10-K 1 diamondresorts-12312014x10k.htm DR 12.31.2014 10-K DiamondResorts- 12.31.2014 - 10K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
FORM 10-K
______________________________________
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number: 001-35967
______________________________________
DIAMOND RESORTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
______________________________________
Delaware
 
46-1750895
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
10600 West Charleston Boulevard
Las Vegas, Nevada
 
89135
(Address of principal executive offices)
 
(Zip code)
 
 
 
(702) 684-8000
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class                                                      
Name of each exchange on which registered
Common Stock, par value $0.01 per share
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES x NO o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO x
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES x NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x
 
Accelerated filer o
 
 
 
Non-accelerated filer o
 
Smaller reporting company o
                  (Do not check if a smaller reporting company)
 
 




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o YES x NO
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2014 (the last business day of the registrant’s most recently completed second fiscal quarter) was $746,768,786 based on the last reported sale price on the New York Stock Exchange on June 30, 2014.
As of February 20, 2015, there were 75,734,588 outstanding shares of the common stock, par value $0.01 per share, of the registrant.    
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, in connection with the registrant's 2015 Annual Meeting of Stockholders, are incorporated by reference into Part III of this report.

 




 
TABLE OF CONTENTS
 PART I
 
 
    ITEM 1. BUSINESS
 
 
    ITEM 1A. RISK FACTORS
 
 
    ITEM 1B. UNRESOLVED STAFF COMMENTS
 
 
    ITEM 2. PROPERTIES
 
 
    ITEM 3. LEGAL PROCEEDINGS
 
 
    ITEM 4. MINE SAFETY DISCLOSURES
 
 
PART II
 
 
    ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
 
    ITEM 6. SELECTED FINANCIAL DATA
 
 
    ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 
    ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 
    ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
 
    ITEM 9A. CONTROLS AND PROCEDURES
 
 
    ITEM 9B. OTHER INFORMATION
 
 
PART III
 
 
    ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
 
    ITEM 11. EXECUTIVE COMPENSATION
 
 
    ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
 
    ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
 
    ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 
 
PART IV
 
 
    ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 
 
SIGNATURES
 
 


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PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements, which are covered by the "Safe Harbor for Forward-Looking Statements" provided by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. We have tried to identify forward-looking statements in this report by using words such as “anticipates,” “estimates,” “expects,” “intends,” “plans” and “believes,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could.” These forward-looking statements include, among others, statements relating to our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs and other similar matters. These forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this report as a result of various factors, including, among others:
adverse trends or disruptions in economic conditions generally or in the vacation ownership, vacation rental and travel industries;
adverse changes to, or interruptions in, relationships with our affiliates and other third parties, including termination of our hospitality management contracts;
our ability to maintain an optimal inventory of VOIs for sale overall, as well as in specific Diamond Collections;
our ability to sell, securitize or borrow against our consumer loans;
decreased demand from prospective purchasers of VOIs;
adverse events, including weather-related and other natural disasters and crises, or trends in vacation destinations and regions where the resorts in our network are located;
changes in our senior management;
our ability to comply with regulations applicable to the vacation ownership industry;
the effects of our indebtedness and our compliance with the terms thereof;
changes in the interest rate environment and their effects on our outstanding indebtedness;
our ability to successfully implement our growth strategy;
our ability to compete effectively; and
other risks and uncertainties discussed in "Item 1A. Risk Factors" and elsewhere in this annual report.
Accordingly, you should read this report completely and with the understanding that our actual future results may be materially different from what we expect.
Forward-looking statements speak only as of the date of this report. Except as expressly required under federal securities laws and the rules and regulations of the Securities and Exchange Commission (the "SEC"), we do not have any obligation, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this report, whether as a result of new information or future events or otherwise. You should not place undue reliance on the forward-looking statements included in this report or that may be made elsewhere from time to time by us, or on our behalf. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

Except where the context otherwise requires or where otherwise indicated, references in this annual report on Form 10-K to "the Company," "we," "us" and "our" refer to Diamond Resorts Parent, LLC ("DRP") prior to the consummation of the Reorganization Transactions on July 24, 2013, and Diamond Resorts International, Inc. ("DRII"), as the successor to DRP, following the consummation of the Reorganization Transactions, in each case together with its subsidiaries. See "Item 1. Business—Company History" for further discussion regarding the Reorganization Transactions.




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INDUSTRY AND MARKET DATA

Certain market, industry and similar data included in this report have been obtained from third-party sources that we believe to be reliable, including the ARDA International Foundation, (the "AIF"). Our market estimates are calculated by using independent industry publications and other publicly available information in conjunction with our assumptions about our markets. We have not independently verified any market, industry or similar data presented in this report. Such data involves risks and uncertainties and are subject to change based on various factors, including those discussed under the headings “Cautionary Statement Regarding Forward-Looking Statements” and "Item 1A. Risk Factors" in this report.
TRADEMARKS
Diamond Resorts International®, Diamond Resorts®, THE Club®, The Meaning of Yes®, We Love to Say YesTM, Vacations for Life®, Affordable Luxury. Priceless MemoriesTM, Events of a LifetimeTM, Stay Vacationed™ and our other registered or common law trademarks, service marks or trade names appearing in this report are our property. This report also refers to brand names, trademarks or service marks of other companies. All brand trademarks, service marks or trade names cited in this report are the property of their respective holders.





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ITEM 1.     BUSINESS

Company Overview

We are a global leader in the hospitality and vacation ownership industry, with a worldwide network of 333 vacation destinations located in 34 countries throughout the continental United States ("U.S."), Hawaii, Canada, Mexico, the Caribbean, Central America, South America, Europe, Asia, Australia, New Zealand and Africa. Our resort network includes 93 resort properties with approximately 11,000 units that we manage and 236 affiliated resorts and hotels and four cruise itineraries, which we do not manage and do not carry our brand, but are a part of our network and, through the Clubs (defined below), are available for our members to use as vacation destinations. We offer Vacations for Life®--a simple way to acquire a lifetime of vacations at top destinations worldwide.
We offer a vacation ownership program whereby members acquire vacation ownership interests ("VOIs" or "Vacation Interests") in the form of points. Members receive an annual allotment of points depending on the number of points purchased, and, through the Clubs, they can use these points to stay at destinations within our network of resort properties, including Diamond Resorts managed properties as well as affiliated resorts, luxury residences, hotels and cruises. Unlike a traditional interval-based vacation ownership product that is linked to a specific resort and week during the year, our points-based system permits our members to maintain flexibility relating to the location, season and duration of their vacation.
A core tenet of our management philosophy is delivering consistent quality and personalized services to each of our members, and we strive to infuse hospitality and service excellence into every aspect of our business and each member's vacation experience. This philosophy is embodied in We Love to Say YesTM, a set of Diamond values designed to provide each of our members and guests with a consistent, “high touch” hospitality experience through our commitment to be flexible and open in responding to the desires of our members and guests. Our service-oriented culture is highly effective in building a strong brand name and fostering long-term relationships with our members, resulting in additional sales to our existing member base.
Our business consists of two segments: (i) hospitality and management services and (ii) Vacation Interest Sales and Financing.
Hospitality and Management Services. We are fundamentally a hospitality company that manages a worldwide network of resort properties and provides services to a broad member base. We manage 93 resort properties, as well as eight multi-resort trusts (the "Diamond Collections"), each of which holds ownership interests in a group of resort properties (including our managed resorts). Substantially all of our management contracts automatically renew, and the management fees we receive are based on a cost-plus structure. As the manager, we operate the front desks, provide housekeeping, conduct maintenance and manage human resources services. We also operate, directly or by managing outsourced providers of, amenities such as golf courses, food and beverage venues and retail shops, an online reservation system, customer contact centers, rental, billing and collection, accounting and treasury functions, communications and information technology services. In addition to resort services, key components of our business are the Clubs, which enable our members to use their points to stay at resorts in our network. The Clubs offer our members a wide range of other benefits, such as the opportunity to purchase various products and services, including private luxury property rentals, high-profile sporting events, guided excursions, consumer electronics and home appliances at discounted prices, for which we earn commissions. Our Clubs include THE Club, which is the primary Club sold, and provides members with full membership access to all resorts in our network and offers the full range of member services, as well as other Clubs that enable their members to use their points to stay at specified resorts in our network and provide their members with a more limited offering of benefits. We refer to THE Club and other Club offerings as "the Clubs." Fees paid by our members cover the operating costs of our managed resorts (including the absorption of a substantial portion of our overhead related to the provision of our management services), our management fees, maintenance fees for VOIs at resorts that we do not manage that are held by the Diamond Collections, and, in the case of members of the Clubs, membership dues. As part of our hospitality and management services, we typically enter into agreements with our managed resorts and the Diamond Collections under which we reacquire VOIs from members who fail to pay their annual maintenance fees or other assessments, serving as the principal source of our VOI inventory that we sell.
Vacation Interest Sales and Financing. We sell VOIs principally through presentations, which we refer to as “tours,” at our 53 sales centers, substantially all of which are located at our managed resorts. We generate sales prospects by utilizing a variety of marketing programs, including presentations at our managed resorts targeted at existing members and current guests who stay on a per-night or per-week basis, overnight mini-vacation packages, targeted mailings, member referrals, telemarketing, gift certificates and various destination-specific marketing efforts. As part of our sales efforts, and to generate interest income and other fees, we also provide loans to qualified VOI purchasers.
The charts below show the total revenue and net income for each segment of our business for the year ended December 31, 2014 (with the percentages representing the relative contributions of these two segments):

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The Vacation Ownership Industry
The vacation ownership industry enables individuals and families to purchase VOIs, which facilitates shared ownership and use of fully-furnished vacation accommodations at a particular resort or network of resorts. VOI ownership distinguishes itself from other vacation options by integrating aspects of traditional property ownership and the flexibility afforded by pay-per-day resorts or hotels. As compared to pay-per-day resort or hotel rooms, VOI ownership typically offers consumers more space and home-like features, such as a full kitchen, living and dining areas and one or more bedrooms. Further, room rates and availability at pay-per-day resorts and hotels are subject to periodic change, while much of the cost of a VOI is generally fixed at the time of purchase. Relative to traditional vacation property ownership, VOI ownership affords consumers greater convenience and variety of vacation experiences and requires significantly less up-front capital, while still offering common area amenities such as swimming pools, playgrounds, restaurants and gift shops. Consequently, for many vacationers, VOI ownership is an attractive alternative to traditional vacation property ownership and pay-per-day resorts and hotels.
Typically, a vacation ownership resort is overseen by an organization generally referred to as a homeowners association ("HOA"), which is administered by a board of directors, generally elected by the owners of VOIs at the resort. The HOA is responsible for ensuring that the resort is financially sound and adequately maintained and operated. To fund the ongoing operating costs of the resort, each VOI holder is required to pay its pro rata share of the expenses to operate and maintain the resort, including any management fees payable to a company to manage and oversee the day-to-day operation of the resort. If a VOI owner fails to pay its maintenance fee, that owner will be in default, which may ultimately result in a forfeiture of that owner's VOI to the HOA and a consequent ratable increase in the expense-sharing obligations of the non-defaulted VOI owners.
The management and maintenance of a resort in which VOIs are sold are generally either provided by the developer of the resort or outsourced to a management company, but, in either case, many developers often regard the management services provided as ancillary to the primary activities of property development and VOI sales. Historically, certain real estate developers have created and offered VOI products in connection with their investments in purpose-built vacation ownership properties or converted hotel or condominium buildings. These developers have frequently used substantial project-specific debt financing to construct or convert vacation ownership properties. The sales and marketing efforts of these developers have typically focused on selling out the intervals in the development, so that the developer can repay its indebtedness, realize a profit from the interval sales and proceed to a new development project.
As the vacation ownership industry evolved, some in the industry recognized the potential benefits of a more integrated approach, where the developer's resort management operations complemented its sales and marketing efforts. In addition, the types of product offerings have also expanded over time, moving from fixed-or floating-week intervals at individual resorts, which provide the right to use the same property each year, or in alternate years, to points-based memberships in multi-resort vacation networks. These multi-resort vacation networks are designed to offer more flexible vacation opportunities. In addition to these resort networks, developers of all sizes may also affiliate with vacation ownership exchange companies in order to give

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customers the ability to exchange their rights to use the developer's resorts for the right to access a broader network of resorts. According to the AIF, a trade association representing the vacation ownership and resort development industries, the percentage of resort networks offering points-based products has been rising in recent years and, due to the flexibility of these types of products, the AIF believes that this trend will continue in the near future as companies that have traditionally offered only weekly intervals expand their product offerings. Entry into this market, particularly by single site developers, is expensive and complex due to the need for the necessary support systems such as the technology requirements, legal know-how and strong business and inventory controls to provide such services.
Growth in the vacation ownership industry has been achieved through expansion of existing resort companies as well as the entry of well-known lodging and entertainment companies, including Disney, Four Seasons, Hilton, Hyatt, Marriott, Starwood and Wyndham, which have developed larger purpose-built resorts and added vacation ownership developments to their existing pay-per-day resorts and hotels. The industry's growth can also be attributed to increased market acceptance of vacation ownership resorts, enhanced consumer protection laws and the evolution from a product offering a specific week-long stay at a single resort to the multi-resort points-based vacation networks, which offer a more flexible vacation experience.
According to the AIF's State of the Vacation Timeshare Industry Report ("State of the Industry Report"), as of December 31, 2013, the U.S. vacation ownership community was comprised of approximately 1,500 resorts, representing approximately 192,000 units and an estimated 8.5 million vacation ownership week equivalents. As reported by the AIF and reflected in the graph below, VOI sales during 2009 through 2011 were down significantly from levels prior to the economic downturn that started in 2008, which the AIF attributes largely to the fact that several of the larger VOI developers intentionally slowed their sales efforts through increased credit score requirements and larger down payment requirements in the face of an overall tighter credit environment. However, according to the State of the Industry Report, VOI sales in the U.S. increased by 6.0% from 2011 to 2012 and by 11.0% from 2012 to 2013. Based on AIF's Quarterly Pulse Survey reports, this trend of increasing VOI sales continued to accelerate to a 9.1% increase for the first three quarters of 2014 as compared to the same period in 2013.
Source: Historical timeshare industry research conducted by Ragatz Associates and American Economic Group, as of December 31, 2013.

We expect the U.S. vacation ownership industry to continue to grow over the long term due to favorable demographics, more positive consumer attitudes, availability of capital and the low penetration of vacation ownership in North America. According to the AIF's bi-annual 2014 Shared Vacation Ownership Owners Report (the “Owners Report”), based upon a survey of the U.S. VOI owners, the median household income of VOI owners was $89,500 in 2014, 90% of VOI owners own their primary residence and 67% have a college degree. The Owners Report indicated that 83% of VOI owners rate their overall ownership experience as good to excellent and that the top four reasons for purchasing a VOI are resort location, saving money on future vacations, overall flexibility and quality of the accommodations. According to the Owners Report, less than 8% of U.S. households own a VOI. We believe this relatively low penetration rate of vacation ownership suggests the presence of a large base of potential customers.
The European vacation ownership industry is also significant. According to AIF, based on the latest survey, the European vacation ownership community was comprised of approximately 1,300 resorts in 2010, representing approximately 88,000 units. In addition, we believe that rapidly-growing international markets, such as Asia and Central

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and South America, present significant opportunities for expansion of the vacation ownership industry due to the substantial increases in spending on travel and leisure activities forecasted for consumers in those markets.
As the vacation ownership industry continues to mature, we believe that keys to success for a company in this industry include:
Hospitality Focus. Integrating hospitality into every aspect of a guest's vacation experience, including VOI sales, should result in higher levels of customer satisfaction and generate increased VOI sales, as compared to companies that do not view hospitality as an integral component of the services they provide.
Broad, Flexible Product Offering. Offering a flexible VOI product that allows customers to choose the location, season, duration and size of accommodation for their vacation, based upon the size of the product purchased, coupled with a broad resort network, will likely attract a broader spectrum of customers.
Consistent, High-Quality Resort Management. Ensuring a consistent, high-quality guest experience across a company's managed resorts and a brand the customer can trust should enhance VOI sales and marketing efforts targeted at new customers and increase the potential for additional VOI sales to existing customers.
Financing. Providing quick and easy access to consumer financing will often expedite a potential purchaser's decision-making process and result in additional VOI purchases.
We believe that competition in the vacation ownership industry is based primarily on the quality of the hospitality services and overall experience provided to customers, the number and location of vacation ownership resorts in the network, trust in the brand and the availability of program benefits.
Competitive Strengths
Our competitive strengths include:
A substantial portion of the revenue from our hospitality and management services business converts directly to Adjusted EBITDA.
Substantially all of our management contracts with our managed resorts and the Diamond Collections automatically renew, and under these contracts we receive management fees generally ranging from 10% to 15% of the other costs of operating the applicable resort or Diamond Collection (with a weighted average of 12.9% based upon the total management fee revenue for the year ended December 31, 2014). The covered costs paid by our managed resorts and the Diamond Collections include both the direct resort operating costs and the absorption of a substantial portion of our overhead related to this part of our business. Accordingly, our management fee revenue results in a comparable amount of Adjusted EBITDA. Generally, our revenue from management contracts increases to the extent that (i) operating costs at our managed resorts and the Diamond Collections rise and, consequently, our management fees increase proportionately under our cost-plus management contracts; (ii) we add services under our management contracts or (iii) we acquire or enter into contracts to manage resorts not previously managed by us.
The principal elements of our business provide us with significant financial visibility.
Management fees from our cost-plus management contracts. All anticipated operating costs of each of our managed resorts and Diamond Collections, including our management fees and costs pertaining to the specific managed resort or Diamond Collection, such as costs associated with the maintenance and operations of the resort, are included in the annual budgets of these resorts and Diamond Collections. These annual budgets are determined by the board of directors of the HOA or Diamond Collection, as applicable, and are typically finalized before the end of the prior year. As a result, a substantial majority of our management fees are collected by January of the applicable year as part of the annual maintenance fees billed to VOI owners and released to us as services are provided. Unlike typical management agreements for traditional hotel properties, our management fees are not affected by average daily rates ("ADR") or occupancy rates at our managed resorts. In addition, while our management contracts may be subject to non-renewal or termination, no resort or Diamond Collection has terminated or elected not to renew any of our management contracts during the past five years.
Fees earned by operating the Clubs. Dues payments for each of the Clubs are billed and generally collected together with the member's related annual maintenance fees. Substantially all Club dues are collected by January of the applicable year. Members of the Clubs are not permitted to make reservations or access the applicable Club's services and benefits if they are not current in payment of these dues. The Clubs also provide specific services to the Diamond Collections, such as call center services, for which the Clubs charge a fee to the Diamond Collections, and are included in the Diamond Collection maintenance fees. Some of the Clubs offer a tiered loyalty membership whereby additional resorts and benefits are made available as the member purchases more points, resulting in higher club dues

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for members in a higher loyalty tier.
VOI sales. Our VOI sales revenue is primarily a function of three levers: the number of tours we conduct, our closing percentage (which represents the percentage of VOI sales closed relative to the total number of sales presentations at our sales centers) and the sales price per transaction. We generally have a high degree of near-term visibility as to each of these factors. Before the beginning of a year, we can predict with a high degree of confidence the number of tours we will conduct that year, and we believe that we can tailor our sales and marketing efforts to effectively influence our closing percentage and average transaction size in order to calibrate our VOI sales levels over the course of the year.
Financing of VOI sales in the U.S. We target the level of our consumer financing activity in response to capital market conditions. We accomplish this by offering sales programs that either encourage or discourage our customers to finance their VOI purchases with us, without compromising our underwriting standards. As of December 31, 2014, the weighted average Fair Isaac Corporation ("FICO") score (based upon loan balance) for our borrowers across our existing loan portfolio was 719, and the weighted average FICO score for our borrowers on loans originated since October 2008 was 757. The default rate on our originated consumer loan portfolio was 6.3% (as a percentage of our outstanding originated portfolios) for 2014, and ranged from 5.7% to 8.6% on an annual basis from 2009 through 2014.

Our capital-efficient business model requires limited investment in working capital and capital expenditures.
Limited working capital required. Our hospitality and management services business consumes limited working capital because a substantial portion of the funds we receive under our management contracts is collected by January of each year and released to us as services are provided. Moreover, all resort-level maintenance and improvements are paid for by the owners of VOIs, with our financial obligation generally limited to our pro rata share of the VOIs we hold as unsold VOIs.
Limited investment capital required. Generally we do not believe that we will need to build resort properties or acquire real estate in the foreseeable future to support our anticipated VOI sales levels; however, in certain geographic areas, we may from time to time acquire additional VOI inventory through open market purchases or other means. Although the volume of points or intervals that we recover could fluctuate in the future for various reasons, we reacquire approximately 2% to 5% of our total outstanding VOIs from defaulted owners on an annual basis. This provides us with a relatively low-cost, consistent stream of VOI inventory that we can resell. We may engage in targeted development projects, particularly in attractive locations where member demand exceeds our existing supply, and in these circumstances, we expect that we will generally seek to structure developments in a manner that limits our financial exposure, including by minimizing the amount of time between when we are required to pay for the new VOI inventory and when such inventory is sold. In a majority of our strategic transactions, we have acquired an on-going business, consisting of management contracts, unsold VOI inventory and an existing owner base, which has generated immediate cash flow for us.
Access to financing. The liquidity to support our provision of financing to our customers for VOI purchases is provided through the Conduit Facility, the Quorum Facility (collectively, the “Funding Facilities”) and securitization financings and, as a result, also consumes limited working capital. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesIndebtedness" for the definition of and further detail of these borrowings. )
Our scalable VOI sales and marketing platform has considerable operating leverage and drives increases in Adjusted EBITDA.
We have built a robust and versatile sales and marketing platform. This platform enables us to take actions that directly impact the three levers that primarily determine our VOI sales revenue: the number of tours we conduct, our closing percentage and the sales price per transaction. Our objective is to consistently monitor and adjust these three factors to reach an optimum level of VOI sales based on our available VOI inventory. With our scalable sales platform in place, we do not foresee the need to significantly increase the number of sales centers or the size of our sales team. Accordingly, we believe our VOI sales business has considerable operating leverage and the ability to drive increases in Adjusted EBITDA.
Our high level of customer satisfaction results in significant sales of additional VOIs to our members.
We believe our efforts to introduce hospitality, service excellence and quality into each member's vacation experience have resulted in a high degree of customer satisfaction, driving significant sales of additional VOIs to our existing members who previously purchased points from us, as well as members we acquired in our strategic acquisitions who purchased points from us for the first time. In 2014, 2013 and 2012, approximately 63%, 58% and 53%, respectively, of the total dollar amount of VOI sales were to existing members who previously purchased points from us, and approximately 17%, 19% and 19%, respectively, of the total dollar amount of VOI sales were to members we acquired in our strategic acquisitions who purchased

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points from us for the first time (an “Acquired Member”). After an Acquired Member makes his or her first purchase from us, all future transactions involving that Acquired Member are treated as sales to an existing member.
Our accomplished leadership team positions us for continued growth.
We have an experienced leadership team that has delivered strong operating results through disciplined execution. Our management team has taken a number of significant steps to refine our strategic focus, build our brand recognition and streamline our operations, including (i) maximizing revenue from our hospitality and management services business; (ii) driving innovation throughout our business, most significantly by infusing our hospitality focus into our customer interactions, and (iii) adding resorts to our network and owners to our owner base through complementary strategic acquisitions and efficiently integrating businesses acquired. Members of our management team have substantial equity interests in our Company that closely align their economic interests with those of our other stockholders.
Growth Strategies
Our growth strategies are as follows:
Continue to grow our hospitality and management services business.
We expect our hospitality and management services revenue will continue to grow as rising operating expenses at our managed resorts result in higher revenues under our cost-plus management contracts. We intend to generate additional growth in our hospitality and management services business by (i) increasing Club membership revenue; (ii) adding service and activity offerings for members of the Clubs and (iii) expanding opportunities for our members to purchase third-party products and services and (iv) pursue additional management and service contracts.
Increase Club membership revenue. Purchasers of our points are, in almost all cases, automatically enrolled in THE Club. In addition, as existing members purchase more points and thereby upgrade Club memberships to a higher loyalty tier, higher fees are collected. When we complete an acquisition, we typically create a tailor-made Club, with limited additional resorts and benefits. This results in an owner base that becomes familiar with the concept of a Club, and should therefore be more likely to upgrade and purchase points from us with membership in THE Club. We also have implemented programs to drive interval owners at our managed resorts to join THE Club.
Broaden hospitality service and activity offerings. We intend to continue to make membership in the Clubs more attractive to our members by expanding the number and variety of offered services and activities, such as airfare, cruises, guided excursions, golf outings, entertainment, theme park tickets, luggage and travel protection and access to luxury accommodations outside our network of resorts. For example, in October 2013, we commenced The Diamond Luxury Selection, a Club member benefit exclusively for our members with large point ownership and, therefore, in a higher loyalty tier. Qualifying members can access The Diamond Luxury Selection using their points through THE Club for stays within a collection of approximately 2,500 private luxury properties, including villas, resorts, boutique hotels and yachts. Such hospitality-focused enhancements may allow us to increase the dues paid by members of THE Club and should also generate commission revenue for us.
Pursue additional management and service contracts. We intend to actively leverage existing management contracts to add services provided to our members under our management contracts and increase the management fees to cover those new services. In addition, we may purchase or otherwise obtain additional management contracts at resorts that we do not currently manage. Furthermore, we intend to broaden our business-to-business services on a fee-for-service basis to other companies in the hospitality and vacation ownership industry. For example, we have entered into fee-for-service agreements with resort operators and hospitality companies pursuant to which we provide them with resort management services, VOI sales and marketing services and inventory rental services. These types of arrangements are highly profitable for us because we are not required to invest any significant capital. In the future, in situations where we can leverage our unique expertise, skills and infrastructure, we intend to expand our provision of business-to-business services on an à la carte basis or as a suite of services to third-party resort developers and operators and other hospitality companies.
Continue to leverage our scalable sales and marketing platform to increase VOI sales revenue.
We intend to continue to take advantage of the operating leverage in our sales and marketing platform. While we have increased our focus on potential new owners, we will continue to market to our existing long-term membership base, and expect that through these efforts and our continuing commitment to ensuring high member satisfaction, a significant percentage of our VOI sales will continue to be made to our existing members. We will also continue to target the ownership base at resorts that we now manage as a result of our strategic acquisitions to encourage these prospective customers to purchase our VOIs. While we anticipate that the bulk of our future VOI sales will be made through our traditional selling methods, we are seeking

