High Country Club Plans Restructuring
By: Destination Club News
Date: October 27, 2008
The slumping economy and real estate market have led High Country Club to make numerous policy changes to transition to become "self sufficient" and rely on membership annual dues and not on new destination club sales.
Christian Kirschner, High Country Club's Founder, President and CEO, sent a letter out to members detailing the market events that brought the club to this point and what changes need to be made. The market conditions that Kirschner mentions are as follows:
Real Estate Market
Over the past month, High Country Club had each home in the portfolio appraised and saw a "drastic decline in all of our real estate values ranging from 20% - 50%."
Difficulty Raising Capital
Real estate values and a club's ability to raise new capital are largely correlated to one another. Predominately, each destination club's only real assets are its real estate holdings. As destination clubs are largely built on the appreciation of their real estate, investors and creditors look at the club's portfolio prior to making capital injections or provide credit. As the real estate holdings of High Country Club went down, so did it's ability to bring in new capital needed throughout the business.
High Country Club's announcement comes on the same day that the Dow Jones hit a five year low. Kirschner believes that the combination of financial and real estate conditions have led to consumer fear, stating that "membership sales have declined since the beginning of 2008 because of consumers fears, and with the economic events of the past 60 days, new sales have become next to impossible."
Because of these conditions, High Country Club will make numerous changes to their business model including:
- an increase in annual dues
- pre-paid annual dues one year in advance, like many other clubs
- a cleaning fee for each member stay averaging $200
- decreasing their portfolio to 21 homes, 17 of which will be owned
- reservations allowed up to two years in advance
- new resignation policy allowing members to redeem one in, one out
- the ability to resell your membership
- no new memberships sold, just memberships to fill redeeming members
Annual Dues and Fees
Based on their membership plan, members will see an increase in annual dues between $200 and $700. In addition, High Country Club will now charge a variable cleaning fee for each stay. Each home will have its own fee but will average to around $200 per stay.
High Country Club Real Estate
Prior to 2008, High Country Club had widely been able to put down 30% on new real estate acquisitions and finance 70%. Soon thereafter, lenders began requiring 40%. Leveraging this much of their real estate acquisitions coupled with the recent real estate price drops led to little or no equity in the club's homes.
As mentioned in High Country Club's Success Plan Questions and Answers, the homes that High Country Club kept were chosen for several reasons. Homes that had excessive costs or were underutilized were not kept. Of the 21 total homes High Country Club will keep, 17 will be owned by the club.
New Redemption Policy and Suspension of Sales
High Country Club members will now be able to sell their membership themselves, effectively creating a one in, one out policy. Members will be allowed to set their own membership deposit pricing but will not be able to sell their membership for more than the most recent membership pricing structure or negotiate on annual dues. New membership sales will be suspended until the market becomes more favorable.
High Country Club has actively sought to merge or be acquired by another destination club since they began experiencing problems and has cut over half of their employees, including Heath and Casey Kirschner, Christian's brothers. High Country Club will consist of five employees consisting of Christian, CFO Dan Moorhead, and all three of the members of the Member Services Department, ensuring that members will not see a drop off in service.
Read Christian Kirschner's High Country Club Success Plan Letter in its entirety.
Read High Country Club's Success Plan Frequently Asked Questions in its entirety.
Current members will be sent a new addendum on Wednesday, October 29 containing the above information. Members will have until November 12 to notify the club of their intentions and November 14 to sign and return their addendum. Members who don't elect to move forward with the new plan will be put on the resignation list.
Unlike the recent Portofino bankruptcy filing and the much-publicized Tanner & Haley bankruptcy, High Country Club has elected to be forthcoming with their members and prospects. Tanner & Haley Destination Club continued to sell multi-million dollar memberships just days prior to their bankruptcy while High Country Club has stated that they will be providing daily updates to their members.
If this plan is put into place, Kirschner and High Country Club believe they can be one of but a few clubs that are completely self sustained by their annual dues. By doing so, the club will no longer rely on new membership sales to be sustainable. More than 75% of the current members will need to sign their updated addendums for the success plan that Kirschner has laid out to work.
If the club members do not accept the new membership terms and the High Country Club assets must be liquidated, Kirschner believes that once the mortgage holders were paid, no equity would be left to refund members' deposits.
Christian concludes his letter with "I am hopeful that over the next three weeks we will be able to come together as a club and successfully thrive through the tough economic times ahead."
As a member of the Destination Club Association, it is good to see that High Country Club has gone above and beyond the level of transparency the organization requires. By proactively working alongside their members, High Country Club may have a tough road ahead, but may ultimately position themselves to thrive once again.