Destination Clubs on the Opposite Side of the Spectrum File For Bankruptcy

By: Destination Club News
Date: January 29, 2009

In one of the worst weeks in the history of the destination club sector, two clubs on polar opposite sides of the industry, different in nearly every way imaginable, have both filed for Chapter 7 bankruptcy.

High Country Club managed to attract hundreds of members as the low cost alternative in the industry, offering full memberships for what many other destination clubs charged each year in annual dues alone. This value proposition allowed High Country Club to grow at a record pace, counting double digit membership sales months with regularity. Then in October of last year, CEO Christian Kirschner announced "The economy has and continues to negatively affect the prospects for High Country Club and the way we are able to operate. Since the beginning of 2008, we have seen our ability to raise capital become increasingly difficult, our investor sources have not come through, the ability to obtain credit is not available and consumer confidence has deteriorated."

After attempting to restructure their destination club for months, High Country Club's bankruptcy filing was announced this week. "The severe decline in the economy has made it impossible to operate our business," wrote Kirschner. "Our team has worked tirelessly over the past 120 days to restructure and save the business. However, multiplying outside factors and a declining membership has made operations impossible."

While the comparatively inexpensive High Country Club brought in new members at a prolific pace, Yellowstone Club World, without question the destination club industry's most grandiose club, struggled to attract the ultra-affluent travelers they pursued. An outgrowth of the Yellowstone Club, a Montana based resort that includes celebrities Bill Gates and Dan Quayle, Yellowstone Club World would expand the reach of their predecessor with a global collection of extravagant vacation properties. Amongst these residences was a 14th century French chateau purchased for $28 million, a $40 million Mexican resort, a private island in the Caribbean for $28 million, and a 265 acre lot in St. Andrews for $40 million. Averaging approximately $35 million each, properties within the Yellowstone Club World portfolio were worth more than five times more than the properties available at The Solstice Collection, the industry's leader in the ultra-affluent class.

Four members have forced Yellowstone Club World to file for bankruptcy, claiming $4.65 million in refunds and to determine the ownership of the club residences. "We're concerned the assets they do have are no longer in control of the Yellowstone Club World," said John Amsden, a lawyer representing the members. "The involuntary bankruptcy was necessary because it appears that there is no one minding the club's business. We hope that the matter can be resolved with a minimum of expense."

Both flawed, High Country Club and Yellowstone Club World both filing for bankruptcy in the same week comes on the heels of The LUSSO Collection filing for bankruptcy and One Key World ceasing operations, all contributing to an uncertain destination club market with potential members asking which clubs can be trusted.

No matter what clubs you may be considering, conducting a substantial and thorough due diligence review should be a requisite step in your evaluation. For a list of suggested questions that should be asked and a background of the pros and cons of destination club membership, request a free copy of our Destination Club Guide.