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to more fully integrate the VOI sales experience into our hospitality and management services. For example, at some of our managed resorts, we offer enhanced mini-vacation packages, which we refer to as Events of a LifetimeTM, in which a group of members or prospective customers who have purchased such packages are invited to dine together, along with our sales team members, and to attend a show, golf outing or other local attraction as a group over a two-day period. At the end of the stay, our sales team provides an in-depth explanation of our points-based VOI system and the value proposition it offers. We have found that, by driving innovation throughout our business, most significantly by infusing our hospitality focus into the sales process and creatively engaging with potential purchasers, we improve potential purchasers' overall experience and level of satisfaction and, as a result, are able to increase the likelihood that they will buy our VOIs and increase the average transaction size. We have extended this philosophy of increased engagement and hospitality focus into other sales techniques, and intend to continue to innovate in this area.
Pursue additional revenue opportunities consistent with our capital-efficient business model.
We believe that we can achieve growth without pursuing revenue opportunities beyond those already inherent in our core business model. However, to the extent consistent with our capital-efficient business model, we intend to:
Selectively pursue strategic transactions. We intend to pursue acquisitions of ongoing businesses, including management contracts and VOI inventory, on an opportunistic basis where the economic terms are favorable and we can achieve substantial synergies and cost savings. Future acquisitions may be similar in structure to transactions we have completed during the past several years in which we added locations to our network of available resorts, additional management contracts, new members to our owner base and additional VOI inventory that we may sell to existing members and potential customers.
Prudently expand our geographic footprint. We believe that there are significant opportunities to expand our business into new geographic markets in which we currently may have affiliations, but do not manage resorts or market or sell our VOIs. We believe that certain countries in Asia and Central and South America are particularly attractive potential new markets for us because of the substantial increases in spending on travel and leisure activities forecasted for their consumers. To the extent that we can maintain our high quality standards and strong brand reputation, we are selectively exploring acquisitions of ongoing resort businesses in these markets and may also pursue co-branding opportunities, joint ventures or other strategic alliances with existing local or regional hospitality companies. For example, we have entered into a joint venture with affiliates of Dorsett Hospitality International, a large hotel developer, owner and operator in Asia, and China Travel International Investment Hong Kong Ltd., an investment holding company engaged in the operation of travel destinations (including hotels, theme parks, natural and cultural scenic spots and leisure resorts), travel agency and related business operations. The venture expects to create, market, sell and service vacation packages and associated benefits (including vacation ownership) to customers in Asia. In addition, we may engage in targeted development projects, particularly in attractive locations where member demand exceeds our existing supply, in a manner consistent with our capital-light model. We believe that expansion of our geographic footprint will produce revenue from consumers in the markets into which we enter and also make our resort network more attractive to existing and prospective members worldwide.
Our Customers
Our customers are typically families seeking a flexible vacation experience. A majority of our new customers stay at one of the resorts in our network, either by reserving a unit on a per-night or per-week basis, exchanging points through an external exchange service, or purchasing a mini-vacation package, prior to purchasing a VOI. We have also generated significant additional sales to our existing members who wish to purchase additional points and thereby increase their benefit options within our network.
We believe a majority of our customers are between 45 and 65 years old. The baby boomer generation is the single largest population segment in the U.S. and Europe and is our key target market. With the premium resorts in our network and the broad range of benefits that we offer, we believe we are well-positioned to target an affluent subsection of the baby boomer population.
Our Services
Hospitality and Management Services. We manage 93 resort properties, which are located in the continental U.S., Hawaii, Mexico, the Caribbean and Europe, as well as the Diamond Collections. As the manager of these resorts and the Diamond Collections, we operate the front desks, provide housekeeping, conduct maintenance and manage human resources services. We also operate, or outsource the operation of, amenities such as golf courses, food and beverage venues and retail

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shops, an online reservation system, customer service contact centers, rental, billing and collection, accounting and treasury functions and communications and information technology services.
As an integral part of our hospitality and management services, we have entered into inventory recovery agreements with a substantial majority of the Diamond Collections and HOAs for our managed resorts in North America, together with similar arrangements with the European Collection and a majority of our European managed resorts, whereby we recover VOIs from members who fail to pay their annual maintenance fee or assessments due to, among other things, death or divorce or other life-cycle events or lifestyle changes. Because the majority of the cost of operating the resorts that we manage is spread across our member base, by recovering VOIs from members who have failed to pay their annual maintenance fee or assessments, we reduce bad debt expense at the HOA and Diamond Collection level, which is a component of the management fees billed to members by each resort's HOA or each Diamond Collection's non-profit members association (each, a "Collection Association"), supporting the financial well-being of those HOAs and the Diamond Collections.
HOAs. Each of the Diamond Resorts managed resorts, other than certain resorts in our European Collection and Latin America Collection, is typically operated through an HOA, which is administered by a board of directors. Directors are elected by the owners of intervals at the resort (which may include one or more of the Diamond Collections) and may also include representatives appointed by us as the developer of the resort. As a result, we are entitled to voting rights with respect to directors of a given HOA by virtue of (i) our ownership of intervals at the related resort; (ii) our control of the Diamond Collections that hold intervals at the resort and/or (iii) our status as the developer of the resort. The board of directors of each HOA hires a management company to provide the services described above, which in the case of all Diamond Resorts managed resorts, is us. Through December 31, 2014, we functioned as the HOA for two resorts in St. Maarten and collected maintenance fees, earned management fees and incurred operating expenses at these two resorts. Effective January 1, 2015, however, we assigned our rights and obligations to two newly-created stand-alone HOAs and ceased functioning as the HOA for such resorts, and now provide management services to these resorts pursuant to our customary management agreements. See "Note 31—Subsequent Events" of our consolidated financial statements included elsewhere in this annual report for further detail.
Our management fees with respect to a resort are based on a cost-plus structure and are calculated based on the direct and indirect costs (including the absorption of a substantial portion of our overhead related to the provision of management services) incurred by the HOA of the applicable resort. Under our current resort management agreements, we receive management fees generally ranging from 10% to 15% of the other costs of operating the applicable resort (with a weighted average of 12.9% based upon the total management fee revenue for the year ended December 31, 2014). Unlike typical commercial lodging management contracts, our management fees are not impacted by changes in a resort's ADR or occupancy level. Instead, the HOA for each resort engages in an annual budgeting process in which the board of directors of the HOA estimates the costs the HOA will incur for the coming year. In evaluating the anticipated costs of the HOA, the board of directors of the HOA considers the operational needs of the resort, the services and amenities that will be provided at or to the applicable resort and other costs of the HOA, some of which are impacted significantly by the location, size and type of the resort. Included in the anticipated operating costs of each HOA are our management fees. The board of directors of the HOA discusses the various considerations and approves the annual budget, which determines the annual maintenance fees charged to each owner. One of the management services we provide to the HOA is the billing and collection of annual maintenance fees on the HOA's behalf. Annual maintenance fees for a given year are generally billed during the previous November, due by January and deposited in a segregated or restricted account we manage on behalf of the HOA. As a result, a substantial majority of our fees for March through December of each year are collected from owners in advance. Funds are released to us from these accounts on a monthly basis for the payment of management fees as we provide our management services.
Our HOA management contracts typically have initial terms of three to ten years, with automatic renewals. These contracts can generally only be terminated by the HOA upon a vote of the owners (which may include one or more of the Diamond Collections) prior to each renewal period, other than in some limited circumstances involving cause. No HOA has terminated any of our management contracts during the past five years. We generally have the right to terminate our HOA management contracts at any time upon written notice to the respective HOA. During the past five years, we have terminated only one and sold two immaterial HOA management contracts.

Diamond Collections. The Diamond Collections currently consist of the following:

the Diamond Resorts U.S. Collection (the “U.S. Collection”), which includes interests in resorts located in Arizona, California, Florida, Missouri, Nevada, New Mexico, South Carolina, Tennessee, Virginia and St. Maarten;

the Diamond Resorts Hawaii Collection (the “Hawaii Collection”), which includes interests in resorts located in Arizona, California, Hawaii, Nevada and Utah;

the Diamond Resorts California Collection (the “California Collection”), which includes interests in resorts located in Arizona, California and Nevada;

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the Premiere Vacation Collection (the “Premiere Vacation Collection”), which includes interests in resorts added to our network in connection with our acquisition of certain assets from ILX Resorts Incorporated in August 2010 (the "ILX Acquisition") located in Arizona, Colorado, Indiana, Nevada and Baja, Mexico;

Monarch Grand Vacations (the “Monarch Grand Collection”), which includes interests in resorts added to our network in connection with the PMR Acquisition (see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview” for the definition of the PMR Acquisition) located in California, Nevada, Utah and Mexico;

the Diamond Resorts European Collection (the “European Collection”), which includes interests in resorts located in Austria, England, France, Italy, Norway, Portugal, Scotland, Spain Balearics, Spain Canaries and Spain Costa;

the Diamond Resorts Latin America Collection (the “Latin America Collection”), which currently includes interests in the Cabo Azul Resort located in Baja California Sur, Mexico, which was added to our network in connection with the PMR Acquisition; and

the Diamond Resorts Mediterranean Collection (the “Mediterranean Collection”), which includes interests in resorts added to our network in connection with the Aegean Blue Acquisition (see “Our Strategic Acquisitions” for the definition of the Aegean Blue Acquisition) located in the Greek Islands of Crete and Rhodes.
Each of the Diamond Collections is operated through a Collection Association, which is administered by a board of directors. Directors are elected by the points holders within the applicable Diamond Collection with the following exceptions: (i) The Premiere Vacation Collection allows the developer to appoint the board of directors until 90.0% of all membership interests are sold, (ii) the board of directors of the European Collection is comprised of five directors, three of whom are appointed by the developer and two of whom are appointed by the members of that Collection (provided the developer may exercise its vote as a member of that Collection) and (iii) the board of Directors of the Mediterranean Collection is comprised of three directors, two of whom are appointed by the developer and one of whom is appointed by the Trustee.
We own a significant number of points in each of the Diamond Collections (which in the case of the Mediterranean Collection are in the form of shares but for simplicity are also referred to in this annual report as points), which we hold as inventory. The board of directors of each Diamond Collection hires a company to provide management services to the Diamond Collection, which in each case is us.
As with our HOA management contracts, management fees charged to the Diamond Collections in the U.S. are based on a cost-plus structure and are calculated based on the direct and indirect costs (including the absorption of a substantial portion of our overhead related to the provision of our management services) incurred by the Diamond Collection. Under our current Diamond Collection management agreements, we receive management fees of 15.0% of the other costs of the applicable Diamond Collection (except with respect to our management agreement with the Monarch Grand Collection, under which we receive a management fee of 10.0% of the costs of the Monarch Grand Collection). Our management fees are included in the budgets prepared by each Collection Association, which determines the annual maintenance fee charged to each owner. One of the management services we provide to all of the Diamond Collections is the billing and collection of annual maintenance fees on the Diamond Collection's behalf. Annual maintenance fees for a given year are generally billed during the previous November, due by January and deposited in a segregated or restricted account we maintain on behalf of each Diamond Collection. As a result, a substantial majority of our fees for February through December of each year are collected from owners in advance. Funds are released to us from these accounts on a monthly basis for the payment of management fees as we provide our management services.
Apart from the management contract for the European Collection and the Mediterranean Collection, our Diamond Collection management contracts have initial terms of three to ten years, with automatic renewals of three to ten years, and can generally only be terminated by the Diamond Collection upon a vote of the Diamond Collection's members prior to each renewal period, other than in some limited circumstances involving cause. In the case of the Mediterranean Collection, the management agreement is indefinite and irrevocable. In the case of the resorts we manage that are part of the European Collection, generally the management agreements have either indefinite terms or long remaining terms (approximately 40 years) and can only be terminated for an uncured breach by the manager or a winding up of the European Collection. No Diamond Collection has terminated, or elected not to renew, any of our management contracts during the past five years. Save for the above, we generally have the right to terminate our Diamond Collection management contracts at any time upon written notice to the applicable Diamond Collection. The management contract for the European Collection has an indefinite term, can only be terminated by the European Collection for an uncured breach by the manager or a winding up of the European Collection, and may not be terminated by the manager.

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Clubs. Another key component of our hospitality and management services business is our management of the Clubs. We operate a Vacation Interest exchange program that enables our members to use their points to stay at resorts outside of their home Diamond Collection, as well as other affiliated resorts, hotels and cruises, for which an annual fee is charged. In addition, the Clubs provide services to the Diamond Collections, such as reservation call center services and customer services, which are billed on a cost-plus basis to the Diamond Collections directly.
The Clubs offer our members a wide range of other benefits, such as the opportunity to purchase various products and services, including guided excursions and member events and reservation protection products, for which we earn commissions. See "Our Flexible Points-Based Vacation Ownership System and the ClubsThe Clubs" for additional information regarding the Clubs.
Vacation Interest Sales and Financing. We market and sell VOIs that provide access to our network of 93 Diamond Resorts managed resorts and 236 affiliated resorts and hotels and four cruise itineraries.
The VOI inventory that we reacquire pursuant to our inventory recovery agreements provides us with a steady stream of low-cost VOI inventory that we can sell to our current and prospective members. Our VOI inventory is also supplemented by VOIs recovered from members who default on their consumer loans, including consumer loans that we originate and loans that we acquire from third-parties, as well as inventory purchased in strategic acquisitions. See "Note 24—Business Combinations" of our consolidated financial statements included elsewhere in this annual report for discussion of these acquisitions. In addition, we may engage in targeted development projects in particularly attractive locations where member demand exceeds our existing supply.
We have 53 sales centers across the globe, 46 of which are located at managed resorts, five of which are located at affiliated resorts and two of which are located off-site. We currently employ an in-house sales and marketing team at 36 of these locations and also maintain agency agreements with independent sales organizations at 17 locations. A relatively small portion of our sales, principally sales of additional points to existing members, are effected through our call centers. Our sales representatives utilize a variety of marketing programs to generate prospects for our sales efforts, including presentations at resorts targeted to current members and guests, overnight mini-vacation packages, targeted mailing, telemarketing, gift certificates and various destination-specific local marketing efforts. Additionally, we offer incentive premiums in the form of tickets to local attractions and activities, hotel stays, gift certificates or meals to guests and other potential customers to encourage attendance at sales presentations.
We generate our VOI sales primarily through conducting sales presentations, or tours, at our sales centers. These tours generally include a tour of the resort properties, as well as an in-depth explanation of our points-based VOI system and the value proposition it offers our members. Our tours are designed to provide guests with an in-depth overview of our Company, our resort network and benefits associated with membership in THE Club, as well as a customized presentation to explain how our products and services can meet their vacationing needs. We also conduct sales presentations at various offsite and hotel locations (outside of our managed resorts) based on potential leads for VOI sales identified through innovative marketing targeted toward individuals with desired demographics.
Our sales force is highly trained in a consultative sales approach designed to ensure that we meet customers' needs on an individual basis. We manage our sales representatives' consistency of presentation and professionalism using a variety of sales tools and technology. The sales representatives are principally compensated on a variable basis determined by performance, subject to a base compensation amount.
Our marketing efforts are principally directed at the following channels:
our existing member base;
guests who stay at our managed resorts;
off-property contacts who are solicited from the premises of hospitality, entertainment, gaming and retail locations;
participants in third-party vacation ownership exchange programs, such as Interval International, Inc. (“Interval International”), and Resorts Condominiums International, LLC (“RCI”), who stay at our managed resorts;
member referrals; and
other potential customers who we target through various marketing programs.
We employ innovative programs and techniques designed to infuse hospitality into our sales and marketing efforts. For example, we offer enhanced mini-vacation packages at some of our managed resorts, which we refer to as Events of a LifetimeTM, at which our members or prospective customers who have purchased such packages are invited to dine together, along with our sales team members, and to attend a show, golf outing or other local attraction as a group over a two-day period. At the end of the stay, our sales team provides an in-depth explanation of our points-based VOI system and the value

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proposition it offers our members. In addition, we have an initiative in which select members and guests receive “high-touch” services such as a special welcome package, resort orientation and concierge services, as part of a pre-scheduled in-person sales presentation. Results from these enhanced programs and initiatives have been positive. We have found that, by driving innovation throughout our business, most significantly by infusing our hospitality focus into the sales process and creatively engaging with potential purchasers, we improve potential purchasers' overall experience and level of satisfaction and, as a result, are able to increase the likelihood that they will buy our VOIs and increase the average transaction size.
Although the principal goal of our marketing activities is the sale of points, in order to generate additional revenue and offset the carrying cost of our VOI inventory, we use a portion of the points and intervals which we own or acquire the right to use to offer accommodations to consumers on a per-night or per-week basis, similar to hotels. We generate these stays through direct consumer marketing, travel agents, external websites and our own website and vacation package wholesalers. In addition, we provide rental services on behalf of certain of our affiliated resorts for a commission. We believe that these operations, in addition to generating supplemental revenue, provide us with a good source of potential customers for the purchase of points.
We provide loans to eligible customers who purchase VOIs through our U.S., Mexican and St. Maarten sales centers and choose to finance their purchase. These loans are collateralized by the underlying VOI, generally bear interest at a fixed rate, have a typical term of 10 years and are generally made available to consumers who make a down payment within established credit guidelines. Our minimum required down payment is 10%. Since late 2008, our average cash down payment has been 19.3% and the average initial equity contribution for new VOI purchases by existing owners (which take into account the value of VOIs already held by purchasers and pledged to secure a new consumer loan) has been 30.1%, which has resulted in an average combined cash and equity contribution of 49.4% for these new VOI purchases.
As of December 31, 2014, our loan portfolio (including loans we have transferred to special-purpose subsidiaries in connection with the Conduit Facility, Quorum Facility and securitization transactions) was comprised of approximately 74,000 loans with an outstanding aggregate loan balance of approximately $858.9 million. Our total portfolio includes loans that have been written off for financial reporting purposes due to payment defaults and delinquencies but which we continue to administer, and is comprised of loans that were originated by us and loans that were acquired in connection with our acquisitions.
Approximately 45,000 of these consumer loans are loans under which the consumer was not in default, and the outstanding aggregate loan balance was approximately $592.9 million. Approximately 39,000 of these loans were originated by us and approximately 6,000 of the loans were acquired in connection with one of our acquisitions.
Approximately 29,000 loans within our loan portfolio, with an outstanding aggregate loan balance of approximately $265.9 million, are loans that are in default (which we define as having occurred upon the earlier of (i) the completion of cancellation or foreclosure proceedings or (ii) the customer’s account becoming over 180 days delinquent), and have not yet been foreclosed upon or canceled. These loans have already been written off for financial reporting purposes but we continue to administer them until we elect, subject to applicable law, to foreclose or cancel them. We elect to recover defaulted loans based on a variety of factors, including our VOI inventory needs and the carrying costs associated with recapturing the VOI inventory. Approximately 21,000 of these loans were already in default at the time we acquired them, and approximately 4,000 of the loans were originated by other entities prior to the completion of one of our acquisitions. Approximately 4,000 of the loans were originated by us.
The weighted-average interest rate for all of the loans in our portfolio as of December 31, 2014 was approximately 14.8%, which includes a weighted average interest rate for loans in default of approximately 16.6%. As of December 31, 2014, approximately 8.8% of our owner-families had an active loan outstanding with us.
We underwrite each loan application to assess the prospective buyer's ability to pay through the credit evaluation score methodology developed by FICO based on credit files compiled and maintained by Experian (for U.S. residents) and Equifax (for Canadian residents). In underwriting each loan, we review the completed credit application and the credit bureau report and/or the applicant’s performance history with us, including any delinquency on existing loans with us, and consider in specified circumstances, among other factors, whether the applicant has been involved in bankruptcy proceedings within the previous 12 months and any judgments or liens, including civil judgments and tax liens, against the applicant. As of December 31, 2014, the weighted average FICO score (based upon loan balance) for our borrowers across our existing loan portfolio was 719, and the weighted average FICO score for our borrowers on loans we originated since late 2008 was 757.
Our consumer finance servicing division includes underwriting, collection and servicing of our consumer loan portfolio. Loan collections and delinquencies are managed by utilizing modern collection technology and an in-house collection team to minimize account delinquencies and maximize cash flow. We generally sell or securitize a substantial portion of the consumer loans we generate from our customers through conduit and securitization financings. We act as servicer for consumer loan portfolios, including those sold or securitized through conduit or securitization financings and receivables owned by third parties, for which we receive a fee.

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Through arrangements with certain financial institutions in Europe, we broker financing for qualified customers who purchase points through our European sales centers.
Our Resort Network
Our resort network currently consists of 333 vacation destinations, which includes 93 Diamond Resorts managed properties with approximately 11,000 units worldwide that we manage, and 236 affiliated resorts and hotels and four cruise itineraries, which we do not manage and which do not carry our brand name but are a part of our network and, consequently, are available for our Club members to use as vacation destinations. Through our management, we provide guests with a consistent and high quality suite of services and amenities, and, pursuant to our management agreements, we have oversight and management responsibility over the staff at each location. Of the managed resorts, 46 have food and beverage operations, 41 have a gift shop, pro shop or convenience store, and 28 have a golf course, leisure center or spa. Most of these amenities are operated by third parties pursuant to leases, licenses or similar agreements. Revenue from these operations is included in Consolidated Resort Operations Revenue in our consolidated statements of operations, together with revenues from services that we provided for our properties located in St. Maarten where we functioned as the HOA through December 31, 2014 (which have historically constituted a majority of such revenue). For a further discussion of our Consolidated Resort Operations Revenue, see “Management’s Discussion and Analysis of Financial Condition and Results of OperationsKey Revenue and Expense ItemsConsolidated Resort Operations Revenue."
Affiliated resorts are resorts with which we have contractual arrangements to use a certain number of vacation intervals or units either in exchange for our providing similar usage of intervals or units at our managed resorts or for a maintenance or rental fee. These resorts are made available to members of the Clubs through affiliation agreements. In the vast majority of cases, our affiliated resorts provide us with access to their vacation intervals or units in exchange for our providing similar usage of intervals or units at our managed resorts, and no fees are paid by us in connection with these exchanges. However, in a limited number of circumstances, we receive access to accommodations at our affiliated hotels and cruises through two other types of arrangements. In the first of these types of arrangements, we pay an upfront fee to an affiliated hotel or cruise company for access to a specified number of vacation intervals or units, and we incorporate this upfront fee into our calculation for annual dues to be paid by members of the Clubs. In the second of these types of arrangements, a member who desires to stay at an affiliated hotel for a particular time period deposits points with us and, in exchange, we pay our affiliated hotel the funds required in order to allow such member access and, in turn, we use the points redeemed to secure a unit, which we then use for marketing or rental purposes. The benefit of these arrangements, in comparison to traditional exchange companies, is that there is no need to wait for an owner to deposit their week’s ownership into the program in order to then make it available to members. These arrangements secure availability for our members in advance and, therefore, tend to provide better customer service and availability.
We identify and select affiliated resorts based on a variety of factors, including location, amenities and preferences of our members. We have established standards of quality that we require each of our affiliates to meet, including with respect to the maintenance of their properties and level of guest services. In general, our affiliate agreements allow for termination by us upon 30 days’ notice to the affiliate, although some of our affiliate agreements cannot be terminated until a specified future date. Further, our affiliate agreements permit us to terminate our relationship with an affiliate if it fails to meet our standards. In any event, none of our affiliate agreements requires us to make any payments in connection with terminating the agreement. In addition to our affiliate agreements, we own, through one or more of the Diamond Collections, intervals at a few of our affiliated resorts.
Our network of resorts includes a wide variety of locations and geographic diversity, including beach, mountain, ski and major city locations, as well as locations near major theme parks and historical sites. The accommodations at these resorts are fully furnished and typically include kitchen and dining facilities, a living room and a combination of bedroom types including studios and one-, two-, three- and four-bedroom units with multiple bathrooms. Resort amenities are appropriate for the type of resort and may include an indoor and/or outdoor swimming pool, hot tub, children's pool, fitness center, golf course, children's play area and/or tennis courts. Further, substantially all of our Diamond Resorts managed resorts in Europe and some of our Diamond Resorts managed resorts in North America include onsite food and beverage operations, the majority of which are operated by third-party vendors.
Purchasers of points acquire memberships in one of the eight Diamond Collections.
Legal title to the real estate underlying the points in a Diamond Collection, other than the Latin America Collection, is held by the trustee or the Collection Association for that Diamond Collection and, accordingly, such purchasers do not have direct ownership interests in the underlying real estate. The Latin America Collection currently consists only of the Cabo Azul Resort, and title to the units in the Latin America Collection is held in trust for the benefit of the developer of the Latin America Collection. Other than unsold intervals which we maintain in inventory, various common areas and amenities at certain resorts

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and a small number of units in European resorts, we do not hold any legal title to the resort properties in our resort network.

