-available basis. Club owners are not wedded to a specific residence, a factor that allows for even more flexibility – they may vacation in any residence within the category they purchased.

The Deer Valley Club proved to be a highly popular concept to those interested in owning ski property,
allowing buyers to have a ski home in a prime ski-in, ski-out location with firstclass services for a fraction of the cost of whole ownership. Originally the developers anticipated selling out the property for $13 million as condominiums; however, the residence club results far exceeded their expectations – the club sold out for a total of $22 million.

This real estate success story had developers in other ski areas eagerly knocking on Dering’s door. As a result, he founded DCP InternationalSM, a company that would expertly deliver the residence club concept to other popular resort destinations by consulting with developers on the sales, marketing and design of such properties. While Dering has kept his home in Park City, DCP set up its operational headquarters in Chicago and has project managers in various other locations throughout the country who work hand-in-hand with developers.

During the sales phase of the Deer Valley Club, there were some interesting observations. “Early on, the biggest surprise was that almost all our buyers could afford their own Deer Valle home,” says Dering. “But they did the same math I did and recognized that traditional second home ownership made little sense for them. They also found that residence club ownership would be considerably more convenient.”

Throughout much of the 1990s, DCP International helped developers launch private residence clubs in other western ski resort towns, including the Christie Club in Steamboat Springs, CO and Franz Klammer Lodge in Telluride, CO.

“After introducing the product to various ski areas, it occurred to me that luxury fractional ownership could be a successful endeavor in any type of resort destination where second home real estate is very expensive,” Dering recalls. “It seemed reasonable that people who are frequent visitors to specific beach destinations, golf destinations, and even urban areas would be likely enthusiasts of private
residence club ownership.”

Looking to expand the residence club concept to additional vacation destinations, DCP International introduced the first residence club in Bermuda with The Residence Club at Tucker’s Point and the first residence club in Mexico with Club Quinta Real in Huatulco. They are now consulting on a second property
in Huatulco, Encanto Villas & Residence Club, whose first phase is due to open in winter 2009. The company was also a pioneer in the urban market by creating The Phillips Club in Manhattan near Lincoln Center – the first private residence club in a major metropolitan area. The sold-out Phillips Club spawned
Phillips Club II, currently in sales. Whisking the concept across the Atlantic, DCP helped create Europe’s first urban residence club, Palazzo Tornabuoni in Florence, Italy – a property that is attracting both American and European buyers.

“The Europeans are really embracing the concept of fractional ownership, and now we have a London office to oversee our growing number of properties,” Dering comments. “Moreover, with the weakened dollar,
Europeans are finding tremendous value in purchasing residence club memberships off the continent. For example, we have a second project in Bermuda, The Reefs Club, which is being marketed to the United Kingdom. This is a great deal for the Brits given the Bermuda dollar is tied to the U.S. dollar, and there is nonstop flight service from London.”

The Reefs Club is a project tied to a luxury hotel. The Reefs is Bermuda’s most awardwinning hotel and boasts a remarkable number of repeat visitors year after year. For these enthusiasts of the hotel and Bermuda, The Reefs Club is a sensible purchase, especially in light of government restrictions on whole ownership properties being sold to foreigners. These restrictions have driven home prices well into the millions and have greatly limited the supply, making Bermuda an ideal location for fractional real estate, which can legally be sold to non-Bermudians. David Dodwell, developer of The Reefs Club who engaged DCP says, “Many East Coast cities offer two-hour, non-stop flights to Bermuda, making us a convenient second home destination. We are providing repeat visitors the opportunity to own a luxury residence on the same secluded pink-sand beach The Reefs is renowned for and to enjoy the same type of first-class service the hotel offers.”

Owners of The Reefs Club will have their own amenities such as an infinity-edge pool, rooftop putting green, and owners’ lounge. Two-bedroom residences start at $350,000 and three-bedrooms are priced at $410,000 for a one-tenth share – a significant value considering the whole ownership homes currently listed on the island start at $4.4 million and condos average $2.4 million. DCP has been enlisted by several developers in Florida, the latest of which is Magnolia Private Residence Club on coastal Highway 30-A between Destin and Panama City on the Panhandle. The club is offering threebedroom residences priced at just $159,000 for a one-eighth share.

“Many developers who initially created their projects to be whole ownership, have been adversely affected by the soft market, particularly in Florida,” Dering explains. “They are now looking for new and creative ways to sell. They are discovering that private residence clubs are a logical solution since they are a lifestyle purchase that come with a real estate deed as opposed to an appreciation driven real estate investment..”

Magnolia Private Residence Club is largely appealing to a regional market – those within driving distance from Atlanta, New Orleans, and other nearby cities. Dering believes close proximity will be a significant draw, and the company is expanding into more regional markets. “The ability to vacation at a club anytime there is availability is particularly attractive for people who frequent these destinations,” he notes.

DCP is also planning to expand more into Europe. Dering expects to add three to five more clubs there in the near future. Even during this time of economic uncertainty, DCP is consulting on a growing number of
projects. According to resort market research firm Ragatz Associates, the private residence club industry grew 12 percent in 2007 over the previous year. DCP reports to have more than $2 billion either sold, under contract, or in development.

After 18 years in the industry, Dering has observed that consumer awareness and acceptance are growing rapidly as more clubs enter the marketplace. He adds, “As is the case with developers, the current soft real
estate market has affluent buyers looking for a vacation home alternative that is lifestyle driven, not investment-driven. Our product delivers value in all market conditions because the carrying costs are much lower while the level of services and amenities is much higher than traditional real estate. Hence, the vacation value exceens the annual cost of ownership.”

As far as the future of the private residence club industry, Dering says, “All indicators point to continued growth. For me, the most important barometer is owner satisfaction, which continues to be high at
all our clubs.”

He adds that the two comments most heard from owners are “It just makes so much sense,” and “The only thing I have to worry about is when I’m coming back.” Dering’s opinion is supported by other industry experts.

“Residence clubs continue to be the fastest growing segment of the luxury vacation home sector,” notes Dr. Richard Ragatz, founder of Ragatz Associates, a leading real estate research firm. “This growth is attributable to greater consumer awareness and extremely high owner satisfaction. Increasingly, affluent
buyers are recognizing that residence clubs offer distinct advantages over whole ownership and timeshares.”

With such an enthusiastic response from owners and developers, DCP International is poised to remain an industry leader and continue to deliver successful residence clubs to worldwide destinations.

For more information on DCP International’s projects and developer services, visit
www.dcp-international.com.