The Portofino Club was the second destination club to form, but this early birth has led to some growing pains, and the club is undergoing a restructuring and recapitalization.

Portofino was founded in 2002 and merged with another club, Signature Destinations, in 2006. The two clubs were maintained as separate "Collections", Portofino with $2.5m homes and Signature with $1.5m homes. Early last year they launched their highest tier club, the Continental Collection with $3.5m homes, although there are currently only two homes in this club level.

We spoke to Ron Tapp, the founder and CEO of Portofino Club, to talk through the upcoming restructuring. The club is planning a private placement for next month and also has four of its homes available for sale, one of which is due to close this Friday. By the end of April Ron is expecting the club to be in a much stronger financial position.

Last year saw the departure of President Rance Rogers and the club has recently moved offices in order to bring it's costs into line with revenues.

Portofino home in Cabo del Sol

As owners of vacation homes often find out, the costs of running your dream home are often far higher than you originally expect. Some of the earliest destination clubs made this same mistake, and started with their initial fees or their annual dues too low to cover the costs of buying homes and running the club.

As a broad rule of thumb, destination clubs start with some equity or debt to buy their first homes. They then use members initial deposits to buy new homes and pay for sales and marketing to attract new members. The annual dues paid by members cover operating costs such as providing member services, home maintenance, debt service, and the costs of running the homes.

Portofino was under capitalized from the start, but also set both it's initial membership deposits and its annual fees too low for the level of homes and services it is providing.

After its recapitalization Portofino will also be restructuring it's membership so that all the refundable deposits are secured against individual properties in the clubs portfolio.

Destination clubs make a lot of sense as alternatives to buying a vacation home or staying in luxury hotels. But in the same way that you should do plenty of research before buying a vacation home, you should do plenty of research before joining a club.

Start by making sure the club has the type of homes you like in your favorite vacation spots - our destination club homes directory is a good place to begin. The good clubs will be willing to share detailed financial information with you and offer assurances about their financial structure and the security of your deposit. If you're uncomfortable with this sort of information ask your lawyer or accountant for help - just as you would on buying a vacation home.

Our in depth Guide to Destination Clubs includes a list of questions to ask the clubs prior to joining. You can also contact our analysts using the contact us form.