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The following is a list as of December 31, 2014, by geographic location, of our managed resorts, with a brief description and the number of units at each such managed resort, together with a list of our affiliated resorts:
Managed Resorts
NORTH AMERICA AND THE CARIBBEAN
Resort
 
Location
Units
Rancho Mañana Resort
 
Cave Creek, Arizona
38

Set in the high desert of Arizona, Rancho Mañana Resort provides guests with breathtaking mountain views. The secluded retreat features spacious two bedroom accommodations, each with a gourmet kitchen, two full master suites and an elegant western décor. Guests can relax poolside or play golf at the adjacent championship Rancho Mañana Golf Club. Nearby amenities include shops, restaurants, galleries, sporting activities and cultural events in Phoenix.
 
 
 
 
 
Kohl's Ranch Lodge
 
Payson, Arizona
66

Located on the banks of Tonto Creek in the largest Ponderosa Pine Forest in the world, Kohl's Ranch Lodge is historically famous for its western hospitality. Situated at the base of the Mogollon Rim in the area that author Zane Grey made famous with his popular adventures of the Old West, the friendly and casual atmosphere of Kohl's Ranch Lodge makes each stay an inviting experience where guests can enjoy a classic stay in Arizona's back country.
 
 
 
 
 
PVC at The Roundhouse Resort
 
Pinetop, Arizona
20

This resort is nestled in eastern Arizona’s White Mountains, where Pinetop-Lakeside’s motto is “Celebrate the Seasons” and where guests can enjoy year-round adventures. The log-sided mountain homes at this resort feature fireplaces, jetted spas, large fully equipped kitchens, covered porches and private yards and are a perfect getaway for family cabin fun. After a day of outdoor play, guests can look forward to a relaxing master suite spa retreat.
 
 
 
 
 
Scottsdale Links Resort
 
Scottsdale, Arizona
218

This 218 unit resort with one-, two- and three-bedroom accommodations is located between the TPC Desert Golf Course and the McDowell Mountains in Scottsdale, within a close proximity of Phoenix. With a spa, fitness center, outdoor heated pool and spacious units, this resort is ideal for families making it a base for exploring the area.
 
 
 
 
 
Scottsdale Villa Mirage
 
Scottsdale, Arizona
154

Located 25 minutes from the Phoenix airport, this 154 unit resort has a heated outdoor pool, children’s pool, whirlpools, tennis courts, playground, fitness center and game room to provide fun and relaxation for guests and families of all ages.
 
 
 
 
 
Bell Rock Inn
 
Sedona, Arizona
85

Framed by extraordinary views along the Red Rock Scenic Byway, with its sandstone formations and rich red landscape of Arizona’s backcountry, this resort is set amid the natural beauty of Sedona and provides easy access to the sights, sounds and wonder of the Coconino National Forest. In addition to a laid-back and friendly ambience, the resort offers a poolside barbeque and in-suite fireplaces.
 
 
 
 
 
Los Abrigados Resort & Spa
 
Sedona, Arizona
194

Nestled against the banks of the famous Oak Creek in Sedona, Arizona, and situated in twenty-two acres filled with winding walkways, cascading fountains and shady nooks in the foothills of Arizona’s Red Rock Country, this resort is within walking distance to many restaurants, galleries, shops and hiking trails. From the scenic and quaint Oak Creek to the stunning red rock formations and new age energy of Sedona, Los Abrigados Resort & Spa provides a comfortable, quiet and relaxing selection of accommodation styles with easy access to many outdoor adventures and activities.
 
 
 
 
 
The Ridge on Sedona Golf Resort
 
Sedona, Arizona
174

Situated 15 minutes away from Sedona town center, The Ridge on Sedona Golf Resort has 174 units surrounding five whirlpools and pools with a fitness center, game room and a clubhouse.
 
 
 
 
 
Sedona Summit
 
Sedona, Arizona
278

Sedona Summit is located four miles from Sedona town center, amid stunning red rock mountain scenery nestled in the upper Sedona Plateau. The 278 units are spread across 39 two-story buildings with six pools and whirlpools located throughout the complex, as well as BBQ areas and a fitness center.
 
 
 
 
 
 
 
 
 

18


Resort
 
Location
Units
Varsity Clubs of America Tucson
 
Tucson, Arizona
60

This resort provides all-suite guest accommodations with convenient proximity to the University of Arizona and a number of golf courses, including a variety of luxurious municipal and championship style courses. Tucson affords travelers an oasis under the Sonoran Sun. Affectionately known as Old Pueblo, Tucson is built upon a deep Native American, Spanish, Mexican and Old West foundation and the Varsity Clubs of America — Tucson affords a relaxing getaway whether traveling for business, game day, family and friends, or just a little down time.
 
 
 
 
 
Riviera Beach & Spa Resort
 
Capistrano Beach, California
102

This resort is positioned adjacent to the Riviera Shores Resort in Capistrano Beach, California, located in Capistrano Beach overlooking the coast on the southern end of Dana Point. Nearby Dana Point Harbor is home to spectacular dining, Ocean Village shopping, and marine activities. Many of the one- and two-bedroom villas offer Pacific Ocean views. A kitchen, whirlpool tub, and outdoor barbecue come standard in every villa, and the resort has two swimming pools, jacuzzi and sauna, fitness center and game room.
 
 
 
 
 
Riviera Shores Resort
 
Capistrano Beach, California
28

This resort is located adjacent to the Riviera Beach Resort in Capistrano Beach, California. The resort overlooks the coast on the southern end of Dana Point, and offers two swimming pools, a whirlpool spa, fitness center, game room, sauna and many other amenities. Every villa includes, a partial kitchen, two TVs and an outdoor barbecue, and many of the one- and two-bedroom villas include a whirlpool bathtub.
 
 
 
 
 
Marquis Villas Resort
 
Palm Springs, California
98

Located in the heart of Palm Springs, California with a spectacular mountain setting at the base of the beautiful San Jacinto Mountains, Marquis Villas Resort provides oversized accommodations with fully equipped kitchens and private patios or balconies.
 
 
 
 
 
Palm Canyon Resort
 
Palm Springs, California
236

This resort is located in Palm Springs and offers junior villa, one-, two- and three-bedroom accommodations. The resort features a dramatic rock formation with cascading waterfalls around a 1.5-acre swimming pool and sun deck, along with an in-cave whirlpool spa and water slides for adults and children.
 
 
 
 
 
Riviera Oaks Resort & Racquet Club
 
Ramona, California
70

Located in the San Vicente Valley, this resort offers spacious one- and two-bedroom villas, which have a fireplace as well as well-equipped kitchens. The family-friendly resort features 17 tennis courts, paddle tennis, hiking trails, horseback riding and a nearby country club with an 18-hole golf course. It also has two large swimming pools, two whirlpool spas and a day spa.
 
 
 
 
 
Lake Tahoe Vacation Resort
 
South Lake Tahoe, California
181

Located on the edge of Lake Tahoe, America’s largest alpine lake and only a mile away from the Heavenly Mountain Resort base lodge, Lake Tahoe Vacation Resort is ideally placed for a winter skiing vacation as well as for summer activities such as hiking, horseback riding and water sports. The resort has both indoor and outdoor pools and hot tubs, fitness center and game room.
 
 
 
 
 
The Historic Crags Lodge
 
Estes Park, Colorado
33

Nestled quietly on the north shoulder of Prospect Mountain, The Historic Crags Lodge offers breathtaking and majestic views of the Continental Divide to the west and a bird’s eye view of downtown Estes Park to the east. The Historic Crags Lodge is everything you would imagine from a quiet Colorado mountain retreat. The Historic Crags Lodge is set high amid the mountain pines of the Colorado Rockies and boasts comfortable guest suites complete with dining and group services suitable for families, couples, weddings and conferences, all within easy access of the Estes Park Aerial Tramway and the spectacular Rocky Mountain National Park.
 
 
 
 
 
Daytona Beach Regency
 
Daytona Beach, Florida
86

This resort is situated on beachfront of the world famous Daytona Beach. Close to the Speedway attractions, it provides one- and two-bedroom units, indoor and outdoor pools with slides and hot tubs, poolside bar, fitness center, volleyball courts and game room.
 
 
 
 
 
Barefoot’n Resort
 
Kissimmee, Florida
22

This resort, which offers one-bedroom accommodations, is located in Kissimmee, Florida, within easy access of Florida's Walt Disney World® Resort, Universal Orlando® Resort and SeaWorld® Orlando. The resort is equipped with an outdoor swimming pool, children’s pool, playground, and barbeque and picnic areas. The resort is accredited in the Florida Department of Environmental Protection’s (DEP) Florida Green Lodging program, which designates lodging facilities that commit to conserving and protecting Florida’s natural resources.
 
 
 
 
 

19


Resort
 
Location
Units
Parkway International Resort
 
Kissimmee, Florida
143

This resort is tucked away in a wooded area in Kissimmee, Florida, just one mile from the main gate of Walt Disney World® Resort. The resort offers two-bedroom, two-bathroom accommodations and nature trails, outdoor pool, hot tub, children’s wading pool and poolside bar and grill. The resort is accredited in the Florida Department of Environmental Protection’s (DEP) Florida Green Lodging program.
 
 
 
 
 
Polynesian Isles Resort
 
Kissimmee, Florida
130

This resort offers beautiful accommodations just minutes from the epicenter of Orlando theme parks, shopping and dining experiences. Nearby attractions and activities also include backcountry horseback riding adventures, the Kennedy Space Center and the famed Daytona Beach. True to its South Pacific heritage, this resort features tropical splendor that surrounds the pools, spas, tennis, shuffleboard courts and putting greens.
 
Crescent Resort on South Beach
 
Miami Beach, Florida
27

This is a boutique resort situated in the heart of Miami’s South Beach neighborhood, in the center of the SoBe Historic District, with easy access to the beachfront. It was built in 1938, and was designed with a facade that resembles a fine steam ship with all of its port holes in classic Art Deco style, with neon lighting at night. The Art Deco style continues in the resort’s one- and two-bedroom accommodations.
 
 
 
 
 
Charter Club Resort of Naples Bay
 
Naples, Florida
33

Located in southwest Florida along the Paradise Coast on Naples Bay, this small resort is comprised of 11 three-story buildings, with spacious two-bedroom, two-bathroom accommodations, each with a private lanai. Situated on one of the marine inlets typical of Naples, the resort also has a heated pool and separate children’s pool with a Tiki Hut grill bar.
 
 
 
 
 
The Cove on Ormond Beach - North Tower
 
Ormond Beach, Florida
54

Located directly on the beach in Ormond Beach, Florida, this resort features an activity pool with a two-story tube slide, hot tub, barbecue and picnic area. It also has 150 feet of private beach and is situated for easy access to Daytona Beach restaurants, shops and golf facilities.
 
 
 
 
 
The Cove on Ormond Beach - South Tower
 
Ormond Beach, Florida
57

This resort shares the facilities, such as the activity pool and private beach front, with the North Tower and also offers studio and one- and two-bedroom accommodations.
 
 
 
 
 
Bryan’s Spanish Cove
 
Orlando, Florida
44

This resort, which is located directly on the waterfront of Lake Bryan in Orlando, offers two-bedroom, two-bathroom accommodations. The resort is accredited in the Florida Department of Environmental Protection’s (DEP) Florida Green Lodging program.
 
 
 
 
 
Grand Beach
 
Orlando, Florida
192

Located minutes from Florida’s Walt Disney World® Resort, SeaWorld® Orlando and Universal Orlando® Resort, this 192 unit resort is located on the edge of Lake Bryan. All units contain three bedrooms, three bathrooms and fully-equipped kitchens, which provide spacious family accommodations, as well as an outdoor pool, whirlpool, children’s pool, playground, game room and fitness center.
 
 
 
 
 
Grande Villas Resort
 
Orlando, Florida
249

This resort provides distinctive and perfectly situated accommodations for a family vacation. The Grande Villas include comfortable accommodations with private screened patios or balconies, fully equipped kitchens, two outdoor swimming pools, spa pools, children's pool, playground and miniature golf. Nearby amenities include Walt Disney World® Resort, Universal Orlando® Resort and SeaWorld® Orlando.
 
 
 
 
 
Mystic Dunes Resort & Golf Club
 
Orlando, Florida
715

Built on one of the highest elevations in the area, Mystic Dunes Resort & Golf Club is nestled on over 600 acres of rolling hills, lush Florida nature preserves and beautiful tropical landscape, with a well-respected golf course that recently hosted the Brian Gay Invitational Golf Tournament. The vacation villas, as well as a wide array of resort amenities and services, make Mystic Dunes Resort & Golf Club one of the best family vacation and golf resorts in Orlando.
 
 
 
 
 
Orbit One Vacation Villas
 
Orlando, Florida
116

This resort, which is located just one mile from Walt Disney World® Resort in Orlando, offers two-bedroom, two-bathroom accommodations and on-site amenities such as two swimming pools, children’s wading pool, hot tub, tennis courts, racquetball court and beach volleyball. The resort is accredited in the Florida Department of Environmental Protection’s (DEP) Florida Green Lodging program.
 
 
 
 
 
 
 
 
 
 
 
 
 

20


Resort
 
Location
Units
Liki Tiki Village Resort
 
Winter Garden, Florida
546

Situated in 64 landscaped acres in Winter Garden, Florida, this resort offers the Liki Tiki Lagoon Water Adventure, a 1.5 acre, 220,000-gallon water park with a gently rolling wave pool, five water slides, an erupting water volcano, a waterfall, a toddler’s area, spouting tiki heads and a dancing fountain. This large resort has studio and one-, two- and three-bedroom accommodations. The resort is accredited in the Florida Department of Environmental Protection’s (DEP) Florida Green Lodging program.
 
 
 
 
 
The Point at Poipu
 
Kauai, Hawaii
214

Located on the island of Kauai, this resort offers 214 units with lush garden or ocean views across Shipwreck Beach to every suite. The resort has an outdoor beach entry pool as well as a children's pool, hot tub, fitness center, spa and sauna.
 
 
 
 
 
Ka'anapali Beach Club
 
Maui, Hawaii
412

With 412 units in a 12-story building, Ka’anapali Beach Club is located on the beachfront of Maui’s famous Ka'anapali Beach. The resort has a newly refurbished restaurant and pool bar and newly refurbished pools, as well as a fitness center, spa, sauna, hair salon and gift shop.
 
 
 
 
 
Varsity Club of America South Bend
 
Mishawaka, Indiana
86

Located in Mishawaka, Indiana, this all-suite hotel offers unique and convenient accommodations in the heart of a college town. With its close proximity and easy access to the University of Notre Dame, the Varsity Club of America South Bend provides comfortable guest suites, indoor and outdoor swimming pools, a spacious indoor billiards parlor and plenty of outdoor barbeque grills for game days and family fun. The South Bend/Mishawaka area boasts a variety of enriching and entertaining attractions from outdoor recreation and sports to museums, nightlife and shopping.
 
 
 
 
 
The Suites at Fall Creek
 
Branson, Missouri
214

This resort offers 214 units, many with lake views over Lake Taneycomo. Ten minutes away from Branson town center, the resort is ideally located to explore this destination, while providing a selection of amenities onsite, including a fitness center, basketball courts, boating, fishing, indoor and outdoor pools, hot tubs, miniature golf, playground, shuffle board and tennis courts.
 
 
 
 
 
Cancún Resort Las Vegas
 
Las Vegas, Nevada
441

Located in Las Vegas, Nevada, this resort offers spacious and very comfortably appointed villas and penthouse suites, situated south of the heart pounding, non-stop excitement and glamour of the fabulous Las Vegas Strip. A towering Mayan Pyramid with a cascading waterfall, four enormous waterslides, a grand swimming pool and poolside cafe and a full range of spa services are just a few of the many amenities.
 
 
 
 
 
Desert Paradise Resort
 
Las Vegas, Nevada
141

This Las Vegas resort is tucked away from the Las Vegas Strip and provides a good base to explore the area. The resort has 141 units across two-story buildings, all with balconies or terraces. It also has two central pool areas equipped with hot tubs and children’s pools, as well as barbeque areas and a fitness center.
 
 
 
 
 
Polo Towers Suites
 
Las Vegas, Nevada
312

This resort is located in the heart of the Las Vegas Strip and shares facilities with Polo Towers Villas. With 312 units, the resort offers a new and comprehensive fitness center, and two outdoor pool areas including a roof top pool.
 
 
 
 
 
Polo Towers Villas
 
Las Vegas, Nevada
199

This resort has 199 units and shares facilities with Polo Towers Suites, including a new fitness center, outdoor pools and spa.
 
 
 
 
 
Villas de Santa Fe
 
Santa Fe, New Mexico
105

This resort is situated in Santa Fe, halfway between Taos and Albuquerque. With 105 one- and two-bedroom units, the resort offers a base to explore the surrounding area, which is rich in culture, as well as providing a heated outdoor pool and hot tub, fitness center, game room and clubhouse.
 
 
 
 
 
Bent Creek Golf Village
 
Gatlinburg, Tennessee
47

A combination of 47 one- and two- bedroom units and cabins situated amid a Gary Player golf course make up Bent Creek Golf Village. Located 11 miles away from the center of Gatlinburg and the Great Smoky Mountains National Park, this resort offers indoor and outdoor heated pools, fitness center, game room, and volleyball and basketball courts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

21


Resort
 
Location
Units
Cedar Breaks Lodge and Spa
 
Brian Head, Utah
158

This resort in Brian Head, Utah is a year round, family-oriented destination, located an easy three-hour drive from Las Vegas. With outdoor recreational activities for visitors of all ages and abilities, Brian Head activities include skiing and snowboarding during the winter and mountain biking, hiking, fishing and more in the warmer months. Amenities include two on-site restaurants serving classic American cuisine, as well as the Cedar Breaks Bar and Grill. Additional amenities include storage and an on-site convenience store, as well as an indoor heated pool, sauna, steam room and hot tubs.
 
 
 
 
 
Greensprings Vacation Resort
 
Williamsburg, Virginia
147

Offering 147 two- and four- bedroom units, this resort is ideally placed to explore the historical town of Colonial Williamsburg as well as the area's theme parks. The resort is equipped with indoor and outdoor pools, hot tubs, a fitness center, playgrounds, sauna and tennis, volleyball and basketball courts.
 
 
 
 
 
The Historic Powhatan Resort
 
Williamsburg, Virginia
443

Amid 256 acres of woodland and located a short drive from Colonial Williamsburg and the area’s theme parks, this resort offers one-, two- and three-bedroom accommodations totaling 443 units. Amenities include indoor and outdoor pools and hot tubs, two restaurants open for breakfast, lunch and dinner and a gift shop.
 
 
 
 
 
Cabo Azul Resorts
 
Baja California, Mexico
138

Gleaming white-sand beaches and the unsurpassed allure of the Sea of Cortez make the Cabo Azul Resort a terrific destination. With a truly fresh look and feel, this resort is a true masterpiece on 12 oceanfront acres in San Jose del Cabo. This resort features a tri-level infinity-edge swimming pool, swim-up bars and an on-site Mexican cuisine restaurant. Additional amenities include a full service spa, a state of the art fitness center and a stunning five-story, open air wedding chapel.
 
 
 
 
 
Sea of Cortez Beach Club
 
Sonora, Mexico
30

The Sea of Cortez, with its laid back seaside havens dotted along the coast, provides a soothing escape in any season. Oceanfront, the Sea of Cortez Beach Club offers luxurious suites with private patios or balconies. Water sport excitement abounds with spectacular diving and snorkeling adventures, calm open sea kayaking, or deep sea fishing, or taking it slow with a relaxing poolside escape, whale and dolphin sightings or long and lazy beach strolls.
 
 
 
 
 
Royal Palm Beach Resort
 
Philipsburg, St. Maarten
140

Located on the Dutch side of the island, all 140 of the one-, two- and three-bedroom units at this resort face the beach and have balconies or terraces. Facilities at the resort include a restaurant, swimming pool and poolside bar, gym and beauty salon.
 
 
 
 
 
Flamingo Beach Resort
 
Philipsburg, St. Maarten
208

Located on the Dutch side of St. Maarten, this resort is situated on a private beachfront with 208 studio and one-bedroom units. The resort offers a restaurant and snack bar, as well as an outdoor pool and tennis courts.
 
 
 
 
 
North America and the Caribbean Subtotal
 
 
7,884

 
 
 
 


22


EUROPE
Resort
 
Location
Units
Alpine Club
 
Schladming, Austria
92

Overlooking the town of Schladming, this resort is located amidst stunning scenery one hour from Salzburg, Austria and two and a half hours from Munich, Germany. With accommodation choices across 92 units, The Alpine Club also offers a sauna and solarium, tennis, badminton and game room.
 
 
 
 
 
Alvechurch Marina*†
 
Alvechurch, England
2

With four- and six-berth canal boats based at this marina in Worcestershire, there are many round trip routes through the Black Country that can be followed. As a unique way to see the English countryside, visits to Birmingham city center, Worcester Cathedral, historic houses and theme parks can also be incorporated into a vacation itinerary.
 
 
 
 
 
Anderton Marina*†
 
Cheshire, England
3

Anderton Marina is based on the Trent and Mersey canals and has three boats available. From this location, routes include a journey to the old city of Chester as well as Middlewich.
 
 
 
 
 
Gayton Marina*†
 
Cheshire, England
3

Four- and six-berth canal boats are available to navigate through Warwick to Warwick Castle or the university city of Chester. Whichever route is taken, these boats provide the easiest access to the rolling English countryside in the midlands.
 
 
 
 
 
Woodford Bridge Country Club
 
Devon, England
102

Originally an old coaching inn from the 15th century, this resort in Devon has 102 units, with the majority of units having either a terrace or balcony. With a heated indoor pool and whirlpool and a restaurant and bar onsite, this resort offers a base to explore the Devonshire countryside including Dartmoor and Exmoor, which are short drives away, along with the well-known Eden Project.
 
 
 
 
 
Blackwater Meadow Marina*†
 
Ellesmere, England
2

This marina is located in Shropshire in the heart of the English countryside and has one four-berth and one six-berth canal boat based there. Numerous itineraries include visits to Wales and Chirk Castle, and navigating across Chirk Viaduct standing over 70 feet above the ground.
 
 
 
 
 
Broome Park Golf and Country Club
 
Kent, England
13

The resort is located on the grounds of a Grade I listed manor house in the county of Kent and is 15 minutes from the historic city of Canterbury, famous for its cathedral and historic buildings. With 13 two-bedroom lodges, this resort offers an 18-hole golf course onsite, as well as a restaurant and bar in the mansion house. Other resort amenities include a newly constructed gym, indoor pool, solarium, sauna and squash courts, as well as tennis courts and croquet. The resort is 10 minutes away from the coast and the cliffs of Dover and provides easy access to the Eurostar train.
 
 
 
 
 
Pine Lake Resort
 
Lancashire, England
155

Based on the edge of the Lake District and the Lune Valley, this resort is surrounded by superb English countryside and positioned around a lake. The resort is made up of 155 Scandinavian style two-bedroom lodges and a selection of studio apartments with a central reception building that includes the restaurant, bar, and entertainment and meeting rooms, along with a separate indoor heated pool and whirlpool.
 
 
 
 
 
Thurnham Hall
 
Lancaster, England
50

With 50 accommodation choices located either in the 12th century mansion house or in buildings within the 30 acre grounds, this resort offers a large indoor swimming pool and state of the art fitness center. The restaurant is located in the old mansion house along with a member’s lounge and a restored chapel house providing huge fireplaces and original exposed stone walls.
 
 
 
 
 
Thurnham Hall Tarnbrook
 
Lancaster, England
9

This building is located within the grounds of Thurnham Hall and shares the amenities there. It is a newly built building with 9 spacious two-bedroom apartments.
 
 
 
 
 



23


Resort
 
Location
Units
Cromer Country Club
 
Norfolk, England
100

This resort has 100 units, all with balconies or terraces that provide views over the gardens and woodlands. This resort is less than one mile from the sea and marina in Cromer, and includes an indoor heated pool and whirlpool, a gym, spa, sauna, steam room, badminton courts and game room.
 
 
 
 
 
Wychnor Park Country Club
 
Staffordshire, England
43

This resort is situated within the 55 acre estate of Wychnor Park, which dates from the time of Queen Anne in the 17th century. The main mansion house is a Grade II listed building and houses some of the 43 units that are available, most of which have a terrace or balcony. The resort has a restaurant and member lounge bar, as well as a heated indoor pool, sauna, solarium and spa.
 
