Last week, destination club High Country Club announced in a letter to members that it was reorganizing membership plans, trimming its home portfolio and raising annual dues in order to combat the worsening economic and real estate crisis.

We sat down with Jamie Cheng, Halogen Guides’ chief analyst, to sort out what consumers need to know about this latest development in the destination club industry.

What are the key points of the new High Country Club Plan?

Cheng: The biggest news is the size of the High Country Club home portfolio. The club will trim 15 homes from its portfolio and keep 21 homes. Six of those homes leaving the portfolio are leased properties, so the club won’t get any equity from their exit.

The shift will effectively increase the club’s member-to-home ratio to 10-to-1. Members should expect tight availability, especially during the peak travel seasons. Other leading destination clubs maintain a member to home ratio of 6-to-1 or lower.

The club is also altering its resignation policy by bringing in free market forces. High Country Club, under a one-in, one-out policy, will allow members to set their own sales price for a plan. New member sales at High Country Club have dried up over the past 45 days. Rather than see the resignation list grow and stagnate, the club is giving more power to the member.

Resigning members may appreciate that they have the authority to price the membership as they see fit—a strategy that may expedite a new sale. On the other hand, resigning members in a financial crunch may be willing to low-ball their membership cost. And a fire sale on one membership isn’t going to help encourage future sales.

Finally dues at the club will go up under this plan. The cost-per-night of a High Country Club membership has been, historically, among the lowest in the business. Clearly club executives have realized that dues of $2,300 to $9,600 a year don’t fully cover the operating costs and provide enough of a cushion in an economic crisis.

Dues at other large clubs are more than twice as high as those at High Country Club but reflect the real cost of maintaining a real estate portfolio and offering members the high level of service that clubs promise. This increase is long overdue.

Why did this happen and could other clubs soon be in a similar boat?

Cheng: Christian Kirschner, the president and CEO of High Country Club points to several reasons for the reorganization. Obviously, the economic environment hit this club hard but there were specific reasons that led to this crisis.

For starters, the club was in merger negotiations with another club for the past six months. Two and a half weeks before the announcement of the plan, the merger collapsed. Additionally, the club lost access to cash when one lender cut off a $500,000 line of credit. Finally, new membership sales evaporated in the previous 45 days according to the CEO.

High Country Club was a member of the Destination Club Association and we’ll be talking to that trade organization later this week about the High Country Club plan and how the DCA plans adjust its policy in the wake of this announcement. Clearly however, all clubs need to live within their means by both reigning in expenses and encouraging members to remain with the club.

This plan needs to be approved by the majority of members in order for the club to survive. Will it pass?

Cheng: The club’s communication to members has been nothing but frank. It cited a decline of 20% to 50% in the value of its real estate portfolio this year alone. The CEO has told members that the club will shut down on November 17 if this plan is not approved. Not a reorganization. Not a membership sales halt. A shutdown.

The club has said that once its secured creditors are paid—and members fall into the unsecured creditor camp—there will likely not be any cash remaining. Faced with that prospect, we expect that members will approve the new structure in order to save the club. The alternative is bleak.