This is Part I of a series of interviews with Graham Kos regarding his role with the Destination Club previously known as the Solstice Collection. – Ed

Remind our readers about what the Solstice Collection was, and what it meant to you and to the members at first.

Our model was small to begin with – our original plan at the outset was to have 7 exceptional homes and 42 members. I originally found the destination club industry compelling as, for the first time, it presented a real estate investment model that allowed you to purchase a category of real estate ( high end second homes ) which historically had the greatest appreciation over time but typically was not acquired for strictly investment purposes. In addition, it was a uniquely fun and creative project that took you to the most beautiful locations in the world.

In the beginning, I had an extremely small but very effective team. I did not hire my first “employee” for the company until year three. I did not take a salary for myself the first two years nor did the company have an office during this time. We were able to accomplish quite a bit with a very small budget. Our secret weapon was my wife, Shay, who did all the design work for Solstice. It was her style, her vision, her way of living that we were selling.

We had great PR, and we received many awards – Best of the Best for three years from Robb [Report], and two years from Business Britain. We raised our rates to the highest in the industry, we bought more properties, our credit lines were solid, and things were going well.

To us, Solstice was more than just a business venture – it was a vision; a way of seeing and indeed a way of being. It also fulfilled a need that I saw consistently with those who I knew were on the UHNW [Ultra High Net Worth] level: to travel in the most elite, seamless manner possible – and not with a lot of extra services by the way! We wanted members to have a real second home experience and with homes that had soul, a story, reflected by great interiors. Where other clubs had a very generic approach to interior design, we had furniture from the best European design houses, original art and sculpture, all hand picked from French flea markets in Paris and Lyon, or made specifically for us. Each item reflected the Solstice vision. We had a Villa in Florence whose façade was created by Michelangelo, a residence deep in the Amazon rain forest, a home in Aspen, designed by a famous young architect, Scott Lindenau, and our newest property, the home in Napa, that took about four years to build, as each stone had to be removed from an old Pony Express office in Texas, and brought here to [the] Napa Valley. I co-architected the home, and Shay did the interiors.

One of the greatest challenges along the way was balancing sales and profitability with the original vision of quality and uniqueness – these two concepts are often at odds in a business proposition and balancing these two somewhat conflicted concepts was one of the underlying issues of contention with the Parallel Group.

How did the merging and de-merging with Parallel affect the structural integrity of the Solstice collection?

We had very high hopes at the time of the Parallel merger. At the time they were a new high end destination club competitor, and we thought that merging would give our members and their members more access and variety of high-end homes. We thought also economically it made sense, but in the end, their focus – making Solstice into a much larger club – and ours, doing so without sacrifice to the quality and uniqueness – just did not jell. We also believed that with the merger additional monies would be invested to expand the portfolio and subsequently that did not happen. So, with the help of a Swiss investor who provided the money to de-merge, we de-merged. This was a necessary step, but it began a process where the de-merge circumstances began to control us, we did not control them.

After the de-merge in May of 2008, ironically, other things became clear but also painful. We took back management of the club in June and then spent the first 90 days closing our Scottsdale office and dramatically downsizing management. A month later Lehman went bankrupt and our phones literally stopped ringing. Our business model was not fundamentally different than others in the industry and it required a certain amount of sales to support the development side of the business. The combination of an abrupt end to sales, and mounting membership redemptions caused great stress to the model. As difficult as these issues were to deal with an even more daunting issue was our main credit facility – the Fortress debt – was coming due at year‘s end, and our lender, like many others at that time, was calling every loan they could (our interest rate had no floor and was yielding just 3.5% – not a terribly attractive yield to a hedge fund). The environment for new lending was extremely difficult at the time.

How did the decline begin, and when did Solstice declare bankruptcy?

2008 was a difficult year as for many reasons, potential members just weren’t committing to Solstice, even though many loved the idea. In the beginning of the year our unwinding from parallel seemed to distract from our core sales efforts. We remained optimistic that once past this distraction things would return to normal – they did not. I was asked by certain members of the advisory board to step down in November of 2008. I agreed to do this, despite my misgivings, on the condition that they provide me with a viable plan to retire or replace our existing credit facility coming due at year end. After all I was personally liable on the debt. I actually never received an official response to that proposition as a few days later, after employees left the office one by one , I was informed by a third party in my now empty office that I had been removed by the board. In March of the following year Solstice declared bankruptcy.»

Could you explain the relevance of the Fortress debt and how that impacted – both positively and negatively – the fate of Solstice?