 
 
 
 
Worcester Marina*†
 
Worcester, England
2

Based at the southern end of the Worcester Birmingham canal, two four- and six-berth canal boats are available for itineraries that include Worcester Cathedral, the Royal Worcester Porcelain factory and the home of Shakespeare: Stratford-upon-Avon.
 
 
 
 
 
Le Manoir des Deux Amants
 
Connelles, France
35

Set amid the stunning landscaped parkland in the heart of the Normandy countryside, the resort is one and a half hours from Paris and 100 kilometers from Le Havre. The resort offers 35 units situated on the banks of the famous River Seine and includes an onsite restaurant, a leisure center and an indoor swimming pool.
 
 
 
 
 
Le Résidence Normande
 
Connelles, France
14

This resort has 14 units and is situated next to Le Manoir des Deux Amants and shares its facilities.
 
 
 
 
 
Le Club Mougins
 
Mougins, France
55

Located 10 minutes from the beautiful beaches of Cannes and a half hour from Nice on the French Riviera, this resort has 55 units and a restaurant and bar and lounge onsite, as well as an outdoor pool, gym and sauna.
 
 
 
 
Royal Regency
 
Paris, France
47

Located 20 minutes from the center of Paris on the Metro Line, this resort is ideally suited to exploring this beautiful European city.
 
 
 
 
 
Grand Leoniki Resort†
 
Crete, Greece
39

Grand Leoniki, is a sister resort to Leoniki Residence Resort, and is situated across the road from the beach at Rethymnon on the highly demanded island of Crete. Guests enjoy the exclusive use of the squash court, gym, indoor and outdoor pools and jacuzzi as well as being able to use the health club and saunas. The resort also has an onsite Greek restaurant.
 
 
 
 
 
Leoniki Residence†
 
Crete, Greece
97

This resort is a sister resort to Grand Leoniki Resort, and is located a short walk away from the beach at Rethymnon. It has the same two impressive outdoor swimming pools, a poolside bar and fitness facilities, as well as a full service traditional Greek onsite restaurant.
 
 
 
 
 
Village Heights Golf Resort†
 
Crete, Greece
197

Village Heights Resort overlooks Hersonissos on the north eastern coastline of Crete. The accommodations are built in traditional "Greek Village" style and set in beautifully landscaped gardens, and command breathtaking views of the coast, Hersonissos and its pretty harbor. The resort boasts three swimming pool areas, including a superb infinity style pool as well as a full service onsite spa/health club, with sauna and jacuzzis, gym and aerobics, and massage therapy and its own indoor hydrotherapy pool. In addition, Village Heights has two restaurants, a poolside snack bar, a full bar and an onsite convenience store/gift shop. There is also an 18-hole PGA designed golf course adjacent to the property.
 
 
 
 
 
The Village Holiday Club†
 
Crete, Greece
31

Located in the charming village of Koutouloufari, the Village Holiday Club has an authentic Greek Village atmosphere and is within easy walking distance of the local restaurants, shops and bars. Built into a hill, the resort offers an exclusive pool with bar amenities, and many accommodations have large balconies offering a panoramic view of the lush gardens and views over the Bay of Hersonissos.
 
 
 
 
 




24


Resort
 
Location
Units
Sun Beach Holiday Club†
 
Rhodes, Greece
66

Located in Ialyssos, on the Greek island of Rhodes, this is a seafront resort that is well equipped with gym, tennis courts, water polo, swimming, windsurfing and volleyball. There are two on-site restaurants to choose from, or alternatively a short distance away is Rhodes Town, where a variety of evening entertainment and dining experiences can be found. This is also a very historic island - Rhodes Old Town is a designated UNESCO World Heritage site that boasts the Palace of the Grand Masters - a fabulous medieval castle complete with its medieval walls. 
 
 
 
 
 
East Clare Golf Village
 
Bodyke, Ireland
51

With 51 two-bedroom units, this recently-constructed resort is located next to East Clare Golf course in County Clare, Ireland, approximately one hour outside of Shannon. The resort provides a great base to explore the neighboring countryside and tourist attractions of Bunnratty Castle and the Cliffs of Moher.
 
 
 
 
 
Dangan Lodge Cottages
 
Ennis, Ireland
6

Converted from an original farmhouse and associated farm buildings, this small resort provides unusual, but traditional, Irish accommodations with exposed stone walls, solid fuel stoves and inglenook fireplaces.
 
 
 
 
 
Fisherman's Lodge
 
Scarriff, Ireland
6

Located on the edge of the shores of Lough Derg in County Clare, the largest lake in Ireland, this resort is made up of six split level open plan studio units with spiral staircases to the upper floor.
 
 
 
 
 
Palazzo Catalani
 
Soriano, Italy
17

This resort is a hideaway in the Italian countryside. Located in the medieval village of Soriano nel Cimino, this 17th century building perched on the top of a hill and now housing 17 units was once the mansion of a nobleman. The onsite restaurant specializes in Italian cuisine and features a bar and lounge.
 
 
 
 
 
Palazzo at Soriano
 
Soriano, Italy
15

Built into the rocky hillside this resort is completely unique in its design. Each of the 15 rooms has its own charm and individual floor plan. A spa and gym are available as are the tiered gardens that give panoramic views across the town and valley. 
 
 
 
 
 
Diamond Suites on Malta
 
St. Julians, Malta
46

Located within the luxury five-star InterContinental Malta Hotel, this resort offers 46 accommodation choices, most with balconies or terraces. The resort is situated in St. Georges Bay in St. Julians and is less than five miles from the capital of Valletta.
 
 
 
 
 
Vilar do Golf
 
Loulé, Portugal
179

Located on the southern coast of Portugal, this resort has 179 one- and two-bedroom units situated around a golf course all with balconies or terraces. Located two kilometers from the beach in the Algarve, the resort amenities include indoor and outdoor pools, gym, sauna, badminton, basketball, volleyball, game room and an onsite restaurant as well as a poolside bar and grill.
 
 
 
 
 
The Kenmore Club
 
Perthshire, Scotland
57

With 57 cottage style units located on the shores of Loch Tay, this is a special resort at the heart of the Scottish highlands, with easy access to explore the local whiskey distilleries. The resort is located a 90-minute drive from Dundee and less than two hours from the historic city of Edinburgh.
 
 
 
 
 
Los Amigos Beach Club
 
Costa del Sol, Spain
139

This resort has 139 units and is situated 300 meters from the beach. It is a short drive to the beautiful cities of Malaga, Marbella, Granada and Seville. Amenities include two outdoor and one indoor swimming pools, tennis courts and miniature golf, as well as two restaurants onsite, a market and a gift shop.
 
 
 
 
 
Royal Oasis Club at Benal Beachs
 
Costa del Sol, Spain
33

Built around one of the largest privately-owned outdoor swimming pool complexes in Europe, this resort includes 33 units and is located 200 meters from the beach. In addition, the resort has an indoor swimming pool, fitness center and sauna.
 
 
 
 
 
Royal Oasis Club at Pueblo Quinta
 
Costa del Sol, Spain
52

This resort is situated in lush gardens and contrasts with the hotel blocks of the Costa del Sol, with 52 one- and two-bedroom units, many of which have balconies or terraces. This resort also offers a central outdoor pool, indoor pool, gym and onsite restaurant.
 
 
 
 
 


25


Resort
 
Location
Units
Sahara Sunset
 
Costa del Sol, Spain
149

Styled with Moorish architecture, this resort offers 149 units, all with a balcony or terrace. With a featured landscaped pool, this resort also features an additional outdoor pool, an indoor pool, an onsite restaurant, and newly constructed gym, sauna, spa and steam room.
 
 
 
 
 
Club Cala Blanca
 
Gran Canaria, Spain
92

Situated on Gran Canaria in the Canary Islands, this resort provides 92 one- and two-bedroom units. Built on a beautiful hillside, every room has a sea view and a sunny balcony or terrace. The resort is located 10 minutes away from Puerto de Mogan (known as Canarian Little Venice) and includes an outdoor pool and pool bar and grill, as well as an onsite restaurant.
 
 
 
 
 
Club del Carmen
 
Lanzarote, Spain
65

Located on Puerto del Carmen, this resort is perfectly situated two minutes from the beaches of Playa Grande and Playa Chica. With 65 units, this resort offers an outdoor pool and poolside bar, extensive sun terraces and rooftop deck and onsite restaurant.
 
 
 
 
 
Jardines del Sol
 
Lanzarote, Spain
52

Situated on the southern tip of Lanzarote near Playa Blanca, this resort has been built in the style of a Spanish pueblo blanco, or white village. This resort offers 47 bungalows, 2 two-bedroom and 3 three-bedroom villas and provides an onsite restaurant and outdoor pool.
 
 
 
 
 
Garden Lago
 
Majorca, Spain
81

Situated at the north of the island of Majorca, this resort offers 81 accommodation choices in two- and three-bedroom units. It is located one kilometer from the beach and includes an outdoor pool and whirlpool, gym and sauna, and onsite restaurant as well as many amenities nearby.
 
 
 
 
 
White Sands Beach Club†
 
Menorca, Spain
76

This resort has 76 units on a beachfront location built up into the hillside situated on the island of Menorca. With a central infinity edge pool and convenient snack bar restaurant onsite, this destination is a relaxing place to vacation and is available 44 weeks of the year.
 
 
 
 
 
Royal Sunset Beach Club
 
Tenerife, Spain
125

Located conveniently close to Playa de las Americas' abundant shops, restaurants and nightlife, this resort has a range of facilities situated in sub-tropical gardens and a beautifully landscaped outdoor pool. This resort has 125 units and a private clubhouse with a bar, lounge, restaurant, gym, squash courts and sauna.
 
 
 
 
 
Royal Tenerife Country Club
 
Tenerife, Spain
185

Set amid the greens of the challenging Golf del Sur course, with a focal point of a central landscaped swimming pool and the beach six kilometers away, the resort includes 185 one- and two-bedroom units, tennis courts, gym, restaurant and supermarket.
 
 
 
 
 
Santa Barbara Golf and Ocean Club
 
Tenerife, Spain
276

This resort exhibits Moorish inspired architecture and includes 276 units, most of which have a sea view. The resort amenities include a central pool and whirlpool, two onsite restaurants, a poolside bar and grill, gym, sauna, spa and solarium.
 
 
 
 
 
Sunset Bay Club
 
Tenerife, Spain
248

This village-style resort of 248 units is situated at Torviscas on the outskirts of Playa de las Americas, and is a 10 minute walk from the beach. It has two outdoor pools and a children’s pool, and there are several local shops and restaurants on the property.
 
 
 
 
 


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Resort
 
Location
Units
Sunset Harbour Club
 
Tenerife, Spain
255

This resort has been built in the traditional style of an Andalusian pueblo blanco or white village. Situated on the outskirts of Playa de las Americas, this resort is located near nightlife and many local restaurants and bars. The resort has 255 units, including studio, one-and two-bedroom accommodation choices.
 
 
 
 
 
Sunset View Club
 
Tenerife, Spain
106

With panoramic views of the ocean and a backdrop of the snow-capped Mount Teide volcano, this resort offers 106 one-and two-bedroom units with easy access to the golf courses of the Golf del Sur and numerous local shops and restaurants.
 
 
 
 
 
Europe Subtotal
 
 
3,468

Total number of units at Managed Resorts
11,352

 
 
 
 
* Denotes canal boat marinas; number of units denotes number of boats managed.
 
    Denotes resorts that are only open for a portion of the year.
 
s    Denotes resorts at which a portion of the unsold VOIs are held for sale and future disposal. See "Note 13—Assets Held for Sale" of our consolidated financial statements included elsewhere in this annual report for further detail.
 
Affiliated Resorts, Hotels and Cruise Itineraries
The following is a list by geographic location of our affiliated resorts, as of December 31, 2014, which we did not manage and which did not carry our brand, but were a part of our resort network:


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AFFILIATED RESORTS - UNITED STATES AND TERRITORIES
Resort
 
Location
The Shores
 
Orange Beach, Alabama
London Bridge Resort
 
Lake Havasu City, Arizona
The Roundhouse Resort
 
Pinetop, Arizona
Scottsdale Camelback
 
Scottsdale, Arizona
Sedona Springs Resort
 
Sedona, Arizona
Villas at Poco Diablo
 
Sedona, Arizona
Villas of Sedona
 
Sedona, Arizona
Grand Pacific Resorts - Mountain Retreat
 
Arnold, California
San Luis Bay Inn
 
Avila Beach, California
Grand Pacific at Carlsbad Seapointe Resort
 
Carlsbad, California
Grand Pacific at Carlsbad Inn Beach Resort
 
Carlsbad, California
RVC’s Cimarron Golf Resort
 
Cathedral City, California
Grand Pacific at Coronado Beach Resort
 
Coronado, California
Grand Pacific at RiverPointe Napa Valley
 
Napa, California
Grand Pacific at Red Wolf Lodge
 
Olympic Valley, California
Grand Pacific Palisades Resort and Hotel
 
Palisades, California
Desert Isle of Palm Springs
 
Palm Springs, California
Oasis Resort
 
Palm Springs, California
Lodge at Lake Tahoe
 
South Lake Tahoe, California
Tahoe Beach and Ski Club
 
South Lake Tahoe, California
Tahoe Seasons Resort
 
South Lake Tahoe, California
GeoHolidays Heights at Lac Morency
 
St Hippolyte, Quebec, Canada
Clock Tower
 
Whistler, British Columbia, Canada
VI at Rosedale on Robson Resort
 
Vancouver, Canada
The Village at Steamboat Springs
 
Steamboat Springs, Colorado
Coconut Mallory Resort and Marina
 
Key West, Florida
Westgate at South Beach
 
Miami Beach, Florida
Coconut Palms Beach Resort
 
New Smyrna Beach, Florida
Ocean Beach Club
 
New Smyrna Beach, Florida
Ocean Sands Beach Club
 
New Smyrna Beach, Florida
Sea Villas
 
New Smyrna Beach, Florida
Cypress Pointe Resort
 
Orlando, Florida
Sea Mountain
 
Big Island, Hawaii
Sea Village
 
Big Island, Hawaii
Grand Pacific at Alii Kai Resort
 
Kauai, Hawaii
Kapaa Shore
 
Kauai, Hawaii
Pono Kai
 
Kauai, Hawaii
RVC at Kona Reef
 
Kona, Hawaii
Fairway Villa
 
Maui, Hawaii
Ka'anapali Shores
 
Maui, Hawaii
Papakea Resort
 
Maui, Hawaii
Valley Isle
 
Maui, Hawaii
Royal Kuhio
 
Oahu, Hawaii
Elkhorn Resort
 
Ketchum, Idaho
 
 
 

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Resort
 
Location
Great Wolf Lodge Kansas City
 
Kansas City, Kansas
Frenchmen Orleans Resort
 
New Orleans, Louisiana
Rangeley Lake Resort
 
Rangeley, Maine
Coconut Malorie
 
Ocean City, Maryland
Edgewater Beach Resort
 
Dennis Port, Massachusetts
Beachside Village Resort
 
Falmouth, Massachusetts
Great Wolf Lodge New England
 
Fitchburg, Massachusetts
Cove at Yarmouth
 
Yarmouth, Massachusetts
Great Wolf Lodge Traverse City
 
Traverse City, Michigan
The Carriage House
 
Las Vegas, Nevada
Kingsbury of Tahoe
 
Stateline, Nevada
The Ridge Pointe
 
Stateline, Nevada
Village of Loon Mountain
 
Lincoln, New Hampshire
Peppertree Atlantic Beach
 
Atlantic Beach, North Carolina
Blue Ridge Village
 
Banner Elk, North Carolina
Great Wolf Lodge Charlotte-Concord
 
Concord, North Carolina
Great Wolf Lodge Cincinnati-Mason
 
Mason, Ohio
Great Wolf Lodge Sandusky
 
Sandusky, Ohio
Embarcadero
 
Newport, Oregon
The Pines at Sunriver
 
Sunriver, Oregon
Great Wolf Lodge Pocono Mountains
 
Poconos Mountains, Pennsylvania
Church Street Inn
 
Charleston, South Carolina
Island Links Resort
 
Hilton Head Island, South Carolina
Royal Dunes
 
Hilton Head Island, South Carolina
Ellington at Wachesaw Plantation
 
Murrells Inlet, South Carolina
Dunes Village Resort
 
Myrtle Beach, South Carolina
Peppertree Ocean Club
 
Myrtle Beach, South Carolina
Gatlinburg Town Square
 
Gatlinburg, Tennessee
Gatlinburg Town Village
 
Gatlinburg, Tennessee
Mountain Meadows
 
Pigeon Forge, Tennessee
Great Wolf Lodge Grapevine
 
Grapevine, Texas
Villas on Lake at Lake Conroe
 
Montgomery, Texas
RVC’s The Miner’s Club
 
Park City, Utah
Great Wolf Lodge Williamsburg
 
Williamsburg, Virginia
RVC’s The Sandcastle, Birch Bay
 
Blaine, Washington
Great Wolf Lodge Grand Mound
 
Grand Mound, Washington
Blackbird Lodge
 
Leavenworth, Washington
VI at Homestead
 
Lynden, Washington
Point Brown
 
Ocean Shores, Washington
Great Wolf Lodge Wisconsin Dells
 
Wisconsin Dells, Wisconsin
Mirror Lake and Tamarack Resort
 
Wisconsin Dells, Wisconsin
Teton Club
 
Jackson, Wyoming
Ricon Beach Resort*
 
Anasco, Puerto Rico
 
 
 

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AFFILIATED RESORTS - MEXICO, THE CARIBBEAN, CENTRAL AND SOUTH AMERICA
Resort
 
Location
Occidental Grand Aruba
 
Palm Beach, Aruba
All Seasons Resort*
 
Barbados
Paradise Harbour Club
 
Nassau, Bahamas
Grand Palladium Imbassaí Resort & Spa
 
Nr Salvador, Bahia, Brazil
Occidental Grand Papagayo
 
Guanacste, Costa Rico
GeoHolidays at Pueblo Real
 
Quepos, Costa Rica
Grand Palladium Punta Cana Resort and Spa
 
Punta Cana, Dominican Republic
Occidental Grand Punta Cana
 
Punta Cana, Dominican Republic
Sirenis Tropical Suites Casino and Aquagames
 
Punta Cana, Dominican Republic
Grand Palladium Jamaica Resort and Spa
 
Lucea, Jamaica
Cabo Villas Beach Resort
 
Cabo San Lucas, Mexico
El Dorado Royale
 
Cancun, Mexico
Laguna Suites Golf and Spa
 
Cancun, Mexico
Ocean Spa Hotel
 
Cancun, Mexico
RVC’s Club Regina Cancun
 
Cancun, Mexico
Sunset Lagoon Resort
 
Cancun, Mexico
Sunset Royal Resort
 
Cancun, Mexico
Allegro Cozumel
 
Cozumel, Mexico
Occidental Grand Cozumel
 
Cozumel, Mexico
RVC’s Villa Vera Puerto Isla Mujeres
 
Isla Mujeres, Mexico
RVC’s Club Regina Los Cabos
 
Los Cabos, Mexico
El Cid el Moro Beach
 
Mazatlan, Mexico
El Cid Marina Beach
 
Mazatlan, Mexico
Occidental Grand Nuevo Vallarta
 
Nuevo Vallarta, Mexico
Hacienda Tres Rios Resort Spa and Nature Park
 
Playa del Carmen, Mexico
Grand Palladium Vallarta Resort and Spa
 
Puerto Vallarta, Mexico
RVC’s Club Regina Puerto Vallarta
 
Puerto Vallarta, Mexico
El Dorado Seaside
 
Riviera Maya, Mexico
Allegro Playacar
 
Riviera Maya, Mexico
Grand Palladium Kantenah Resort and Spa
 
Riviera Maya, Mexico
Grand Palladium Riviera Resort and Spa
 
Riviera Maya, Mexico
Grand Sirenis Riviera Maya Resort and Spa
 
Riviera Maya, Mexico
Occidental Grand Xcaret
 
Riviera Maya, Mexico
Royal Hideaway Playacar
 
Riviera Maya, Mexico
RVC’s Villa Vera Puerto Mio Zihuatanejo
 
Zihuatenajo, Mexico
The Atrium Resort
 
Simpson Bay, St. Maarten
 
 
 








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AFFILIATED RESORTS - ASIA AND AUSTRALIA
Resort
 
Location
Beach House Seaside Resort
 
Coolangatta, Australia
Tamarind Sands
 
New South Wales, Australia
Vacation Village Resort
 
Port Macquarie, Australia
Tiki Village International Resort
 
Surfer's Paradise, Australia
Bellbrae Country Club
 
Victoria, Australia
Mt Martha Valley Resort
 
Victoria, Australia
Tangla Hotel Beijing*
 
Beijing, China
HNA Grand Hotel West Beijing*
 
Beijing, China
HNA Resort Yunqi Hangzhou*
 
Hangzhou, China
HNA Resort Huagang Hangzhou*
 
Hangzhou, China
Anantara Vacation Club Sanya
 
Sanya, China
Tangla Hotel Shenzhen*
 
Shenzhen, China
HNA Beach & Spa Resort Haikou*
 
Haikou, China
HNA Business Hotel Downtown Haikou*
 
Haikou, China
HNA Resort Sanya*
 
Sanya, China
Tangla Hotel Sanya*
 
Sanya, China
Tangla Hotel Tianjin*
 
Tianjin, China
HNA Resort Spa & Golf Xinlong Hainan*
 
Xinlong, China
Royal Goan Beach Club at MonteRio
 
Bardez, India
Royal Goan Beach Club at Royal Palms
 
Benaulin, India
Royal Goan Beach Club at Haathi Mahal
 
Salcette, India
Anantara Vacation Club Bali Seminyak
 
Bali, Indonesia
Royal Bali Beach Club at Candidasa
 
Bali, Indonesia
Royal Bali Beach Club at Jimbaran Bay
 
Bali, Indonesia
Anantara Vacation Club at Oaks Shores
 
Queenstown, New Zealand
Anantara Vacation Club at Anantara Bangkok Sathorn
 
Bangkok, Thailand
Royal Bella Vista Country Club at Chiang Mai
 
Chiang Mai, Thailand
Anantara Vacation Club Bophut Koh Samui
 
Koh Samui, Thailand
Royal Lighthouse Villas at Boat Lagoon
 
Phuket, Thailand
Anantara Vacation Club Phuket Mai Kai
 
Phuket, Thailand
 
 
 




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AFFILIATED RESORTS - EUROPE AND AFRICA
Resort
 
Location
Holiday Club Schloesslhof
 
Axams, Austria
Holiday Club Siesta
 
Scarnitz-GieBenbach, Austria
Mondi-Holiday Hotel Bellevue
 
Bad Gastein, Austria
Mondi-Holiday Hotel Grundlsee
 
Grundlsee, Austria
Balkan Jewel Resort
 
Razlog, Bulgaria
Burnside Park
 
Bowness-on-Windermere, England
Broome Park Mansion House
 
Kent, England
Stouts Hill
 
Uley, England
Walton Apartments
 
Walton, England
Mondi-Holiday Hotel Oberstaufen
 
Oberstaufen, Germany
Holiday Club Breitenbergerhof
 
Meran, Italy
Mondi-Holiday Hotel Tirolensis
 
Prissiano, Italy
Royal Reserve Safari and Beach Club
 
Nr Mombasa, Kenya
Gålå Fjellgrend
 
Gudbrandsdalen, Norway
Pestana Miramir
 
Funchal, Portugal
Pestana Alvor Park
 
Madeira, Portugal
Pestana Grand
 
Madeira, Portugal
Pestana Palms
 
Madeira, Portugal
Pestana Village
 
Madeira, Portugal
Pestana Porches Praia
 
Porches, Portugal
The Peninsula
 
Cape Town, South Africa
Breakers Resort
 
KwaZulu-Natal, South Africa
Champagne Sports Resorts
 
KwaZulu-Natal, South Africa
Avalon Springs
 
Montagu, Garden Route, South Africa
Jackalberry Ridge
 
Mpumalanga, South Africa
Wilderness Dunes
 
Wilderness, Garden Route, South Africa
 
 
 



