The current economy is severely affecting High Country Club. It is cutting the number of homes, asking members to pay increased dues but also allowing members to resell their memberships. It has already reduced staff levels.
In a very frank letter sent out to members today, Christian Kirschner, High Country Club CEO details how the current economic malaise has affected the club. There are several key points that he notes:
- Property Values, which have declined 20%-50% in the last 10 months
- Financing Ability, debt funding for new homes has dried up
- New memberships, to quote Christian "new sales have become next to impossible"
With some drastic changes to its operations the club has prepared a "Success Plan" which will allow it to:
- Operate through these tough economic times,
- Allow the club to preserve member deposit obligations
- Allow members to continue enjoying the club for many years to come.
- An increase in annual dues.
- Annual dues will be charged 1 year in advance, which is customary with all other clubs.
- Our portfolio will be reduced to 21 homes. 17 homes will be owned in order to build an equity position back up once the market begins to recover.
- Members will be charged the cleaning fee for each stay averaging $200 per stay.
- Members will be allowed to book 2 years in advance.
- Members will be allowed to resign on a 1 in 1 out basis instead of the current 2 in 1 out.
- Members will be able to negotiate the sale of their membership to a potential new member under our new resignation policy.
- HCC will sell no new memberships, just memberships from the resignation list, until the market begins to recover.
The club has looked at a merger or acquisition with another destination club but is not considering anything at the moment.Layoffs
The club has already laid off 6 people out of an original team of 11. The layoffs include Heath Kirschner, VP Sales, and Casey Kirschner, VP of Property Development, who are brothers of Christian, so the club has clearly made some very tough decisions. Under the "Success Plan" neither of their roles will be needed until the economy turns round and the club can expand again. The remaining staff includes three key customer service personnel to look after members going forwards. All the remaining staff have taken pay cuts to help make the plan work.Home Values & Equity
As part of its assessment the club has had all the homes appraised in the last 30 days. These appraisals have shown a decline in value of 20%-50% since the end of last year. High Country has always used debt to fund a large part of its property acquisitions. Earlier this year Christian commented that he was already finding it harder to raise funding. He had previously been able to put down 30% and fund 70% of new properties, but in the Spring lenders were requiring the club to put down 40% and fund 60%.
Overall with this heavy leverage and the large decline in values the club has little or no equity in its homes.Member Financial Impact
Going forwards under the new plan members will see increased fees, although on the whole these are not drastic increases. Annual dues are increasing by between $200 and $700 and members will have to pay about $200 per stay for cleaning costs. So a typical member will see an increase that averages out to about $40 to $60 per nights stay. Nevertheless its increases that are coming at challenging financial times.Addendum
Members are being asked to agree to the above changes by signing an addendum to their membership agreement by November 14th. The club will require approximately 75% of the members to sign in order for the "Success Plan" to be put in place. The alternative, if members do not agree, is that the club will be wound down, but as noted above there is no equity in the properties and so members are likely to receive nothing under this shut down scenario.
The good news for High Country Club members is that the club has acted quickly and taken rapid action to ensure its survival. The changes are dramatic but with the clear communication from the club at least members can make a decision.