Fortress is a hedge fund and manages private investments. They provided a $50M credit line for Solstice in the summer of 2006. We were allowed to draw 40% of the cost of homes, furnishings and closing costs with that credit line.

At the time we placed the debt Fortress was a new player to the space. Prior to our securing this debt only Textron and Capital Source were lending in this area. From the outside looking in I am sure that this financing would appear to be simple but the reality was that you were purchasing and lending in many different countries – all with different laws regarding lender and borrower rights. At the time we secured this financing it provided the lowest cost and greatest flexibility of any facility that I was aware of in the destination club market, including all the largest clubs. But then again, the Fortress debt was one that our Member Advisory board eventually had issues with: they suggested it was a mistake to fund long-term assets with short-term debt. Like we didn’t know this? The reality was this completely ignores the fact that no long term debt was available in the marketplace at that time (after all, this was a new and unproven industry). Another suggestion I have heard put forth is we took out the line of credit knowing we could never pay it back. That is so ludicrous – I don’t even want to discuss it.

I tend to focus on the bottom line and as it relates to financing the bottom line is no new third party financing was ever put together by the new management last year save the club. I believe now, as I did then, that it was extremely reckless to take control of the club with no plan in place and no past experience to fully understand the all the challenges the club faced.

Part II will be Published Soon.. -Ed

When did you know that you had been removed from Solstice LLC? What lessons did you learn from that day?

It was in first week in December of 2008. The Board members voted me out, and I had to leave. But when I left, I left what was at that time still a viable, functioning club. In retrospect, I found it very disconcerting that despite having achieved a certain degree of success over the preceding 5 years no one had bothered to inquire if a plan existed to retire the Fortress debt – by the way – there was. It was not until the day before new management put the club into bankruptcy that I was queried on my intentions!

One of the lessons I learned from that day, that irrespective of the facts and circumstances, there are always people that think they can do a better job than you. I believe there was more than a degree of arrogance, ego and the desire for control on the part of a few that lay at the base of their intentions and actions. What I saw evolve was a small group of individuals that desired to take control of Solstice but seemed to want to avoid the responsibility that, at least I believe, would go hand in hand with the taking of control. In order to justify their actions and absolve themselves from responsibility they would need a scapegoat to blame things on in case things did not work out under their directorship. I was the lucky scapegoat. Actually to be fair, Shay and I were both blamed for all of Solstice’s ills ( including the drop in the real estate market). It seems to us we were blamed for exactly the same things we were praised for in the early years of Solstice – me for my real estate and development abilities, her for her exceptional taste and great design creativity.

At the end of the day, I think you do learn far more from mistakes than successes. There are several things I now know about myself that I was not completely aware of prior to Solstice. I am not necessarily a good judge of people. I am far too trusting. I am not built to manage companies. You should never put your personal interests behind others as your sacrifice is rarely appreciated.

So, after a year, what happens to Solstice now?

As stated before I tend to move directly to the bottom line – so here are some of the facts, as I know them, surrounding Solstice from December 2008 to December 2009:

In the spring of 2008, we had about $80M in assets.

At the end of 2009 – we will have simply retired the secured debt ($24M) with the sale of all these assets and nothing will be left for unsecured creditors. As a symbol of the whole demise, I would consider the following transactions: We had a contract to sell one of our homes in Aspen in Nov. of 2008 for a net $6.1M. Subsequently, under the new management in the spring of 09 we sold this same property for a net 3.7M.

What will happen to what’s left of the club is this: in a few weeks the minority Swiss partner in Solstice will purchase the remaining assets of Solstice for the secured debt (cents on the dollar from purchase price) and the members and other unsecured debtors will be left with nothing.

Let me explain further: the Swiss investor and his Geneva based equity group will pay off the Fortress debt, and in return, receive the remaining 9 Solstice Collection properties – fully furnished (this is the same group that took control of the club in Dec. 2008). What is personally most disturbing to me as a fully paid member of the club is the knowledge that this group obviously had the resources to help save or restructure the club at any point over the last year but engaged only at the 11th hour to acquire all the assets at a steep discount. Just 3 months earlier a document was circulated to members estimating a $25M net equity in the club after the secured debt was paid. As a member we will now have the ability to “rent” the properties back from them until the markets improve and the assets are eventually liquidated for what I believe will likely be a substantial profit. There is some language in this rental agreement that under certain circumstances could return some funds to the members if they commit and continue to pay rent for a certain time frame but this member is not holding his breath. Members have been asked to make a two year commitment on rent ($40-$86k per year ). I am aware of some members that consider this a reasonable outcome – I am not one.