HOTEL AFFILIATES
Resort
 
Location
Treasury Hotel and Casino*
 
Brisbane, Australia
Jupiters Hotel and Casino*
 
Gold Coast, Australia
Astral Towers*
 
Sydney, Australia
Astral Residences*
 
Sydney, Australia
Darling Hotel*
 
Sydney, Australia
Dorsett Grand Chengdu
 
Chengdu, China
Cosmo Hotel Mongkok
 
Hong Kong, China
Cosmopolitan Hotel Hong Kong
 
Hong Kong, China
Cosmo Hotel Hong Kong
 
Hong Kong, China
Dorsett Kwun Tong, Hong Kong
 
Hong Kong, China
Dorsett Tsuen Wan
 
Hong Kong, China
Lan Kwai Fong Hotel
 
Hong Kong, China
Silka Far East, Hong Kong
 
Hong Kong, China

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Resort
 
Location
Silka Seaview, Hong Kong
 
Hong Kong, China
Silka West Kowloon Hotel
 
Hong Kong, China
Lushan Resort
 
Jiangxi, China
Dorsett Shanghai
 
Shanghai, China
Dorsett Wuhan
 
Wuhan, China
Basingstoke Country Hotel
 
Basingstoke, England
Combe Grove Manor
 
Bath, England
The Imperial Blackpool
 
Blackpool, England
The Old Ship Hotel
 
Brighton, England
The Lygon Arms
 
Broadway, England
The Palace Hotel
 
Buxton, England
Cheltenham Park Hotel
 
Cheltenham, England
Redworth Hall Hotel
 
County Durham, England
Daventry Court Hotel
 
Daventry, England
The Majestic Hotel Harrogate
 
Harrogate, England
Hinckley Island Hotel
 
Hinckley, England
Dorsett Shephers Bush
 
London, England
The Oxford Hotel
 
Oxford, England
Shrigley Hall Hotel Golf & Country Club
 
Shrigley, England
Billesley Manor Hotel
 
Stratford, England
The Imperial Hotel Torquay
 
Torquay, England
Walton Hall
 
Walton, England
Walton Hotel
 
Walton, England
AGORA Fukuoka Hilltop Hotel and Spa
 
Fukuoka, Japan
Imaiso Hotel and Hot Springs
 
Kawazu, Japan
Nanzanso Hotel and Hot Springs
 
Nagaoka, Japan
Hotel Agora Regency Sakai
 
Osaka, Japan
Hotel Agora Osaka Moriguchi
 
Osaka, Japan
Oncri Hotel and Hot Springs
 
Saga City, Japan
Nojiriko Hotel EL Bosco
 
Shinano-Machi, Japan
Agora Place Asakusa
 
Toyko, Japan
Silka Johor Bahru
 
Johor Bahru, Malaysia
Damas Suites & Residences
 
Kuala Lumpur, Malaysia
Dorsett Regency Kuala Lumpur
 
Kuala Lumpur, Malaysia
Regalia Residence
 
Kuala Lumpur, Malaysia
Silka Cheras
 
Kuala Lumpur, Malaysia
Silka Maytower Hotel & Serviced Residences
 
Kuala Lumpur, Malaysia
Dorsett Grand Labuan
 
Lubuan, Malaysia
Dorsett Grand Subang
 
Subang Jaya, Malaysia
The Carlton Hotel
 
Edinburgh, Scotland
Stirling Highland Hotel
 
Stirling, Scotland
The Marine Hotel
 
Troon, Scotland
Dorsett Singapore
 
Singapore, Singapore
The Angel Hotel
 
Cardiff, Wales
 
 
 


33


CRUISES
Cruise
 
Location
Norwegian Cruise Lines
 
Alaska
    Alaskan Glacier Bay Cruise
 
 
Norwegian Cruise Lines
 
Baltic Capitals
    Baltic Capitals Cruise
 
 
Norwegian Cruise Lines
 
Caribbean
    Eastern Caribbean Cruise
 
 
Norwegian Cruise Lines
 
Mediterranean
    Western Mediterranean Cruise
 
 
 
 
 

* Denotes a resort, hotel or cruise itinerary with which we have recently entered into an affiliation arrangement, but which had not yet been integrated into our network, and therefore was not available to our members, as of December 31, 2014.
Diamond Luxury Selection
In addition to our managed resorts and affiliated resorts, since October 2013 we have offered members with large point ownership, as an additional Club benefit, the ability to use their points to rent from a collection of approximately 2,500 private luxury properties, including villas, resorts, boutique hotels and yachts, through participation in The Diamond Luxury Selection. In general, a qualifying member is able to rent these private luxury properties by depositing a designated number of points with us, and we are then required to pay to the owners of these private luxury properties, on behalf of our members, a rental fee. This rental fee determines the number of points required to be used by our members for any particular rental. We also have the option of using these properties for marketing or rental purposes. Similar to our affiliated resorts, we do not manage these luxury properties, they do not carry our brand name and they are not part of any of our Diamond Collections or our resort network.
Our Flexible Points-Based Vacation Ownership System and the Clubs
Our Points-Based System. Our customers become members of our vacation ownership system by purchasing points, which act as an annual currency that is exchangeable for occupancy rights in accommodations at the managed and affiliated resorts in our network. In 2014, the average cost to purchase points equivalent to an annual one-week vacation at one of the U.S. resorts in our network was $27,434. Purchasers of points do not acquire a direct ownership interest in the resort properties in our network. Rather, our customers acquire a membership in one of the eight Diamond Collections. Legal title to the interests in our resort properties in a Diamond Collection, other than the Latin America Collection, is held by the trustee or the Collection Association for that Diamond Collection for the benefit of the members and, with respect to resorts in which interests are not wholly owned by a Diamond Collection, by unaffiliated third parties that also hold interests in the applicable resort.
The principal advantage of our points-based system is the flexibility it gives to members with respect to the use of their points versus the use of traditional intervals. With traditional intervals, an owner has the “fixed” use of a specific accommodation type for a one-week time period at a specific resort or has the “floating” use of a specific type of accommodation for a week to be selected for a particular season at that same resort. An owner may alter his or her vacation usage by exchanging the interval through an external VOI exchange program with which the resort is affiliated, such as Interval International or RCI, for which a fee is charged by the exchange company. Unlike interval owners, points holders can redeem their points for one or more vacation stays in the resorts included in our network (subject to membership type limitations, availability and having the number of points required in their account) without having to use an external exchange company and without having to pay any exchange transaction fees. Because points function as currency within our network, our members have flexibility to choose the location, season, duration and size of accommodation for their vacation based on their annual points allocation, limited only by the range of accommodations within our network and subject to availability. Our members may also “save” their points from prior years, “borrow” points from future years, or pay cash for additional one-time points usage for additional flexibility with respect to reserving vacations at peak times, in larger accommodations, for longer periods of time or for vacationing more often throughout the year.
We evaluate and allocate a points value for each of the resorts in our network. Points values are determined by unit type for each resort and are based on season, demand, location, amenities and facilities. We make a points directory available to our customers online, which allows them to evaluate how they may allocate their available points and select dates and locations for

34


stays at resorts within our network, subject to certain rules and restrictions. For example, customers are subject to forfeiture of points if they cancel reservations within certain time periods prior to their scheduled arrival. Members must also save unused points for use in the subsequent year within a specified deadline each year or else such points will no longer be valid for use. Unlike owners of traditional deeded intervals, owners of our points may book stays of varying durations at the resorts in our network and may purchase additional points to increase their vacation options within our network.
We operate both in-house and outsourced call centers globally for customers to make reservations. We expect to discontinue the outsourced call center in late 2015 and bring all call center services in-house at that time. In addition, we offer a comprehensive online booking service which members can use to reserve stays at the resorts in our network, manage their purchased points and pay fees. We also manage an in-house concierge service for our members with large point ownership at a higher loyalty tier of Club membership, offering services 24/7 globally.
In January 2013, our European subsidiary introduced a new product (the “European Term Product”) available to purchasers in Europe. Purchasers of the European Term Product receive an allocation of points which represents an assignment of a specific week or weeks in a specific unit (without specific occupancy rights), at certain of our European resort properties, as well as use rights to any of the resort properties within our European Collection, for a period of 15 years. At the end of the 15-year period, the trustee of the European Collection will attempt to sell the unit and the net proceeds will be distributed to the then current owners of the unit, which may, or may not, include us. The current trustee of the European Collection also provides trust services relating to the European Term Product. The owners of the European Term Product pay annual maintenance fees at substantially the same rate as owners of points in our European Collection and are also members of THE Club and pay Club fees as part of their maintenance fees. The majority of VOI sales in Europe for the year ended December 31, 2014 were in the European Term Product, and a large majority of the sales of the European Term Product have been to existing owners of points in the European Collection. While we intend to focus on VOI sales in the form of points, we continue to offer the European Term Product to our customers.
The Clubs. Through the Clubs, we operate VOI exchange programs that enable our members to use their points, or points equivalent in the case of intervals, at resorts within our resort network, subject to certain rules and restrictions. The Clubs continue to provide services to a segment of the membership base who historically purchased intervals at some of our managed properties. Purchasers of points are automatically enrolled in THE Club, except for purchasers in Florida and Mexico who must affirmatively elect to join THE Club. THE Club provides members with access to all resorts in our network and offers the full range of member services. In certain circumstances, we offer a restricted version of THE Club for a lower annual fee for certain of our members, which allows members to stay at a limited selection of resorts within our network and provides members with a more limited offering of Club benefits. For example, following the ILX Acquisition and the PMR Acquisition, we offered all members of the Premiere Vacation Collection and the Monarch Grand Collection, respectively, the opportunity to purchase a limited Club offering, which entitled them to use their points at a range of selected resorts in our system.
In addition to the exchange programs, the Clubs offer a global array of other member benefits, discounts, offers and promotions that allow members to exchange points for a wide variety of products and travel services, including airfare, cruises and guided excursions. Most members of the Clubs, irrespective of ownership of points or intervals, have access to an external VOI exchange program for vacation stays at resorts outside of the Clubs' resort network if they desire, as the annual membership fee generally also includes annual membership in the Interval International external exchange program. For our more limited Club offerings, exchanges through the Interval International external exchange program typically require payment to Interval International of an additional membership fee.
Generally, members of the Clubs do not have the right to terminate their membership. However, due to regulatory requirements, members who purchase points in Arizona, California, Florida, Hawaii and Mexico may terminate their membership in the Clubs under specific circumstances. To date, only a minimal number of purchasers of points have opted out of the Clubs. Following the ILX Acquisition and the PMR Acquisition, we also offered the existing members of the Premiere Vacation Collection and the Monarch Grand Collection the option to opt out of our limited Club offerings that were granted following the respective acquisitions.
In addition to annual dues associated with the Clubs, we have also earned revenue associated with legacy owners of deeded intervals at resorts that we acquired in our strategic acquisitions exchanging the use of their intervals for membership in the Clubs, which requires these owners to pay the annual fees associated with Club membership. Furthermore, we also earn reservation protection plan revenue, which is an optional fee paid by customers when making a reservation to protect their points should they need to cancel their reservation, and through our provision of travel-related services and other affinity programs. In the past, we also earned revenue associated with customer conversions into THE Club, which involved the payment of a one-time fee by interval owners who wished to retain their intervals but also participate in THE Club. Expenses associated with our operation of the Clubs include costs incurred for in-house and outsourced call centers, member benefits, annual membership fees paid to a third-party exchange company, where applicable, and administrative expenses.

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Operation and Management of the Diamond Collections
Purchasers of points acquire interests in one of the eight Diamond Collections. For each Diamond Collection for which a trustee holds legal title to the deeded fee simple real estate interests or the functional equivalent, or, in some cases, leasehold real estate interests for the benefit of the respective Diamond Collection's association members in accordance with the applicable agreements, we have entered into a trust agreement with the trustee. Neither the Premiere Vacation Collection nor the Monarch Grand Vacation Collection has a separate trustee, but fee simple title to the real estate interests in such Diamond Collection is held in trust by a Collection Association. Under the trust agreements, points are established as the currency to be used by members for the use and occupancy of accommodations held in trust. For the Latin America Collection, the Cabo Azul developer is entitled to use and occupancy rights with respect to unsold accommodations at the Cabo Azul resort under the terms of a Mexican land trust and the cabo declaration. We use the same trustee for each of the U.S. Collection, California Collection and Hawaii Collection. The trustee is an institution independent of us and has trust powers. Parallel trust agreements for the resorts in Europe are in place with another independent trustee. The Diamond Collections generally have members’ associations, which are organizations of persons who own membership points in the applicable Diamond Collection, that are managed by a board of directors. The associations act as agents for all of the members in collecting assessments and paying taxes, utility costs and other costs incurred by the trust on behalf of members. Generally, the term of each trust, except the European trusts, is perpetual (or in the case of the cabo trust, may be renewed or reconstituted and thus is practically perpetual) and may only be terminated with a unanimous vote of the board of directors and approval by a significant majority of the voting power of members. The European Collection trusts, including customer use rights, expire in approximately 40 years. The Mediterranean Collection trusts, including customer use rights, expire between the end of December 2029 and the end of December 2043.
In accordance with the trust agreements, the boards of these trusts have entered into management agreements with us pursuant to which the board’s management powers are delegated to us. The management agreements generally have three to ten year terms and automatically renew for additional three to ten year terms unless terminated by the applicable members’ association. Through THE Club, members with full membership access may use their points for accommodations at any of the 93 resorts that we manage, at any of our 236 affiliated resorts and hotels or on four cruise itineraries, and, through our limited Club offerings, members may use their points, or points equivalent in the case of intervals, to stay at specified groups of resorts in our network. Members of a particular Diamond Collection have the ability to make reservations at resorts within that Diamond Collection before those resorts are open for bookings by members of other Diamond Collections.
Title to the VOIs included in our U.S. Collection, California Collection and Hawaii Collection has been transferred into the applicable trust in perpetuity, other than leasehold interests which are conveyed for the term of the lease. Title to the U.S. and Mexican VOIs included in the Premiere Vacation Collection and the Monarch Grand Collection is vested in the applicable Collection Association for the benefit of its members. Title to the Latin America Collection is held in a Mexican land trust, and the Cabo Azul developer owns all unsold points. For each of the Diamond Collections, pursuant to the applicable trust and related agreements, we have the right to hold as inventory for sale a significant number of unsold points. Further, in North America, we hold title (via subsidiary resort developer entities) to certain intervals which have not yet been transferred to a Diamond Collection. When these intervals are transferred to a Diamond Collection, we will receive an allocation of points. The majority of the common areas for resorts located in North America are owned by the related HOA. At certain locations, we own commercial space which we utilize for sales centers as well as other guest services, such as a gift shop, mini-market or a food and beverage facility. The amount of such commercial space represents an insignificant portion of our total facilities and no such space is used for any significant retail or commercial operations.
Legal title to substantially all of our managed resorts in our European Collection is generally held in one or more land-holding trusts which have an independent trustee for our benefit and the benefit of our interval owners, as applicable. A substantial portion of our beneficial interest in these resorts is held by the trusts for the benefit of the European Collection points owners. The trusts hold title in various ways, including as owner of a freehold interest, as the tenant under long term leases and through other contractual arrangements at various resorts. For the most part, the leases and other contractual arrangements, as well as the use rights of our interval owners, have terms that expire beginning in 2054, at which point we generally regain full use and ownership of certain of the underlying resorts. In addition, we hold leasehold interests in five of our Diamond Resorts managed European resorts. We lease units for the exclusive use of the European Collection at two of these resorts under long-term leases expiring in 2054 and 2055. Additionally, THE Club leases three other resorts in Europe for use by its members under an arrangement that expires in 2018, with two five-year renewal periods at our option. The European Collection has a board of directors that is comprised of five directors, three of whom are appointed by the developer and two of whom are appointed by the points holders. The board of directors of the European Collection is responsible for endorsing the pro rata allocation of the individual resort budgets that have been approved by their respective governing bodies. Legal title to all of the resorts acquired in connection with the Aegean Blue Acquisition is vested with third-party owners and is leased under long-term lease agreements to the Mediterranean Collection. These long-term leases have termination dates contemporaneous with the termination of the use rights of the members of the Mediterranean Collection.

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Each Diamond Collection member is required to pay to the respective Diamond Collection a share of the overall cost of that Diamond Collection's operations, which includes that Diamond Collection's share of the costs of maintaining and operating the component resort units within that Diamond Collection. A specific resort property may have units that are included in more than one Diamond Collection, or have a combination of units owned by a Diamond Collection and by individual interval owners. To the extent that an entire resort property is not held completely within a specific Diamond Collection, each Diamond Collection pays only the portion of operating costs attributable to its interval ownership in that resort. With the exception of the Mediterranean Collection, each Diamond Collection member's annual maintenance fee is composed of a base fee and a per point fee based on the number of points owned by the member. The annual maintenance fee is intended to cover all applicable operating costs of the resort properties and other services, including reception, housekeeping, maintenance and repairs, real estate taxes, insurance, rental expense, accounting, legal, human resources, information technology and funding of replacement and refurbishment reserves for the underlying resorts. The annual maintenance fee for a holder of points equivalent to one week at one of the resorts in our network generally ranges between $1,411 and $1,842 per year, with an average of $1,627. Assessments may be billed if insufficient operating funds are available or if planned capital improvements exceed the amount of available replacement and refurbishment reserves. If the member does not pay annual maintenance fees or any assessment, the member's use rights may be suspended, and the Diamond Collection may enforce its lien and recover the member's points, subject to the rights of the member's lender, if any. The Diamond Collections then effectively assign their recovery rights to us through their respective inventory recovery agreements with us.
Managed Resorts Outside of Diamond Collections
VOIs for a limited number of the resorts managed by us, consisting principally of the resorts acquired in the Island One Acquisition, are not included in any of our Diamond Collections. Owner-families hold deeded VOIs in these resorts. See “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview” for the definition of the Island One Acquisition. Unsold intervals have been allocated point equivalent amounts that allow members of the Clubs to stay at these resorts.
Interval Ownership
In addition to points, we historically marketed and sold intervals. We generally discontinued selling intervals in October 2007, although several of the resorts we manage continue to have a significant number of legacy deeded interval owners. We believe that points offer our members greater choice and flexibility in planning their vacations as compared to intervals. From an operational perspective, our points-based structure enables us to efficiently manage our inventory and sales centers by selling points-based access to our global network from any sales location, rather than being limited to selling intervals at a specific resort. In addition, the recovery of points-based inventory from our members who default on their maintenance fee or loan payments is easier than the recovery of interval-based products, which are typically governed by local real estate foreclosure laws that can significantly lengthen recovery periods and increase the cost of recovery.
An interval typically entitles the owner to use a fully-furnished vacation accommodation for a one-week period, generally during each year or in alternate years, usually in perpetuity. Typically, the owner holds either a fee simple ownership interest in a specific vacation accommodation or an undivided fee simple ownership interest in an entire resort. An interval owner has the right to stay only at the specific resort from which the interval owner has purchased the interval. However, many of our interval owners in the U.S. are also members of one of the Clubs, and thereby are entitled to the points equivalent for their interval which they may use to stay at other resorts in our network.
Each interval owner is required to pay an annual maintenance fee to the related HOA to cover the owner's share of the cost of maintaining the property. The annual maintenance fee is intended to cover the owner's share of all operating costs of the resort and other related services, including reception, housekeeping, maintenance and repairs, real estate taxes, insurance, rental expense, accounting, legal, human resources and information technology. In addition, the annual maintenance fee includes an amount for the funding of replacement and refurbishment reserves for the related resort to provide for future improvements when necessary. Assessments may be billed if insufficient operating funds are available or if planned capital improvements exceed the amount of available replacement and refurbishment reserves. Annual maintenance fees for interval owners generally range between $591 and $1,589 per year for a one-week interval, with an average of $975. If the owner does not pay the annual maintenance fees or any assessment, the owner's use rights may be suspended, and the HOA may enforce its lien on the owner's intervals, subject to the rights of the owner's lender, if any. See “Recovery of VOIs.” The amount of an interval owner's annual maintenance fees and assessments is determined on a pro rata basis consistent with such person's ownership interest in the resort. For purposes of this allocation, each of the Diamond Collections is assessed annual maintenance fees and assessments based on the intervals held by such Diamond Collection.

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Relationship among Points Owners, THE Club, HOAs and Diamond Collections
The following diagram depicts the relationship among our points owners that are members of THE Club, the HOAs and the Diamond Collections:
Recovery of VOIs
In the ordinary course of our business, we recover VOIs from our members as a result of (i) failures by our members to pay their annual maintenance fee or any assessment, which failures may be due to, among other things, death or divorce or other life-cycle events or lifestyle changes and (ii) defaults on our members' consumer loans for the purchase of their VOIs. With respect to consumer loan defaults, we are able to exercise our rights as a secured lender to foreclose upon the VOI subject to our lien. From time to time, we also recover VOIs from members prior to default on their consumer loans, maintenance fees or assessments.
With respect to members who fail to pay their annual maintenance fee or any assessment, we have entered into inventory recovery agreements with a substantial majority of the Diamond Collections and HOAs for our managed resorts in North America, together with similar arrangements with the European Collection and a majority of our European managed resorts. Each agreement provides that in the event that a member fails to pay these amounts, we have the option to enforce the rights of the HOA or Diamond Collection with respect to the subject VOI, which includes preventing members from using their points or intervals and, if the delinquency continues, recovering the property in the name of the HOA or Diamond Collection. Our rights to recover VOIs for failure to pay annual maintenance fees or assessments are subject to any prior security interest encumbering such VOI, including any interest we hold as a lender on a consumer loan. We are responsible for payment of certain fees, ranging from 45% to 100% of the annual maintenance fees relating to the defaulted intervals or points. Depending upon whether the VOI in default is intervals or points, recovery is effected through a foreclosure proceeding or by contract termination. The recovery of points is more efficient than the recovery of intervals, because the recovery of intervals is governed by local real estate foreclosure laws that significantly lengthen recovery periods and increase the cost of recovery.
Under the terms of our inventory recovery agreements, we are granted full use of the inventory as a result of delinquent annual maintenance fees or assessments for rental and marketing purposes, and we are under no obligation to commence recovery proceedings. Generally, when we recover intervals, we pay from approximately one to three years' worth of annual

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maintenance fees on such intervals. Upon recovery, the HOA or Diamond Collection transfers title to the VOI to us, and we are responsible for all annual maintenance fees and assessments thereafter. We have written or oral agreements with most of our European HOAs that provide us similar rights with respect to recovering delinquent VOIs. After recovery, VOIs are returned to our inventory and become available for sale. Although we recover inventory in the form of intervals as well as points, all inventory recovered is sold in the form of points. Recovered intervals are transferred to one of the Diamond Collections and become part of our points-based system.
Between January 2009 and December 31, 2014, we have experienced a default rate on our financed sales ranging from 5.7% and 8.6% (as measured on an annual average). VOIs recovered through the default process are added to our existing inventory and resold at full retail value. Although the volume of points or intervals that we recover could fluctuate in the future for various reasons, we have recovered in the ordinary course of our business approximately 2% to 5% of the total outstanding VOIs in each of the past six years. Recovered VOI inventory may be sold by us in the form of points to new customers or existing members.
Competition
In our Hospitality and Management Services segment, our competition includes pure real estate and hospitality management companies, as well as the VOI companies that conduct hotel management operations, some of which are noted below. Our competitors may seek to compete against us based on the pricing terms of our current hospitality management contracts. Our competitors may also compete against us in our efforts to expand our fee-based income streams by pursuing new management contracts for resorts that are not currently part of our network.
In our Vacation Interest Sales and Financing business, we compete for prospects, sales leads and sales personnel from established, highly visible vacation ownership resort operators, as well as a fragmented array of smaller operators and owners. In marketing and selling VOIs, we compete against not only vacation ownership companies, but also the vacation ownership divisions of other hospitality companies. Our competitors include Bluegreen Corporation, Hilton Hotels Corporation, Marriott Vacations Worldwide Corporation, Starwood Hotels and Resorts Worldwide, Inc. and Wyndham Worldwide Corporation. In addition, in certain markets, we compete with many established companies focused primarily on vacation ownership, and it is possible that other potential competitors may develop properties near our current resort locations and thus compete with us in the future. We also compete with other vacation options such as cruises, as well as alternative lodging companies such as HomeAway and Airbnb, which operate websites that market available furnished, privately-owned residential properties in locations throughout the world, including homes and condominiums, that can be rented on a nightly, weekly or monthly basis, and particularly in Europe, low-cost tour operators. We believe that the vacation ownership industry will continue to consolidate in the future. In our rental of VOIs, we compete not only with all of the foregoing companies, but also with traditional hospitality providers such as hotels and resorts. In our consumer financing business, we compete with numerous subsets of financial institutions, including mortgage companies, credit card issuers and other providers of direct-to-consumer financing. These providers permit purchasers to utilize a home equity line of credit, mortgage, credit card or other instrument to finance their VOI purchase.
Governmental Regulation
Our marketing and sale of VOIs and other operations are subject to extensive regulation by the federal government and state timeshare laws and, in some cases, by the foreign jurisdictions where our VOIs are located, marketed and sold. The U.S. federal legislation that is or may be applicable to the sale, marketing and financing of VOIs includes, but is not limited to, the Federal Trade Commission Act, the Fair Housing Act, the Americans with Disabilities Act, the Truth-in-Lending Act and Regulation Z, the Home Mortgage Disclosure Act and Regulation C, the Equal Credit Opportunity Act and Regulation B, the Interstate Land Sales Full Disclosure Act, the Telephone Consumer Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Gramm-Leach-Bliley Act, the Deceptive Mail Prevention and Enforcement Act, Section 501 of the Depository Institutions Deregulation and Monetary Control Act of 1980, the Bank Secrecy Act, the USA Patriot Act and the Civil Rights Acts of 1964, 1968 and 1991.
In addition, the majority of states and jurisdictions where the resorts in our network are located extensively regulate the creation and management of vacation ownership resorts, the marketing and sale of VOIs, the escrow of purchaser funds and other property prior to the completion of construction and closing, the content and use of advertising materials and promotional offers, the delivery of an offering memorandum describing the sale of VOIs and the creation and operation of exchange programs and the multi-site vacation interest plan reservation system. Many other states and certain foreign jurisdictions have adopted similar legislation and regulations affecting the marketing and sale of VOIs to persons located in those jurisdictions. In addition, the laws of most states in which we sell VOIs grant the purchaser of the interest the right to rescind a purchase contract during the specified rescission period provided by law. Rescission periods vary by jurisdiction in which we operate, but typically are five to 15 days from the date of sale.

