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Tuesday, November 11, 2008

Recession sadness

Our family stayed at the High Country Club home in Punta Mita, Mexico, and enjoyed a truly "wow" experience. Too good to be true? Turns out, yes, as the Destination Club is failing in the real estate crash.

One of the most disturbing and painful elements of a recession is the way that some high-fliers during the (recent) good times are brought down to painful reality and failure. Consider this email sent to members of the failing High Country Club destination club (a form of deposit-paid resort home sharing plan) and posted on the public site.
Dear High Country Club Member,

It has been a tough 2 and a half weeks. I have been doing everything in my power to save the company I built from scratch and dedicated my life to over the past 4 years.

Against my best judgement, I directed my membership base to Destination Club Forums instead of having a private member only forum knowing that if we had our own private forum people would eventually be directed to Destination Club Forums, which at the time I was confident the truth would eventually prevail. The forum phenomenon in general is truly remarkable. It is impossible to manage truth in this day and age where people can speculate, accuse and make false allegations with no consequences. The sad thing is that a forum can make or break a business. A business that truly has its customers best interests at heart. Businesses, reputations and consequences are not something that I take lightly. I have made the decision to not even look at the forums, but have been advised of some of the content and truly believe it is inappropriate, counter productive and damaging to our company and the industry. I actually heard that someone accused me of buying a $1M property in June when I actually sold my home in June to pay off debt incurred by starting High Country Club and am now renting a home. With that said, I sincerely appreciate those that have done their best to support HCC and reveal truth amongst the ridiculousness.

The feedback of complete support and respect and I have received from the members directly through thousands of emails and hundreds of calls is humbling and contradicts the disrespect and false allegations of the forums. It makes me want to do everything in my power to not let them down. I apologize to my members for subjecting them to such a high degree of negativity and speculation. Unfortunately, the success of High Country Club has been deeply affected by the madness the forums have created. The Success Plan is a plan that will work and will get us through this difficult economy. It is not perfect, but we have a business plan that is better than any club in the industry moving forward. A plan that will no longer require new sales to be sustainable.

The future of HCC is in jeopardy due to the fact many of the yes votes have become no votes over the course of the day and many have downgraded. I understand and acknowledge the model is not perfect and am asking for members to recognize that this is temporary until the economy turns around.

I will not be sending out the Addendum until after the Wednesday vote due to the fact that we are having so many yes votes turn to no votes or downgrades, which makes the prospect of success unlikely. The Addendum is a simple basic form that will have no effect on member's decisions. In order for HCC to be successful, we all need to re-evaluate our decisions and think logically. $350-$450 per night is a tremendous value. Yes, it is more than the original arrangement, but the global economy has changed and we are adjusting to meet the new demands.

I send this email with the utmost respect and compassion for everyone involved. I have and continue to put you and my investors in front of me and my family. I feel that that is my duty.

Please email us your final decision by Wednesday so we can determine whether or not we can move forward.


Christian V. Kirschner
HCC, based in Denver, purchased or leased vacation spot properties and members used their pre-paid dues (after paying sizable deposits with no refunds guaranteed) to access these properties. The result: while it lasted, incredible luxury vacations at prices purportedly within the income of middle income people.

Of course, like most things that are true good to be true, the business survived largely because of optimism. New member deposits coupled with rising real estate values ensured cash flow and the money to purchase new properties, and so the thing looked like it could on for ever. Of course, real estate bubbles never do (or for that matter) any commodity.

Setting aside the obvious personal angst and frustration in Christian Kirschner's email -- and his likely impending bankruptcy, possibly painful litigation, and more -- consider the cost to hundreds of participants in this scheme, who had put their money in and booked vacations, only to find, poof, all is gone.

This sort of thing is happening all over the place. It is 'normal' in the early goings of a recession. The biggest victims are usually businesses fuelled more by leverage than experience; with lofty dreams and inflated visions, that really couldn't withstand the test of time and economic pressure.

Can we learn lessons from this sort of experience? I wish I could say we will, but this recession will end, businesses (especially new companies started during the lean times who operate efficiently, provide real value, and keep their overheads and operating costs low) will thrive, the economy will improve, and then people will fall into the trap of faulty 'eternal' optimism and big dreams, only to experience the pain and angst of hard failures, again.

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