With all that has happened to you, do you have ideas for models out there that could possibly work?

There are two models that in my opinion hold some promise in today’s market. One, where you can put your home in a large pool of similar homes, pay a small membership fee, and travel to those homes anytime – you keep control of your asset. And two, a “closed end” fund where properties were bought, used and held for a pre-determined time by a group and then liquidated in a window of time that would allow for capturing the appreciation.

As regards to all that has not worked thus far in the DC industry: top of the list is “things often cost more than you think.” This applies to both the operation and development side – I believe the often inaccurate modeling of these costs to be the Achilles Heel of the industry. We addressed this by having a very bare bones approach early on and were successful. However, if you want to scale this and do not immediately generate a very high velocity of sales you can have problems.

In hindsight, the cost of acquiring a member is likely not too dissimilar to the sales and marketing costs associated with selling a time share – it might be somewhere closer to 40% than 20% depending on the size of the organization. I am unaware of any club that has a financial position I would want to replicate today. I think it will be very challenging environment to sell memberships over the next 24 months – if not longer.

Are there any clubs you would buy into at the moment?

Personally, after my experience, I am currently not a candidate for club membership.

“This is a completely different economic climate, and therefore a completely different marketing, sales and PR climate as well, “says Luca Franco, President of Luxury Leisure Properties International (LLPI). “We have already created many successful mixed-use products in the past, and now we are moving creatively forward with our newest project, Vallarta Gardens, on Banderas Bay near Puerto Vallarta.”

It is no wonder Luca is proud. Even in this capricious economic climate, the Vallarta Garden’s launch in mid December 2009 has created major buzz. Its location is on Banderas Bay, a peaceful body of water that spans about 40 miles, and is protected by the Sierra Madre mountains. This area is known as the Nayarit Riviera, located on the Pacific, non-Hurricane side of Mexico, midway between Puerto Vallarta and Punta Mita, near a picturesque town of La Cruz de Huanacaxtle.

“And this beachfront getaway is much more than the phrase implies..” Luca comments, “It is a boutique resort, with many luxury amenities. A few minutes away from the residences owners have access to Jack Nicklaus and Tom Weiskopf signature golf courses. There is also is a yacht on the property for owners and members to use. Sportfishing and pleasure cruising are just two of the great amenities here. And then there is the spa… on the beach!”

Vallarta Gardens combines fractional, full ownership and basic vacation rental structures. The homes themselves are between 3,500 and 5,000sf, four and five bedrooms respectively. Pricing starts at $80,000 for 1/13 share.

Luca is one of the few people in the luxury fractional industry whose international reputation is widely known and respected. Multilingual, multicultural, and of European descent, he has been involved in finding and creating successful fractional projects for the past decade. He puts teams together that define the who’s who of the fractional interest industry. Jim Marmorstone, Lisa Manley, Sarah Rezak, Andrew Berry, Daned Kirkham, Eric Pierce and others who are very well-known as the best of the best when it comes to negotiating, sales, and marketing, now consult for the various LLPI projects.“ We have hand picked the best in the fractional field, and can call on them anytime to create new strategies for each of our projects.”

LLPI is an international advisory and management company servicing developers and investors in luxury mixed-use hotels & resorts. Luca said: “Our aim is to maximize value for the hospitality real estate asset,” said Luca, “and this is done by applying creative strategies toward the leisure real estate product. In turn, we can drive significant synergies between the different hotel and resort components.”

LLPI is working in partnership with Valhalla group, with its visionary president Preben Vestdam, in EMEA (Europe, Middle East and Africa) to deliver a consistent global product line — sharing resources, know-how and operating processes & procedures.

LLPI has also established a preferred alliance with Strategic Hotels & Resorts, a leading owner, developer and asset manager of luxury hotels in North America and Europe. SHR is viewed as the pioneer and “blue chip” of hotel and resort asset management with its leading edge systems — setting the standard for operators and owners alike.

One of the more fascinating aspects of Vallarta Gardens is the marketing decision to include a major emphasis on the Mexican market. As Luca says, “We are, of course, vitally connected to the American and pan-Asian market as well, but we know that Vallarta Gardens is only three hours away from Guadalajara, Mexico, with nearly 5 million people, and we believe that many of them want and need a beachfront getaway.”