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The Diamond Collections are required to register pursuant to applicable statutory requirements for the sale of VOI plans in an increasing number of jurisdictions. For example, our subsidiary that serves as the developer of the U.S. Collection is required to register pursuant to the Florida Vacation Plan and Timesharing Act. Such registrations, or any formal exemption determinations, for the Diamond Collections confirm the substantial compliance with the filing and disclosure requirements of the respective timeshare statutes by the applicable Diamond Collection. They do not constitute the endorsement of the creation, sale, promotion or operation of the Diamond Collections by the regulatory body, nor relieve us or our affiliates of any duty or responsibility under other statutes or any other applicable laws. Registration under a respective timeshare act is not a guarantee or assurance of compliance with applicable law nor an assurance or guarantee of how any judicial body may interpret the Diamond Collections' compliance therewith.
Furthermore, most states have other laws that apply to our activities, including but not limited to real estate licensure laws, travel sales licensure laws, advertising laws, anti-fraud laws, telemarketing laws, prize, gift and sweepstakes laws and labor laws. In addition, we subscribe to “do not call” ("DNC") lists for certain states into which we make telemarketing calls, as well as the federal DNC list. Enforcement of the federal DNC provisions began in the fall of 2003, and the rule provides for fines of up to $16,000 per violation. We also maintain an internal DNC list as required by law. Our master DNC list is comprised of our internal list, the federal DNC list and the applicable state DNC lists.
In addition to government regulation relating to the marketing and sales of VOIs, our servicing and collection of consumer loans is subject to regulation by the federal government and the states in which such activities are conducted. These regulations may include the federal Fair Credit Reporting Act, the Fair Debt Collections Practice Act, the Electronic Funds Transfer Act and Regulation B, the Right to Financial Privacy Act, the Florida Consumer Collection Practices Act, the Nevada Fair Debt Collection Practices Act and similar legislation in other states.
Certain state and local laws may also impose liability on property developers with respect to construction defects discovered by future owners of such property. Under these laws, future owners of VOIs may recover amounts in connection with repairs made to a resort as a consequence of defects arising out of the development of the property.
A number of the U.S. federal, state and local laws, including the Fair Housing Amendments Act of 1988 and the Americans with Disabilities Act, impose requirements related to access to and use by disabled persons of a variety of public accommodations and facilities. A determination that we are subject to and that we are not in compliance with these accessibility laws could result in a judicial order requiring compliance, imposition of fines or an award of damages to private litigants. If an HOA at a resort was required to make significant improvements as a result of non-compliance with these accessibility laws, assessments might be needed to fund such improvements, which additional costs might cause owners of VOIs to default on their mortgages or cease making required HOA assessment payments. In addition, the HOA under these circumstances may pursue the resort developer to recover the cost of any corrective measures. Any new legislation may impose further burdens or restrictions on property owners with respect to access by disabled persons. To the extent that we hold interests in a particular resort (directly or indirectly through our interests in a Diamond Collection), we would be responsible for our pro rata share of the costs of improvements resulting from non-compliance with accessibility laws.
The marketing and sale of our points-based VOIs and our other operations in Europe are subject to national regulation and legislation. Directive 2008/122/EC of the European Parliament (the “Directive”) regulates vacation ownership activities within the European Union (which includes the majority of the European countries in which we conduct our operations). The Directive required transposition into domestic legislation by the members of the European Union no later than February 23, 2011 and replaced the previous regulatory framework introduced by EC Directive 94/47/EC. Most of our purchasers in Europe are residents of the United Kingdom, where the Directive has been implemented under The Timeshare, Holiday Products, Resale and Exchange Contracts Regulations 2010. The Directive has now been implemented in all other member states, as well as in Norway, which, although not a member of the European Union, is a member of the European Economic Area. The Directive (i) requires delivery of specified disclosure in the potential purchaser's native language (some of which must be provided in a specified format); (ii) requires a “cooling off” rescission period of 14 calendar days after they return to their resident country and (iii) prohibits any advance payments in all member states.
Prior to February 23, 2011, vacation ownership activities within the European community were governed by the European Timeshare Directive of 1994 (94/47/EC) (or the 1994 Directive).
Other United Kingdom laws which are applicable to us include the Consumer Credit Act 1974 as amended by the Consumer Credit Act 2006, the Consumer Credit (Disclosure of Information) Regulations 2010, the Consumer Credit (Agreements) Regulations 2010 (as amended), the Misrepresentation Act 1967, the Unfair Contract Terms Act 1977, the Unfair Terms in Consumer Contracts Regulations 1999 (as amended), the Consumer Protection from Unfair Trading Regulations 2008, the Data Protection Act 1998 and the Privacy and Electronic Communications (EC) Regulations 2003, the Equality Act 2010, the Employment Rights Act 1996, the Environmental Protection Act 1990, the Clean Air Act 1993, the Companies Act 2006 and the Trade Descriptions Act 1968. The Timeshare, Holiday Products, Resale and Exchange Contracts Regulations

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2010 has an extra-territorial effect when United Kingdom residents purchase VOIs in accommodations located in other European Economic Area states.
We are also subject to the laws and regulations of Mexico, including regulations applicable to developers and providers of timeshare services throughout Mexico, with respect to our operations of the Cabo Azul Resort, located in Baja California Sur, Mexico, and the Sea of Cortez Beach Club located in Sonora, Mexico. In addition to specific timeshare rules and regulations, we are also subject to the constitution and other laws and regulations of Mexico, including limitations with respect to ownership of land near Mexico's borders and beaches by Mexican citizens and companies (including Mexican subsidiaries of foreign companies); provided, however, that the federal government may grant the same right to foreign parties if they agree to consider themselves Mexican nationals with respect to such property and bind themselves not to invoke the protection of their governments in matters relating thereto and take title through a Mexican trust.
All of the countries in which we operate have consumer protection and other laws that regulate our activities in those countries.
We believe that we are in compliance with all applicable governmental regulations, except where non-compliance would not reasonably be expected to have a material adverse effect on us.
Seasonality
Historically, our fiscal quarter ended March 31 has produced the weakest operating results primarily due to the effects of reduced leisure travel. The next three quarters have historically produced the strongest operating results because they coincide with the typical summer vacation season and winter holidays, which result in a greater number of families vacationing as compared to the first fiscal quarter. Generally, a greater number of vacationers at the resorts in our network results in higher tour flow through our sales centers and increased VOI sales.
Insurance
We generally carry commercial general liability insurance. With respect to resort locations that we manage and for corporate offices, we and the HOAs carry all-risk property insurance policies with fire, flood, windstorm and earthquake coverage as well as additional coverage for business interruption arising from insured perils. Further, we carry pollution insurance on all Diamond Resorts managed resort and administrative locations, which covers multiple perils, including exposure to Legionnaire's Disease. We believe that the insurance policy specifications, insured limits and deductibles are similar to those carried by other resort owners and operators. There are certain types of losses, such as losses arising from acts of war or terrorism, which are not generally insured because they are either uninsurable or not economically insurable.
Intellectual Property
We own and control a number of trade secrets, trademarks, service marks, trade names, copyrights and other
intellectual property rights, including Diamond Resorts International®, THE Club®, Polo Towers & Design®, Relaxation . . . simplified®, Diamond Resorts®, DRIVENSM, The Meaning of Yes®, We Love to Say YesTM, Vacations for Life®, Affordable Luxury. Priceless MemoriesTM and Stay VacationedTM, which, in the aggregate, are of material importance to our business. We are licensed to use technology and other intellectual property rights owned and controlled by others, and we license other companies to use technology and other intellectual property rights owned and controlled by us. In addition, we have developed certain proprietary software applications that provide functionality to manage lead acquisition, marketing, tours, gifting, sales, contracts, member profiles, maintenance fee billing, property management, inventory management, yield management and reservations.
Environmental Matters
The resort properties that we manage are subject to federal, state and local laws and regulations relating to the protection of the environment, natural resources and worker health and safety, including laws and regulations governing and creating liability relating to the management, storage and disposal of hazardous substances and other regulated materials and the cleanup of contaminated sites. The resorts are also subject to various environmental laws and regulations that govern certain aspects of their ongoing operations. These laws and regulations control such things as the nature and volume of wastewater discharges, quality of water supply and waste management practices. The costs of complying with these requirements are generally covered by the HOAs that operate the affected resort property, and the majority of the HOAs maintain insurance policies to insure against such costs and potential environmental liabilities. To the extent that we hold interests in a particular

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resort (directly or indirectly through our interests in a Diamond Collection), we would be responsible for our pro rata share of losses sustained by such resort as a result of a violation of any such laws and regulations.
Employees
As of December 31, 2014, we had approximately 7,100 full and part-time employees. Our employees are not represented by a labor union, with the exception of 137 employees in St. Maarten, 126 employees in Mexico, 273 employees in Hawaii and 25 employees in Nevada. Certain of our employees in Europe are also represented by unions. We are not aware of any union organizational efforts with respect to our employees at any other locations. We believe we have a good relationship with the
members of our workforce.
Company History
Diamond Resorts Corporation ("DRC"), formerly Sunterra Corporation, was incorporated under the name KGK Resorts, Inc. in May 1996, completed an initial public offering in August 1996 and became known as Sunterra Corporation in 1998. Sunterra Corporation sought protection under Chapter 11 of the Bankruptcy Code in May 2000 as a result of defaults on its senior unsecured notes and its secured credit facilities. Sunterra Corporation fulfilled the conditions to the effectiveness of its plan of reorganization and emerged from Chapter 11 in July 2002.
In 2006, Sunterra Corporation's common stock was delisted from The NASDAQ Stock Market as a result of, among other things, the resignation of Sunterra Corporation's auditors and the withdrawal of their certification of Sunterra Corporation's financial statements. In addition, Sunterra Corporation became subject to an SEC civil investigation and was named as defendant in two securities class action lawsuits. The SEC investigation was concluded without further action, and both lawsuits were settled.
In April 2007, Diamond Resorts Parent, LLC ("DRP"), through a wholly-owned subsidiary, acquired Sunterra Corporation by merger. Sunterra Corporation's existing equity was canceled and it became a wholly-owned indirect subsidiary of DRP. The Diamond management team assumed leadership of DRP in connection with the merger. In addition, Sunterra Corporation changed its name to Diamond Resorts Corporation.
On July 24, 2013, Diamond Resorts International, Inc. ("DRII") closed the initial public offering of an aggregate of 17,825,000 shares of its common stock at the IPO price of $14.00 per share (the "IPO"). In the IPO, DRII sold 16,100,000 shares of common stock, and Cloobeck Diamond Parent, LLC ("CDP"), in its capacity as a selling stockholder, sold 1,725,000 shares of common stock. Prior to the consummation of the IPO, DRII was a newly-formed Delaware corporation, incorporated in January 2013, that had not conducted any activities other than those incident to its formation and the preparation of filings with the SEC in connection with the IPO. DRII was formed for the purpose of changing the organizational structure of DRP from a limited liability company to a corporation. Immediately prior to the consummation of the IPO, DRP was the sole stockholder of DRII. In connection with, and immediately prior to the completion of the IPO, each member of DRP contributed all of its equity interests in DRP to DRII in return for shares of common stock of DRII. Following this contribution, DRII redeemed the shares of common stock held by DRP and DRP was merged with and into DRII. As a result, DRII is now a holding company, and its principal asset is the direct and indirect ownership of equity interests in its subsidiaries, including DRC. We refer to these and other related transactions entered into substantially concurrently with the IPO as the "Reorganization Transactions."
Available Information
We are required to file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other information with the SEC. We are subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements, and other information with the SEC. Copies of these materials, filed by us with the SEC, are available free of charge on our website at investors.diamondresorts.com. These filings are available as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. You can also obtain copies of these materials by visiting the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549, by calling the SEC at 1-800-SEC-0330, or by accessing the SEC's website at www.sec.gov. The information on, or that may be accessed through, these websites is not incorporated into this filing and should not be considered a part of this filing.

ITEM 1A.    RISK FACTORS
Our business, financial condition and results of operations are subject to various risks, including those described below, which in turn may affect the value of our securities. In addition, other risks not presently known to us or that we currently believe to be immaterial may also adversely affect our business, financial condition and results of operations, perhaps materially. The

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risks discussed below also include forward-looking statements, and actual results and events may differ substantially from those discussed or highlighted in these forward-looking statements. Before making an investment decision with respect to any of our securities, you should carefully consider the following risks and uncertainties described below and elsewhere in this annual report. See also “Cautionary Statement Regarding Forward-Looking Statements.”

Risks Related to Our Business
Unfavorable general economic conditions have adversely affected our business and potential deterioration in conditions in the U.S. and globally could result in decreased demand for VOIs and our ability to obtain future financing.
There have been periods, including from 2008 through 2010, in which our business has been materially adversely affected by unfavorable general economic conditions, including effects of weak domestic and world economies resulting, in part, from the instability of global financial markets and regional economies caused by the recent European debt crisis, high unemployment, a decrease in discretionary spending, a decline in housing and real estate values, limited availability of financing and geopolitical conflicts. Future volatility and disruption in worldwide capital and credit markets and any declines in economic conditions in the U.S., Europe and in other parts of the world could adversely impact our business and results of operations, particularly if the availability of financing for us or for our customers is limited, or if general economic conditions adversely affect our customers' ability to pay amounts owed under our loans to them or for maintenance fees or assessments. If the HOAs and Collection Associations are unable to collect maintenance fees or assessments from our customers, not only would our management fee revenue be adversely affected, but the resorts we manage could fall into disrepair and fail to comply with the quality standards associated with the Diamond Resorts brand, which could decrease customer satisfaction, tarnish our reputation and impair our ability to sell our VOIs.
Our revenues are highly dependent on the travel industry and declines in or disruptions to the travel industry, such as those caused by adverse economic conditions, terrorism and man-made disasters may adversely affect us.
A substantial amount of our VOI sales activities occur at the managed resort locations in our network, and the volume of our sales correlates directly with the number of prospective customers who visit these resorts each year. The number of visitors to these resorts depends upon travel industry conditions, on an overall basis and in the specific geographic areas in which our resorts are located. Such conditions may be adversely affected by a variety of factors, such as weather conditions, general travel patterns and the potential impact of natural disasters and crises.

Actual or threatened war, terrorist activity, political unrest or civil strife and other geopolitical uncertainty could have a similar effect. In addition, any increased concern about terrorist acts directed against the U.S. and foreign citizens, transportation facilities and assets, and travelers' fears of exposure to contagious diseases may reduce the number of tourists willing to fly or travel in the future, particularly if new significant terrorist attacks or disease outbreaks occur or are threatened.
More generally, the travel industry has been hurt by various events occurring in prior years, including the effects of weak domestic and global economies. A sustained downturn in travel patterns, including as a result of increases in travel expenses such as higher airfares or gasoline prices, could cause a reduction in the number of potential customers who visit the managed resorts in our network. If we experience a substantial decline in visitors to these resorts, our VOI sales would likely decline.
Our future success depends on our ability to market VOIs successfully and efficiently, including sales to new members, as well as sales of additional points to our existing ownership base.
We compete for customers with hotel and resort properties and with other vacation ownership resorts and other vacation options such as cruises. The identification of sales prospects and leads, and the marketing of our products to those leads, are essential to our success. We have incurred and will continue to incur significant expenses associated with marketing programs in advance of closing sales to the leads that we identify. If our lead identification and marketing efforts do not yield enough leads or we are unable to successfully convert sales leads to a sufficient number of sales, our growth, including from our efforts to expand Club revenue, and our overall financial performance may be adversely affected. Recently, we have expanded our use of hospitality-focused marketing methods, such as enhanced mini-vacation packages focused on small groups of potential customers. These marketing methods are more expensive and require a greater commitment of resources than traditional marketing activities, and there can be no assurance that we will be successful in continuing to expand these efforts.
In addition, a significant portion of our sales are additional points purchased by existing members who previously purchased points from us, and our results of operations depend in part on our ability to continue making sales to these members. Our recent rate of sales of additional points to existing owners who previously purchased points from us may not be sustainable in future periods. Furthermore, we do not receive all of the same benefits from sales of additional points to these existing members as we do from sales of points to new members, such as new Club members paying the associated fees and to whom

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we can offer services, activities and upgrade opportunities and an expanded ownership base to which we can potentially sell additional points.
Our business may be adversely affected if we are unable to maintain an optimal level of points or intervals in inventory for sales to customers.
Our ability to maintain an optimal level of points or intervals in inventory for sale to customers is dependent on a number of factors, including fluctuations in our sales levels and the amount of inventory recovered through consumer loan and association fee defaults.
If we experience a significant decline in our inventory of points available for sale, we may be required to expend more capital to acquire or build inventory.
We have entered into inventory recovery agreements with substantially all of the Diamond Collections and HOAs for our managed resorts in North America, together with similar arrangements with the European Collections and a majority of our European managed resorts. Pursuant to these agreements and arrangements, we have the option to recapture VOIs either in the form of points or intervals, and bring them into our inventory for sale to customers. During each of the past six years, approximately 2% to 5% of the outstanding points or intervals were recovered by us pursuant to these agreements. We need to maintain such level of recovery to provide us with our relatively low-cost inventory of VOIs for sales to our customers. However, the volume of points or intervals recovered by us could decline in the future for a variety of reasons, including as a result of termination or non-renewal of our inventory recovery agreements. In addition, if a viable VOI resale market were to develop in the future, our members may choose to resell their interests to third parties. Further, in the event applicable state law makes it more difficult to recover points or intervals, it could extend the time required to consummate a recovery or otherwise make it more difficult to consummate such recoveries. An increased level of VOI sales would also reduce our inventory available for sale. If our inventory available for sale were to decline significantly, generally or in a particular Diamond Collection, we may need to make significant capital expenditures to replenish our inventory by purchasing points or intervals or building or acquiring new inventory at existing resorts, including through arrangements with financial sponsors. Alternatively, we would need to substantially reduce the volume of our VOI sales.
If the volume of our inventory of points held by us were to significantly increase, our carrying costs with respect to that inventory would increase.
If VOI sales levels do not keep pace with inventory recovery levels, the volume of our inventory of points or intervals may become higher than desired. Also, if the amount of customer defaults increases and we repurchase more VOI inventory than desired pursuant to our inventory recovery agreements, our carrying costs will increase due to the maintenance fees on the recovered VOI inventory that we are required to pay.
Our recent strategic acquisitions have provided us with additional VOI inventory, and potential future acquisitions may include additional inventory. Further, as part of some of our recent acquisitions, we have incurred additional obligations to repurchase defaulted inventory (either by taking back defaulted consumer loans or repurchasing the inventory that collateralizes such loans). We incur carrying costs associated with our VOI inventory, as we are obligated to pay annual maintenance fees and assessments on any VOIs held in inventory, and higher-than-desired VOI inventory levels would result in increases in these carrying costs. If our inventory available for sale were to increase significantly, we may need to sell some of this excess inventory at significantly discounted prices. In addition, the inventory recovery agreements we enter into with the HOAs and Diamond Collections are subject to annual renewal, and as a result, we may not always repurchase VOI inventory from customers in default. If we do not repurchase such inventory, the annual maintenance fees and assessments are allocated among the remaining non-defaulting owners of units in the HOA and the Diamond Collection, increasing the amounts paid by each of those owners (including us, to the extent we hold units in inventory). This increases the risk that owners of such other units may be unwilling or unable to pay such increased fees and may default as well. The increased per-unit costs could also make units in the HOA and the Diamond Collection less attractive to prospective purchasers.
A substantial portion of our business is dependent upon contracts with HOAs to manage resort properties and with the Diamond Collections. The expiration, termination or renegotiation of these management contracts could adversely affect our business and results of operations.
We are party to management contracts relating to 93 properties and the eight Diamond Collections, under which we receive fees for providing management services. We derive a substantial amount of revenue from these contracts, and our hospitality and management services business accounts for a greater percentage of our Adjusted EBITDA than of our total consolidated revenue. Each of the Diamond Resorts managed resorts, other than certain resorts in our European Collection and the Latin America Collection, is typically operated through an HOA, and each of the Diamond Collections is typically operated through a Collection Association. Each of the HOAs and Collection Associations is administered by a board of directors. The

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boards of directors of the HOAs and Collection Associations are responsible for authorizing these management contracts, and negotiate and enforce the terms of these agreements as fiduciaries of their respective resort properties and Diamond Collections. Furthermore, some state regulations impose limitations on the amount of fees that we may charge the HOAs and Diamond Collections for our hospitality management services and the terms of our management contracts. Our management contracts generally have three to ten year terms and are automatically renewable, but provide for early termination rights in certain circumstances. Any of these management contracts may expire at the end of its then-current term (following notice by a party of non-renewal) or be terminated, or the contract terms may be renegotiated in a manner adverse to us. In addition, our growth strategy contemplates leveraging these existing management contracts to add services provided to our members under our management contracts and increase the management fees to cover those new services. There are no guarantees that this strategy will be successful. We believe there are limits to how much we can increase management fees before the HOAs and Diamond Collections are unwilling or unable to pay such increased fees, and, if such fees are perceived as being too high by prospective customers, our VOI sales may be adversely affected.
Our growth strategy also contemplates our acquisition of, and entry into, new management contracts. We face significant competition to secure new contracts and may be unsuccessful in doing so on favorable terms, if at all.
To the extent our rental proceeds may decline or our vacation interest carrying costs may increase, we may not be able to cover certain other expenditures against which we offset rental proceeds.
Under our inventory recovery agreements, we are required to pay owners' past due maintenance and assessment fees to the HOAs and Diamond Collections. See "Item 1. Business—Recovery of VOIs." In order to offset these expenses, we rent the available units, in which case we are also obligated to pay to the HOAs and Diamond Collections cleaning fees for room stays incurred by our guests who stay with us on a per-night or per-week basis. In 2014, 2013 and 2012, our net vacation interest carrying costs, consisting of carrying costs related to the VOIs that we owned in each of these periods, less amounts generated from rental of these VOIs in these periods were $35.5 million, $41.3 million and $36.4 million, respectively. Additionally, participating members can rent private luxury properties, book high-profile sporting events and take customized international guided excursions by depositing a designated number of points with us. In turn, we pay a usage fee to third parties on behalf of our members. See "Item 1. Business—Our Resort Network—Diamond Luxury Selection." Similarly, under arrangements that we have with certain of our affiliated resorts, holders of our points or intervals who desire to stay at any such affiliated resort deposit points with us and, in exchange, we pay our affiliated resort the funds required to allow such holder access to the desired unit. In order to offset these payments to the third parties or the affiliated resorts, as applicable, we rent available units at our managed resorts. Our ability to rent units is subject to a variety of risks common to the hospitality industry, including competition from large and well-established hotels, changes in the number and occupancy and room rates for hotel rooms, seasonality and changes in the desirability of geographic regions of the resorts in our network. In addition, we experience strong competition in the rental market and are at a disadvantage when competing against larger and better-established hotel and resort chains that focus on the rental market, have more experience in and greater resources devoted to such market, and can offer rental customers additional benefits such as loyalty points related to rentals and a significantly larger pool of potentially available rental options.
We have incurred net losses in the past and may not experience positive net income in the future.
We have incurred net losses in the past and we may incur net losses in the future. As of December 31, 2014, our accumulated deficit was $180.5 million. Excluding a non-recurring gain on bargain purchase from business combination of $2.9 million and $20.6 million for the years ended December 31, 2013 and 2012, our net losses for such periods were $5.4 million and $7.0 million, respectively. Any failure by us to obtain or sustain profitability, or to continue our revenue growth, could cause the price of our common stock to decline significantly.
We utilize external exchange program affiliations as important sources of sales prospects and leads, and any failure to maintain such affiliations could reduce these prospects.
We have an affiliation agreement for an external exchange program with Interval International, which was renegotiated in April 2014 and complements our own vacation ownership exchange programs. As a result of this affiliation, members of THE Club may use their points to reserve the use of a vacation accommodation at more than 2,900 resorts worldwide that participate in Interval International. In addition, interval owners at our managed resorts may join either Interval International or RCI, as their HOA constitutions dictate. Such interval owners may then deposit their deeded intervals in exchange for an alternative vacation destination. When our points and intervals are exchanged through Interval International or RCI, this inventory is made available to owners from other resorts, who are potential customers for our VOI sales. If we do not maintain our external exchange program affiliations, the number of individuals exchanging interests through these programs to stay at our managed resorts may decline substantially.

