2 resort companies to merge

Two of the largest companies in the fledgling destination club industry announced plans to merge Thursday, a deal that will coalesce $200 million worth of luxury properties, including four vacation homes in the Charleston area.

Fort Collins, Colo.-based Private Escapes Destination Clubs will wed Orlando, Fla.-based Ultimate Resorts LLC, combining 140 high-end homes and some 1,200 members.

The union between the No. 2 and 3 players in the industry threatens to wrest business from Exclusive Resorts, the Denver-based company that dominates the market.

The deal is also a move to shore up confidence in a nascent business model that was rocked by a huge bankruptcy last year, according to the Helium Report, an online newsletter focused on the destination club industry.

"While size alone does not ensure financial stability ... the growth of a few larger clubs will signal to prospects that the industry is starting to mature," Helium Report analyst Jamie Cheng wrote Thursday.

Destination clubs are a relatively new phenomenon in hospitality. Memberships typically cost tens of thousands of dollars a year, plus an upfront fee or a deposit of hundreds of thousands of dollars. In exchange, members get to book two to six weeks a year at a portfolio of opulent properties.

The offerings have won favor among the jet-set. But buyers have been wary since Tanner & Haley, the original destination club, filed for bankruptcy in July 2006, stranding almost 900 members who had paid deposits of as much as $1.3 million each.

Tanner & Haley leased a large percentage of its real estate holdings, leaving creditors without much hope for recovery.

Analysts said consolidation, including the merger announced Thursday, is stabilizing the industry. Earlier this year Ultimate Resort bought Tanner & Haley's assets for nearly $100 million and signed on 650 of the defunct club's members.

The new company will be divvied up among the shareholders of Private Escapes and Ultimate Resorts based on the value of the property that each company is bringing to the table.

The pair will start to merge reservation books in 75 days. Private Escapes' chief executive officer, Richard Keith, will serve as chairman of the combined company, while Ultimate Resorts founder Jim Tousignant will assume the CEO title.

The companies have yet to announce the name of the new business.

The clubs have been welcomed on Kiawah Island. Exclusive Resorts has spent $11 million to compile six Kiawah properties. Private Escapes and Ultimate Resorts have three offerings between them in the gated seaside community.

But the city of Charleston has slammed the door on Private Escapes. The company stepped into a feud with officials last year after spending $2.5 million to add 47 Smith St. to its portfolio.

The city contended that the mansion is not in an area of the city zoned for accommodations, and rejected an appeal of that interpretation of the municipal code last year. Private Escapes was still marketing the property to members on its Web site as of Thursday.

The city said Thursday that it would take the club to Livability Court by the end of the month.

Reach Kyle Stock at 937-5763 or kstock@postandcourier.com.