Luca pauses, then says, “Actually, we all need a beachfront getaway, and Vallarta Gardens combines the best of both. It is a true sanctuary.”

www.llpi.us

An Optimist sees opportunity in every difficulty — Winston Churchill

To many in the fractional interest and the destination club industry(s), this year has been the definition annus horribilis, a year most horrible, in the sense that the economy is flat, consumption has become more conscious than conspicuous, and lenders are not lending. It was projected to be, and actually was, the perfect storm of horror for developers on one end and buyers on the other. However, toward the end of this year, a few green shoots of hope have been popping up here and there, giving rise to some of the most reputable consultants, sales and marketing people and all around seers giving their thoughts on what happened this year and what’s to come.

Bill Orwig – Director of Sales, Pond Bay Club, St. Johns

I have been in fractional sales for the past ten years, having started selling the very first fractionals in Deer Valley, Utah. This year has been quite flat and really depressing. But I am convinced, especially after speaking to many this year, that the need is still there. Over the years, having worked with clients at the Villas at Rancho Valencia in Rancho Santa Fe, California, The Rocks in Scottsdale and Pond Bay on St John’s, the need for the fractional is still there! But sales people have to be hired who have the ability to help the potential member/owner to overcome fear of the economic unknown, and guilt at buying something that is beautiful, and will provide pleasure for years and years to come. So, I am cautiously optimistic. I have heard there were seven sales at the Residences at Mission Beach this past fall, there were some sales at Old Greenwood in Lake Tahoe. There have been sales with the Timbers Company properties also, so not everything is flat..

Daned Kirkham – Fractional Sales Consultant

The fractional idea still interests people, and many want to buy, I speak to them all the time! It is just that the new idea “bloom” has worn off, so we as salespeople and consultants have to help those who sell second homes to give the fractional idea a more viable chance, through educating them as to what the fractional idea really is.

Meadowood, though not a true fractional, has been very successful here in Napa because the members can buy fractions of the vineyard and have their own wine and label. It is a club idea, with fractional purchases attached. These types of themed fractionals may be one of the waves of the future.

Wally Hobson – Hobson Advisors

I recently met with some bankers and developer/investors in Chicago, who helped me see a financial reality that I, and others also, were unaccustomed to seeing – how extremely complicated it is now, and will be for eth near terms, probably until first and second quarters 2011, for developers to get loans from banks, as bankers now must personally guarantee a loan will be paid in a defined period of time. Most bankers, according to those I met with, never personally guarantee loans for anything or anyone. It has historically been too risky, and now it is untenable.

What will happen now and in the future? Well, projects in Mexico are doing well. That’s because those projects are selling to the high-end Mexican population – one that is an interesting group. They do not have the uncertainty that the Americans have nowadays. They have other problems – drugs wars being the main one – but they do not have a deeply uncertain, recessed economy. Consequently, they are not as fearful in buying fractionals as Americans right now.

With that said, there are a few successful fractionals in the US right now. I heard of one, The Meriwether Ranch in Montana, that was selling quite well. But in general, as our economy becomes more stable, as consumer trust in the economy becomes stronger, so will fractional sales.

Jim Whitteron – President, Spring Creek Partners, Sales and Marketing Director, Capella Pedregal

Capella Pedregal has been exceptionally successful, even though sales have slowed somewhat in this new economic reality. This year and next, we have learned something new: that in order to adjust to the New Normal Part 2 (The “New Normal (1)” was a phrase coined post 9/11) we had to create new marketing ideas that were completely different from those of last year. In addition, our strategic alliance with Ultimate Escapes has been very successful.

What do I think about 2010 and beyond? I have some optimism that the industry will come back, but very slowly. Gone are the good old days when sales people were order takers. Gone are the days when people would write their checks after looking for a few minutes at the project.

Luca Franco – President of LLPI, Luxury Leisure Properties International

This year has been very difficult for everyone, but here and there are some fractionals that have been selling well. We manage the Four Seasons Residences in Punta Mita, Mexico, and there have been excellent sales there. The brand, of course, is exceptional, but the property is spectacular also. Slow, but picking up, Four Seasons Punta Mita has done very well this year.

I see 2010 as full of creative possibility. We are re-launching another of our projects in Mexico, Vallarta Gardens, in December. We have generated quite a bit of interest, and much of our marketing will target those who live in Mexico. Vallarta Gardens in Puerto Vallarta is a few hours from Guadalajara, a large city of ten million. In this economy, we have learned to use new strategies to market and to sell, and we have been successful. We must use new ideas for this new economic reality.

Eric Pierce – President, Pierce Group, LLC

Here are some standard answers for poor sales performance in 2009:

1) Consumers can’t afford to purchase second home real estate anymore because they took such a hit in their savings and retirement accounts.

2) Consumers can’t justify the expense right now because they are still worried about market turmoil and the possibility of values dropping further.