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We are dependent on the managers of our affiliated resorts to ensure that those properties meet our customers' expectations.
The members of the Clubs have access to all or a portion of the 236 affiliated resorts and hotels and four cruise itineraries in our network. We do not manage, own or operate these resorts, hotels or cruises, and we have limited or no ability to control their management and operations. If the managers of a significant number of those properties were to fail to maintain them in a manner consistent with our standards of quality, we may be subject to customer complaints and our reputation and brand could be damaged. In addition, our affiliation agreements with these resorts may expire, be terminated or not be renewed, or may be renegotiated in a manner adverse to us, and we may be unable to enter into new agreements that provide members of the Clubs with equivalent access to additional resorts.
The resale market for VOIs could adversely affect our business.
There is not currently an active, organized or liquid resale market for VOIs, and resales of VOIs generally are made at sales prices substantially below their original customer purchase prices. These factors may make the initial purchase of a VOI less attractive to potential buyers who are concerned about their ability to resell their VOI. Also, buyers who seek to resell their VOIs compete with our own VOI sales efforts. If the secondary market for VOIs were to become more organized and liquid, the resulting availability of resale VOIs (particularly where the VOIs are available for sale at lower prices than ours) could adversely affect our sales and our sales prices. Furthermore, the volume of VOI inventory that we recapture each year may decline if a viable secondary market develops.
We are subject to certain risks associated with our management of resort properties.
Through our management of resorts and ownership of VOIs, we are subject to certain risks related to the physical condition and operation of the managed resort properties in our network, including:
the presence of construction or repair defects or other structural or building damage at any of these resorts, including resorts we may develop in the future;

any noncompliance with or liabilities under applicable environmental, health or safety regulations or requirements or building permit requirements relating to these resorts;

any damage resulting from natural disasters, such as hurricanes, earthquakes, fires, floods and windstorms, which may increase in frequency or severity due to climate change or other factors; and

claims by employees, members and their guests for injuries sustained on these resort properties.
Some of these risks may be more significant in connection with the properties for which we recently acquired management agreements, particularly those management agreements which were acquired from operators in financial distress. For additional risks related to our acquired businesses, see “Our strategic transactions may not be successful and may divert our management's attention and consume significant resources.” If an uninsured loss or a loss in excess of insured limits occurs as a result of any of the foregoing, we or the HOAs or Diamond Collections may be subject to significant costs. See “The properties included in our resort network may experience damages that are not covered by insurance.”
Additionally, a number of U.S. federal, state and local laws, including the Fair Housing Amendments Act of 1988 and the Americans with Disabilities Act, impose requirements related to access to and use by disabled persons of a variety of public accommodations and facilities. A determination that our managed resorts are subject to, and that they are not in compliance with, these accessibility laws could result in a judicial order requiring compliance, imposition of fines or an award of damages to private litigants. If an HOA at one of our managed resorts was required to make significant improvements as a result of non-compliance with these accessibility laws, assessments might be needed to fund such improvements, which additional costs may cause our VOI owners to default on their consumer loans from us or cease making required HOA maintenance fee or assessment payments. Also, to the extent that we hold interests in a particular resort (directly or indirectly through our interests in a Diamond Collection), we would be responsible for our pro rata share of the costs of such improvements. In addition, any new legislation may impose further burdens or restrictions on property owners with respect to access by disabled persons.
The resort properties that we manage are subject to federal, state and local laws and regulations relating to the protection of the environment, natural resources and worker health and safety, including laws and regulations governing and creating liability relating to the management, storage and disposal of hazardous substances and other regulated materials and the cleanup of contaminated sites. The resorts are also subject to various environmental laws and regulations that govern certain aspects of their ongoing operations. These laws and regulations control such things as the nature and volume of wastewater discharges, quality of water supply and waste management practices. To the extent that we hold interests in a particular resort (directly or

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indirectly through our interests in a Diamond Collection), we would be responsible for our pro rata share of losses sustained by such resort as a result of a violation of any such laws and regulations.
The properties included in our resort network may experience damages that are not covered by insurance.
Our managed resorts are covered by all-risk property insurance policies with fire, flood, windstorm and earthquake coverage, as well as additional coverage for business interruption arising from insured perils. However, market forces beyond our control may limit the scope of the insurance coverage that we obtain or our ability to obtain coverage at reasonable rates. Specifically, certain types of losses, such as losses arising from acts of war or terrorism, are generally not insured because they are either uninsurable or not economically feasible to insure. Accordingly, our insurance may not be adequate to cover all losses in every circumstance. In the event of an uninsured loss, including a loss in excess of insured limits, at any of the resorts in our network, such resorts may not be adequately repaired in a timely manner or at all and we may lose some or all of the future revenues anticipated to be derived from such resorts.
Furthermore, if an HOA or Diamond Collection is subject to any such loss, we will also be responsible for a portion of such loss to the extent of our ownership of VOIs in the resort or Diamond Collection, and any substantial assessments charged by the HOAs or Diamond Collections as a result of any of these items could cause customer dissatisfaction and harm our business and reputation. For example, in October 2011, the HOA of one of our managed resorts levied an assessment to the owner-families of that resort for water intrusion damage. The original amount of the assessment was $65.8 million, but, in connection with the settlement of a class action, the assessment was reduced to $60.9 million. For deeded inventory or Diamond Collection points held by us at the time of the assessment, we owed $9.7 million of the original assessment; however, as a result of the settlement, this was subsequently reduced by $1.2 million. This assessment is payable in annual installments over five years. In addition, pursuant to the related class action settlement, we agreed to pay any amount of assessments defaulted on by owners in return for our recovery of the related VOIs. See "Item 3. Legal Proceedings."
We generally renew our insurance policies on an annual basis. If the cost of coverage becomes too high, we may need to reduce our policy limits, increase the deductibles or agree to certain exclusions from our coverage in order to reduce the premiums to an acceptable amount. Natural disasters and other catastrophic events could materially and adversely affect our ability to obtain adequate future insurance coverage at commercially reasonable rates.
Our international operations are subject to risks not generally applicable to our North American operations, including risks related to difficult economic conditions in certain parts of Europe.
We manage resorts in 12 countries and have sales and marketing operations in 13 countries. Our operations in foreign countries are subject to a number of particular risks, including:
exposure to local economic conditions;

potential adverse changes in the diplomatic relations of foreign countries with the U.S.;

hostility from local populations;

restrictions and taxes on the withdrawal of foreign investment and earnings;

the imposition of government policies and regulations against business and real estate ownership by foreigners;

foreign investment restrictions or requirements;

limitations on our ability to legally enforce our contractual rights in foreign countries;

regulations restricting the sale of VOIs, as described in “BusinessGovernmental Regulation;”

foreign exchange restrictions and the impact of exchange rates on our business;

conflicts between local laws and U.S. laws;

withholding and other taxes on remittances and other payments by our subsidiaries; and

change in and application of foreign taxation structures, including value added taxes.
In addition, Europe and certain European Union countries in particular, continue to experience high levels of unemployment and other difficult economic conditions. These conditions have had and may continue to have, a negative effect

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on the global economy as a whole and on our managed resorts and sales and marketing operations located in Europe. In addition, we now provide special termination rights to purchasers of points in our European Collection who meet specified conditions.

We are also subject to the laws and regulations of the European Union and countries in which we operate resorts. See “Item 1. Business -- Governmental Regulation.” Our international business operations are also subject to various anti-corruption laws and regulations, including restrictions imposed by the Foreign Corrupt Practices Act (“FCPA”). The FCPA and similar anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or generating business. We cannot provide assurance that our internal controls and procedures will always protect us from the reckless or criminal acts that may be committed by our employees or third parties with whom we work. If we are found to be liable for violations of the FCPA or similar anti-corruption laws in international jurisdictions, criminal or civil penalties could be imposed on us.

We are exploring growth opportunities in new international markets in which we have limited experience, including developing markets in Asia and Latin America, which are challenging.
We are exploring growth opportunities in geographic markets such as Asia (including China) and Latin America. We currently have affiliation agreements in place with a number of resorts in Asia and a few resorts in Latin America, and may explore additional co-branding opportunities with existing resorts, joint ventures or other strategic alliances with local or regional operators in those markets. For example, we have entered into a joint venture to create, market, sell and service vacation packages and associated benefits (including vacation ownership) to customers in Asia.
We may also expand our footprint in these and other international markets by pursuing acquisitions, similar to those we have completed recently, where we would acquire resort businesses consisting of management contracts, unsold VOI inventory and an existing membership base. If we expand into new international markets, we will have only limited experience in marketing and selling our products and services in those markets. Expansion into new and developing international markets is challenging, requires significant management attention and financial resources and may require us to attract, retain and manage local offices or personnel in such markets. It also requires us to tailor our services and marketing to local markets and adapt to local cultures, languages, regulations and standards. To the extent we are unable to adapt, or to the extent that we are unable to find suitable acquisition targets or potential affiliates in such markets or to the extent that any such acquisition or existing or future relationships with affiliates in such markets are not as beneficial to us as we expect, our expansion may not be successful. In some of these markets, including China, the concept of vacation ownership is relatively novel. As a result, in these markets there is limited infrastructure and government support for the vacation ownership industry and the industry may lack sufficient mechanisms for consumer protection. There is also currently not a large supply of vacation ownership products and resorts in those markets, which may limit opportunities and increase competition for those limited opportunities.
In addition, many countries in Asia and Latin America are emerging markets and are subject to greater political, economic, legal and social risks than more developed markets, including risks relating to:
political and governmental instability, including domestic political conflicts and inability to maintain consensus;

economic instability, including weak banking systems, inflation and currency risk, lack of capital, and changing or inconsistent economic policy;

weaknesses in legal systems, including inconsistent or uncertain national and local regimes, unavailability of judicial or administrative guidance and inexperience;

tax uncertainty, including tax law changes, limited tax guidance and difficulty determining tax liability or planning tax-efficient structures;

the lack of reliable official government statistics or reports; and

organized crime, money laundering and other crime.
There are also risks related to entering into joint ventures or strategic alliances with local or regional operators, including the joint venture with respect to operations in Asia noted above, such as the possibility that these operators might become bankrupt or fail to otherwise meet their obligations to us. We may not have, and specifically as a minority investor in the venture with respect to operations in Asia, we do not have, control over the joint venture's business or the decisions of the venture, and the other parties to the joint venture may have economic or other business interests or goals that are inconsistent with our business interests or goals and may be in a position to take actions contrary to our policies or objectives. Disputes

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between us and our partners may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business. In addition, we may, in some circumstances, be liable for the actions of our partners. Furthermore, if we do enter into joint ventures or other affiliations with local or regional operators and a significant number of such operators fail to maintain their properties or provide services in a manner consistent with our standards of quality, we may be subject to customer complaints and our reputation and brand could be damaged. To the extent we expand into new international markets, our exposure to the risks described above in “Our international operations are subject to risks not generally applicable to our domestic operations” will also increase.
Our industry is highly competitive and we may not be able to compete effectively.
The vacation ownership industry is highly competitive. We compete against not only vacation ownership companies, but also vacation ownership divisions of other hospitality companies, including various high profile and well-established operators, some of which have substantially greater liquidity and financial resources than we do. Some of these operators also have substantially greater experience and familiarity with emerging international markets, such as Latin America and Asia, in which we intend to explore or may continue to explore, opportunities. Many of the world's most recognized lodging, hospitality and entertainment companies develop and sell VOIs in resort properties. Our competitors include Bluegreen Corporation, Hilton Hotels Corporation, Marriott Vacations Worldwide Corporation, Starwood Hotels and Resorts Worldwide, Inc. and Wyndham Worldwide Corporation. We also compete with numerous other smaller owners and operators of vacation ownership resorts, as well as alternative lodging companies, such as HomeAway and Airbnb, which operate websites that market available furnished, privately-owned residential properties in locations throughout the world, including homes and condominiums, that can be rented on a nightly, weekly or monthly basis. Additionally, due to the recent economic climate, many competitors have had difficulty maintaining their highly-leveraged, development-focused business models and have begun to increase their focus on sales of VOIs and provision of management services. Furthermore, a number of our competitors, including companies with well-known brand names in the hospitality industry, have adopted strategies and product offerings comparable to ours, such as offering points-based VOI systems, thereby reducing our competitive advantage. Our competitors could also seek to compete against us based on the pricing terms of our current hospitality management contracts or in our efforts to expand our fee based income streams by pursuing new management contracts for resorts that are not currently part of our network. We may not be able to compete successfully for customers, and increased competition could result in price reductions and reduced margins, as well as adversely affect our efforts to maintain and increase our market share.
Our existing indebtedness or indebtedness that we may incur in the future could adversely affect us, and the terms of our debt covenants could limit how we conduct our business and our ability to raise additional funds.
As of December 31, 2014, we had $442.8 million in principal amount outstanding under the Senior Credit Facility, $509.4 million of non-recourse indebtedness in securitization notes and borrowings of our subsidiaries and $4.6 million of other recourse indebtedness, for total principal indebtedness of $956.8 million (excluding original issue discounts). See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources for additional information. Our ability to maintain a level of cash flow from operating activities to make scheduled payments, including excess cash flow payments as required under our Senior Credit Facility, or to refinance our debt obligations depends on our future financial and operating performance, which is subject to prevailing economic and competitive conditions and to various financial, business, regulatory and other factors, some of which are beyond our control. If we are unable to fund our debt service obligations, we may be forced to reduce or delay capital expenditures or sell assets, seek additional capital or seek to restructure or refinance our indebtedness. Further, our indebtedness may impair our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, restructuring, acquisitions or general corporate purposes, or such financing may not be available on terms favorable to us. We may also incur substantial additional indebtedness in the future. If new debt or other liabilities are added to our current debt levels, the related risks that we and our subsidiaries now face, as described above, could intensify.

In addition, the Senior Credit Facility and the agreements governing other debt obligations contain, and the agreements that govern our future indebtedness may contain, covenants that restrict our ability and the ability of our subsidiaries to:
incur additional indebtedness or issue certain preferred shares;
create liens on our assets;
pay dividends or make other equity distributions;
purchase or redeem equity interests or subordinated debt;
make certain investments;

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sell assets;
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and
engage in transactions with affiliates.
As a result of these covenants, we could be limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.
Our business plan historically has depended on our ability to sell, securitize or borrow against the consumer loans that we generate, and our liquidity, financial condition and results of operations would be adversely impacted if we are unable to do so in the future.
We generally offer financing of up to 90% of the purchase price to qualified customers who purchase VOIs through our U.S., Mexican and St. Maarten sales centers, and a significant portion of customers choose to take advantage of this opportunity. For example, from January 1, 2012 through December 31, 2014, we financed approximately 75.7% of the total amount of our VOI sales. Our ability to borrow against or sell our consumer loans has been an important element of our continued liquidity, and our inability to do so in the future could have a material adverse effect on our liquidity and cash flow. Furthermore, our ability to generate sales of VOIs to customers who require or desire financing may be impaired to the extent we are unable to borrow against such loans on acceptable terms.
In the past, we have sold or securitized a substantial portion of the consumer loans we originated from our customers. If we are unable to continue to participate in securitization transactions or generate liquidity and create capacity on our Funding Facilities, on acceptable terms, our liquidity and cash flows will be materially and adversely affected. Moreover, if we cannot offer financing to our customers who purchase VOIs through our U.S., Mexican and St. Maarten sales centers, our sales will be adversely affected.
Additionally, we have historically relied on our Funding Facilities to provide working capital for our operations. The Funding Facilities are asset-backed commercial finance facilities either secured by, or funded through the sale of, our consumer loans. The initial maturities of our consumer loans are typically 10 years, as compared to the one-to-two-year term of a typical conduit facility, which provides us with greater liquidity. Our conduit facility originally entered into on November 3, 2008 (as amended and extended, including most recently in February 2015, the “Conduit Facility”) that expires on April 10, 2017 and is renewable upon maturity for 364-day terms at the election of the lenders. Our loan sale facility with Quorum Federal Credit Union (“Quorum”) that became effective on April 30, 2010 (as amended and restated, the “Quorum Facility”) has a funding term ending on December 31, 2015, which may be extended by Quorum for additional one-year periods. If we are unable to extend or refinance our Funding Facilities by securitizing our consumer loan receivables or entering into new Funding Facilities, our ability to access sufficient working capital to fund our operations may be materially adversely affected and we may be required to curtail our sales, marketing and consumer finance operations. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for additional information.
To the extent that our Conduit Facility, Quorum Facility, Senior Credit Facility and operating cash flow are not sufficient to meet our working capital requirements, our ability to sustain our existing operations will be impaired.
We may be unable to raise additional capital we need to grow our business.
We may need to raise additional capital to expand our operations and pursue our growth strategies, including potential acquisitions of complementary businesses, and to respond to competitive pressures or unanticipated working capital requirements. Prior to the IPO, we relied upon affiliates of certain of our major equity holders to provide debt financing for strategic acquisitions. However, these entities may not provide such financing in the future, and we may not otherwise be able to obtain additional debt or equity financing on favorable terms, if at all, which could impair our growth and adversely affect our existing operations. If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests, and the per share value of our common stock could decline.
Our credit underwriting standards may prove to be inadequate, and we could incur substantial losses if the customers we finance default on their obligations. In addition, we rely on certain third-party lenders to provide financing to purchasers of our VOIs in Europe, and the loss of these customer financing sources could harm our business.
We generally offer financing of up to 90% of the purchase price to qualified purchasers of VOIs sold through our U.S., Mexican and St. Maarten sales centers. There is no assurance that the credit underwriting system we utilize as part of our domestic consumer finance activities will result in acceptable default rates or otherwise ensure the continued performance of our consumer loan portfolio. The default rate on our consumer loan portfolio was 6.3% (as a percentage of our outstanding

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originated portfolios) for 2014, and ranged from 5.7% to 8.6% on an annual basis from 2009 through 2014. As of December 31, 2014, approximately 5.3% (based on loan balance) of our VOI consumer loans that we held, or which third parties held under sales transactions, and that were not in default (which we define as having occurred upon the earlier of (i) the completion of cancellation or foreclosure proceedings or (ii) the customer’s account becoming over 180 days delinquent) were more than 30 days past due. Although in many cases we may have personal recourse against a buyer for the unpaid purchase price, certain states have laws that limit our ability to recover personal judgments against customers who have defaulted on their loans. Even where permitted, attempting to recover a personal judgment may not be advisable due to the associated legal costs and the potential adverse publicity. Historically, we have generally not pursued personal recourse against our customers, even when available. If we are unable to collect the defaulted amount due, we traditionally have foreclosed on the customer's VOI or terminated the underlying contract and remarketed the recovered VOI. Irrespective of our remedy in the event of a default, we cannot recover the often significant marketing, selling and administrative costs associated with the original sale, and we will have to incur a portion of such costs again to resell the VOI. See “The resale market for VOIs could adversely affect our business” for additional risks related to the resale of VOIs.
Currently, portions of our consumer loan portfolio are concentrated in certain geographic regions within the U.S. As of December 31, 2014, our loans to California, Arizona and Florida residents constituted 32.4%, 8.6% and 5.7% of our consumer loan portfolio, respectively. No other state or foreign country concentration accounted for in excess of 5.0% of our consumer loan portfolio. Some of these states have been particularly negatively impacted during the economic downturn in recent years, for example, the real estate market in Florida continues to experience one of the highest rates of foreclosure filings in the U.S., and unemployment rates in California remain high as compared to the U.S. generally. Any deterioration of the economic condition and financial well-being of the regions in which we have significant loan concentration could adversely affect our consumer loan portfolio.
We could incur material losses if there is a significant increase in the delinquency rate applicable to our portfolio of consumer loans. An increased level of delinquencies could result from changes in economic or market conditions, increases in interest rates, adverse employment conditions and other factors beyond our control. Increased delinquencies could also result from our inability to evaluate accurately the credit worthiness of the customers to whom we extend financing or our inability to maintain the hospitality level that our customers have come to expect. If default rates for our borrowers were to increase, we may be required to increase our provision for loan losses. In addition, increased delinquency rates may cause buyers of, or lenders whose loans are secured by, our consumer loans to reduce the amount of availability under our Funding Facilities, or to increase the interest costs associated with such facilities. In such an event, our cost of financing would increase, and we may not be able to secure financing on terms acceptable to us, if at all.
Under the terms of our securitization facilities, we may be required, under certain circumstances, to repurchase or replace loans if we breach any of the representations and warranties we made at the time we sold the receivables. Moreover, under the terms of our securitization facilities, in the event of defaults by customers in excess of stated thresholds, we may be required to pay substantially all of our cash flow from our retained interest in the underlying receivable portfolios sold to the parties who purchased the receivables from us.
Finally, we rely on certain third-party lenders to provide consumer financing for sales of our VOIs in Europe. If these lenders discontinue providing such financing, or materially change the terms of such financing, we would be required to find an alternative means of financing for our customers in Europe. If we failed to find another lender, our VOI sales in Europe may decline.
Changes in interest rates may increase our borrowing costs and otherwise adversely affect our business.
We rely on the securitization markets to provide liquidity for our consumer finance operations. Increases in interest rates, changes in the financial markets and other factors could increase the costs of our securitization financings, prevent us from accessing the securitization markets and otherwise reduce our ability to obtain the funds required for our consumer financing operations. To the extent interest rates increase and to the extent legally permitted, we may be required to increase the rates we charge our customers to finance their purchases of VOIs. Our business and results of operations are dependent on the ability of our customers to finance their purchase of VOIs, and in the U.S. we believe we are currently the only generally available lending source to directly finance the sales of our VOIs. Limitations on our ability to provide financing to our customers at acceptable rates or increases in the cost of such financing could reduce our sales of VOIs.
Changes in the U.S. tax and other laws and regulations may adversely affect our business.
The U.S. government may revise tax laws, regulations or official interpretations in ways that could have a significant adverse effect on our business, including modifications that could reduce the profits that we can effectively realize from our international operations, or that could require costly changes to those operations, or the way in which they are structured. For example, the effective tax rates for most U.S. companies reflect the fact that income earned and reinvested outside the U.S. is

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generally taxed at local rates, which are often much lower than U.S. tax rates. If changes in tax laws, regulations or interpretations significantly increase the tax rates on non-U.S income, our effective tax rate could increase and our profits could be reduced. If such increases resulted from our status as a U.S. company, those changes could place us at a disadvantage to our non-U.S. competitors if those competitors remain subject to lower local tax rates.
Fluctuations in foreign currency exchange rates may affect our reported results of operations.
In addition to our operations in the U.S., we conduct operations in international markets from which we receive, at least in part, revenues in foreign currencies. For example, we receive Euros and British Pound Sterling in connection with our European managed resorts and European VOI sales and Mexican Pesos in connection with our operations in Mexico. Because our financial results are reported in U.S. dollars, fluctuations in the value of the Euro and British Pound Sterling against the U.S. dollar have had and will continue to have an effect, which may be significant, on our reported financial results. Exchange rates have been volatile in recent years, due in part to the recent European debt crisis and European central banks taking actions to support their financial system and such volatility may persist due to economic and political circumstances in individual Euro zone countries. A decline in the value of any of the foreign currencies in which we receive revenues, including the Euro, British Pound Sterling or Mexican Peso, against the U.S. dollar will tend to reduce our reported revenues and expenses, while an increase in the value of any such foreign currencies against the U.S. dollar will tend to increase our reported revenues and expenses. Variations in exchange rates can significantly affect the comparability of our financial results between financial periods.
We are also exploring international expansion opportunities in markets such as Asia and Latin America, including pursuing acquisitions in those geographic areas, or seeking out co-branding opportunities, joint ventures or other strategic alliances with local or regional operators in those markets. Any such international expansion would result in increased foreign exchange risk, as described above, as the revenue received from such expansion would primarily be in non-U.S. currency.
We are subject to extensive regulation relating to the marketing and sale of vacation interests and the servicing and collection of customer loans.
As discussed above, our marketing and sale of VOIs and our other operations are subject to extensive regulation by the federal government and state timeshare laws and, in some cases, by the foreign jurisdictions where our VOIs are located, marketed and sold. For a list of certain U.S. federal legislation that is or may be applicable to the sale, marketing and financing of our VOIs, see "Item 1. Business -- Governmental Regulation." In addition, the majority of states and jurisdictions where the resorts in our network are located extensively regulate numerous aspects of our industry, and many other states and certain foreign jurisdictions have adopted similar legislation and regulations affecting the marketing and sale of VOIs to persons located in those jurisdictions. Furthermore, most states have other laws not specific to our industry that apply to our activities, and all of the countries in which we operate have consumer protection and other laws that regulate our activities in those countries.
As discussed above, a number of U.S. federal, state and local laws, including the Fair Housing Amendments Act of 1988 and the Americans with Disabilities Act, impose requirements and create certain risks related to access to and use by disabled persons of a variety of public accommodations and facilities. See "We are subject to certain risks associated with our management of resort properties."
A determination that specific provisions or operations of the Diamond Collections do not comply with relevant timeshare acts or applicable law may have a material adverse effect on us, the trustees of the Diamond Collections, the Collection Associations or the related consumer loans. Such noncompliance could also adversely affect the operation of the Diamond Collections or the sale of points within the existing format of the Diamond Collections, which would likely increase costs of operations or the risk of losses resulting from defaulted consumer loans.
Moreover, from time to time potential buyers of VOIs assert claims with applicable regulatory agencies against our vacation interest salespersons for unlawful sales practices. These claims could have adverse implications for us that could result in negative public relations, potential litigation and regulatory sanctions.
We currently sell VOIs in the U.S. solely through our employees, and in Europe, we currently sell VOIs through employees and third-party sales agents. In the event the federal, state or local taxing authorities in the U.S. or in foreign jurisdictions were to successfully classify such independent contractors or sales agents as our employees, rather than as independent contractors, we could be liable for back payroll taxes, termination indemnities and potential claims related to employee benefits, as required by local law. See "Item 1. Business--Governmental Regulation."
We are also subject to the laws and regulations of Mexico with respect to our operations of resorts located in Mexico. As discussed above, for purposes of ownership of land in Mexico foreign parties may acquire property located near Mexico's beaches and borders if they (i) agree not to invoke the protection of their governments in matters relating thereto and (ii) take

