Resort firms join to battle for share

Company targets Exclusive Resorts

David Milstead, Rocky Mountain News

Thursday, September 13, 2007

Fort Collins-based Private Escapes, a player in the emerging luxury-resort vacation industry, is merging with an Orlando, Fla., competitor to create a company with $200 million in properties.

By combining with Ultimate Resorts, Private Escapes hopes the new, unnamed company will have the scale to better compete with Denver's Exclusive Resorts, the clear industry leader.

"We think this is a business of scalability . . . and the big will get bigger," said Rich Keith, one of the founders of Private Escapes. "People writing checks for $250,000 to $300,000 look to the market leaders."

That's the initiation fee in this industry, which targets the superwealthy with the idea that buying rental time at luxury properties is cheaper and has fewer hassles than owning second and third homes.

Exclusive Resorts, majority owned by AOL founder Steve Case, is the headline-maker in this business. It just hired CEO Jeff Potter away from Frontier Airlines and has grown to more than $1 billion in properties in only five years.

Private Escapes says the merged company and Exclusive Resorts will have roughly 90 percent of the market, with the remaining companies fighting over the last 10 percent.

The merged Private Escapes/Ultimate Resorts has a number of properties below $3 million, giving them two initiation fees priced significantly below Exclusive Resorts.

The merger is not an acquisition or purchase. Instead, -Keith said, the two companies are contributing their properties to a new entity. The shareholders of each will take stakes in the new company based primarily on the amount of assets contributed.

Keith will serve as chairman of the combined company. Ultimate Resorts founder and CEO Jim Tousignant will have the chief's job.

Finance Editor David Milstead can be reached at milstead@RockyMountainNews.com or 303-954-2648.