Solstice announced it would drop its cheapest plan and raise the membership cost to more than $2 million on its highest-level plan. Solstice founder and CEO Graham Kos explains why his team believes this contrarian move is the right step now.

Why is Solstice trimming the number of plans offered?

Graham Kos: Access is every bit as important as the homes, and the best way to open access to everyone at Solstice is to take fewer bodies. We have watched the rest of the destination club industry actually go in the opposite direction. By suspending our Signature membership, we can lower our member-to home ratio to 5-to-1.

The trade-off is we are going to bump up the pricing on January 1. The Platinum plan will go from $975,000 to $1.125 million. We are increasing the Sky level of membership from $1.95 million to $2.25 million. The price increase will also enable us to reduce our debt on each property from 40% to 35%. It lessens our reliance on the credit market and also provides greater equity.

Considering the economic crisis hitting consumers and their stock portfolios, is this the best time to be raising plan prices?

Kos: We have a 10-person member advisory board we just met with in New York, and our membership has said to us that access trumps cost. As a club, we are trying to be as efficient as possible but our members have told us that they would pay more for access. If someone was thinking of spending a few million to join a program, would it matter more if it’s $1.9 million or $2.2 million, or does unfettered access to the properties matter more? It’s the access.

How has the credit crisis impacted the destination club market?

Kos: I think there is impact across the board. Anyone who doesn’t think so has their head in the sand. Over the last 60 days, a lot of people have been sitting on their hands. Until people get some sense of stability, the natural tendency will be to sit on the sidelines. I would be concerned about the velocity of membership sales. I think that holds for all destination clubs, or any industry for that matter. If I was making sweaters, I’d be concerned about sales. One of our advantages is that our numbers have always been modest, playing at the very highest end of this industry. Everyone has been hit by this crisis but I think there has been a lesser impact at the high end.

More clubs are adding partnerships with tour operators and hotels to give members more travel options. Will Solstice go this route?

Kos: If I thought that there was a real value-add we would be doing it. I’m not convinced that layering on a tour or a hotel room somewhere in Europe adds value. I can book the hotel room myself.

What’s next for the property portfolio?

Kos: We have another home in Napa that we’ll start construction on soon. It’s a rammed-earth home and will take a year and half to complete. We’re looking at adding more beach locations, and we’d like to find something in the Riviera Maya and South Beach. Australia and Southeast Asia might make sense as we expand around the globe. Our house in Brazil was slated to open in the fall, but it’s been slow down there. Look for it late summer or early fall 2009.

Learn more about the ins and outs of joining a destination club by downloading our Decision Guide.