52

                                            

title through a Mexican trust or subsidiary. Noncompliance with such agreement by a foreign party, however, would result in forfeiture of the property to the country of Mexico. See "Item 1. Business--Governmental Regulation."
Depending on the provisions of applicable law and the specific facts and circumstances involved, violations of these laws, policies or principles may limit our ability to collect all or part of the principal or interest due on our consumer loans, may entitle certain customers to refund of amounts previously paid and could subject us to penalties, damages and administrative sanctions, and may also impair our ability to commence cancellation and forfeiture proceedings on our VOIs.
We are a party to certain litigation matters and are subject to additional litigation risk.
From time to time, we or our subsidiaries are subject to certain legal proceedings and claims in the ordinary course of business, including claims or proceedings relating to our VOI sales, consumer finance business and hospitality and management services operations. See "Item 3. Legal Proceedings." Any adverse outcome in any litigation involving us or any of our affiliates could negatively impact our business, reputation and financial condition.
Failure to maintain the security of personally identifiable information could adversely affect us.
In connection with our business, we collect and retain significant volumes of personally identifiable information, including credit card and social security numbers of our customers and other personally identifiable information of our customers and employees. The continued occurrence of high-profile data breaches provides evidence of the serious threats to information security. Our customers and employees expect that we will adequately protect their personal information, and the regulatory environment surrounding information security and privacy is increasingly demanding, both in the U.S. and other jurisdictions in which we operate. Protecting against security breaches, including cyber-security attacks, is an increasing challenge, and penetrated or compromised data systems or the intentional, inadvertent or negligent release or disclosure of data could result in theft, loss, fraudulent or unlawful use of customer, employee or company data. It is possible that our security controls over personally identifiable information, our training of employees on data security and other practices we follow may not prevent the improper disclosure of personally identifiable information that we store and manage. A significant theft, loss or fraudulent use of customer or employee information could adversely impact our reputation and could result in significant costs, fines and litigation.
Our reputation and financial condition may be harmed by system failures and computer viruses.
We maintain a proprietary hospitality management reservation and sales system. The performance and reliability of this system and our technology is critical to our reputation and ability to attract, retain and service our customers. Any system error or failure may significantly delay response times or even cause our system to fail, resulting in the unavailability of our services. Any disruption in our ability to provide the use of our reservation system to the purchasers of our VOIs, including as a result of software or hardware issues related to the reservation system, could result in customer dissatisfaction and harm our reputation and business. In addition, a significant portion of our reservations are made through the online reservation system that we operate on behalf of the Diamond Collections and the Clubs as opposed to over the phone, and our costs are significantly lower in connection with bookings through the online reservation system. As a result, if our online reservation system is unavailable for any reason, our costs will increase and the resale value and the marketability of our VOIs may decline, and our members may choose to withhold payments or default on their VOI loans. Our system and operations are vulnerable to interruption or malfunction due to certain events beyond our control, including natural disasters, such as earthquakes, fire and flood, power loss, telecommunication failures, data and other security breaches, break-ins, sabotage, computer viruses, intentional acts of vandalism and similar events. Any interruption, delay or system failure could result in financial losses, customer claims and litigation and damage to our reputation.
Our intellectual property rights are valuable, and our failure to protect those rights could adversely affect our business.
Our intellectual property rights, including existing and future trademarks, trade secrets and copyrights, are and will continue to be valuable and important assets of our business. We believe that our proprietary technology, as well as our other technologies and business practices, are competitive advantages and that any duplication by competitors would harm our business. The measures we have taken to protect our intellectual property may not be sufficient or effective. Additionally, intellectual property laws and contractual restrictions may not prevent misappropriation of our intellectual property or deter others from developing similar technologies. Finally, even if we are able to successfully protect our intellectual property, others may develop technologies that are similar or superior to our technology.
We are required to make a number of significant judgments in applying our accounting policies, and our use of different estimates and assumptions in the application of these policies could result in material changes to our reported financial

53

                                            

condition and results of operations. In addition, changes in accounting standards or their interpretation could significantly impact our reported results of operations.
Our accounting policies are critical to the manner in which we present our results of operations and financial condition. Many of these policies, including with respect to the recognition of revenue and determination of vacation interest cost of sales under Accounting Standards Codification (“ASC”) 978, “Real Estate-Time-Sharing Activities" ("ASC 978") and Accounting Standard Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09") that was issued in May 2014, are highly complex and involve many subjective assumptions, estimates and judgments. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Policies and Use of Estimates" and "Item7. Management's Discussion and Analysis of Financial Condition and Results of Operations—New Accounting Pronouncements" for further detail. We are required to review these estimates regularly and revise them when necessary. Our actual results of operations vary from period to period based on revisions to these estimates. In addition, the regulatory bodies that establish accounting and reporting standards, including the SEC, the Financial Accounting Standards Board and the American Institute of CPAs, periodically revise or issue new financial accounting and reporting standards that govern the preparation of our consolidated financial statements. Changes to these standards or their interpretation could significantly impact our reported results in future periods.
Our directors and executive officers may have interests that could conflict with those of our stockholders.
There are relationships and transactions between our company and entities associated with our executive officers and directors. These relationships and transactions, and the financial interests of our executive officers and directors in the entities party to these relationships and transactions, may create, or may create the appearance of, conflicts of interest, when these executive officers and directors are faced with decisions involving those other entities. See "Note 6— Transactions with Related Parties" of our consolidated financial statements included elsewhere in this annual report for further detail on these relationships and transactions.
Our strategic transactions may not be successful and may divert our management's attention and consume significant resources.
We intend to continue our strategy of selectively pursuing complementary strategic transactions. We may also purchase management contracts, including from resort operators facing financial distress, and purchase VOI inventory at resorts that we do not manage, with the goal of acquiring sufficient VOI ownership at such a resort to become the manager of that resort. The successful execution of this strategy will depend on our ability to identify opportunities for potential acquisitions that fit within our capital-light business model, enter into the agreements necessary to take advantage of these potential opportunities and obtain any necessary financing. We may not be able to do so successfully. In addition, our management may be required to devote substantial time and resources to pursue these opportunities, which may impact their ability to manage our operations effectively.
Acquisitions involve numerous additional risks, including: (i) difficulty in integrating the operations and personnel of an acquired business; (ii) potential disruption of our ongoing business and the distraction of management from our day-to-day operations; (iii) difficulty entering markets in which we have limited or no prior experience and in which competitors have a stronger market position; (iv) difficulty maintaining the quality of services that we have historically provided across new acquisitions; (v) potential legal and financial responsibility for liabilities of acquired businesses; (vi) overpayment for the acquired company or assets; (vii) increased expenses associated with completing an acquisition and amortizing any acquired intangible assets and (viii) challenges in implementing uniform standards, controls, procedures and policies throughout an acquired business.
Most of our acquisitions have focused on acquiring management contracts and related businesses of operators in financial distress or in bankruptcy at the time of such acquisition. If we continue to pursue similar acquisitions, we will be subject to additional risks, including risks and uncertainties associated with bankruptcy proceedings, the risk that such properties will be in disrepair and require significant investment in order to bring them up to our quality standards, potential exposure to adverse developments in the receivable portfolios that we acquire or agree to manage and limitations on our ability to finance such transactions. Furthermore, the number and quality of opportunities to acquire management contracts and related businesses of operators in financial distress or in bankruptcy may be more limited than they had been in the past. We cannot assure you that our growth strategy will be successful, and our failure to manage and successfully integrate acquired businesses could harm our business.
We also intend to expand our business-to-business services provided to resorts in our affiliated resort networks. We cannot assure you that our attempts to expand business-to-business services will be successful, and our failure to expand such services could harm our business and our relationships with those affiliated resorts.

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Risks Related to the Ownership of our Common Stock

The concentration of our capital stock ownership with members of management and our Board of Directors and related entities, together with the Director Designation Agreement and the Stockholders Agreement, will limit stockholders' ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring stockholder approval.

Of the outstanding shares of common stock, members of management and our Board of Directors and related entities, together hold approximately 31.2% of our outstanding common stock. In particular, entities controlled by Stephen J. Cloobeck, our founder and Chairman, hold approximately 22.7% of our outstanding common stock, entities controlled by Lowell D. Kraff, our Vice Chairman, hold approximately 2.5% of our outstanding common stock, and entities controlled by David F. Palmer, our President, Chief Executive Officer and a member of our Board of Directors, hold approximately 5.2% of our outstanding common stock. In addition, certain members of management and our Board of Directors and other stockholders, which collectively hold approximately 46.1% of our outstanding common stock, are parties to a Stockholders’ Agreement (the “Stockholders Agreement”) with us, pursuant to which such parties have agreed, subject to the terms of the Stockholders Agreement, in any election of members of our Board of Directors, to vote their shares of our common stock in favor of our Chief Executive Officer, and individuals designated by DRP Holdco, LLC, one of our significant investors (the "Guggenheim Investor"), as well as an entity controlled by our founder and Chairman, pursuant to a director designation agreement (the “Director Designation Agreement”) among us and certain stockholders party to the Stockholders Agreement.

As a result of their collective ownership of a substantial amount of our outstanding capital stock, members of management and our Board of Directors, including Messrs. Cloobeck, Kraff and Palmer, and related entities have significant influence over matters requiring stockholder approval, including amendment of our certificate of incorporation, approval of significant corporate transactions and the election of our Board of Directors. This influence could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions practically impossible without the support of such individuals and entities.

We incur significant costs and demands upon management and accounting and finance resources as a result of complying with the laws and regulations affecting public companies; if we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and our reputation.
As a SEC reporting company, we are required to, among other things, maintain a system of effective internal control over financial reporting, which requires annual management and, now that we no longer qualify as an "emerging growth company," as defined in the JOBS Act, independent registered public accounting firm assessments of the effectiveness of our internal controls. Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Over the past few years, we have dedicated a significant amount of time and resources to implement our internal financial and accounting controls and procedures, and have had to retain additional finance and accounting personnel with the skill sets that we need as a SEC reporting company. Substantial work may continue to be required to further implement, document, assess, test and remediate our system of internal controls. We may also need to retain additional finance and accounting personnel in the future.
If our internal controls over financial reporting are not effective, if we are not able to issue our financial statements in a timely manner or if we are not able to obtain the required audit or review of our financial statements by our independent registered public accounting firm in a timely manner, we will not be able to comply with the periodic reporting requirements of the SEC and the listing requirements of the NYSE. If these events occur, our common stock listing on the NYSE could be suspended or terminated and our stock price could materially suffer. In addition, we or members of our management could be subject to investigation and sanction by the SEC and other regulatory authorities and to stockholder lawsuits, which could impose significant additional costs on us and divert management attention.
Provisions in our amended and restated certificate of incorporation and under Delaware law may prevent or frustrate attempts by our stockholders to change our management and hinder efforts to acquire a controlling interest in us.
Provisions of our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These include provisions that:
• classify our Board of Directors;

55

                                            

• limit stockholders’ ability to remove directors;
• include advance notice requirements for stockholder proposals and nominations; and
• prohibit stockholders from acting by written consent or calling special meetings.
Furthermore, the affirmative vote of the holders of at least two-thirds of our shares of capital stock entitled to vote is necessary to amend or repeal the above provisions of our amended and restated certificate of incorporation. In addition, absent approval of our Board of Directors, our amended and restated bylaws may only be amended or repealed by the affirmative vote of the holders of at least two-thirds of our shares of capital stock entitled to vote.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for some litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternate forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of fiduciary duty owed by any director or officer to us or our stockholders or creditors; (iii) any action asserting a claim against us or any director or officer pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any action asserting a claim against us or any director or officer governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions described above. This forum selection provision may limit our stockholders’ ability to obtain a judicial forum that they find favorable for disputes with us or our directors, officers, employees or other stockholders.

Our stock price may be volatile or may decline regardless of our operating performance.

The market price for our common stock may be highly volatile. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

variations in our financial results or those of companies that are perceived to be similar to us;

actions by us or our competitors, such as sales initiatives, acquisitions or restructurings;

changes in our earnings estimates or expectations as to our future financial performance, as well as financial estimates by securities analysts and investors, and our ability to meet or exceed those estimates or expectations;

additions or departures of key management personnel;

legal proceedings involving our company, our industry, or both;

changes in our capitalization, including future issuances of our common stock or the incurrence of additional indebtedness;

changes in market valuations of companies similar to ours;

the prospects of the industry in which we operate;

actions by institutional and other stockholders;

speculation or reports by the press or investment community with respect to us or our industry in general;

general economic, market and political conditions; and

other risks, uncertainties and factors described in this annual report.

The stock markets in general have often experienced volatility that has sometimes been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations may cause the trading price of our common stock to decline. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been brought against that company. We may become involved in this type of litigation in the future.

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Litigation of this type may be expensive to defend and may divert our management's attention and resources from the operation of our business.

Future sales of common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock in the market. If our stockholders sell substantial amounts of our common stock in the public market, or if the public perceives that such sales could occur, there could be an adverse impact on the market price of our common stock, even if there is no relationship between such sales and the performance of our business. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
Also in the future, we may issue shares of our common stock in connection with investments or acquisitions. The number of shares of our common stock issued in connection with an investment or acquisition could be material.

If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the stock price of our common stock or trading volume to decline. Moreover, if our operating results do not meet the expectations of the investor community, one or more of the analysts who cover our company may change their recommendations regarding our
company and our stock price could decline.

ITEM 1B.     UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES
Except for unsold VOI inventory, we generally do not have any ownership interest in the resorts in our network other than the ownership of various common areas and amenities at certain resorts and a small number of units in European resorts. We believe our properties are in generally good physical condition with the need for only routine repairs and maintenance and periodic capital improvements. In addition, we lease our global corporate headquarters, located in Las Vegas, Nevada, which consists of approximately 133,000 square feet of space. We also lease our European headquarters, located in Lancaster, United Kingdom, and lease 11 sales and marketing and administrative offices, both domestically and internationally.
We also own certain real estate, the majority of which is held for sale or future development, including 2.1 acres of vacant land located on the Costa del Sol, Spain, 2.8 acres of vacant land located in Scottsdale, Arizona, 19.4 acres of vacant land located in Orlando, Florida and 1.8 acres of land located in Kona, Hawaii.

ITEM 3.     LEGAL PROCEEDINGS
From time to time, we or our subsidiaries are subject to certain legal proceedings and claims in the ordinary course of business.
FLRX Litigation
FLRX Inc. ("FLRX") was a defendant in a lawsuit originally filed in July 2003, alleging the breach of certain contractual terms relating to the obligations under a stock purchase agreement for the acquisition of FLRX in 1998, as well as certain violations under applicable consumer protection acts.
In January 2010, following a jury trial, a Washington state court entered a judgment against FLRX, awarding plaintiffs damages of $30.0 million plus post-judgment interest at a rate of 12% per annum and attorney’s fees of approximately $1.5 million plus accrued interest, and ordered specific performance of certain ongoing contractual obligations pursuant to the breach of contract claim (the "FLRX Judgment"). FLRX's appeal and petition for review of the verdict were denied.
In April 2012, the plaintiffs in the FLRX case filed a lawsuit against DRP and DRC (the "Alter Ego Suit"). The complaint, which alleged two claims for alter ego and fraudulent conveyance, sought to hold DRP and DRC liable for the judgment entered against FLRX. DRP was subsequently dismissed as a defendant.

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On November 15, 2013, the parties to the Alter Ego Suit executed a settlement agreement which provided for (i) the dismissal of the Alter Ego Suit, with prejudice; (ii) the payment by DRC of $5.0 million in cash to the plaintiffs; (iii) the transfer of shares of a subsidiary of DRC, the only assets of which were, at the time of transfer, majority interests in two undeveloped real estate parcels in Mexico with a carrying value of $5.3 million and an appraised value of $6.7 million and (iv) the release of DRC and all of its affiliates (other than FLRX) from any liability in connection with the FLRX Judgment or matters relating to that judgment. Such actions were completed in December 2013 and January 2014. As a result of the settlement, we recorded a pre-tax charge to earnings of $10.5 million during the fourth quarter of 2013. The Alter Ego case was dismissed by the United States District Court for the Western District of Washington on June 24, 2014.
The settlement did not impact FLRX's liability under the FLRX Judgment. Since FLRX currently conducts no operations and has no material assets, and since none of DRII or any of its subsidiaries has any obligation to provide any funding to FLRX, we believe that we will not have any material liability if or when the case against FLRX is ultimately resolved. It is possible that FLRX may at some point determine to file for protection under the Federal Bankruptcy Code.
St. Maarten Litigation
In December 2004 and January 2005, two separate cases were filed in the Joint Court of Justice of the Netherlands Antilles against AKGI St. Maarten NV or AKGI, one of our subsidiaries, challenging AKGI's title to seven whole ownership units at the Royal Palm Resort, and alleging the breach of certain agreements that existed prior to AKGI's acquisition of the resort. AKGI purchased the resort at auction in 1995. Each claimant alleges that, between 1989 and 1991, he purchased certain units from the prior owner of Royal Palm Resort, and that he holds in perpetuity, legal title to, or a leasehold interest in, these respective units and is entitled to a refund of the purchase price and an annual 12% return on the purchase price (which totaled $1.2 million in one case and $1.3 million in the other case). Due to the nature of the AKGI purchase and the underlying St. Maarten laws, we believe that the obligations to the claimants would only be enforceable if the agreement between the claimant and AKGI's predecessor was either a timeshare agreement or a lease agreement. AKGI has answered that the claimants' agreements were, in fact, investment contracts, and are therefore not enforceable under St. Maarten law. In February 2011, the case that was pending in the highest and final court of appeal was dismissed as to all claims, with our having no obligations, financial or otherwise, to claimant. The other case that was pending in the intermediate court of appeal was decided in favor of AKGI on September 29, 2014. No appeal was filed by the claimant of that case, which is now closed as well. 

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Price of Common Stock

Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “DRII.” As of February 20, 2015, there were 53 holders of record of our common stock.

The following table sets forth the quarterly high and low sales prices per share of our common stock as reported by the NYSE since the inception of the trading of our common stock in July 2013 in connection with the IPO.
 
 
Stock Price
Fiscal Year Ended December 31, 2014
 
High
 
Low
First Quarter of 2014
 
$
20.69

 
$
16.51

Second Quarter of 2014
 
$
23.83

 
$
16.89

Third Quarter of 2014
 
$
26.33

 
$
21.82

Fourth Quarter of 2014
 
$
28.50

 
$
19.59

 
 
 
 
 
Fiscal Year Ended December 31, 2013
 
High
 
Low
Third Quarter of 2013 (beginning July 19, 2013)
 
$
19.42

 
$
14.18

Fourth Quarter of 2013
 
$
19.25

 
$
16.45



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Dividend Policy

We have never declared or paid any cash dividends on our capital stock. Our current policy, which is subject to regular review by our Board of Directors, is to retain any earnings to finance the development and expansion of our business. Any future determination to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on our financial condition, results of operations, contractual restrictions, capital requirements, general business conditions and other then-existing factors that our Board of Directors may deem relevant. The Senior Credit Facility also restricts our ability to pay dividends, subject to specified exceptions based upon our excess cash flow determined in accordance with the Senior Credit Facility. See "Note 16Borrowings" of our consolidated financial statements included elsewhere in this annual report for further details.

Issuer Purchases of Equity Securities
On October 28, 2014, our Board of Directors authorized a stock repurchase program allowing for the expenditure of up to $100.0 million for the repurchase of our common stock, subject to the terms, conditions and limitations in the Senior Credit Facility. For the period from inception of the program through December 22, 2014, the Senior Credit Facility restricted our expenditures under the program to approximately $25 million. On December 22, 2014, we entered into an amendment to the Senior Credit Facility, allowing us to make restricted payments of at least $75 million, including purchases under the stock repurchase program. For further detail regarding the stock repurchase program and the amendment to the Senior Credit Facility, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources-Overview.
The following is a summary of common stock repurchased by us by month during the fourth quarter of 2014 under our stock repurchase program:
Period
 
Total number of shares purchased
 
Average price paid per share
 
Total number of shares purchased as part of publicly announced program
 
Approximate dollar value of shares that may yet be purchased under the program
October 1 to 31
 

 

 

 
$

November 1 to 30
 
275,200

 
$
24.64

 
275,200

 
$
93,220,000

December 1 to 31
 
367,700

 
$
25.22

 
367,700

 
$
83,946,000

Total
 
642,900

 
$
24.97

 
642,900

 
 

Stock Performance Graph

The following line graph compares the performance of our common stock against the S&P MidCap 400 Index, S&P SmallCap 600 Index and the S&P Composite 1500 Hotels, Resorts & Cruise Lines Index, from July 19, 2013 (the date our common stock commenced trading on the NYSE) through December 31, 2014. The graph tracks the performance of a $100 investment at the market close on July 19, 2013 in our Common Stock and in the S&P SmallCap 600 Index and the S&P Composite 1500 Hotels, Resorts & Cruise Lines Index (with the reinvestment of all dividends and other distributions). Since our Common Stock began trading on the NYSE, we have not declared any dividends to be paid to our stockholders. The stock price performance reflected below is based on historical results and is not necessarily indicative of future stock price performance.

For the year ended December 31, 2014, we determined it is more appropriate to use the S&P MidCap 400 Index as the broad equity market index, as compared to the S&P SmallCap 600 Index used for the year ended December 31, 2013. Our market capitalization exceeded $2 billion at December 31, 2014, which exceeded the maximum market capitalization for an entity included in the S&P SmallCap 600 Index. The line graph below includes both the S&P MidCap 400 Index and the S&P SmallCap 600 Index for comparative purposes.

The Stock Performance Graph is not deemed to be “soliciting material” or to be “filed” with the SEC for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of DRII under the Securities Act or the Exchange Act.


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ITEM 6.     SELECTED FINANCIAL DATA

Set forth below is selected consolidated audited financial and operating data at the dates and for the periods indicated.

The financial and operating data set forth below (i) through July 24, 2013 is that of DRP and its subsidiaries, after giving retroactive effect to the Reorganization Transactions and (ii) after July 24, 2013 is that of DRII and its subsidiaries. Our historical results are not necessarily indicative of the results that may be expected in any future period. The selected consolidated statement of operations data for years ended December 31, 2014, 2013 and 2012, and the selected consolidated balance sheet data as of December 31, 2014 and 2013 have been derived from our audited consolidated financial statements included elsewhere in this annual report. The selected consolidated statement of operations data for the years ended December 31, 2011 and 2010 and the selected historical consolidated balance sheet data as of December 31, 2012, 2011 and 2010 have been derived from our audited consolidated statements of operations for the years ended December 31, 2011 and 2010 and our audited consolidated balance sheets as of December 31, 2012, 2011 and 2010 which are not included in this annual report.
The selected consolidated financial and operating data set forth below should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements included elsewhere in this annual report.


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Year ended December 31,
 
 
2014
 
2013
 
2012
 
2011
 
2010
 
 
($ in thousands, except as otherwise noted)
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
844,566

 
$
729,788

 
$
523,668

 
$
391,021

 
$
370,825

Total costs and expenses
 
734,875

 
726,536

 
524,335

 
390,235

 
391,258

Income (loss) before provision (benefit) for income taxes and discontinued operations
 
109,691

 
3,252

 
(667
)
 
786

 
(20,433
)
Provision (benefit) for income taxes
 
50,234

 
5,777

 
(14,310
)
 
(9,517
)
 
(1,274
)
Net income (loss)
 
$
59,457

 
$
(2,525
)
 
$
13,643

 
$
10,303

 
$
(19,159
)
Other Financial Data (Unaudited):
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
$
17,950

 
$
15,150

 
$
14,329

 
$
6,276

 
$
5,553

Net cash provided by (used in):
 
 
 
 
 
 
 
 
 
 
     Operating activities
 
$
118,058

 
$
2,743

 
$
24,637

 
$
9,233

 
$
66,001

     Investing activities
 
$
(17,100
)
 
$
(58,065
)
 
$
(69,355
)
 
$
(109,743
)
 
$
(37,399
)
     Financing activities
 
$
106,750

 
$
70,033

 
$
45,520

 
$
93,037

 
$
(18,271
)
Operating Data:
 
 
 
 
 
 
 
 
 
 
     Branded resorts(1)
 
93

 
93

 
79

 
71

 
70

     Affiliated resorts(1)
 
236

 
210

 
180

 
144

 
109

     Cruise itineraries(1)
 
4

 
4

 
4

 
4

 

Total destinations
 
333

 
307

 
263

 
219

 
179

Total number of tours(2)
 
220,708

 
207,075

 
180,981

 
146,261

 
130,801

Closing percentage(3)
 
14.4
%
 
14.5
%
 
14.8
%
 
14.4
%
 
17.4
%
Total number of VOI sale transactions(4)
 
31,759

 
29,955

 
26,734

 
21,093

 
22,719

Average VOI sale price per transaction(5)
 
$
18,988

 
$
16,771

 
$
12,510

 
$
10,490

 
$
9,526

Volume per guest(6)
 
$
2,732

 
$
2,426

 
$
1,848

 
$
1,513

 
$
1,655