The same day that destination club High Country Club announced its reorganization plan to members, the club resigned from the Destination Club Association (DCA), citing its inability to comply with the trade organization’s requirement to pass a net asset test.

Adam Wegner, president of the DCA, said that since the announcement, current DCA members have discussed the need for clubs to both perform the net asset test more often and continue communication with members concerned about the economic standing of destination clubs. “Some clubs have announced that they have gone to more frequent reviews,” said Wegner.

The inability to pass a net asset test was likely only one factor in High Country Club’s decision to reorganize. A net asset test, which measures the club’s ability to cover its membership deposits, “has nothing to do with cash flow or liquidity,” according to Wegner, and the failure of a net asset test does not necessarily mean that the club is poised to close its doors.

High Country Club’s proposed reorganization plan calls for increasing dues, a move that would help the company support its cost of operations. Wegner said that the artificially low dues sometimes charged by start-up clubs to attract members are impossible to maintain over the long-term. Annual dues at High Country Club were among the lowest in the industry.

Wegner advises members and potential members to look not only at the basic value of a destination club’s real estate portfolio, but also at how well positioned the club is to absorb losses—both in the early years and during economic downturns, when members may resign. Wegner indicated that many clubs are now focused on cutting expenses and stocking up on cash to better weather lean times.

So is the High Country Club reorganization plan, which threatens a club shutdown if not passed, a precursor to another Tanner & Haley, the failed club that called it quits in 2006? Not necessarily.

“I think there are major differences between High Country Club and Tanner & Haley,” said Wegner, noting that the club appears to have acted fast, is working to find a solution and is communicating regularly with its members. “And there are no allegations of really reckless behavior or other strange decisions that we saw with Tanner & Haley.”