3) I even heard one example of someone who said they wouldn’t buy because it would look bad to their friends; i.e. “rubbing it in their faces”… whatever, not buying that one.

4) There is no consumer financing for fractional and until that comes back, nothing will sell.

But here is one that we don’t hear about:

The more difficult it is to sell, the more developers push super incentives and price breaks with sales people hammering the phones and email all day long to a point where they have offended the prospect. These tactics have been around for decades and are a recipe for disaster. What sales organizations have not done is provide methods to reduce buyer risk. I spoke to someone in Telluride recently and they said Franz Klammer fractional re-sales have been somewhat steady this year. This is because the development is sold out so there is very little risk. In July of this year, the Aspen Times reported that “fractional sales are carrying the market right now” with a 23% increase from the first half of 2008. So, instead of adding price breaks or trying to find financing for something that is already heavily discounted, developers should have been wowing their prospects with experience and lifestyle and using tools that reduce risk.

What will happen it 2010?

We should continue to see slower sales pace for the next 6 to 8 months but I’m optimistic for the start of a rebound in Spring/Summer of 2010. The high-end buyer will have been sitting on their hands (and wallets) for two years by then and will be anxious, especially as the stock market continues to correct itself. One point of caution however is primary home values. If they continue to remain stagnant, fewer buyers will have equity line opportunities that they can use for a new fractional purchase.

Developers without finished product will continue to struggle next year. We still have a glut of completed inventory on the market at very low prices. Furthermore, preview stays have becoming very popular and help bring in additional revenue to developers not to mention a strong audience of affinity buyers, so those developers without the completed inventory will be at a severe disadvantage.

Fractional sales should be the leader in the resurgence of resort real estate sales. We should start to see an emergence of new risk mitigation products and services for the industry which will help kick start sales again. When the perceived risk is reduced or eliminated and the market comes back the industry will take off.

Full ownership transactions might regain a little bit of the momentum they once had but definitely nothing like we saw in 2004 and 2005. It is just not practical for the majority of the vacation population. Due to the lack of demand for full ownership there will likely be fewer investment buyers as well for the foreseeable future.

Calistoga Ranch is one of the few seasoned private residence clubs in the California wine country. In keeping with the rich heritage of the area, the club features an on-site vineyard and wine cave where owners and guests can immerse themselves in the wine culture of the area.

Calistoga Ranch architect Scott Lee knew that Calistoga Ranch needed to reflect a well-defined, natural organicity. “Our charge was to create a private retreat, a sanctuary celebrating what Napa Valley is all about – food, wine and nature. We designed and individually placed each of the more than 200 structures on the site not only to avoid cutting down the 100-year-old heritage oak trees but also to integrate them into our design.”

Lee and his team focused on the tradition of outdoor living by creating what he calls the campground legacy. Each guest lodge is its own camp, he says, made up of a cluster of spaces centering on the outdoor living space and fireplace, just as in a campsite. And interior designer Darrell Schmitt used rustic, natural materials to create a connection between the inside and outside, incorporating such elements as handmade tile baths and fabrics like hand-woven chenille and Tibetan wool carpets. There are outdoor and indoor showers, and multiple meditation spaces as well.

Mark Harmon, principal and CEO of Auberge Resorts, the company that owns and operates Calistoga Ranch, says members love the sense of peace the club’s design and surroundings offer. “I have spoken to so many members over the years,” he says. “They say that Calistoga Ranch is their true sanctuary … When they leave here, they are refreshed and calmed.”

I spent some time recently at Calistoga Ranch, the experience was one of true sanctuary, just as Mark Harmon said. Calistoga Ranch is a little off the beaten and crushed wine paths of Napa. It is a high end resort with guest cottages as well as a Private Residence Club with owner’s residences. The owner’s residences are of an exceptional, modular design, with an enclosed interior living area, kitchen, and two master bedroom modules. What ties these together is the exceptional outdoor living space, with deck, fireplace, grill, outdoor dining areas, all with views of California’s live oak bosques, Ponderosa and Cottonwood trees.

The undeniable feeling is that of living in an elite treehouse, with all the spa and dining amenities of living at a large resort, defining the best of both worlds, nature and culture, sanctuary and society, peace and – if you choose – activity.

The Spa at Calistoga Ranch is one that allows an enhanced feel of true sanctuary. It is located in area called The Bathhouse, where you can truly “take the waters” in a multiplicity of ways. The soaking pools overlook one of the ranch’s creeks, or you can take a mud bath in one of the large private outdoor spaces. When I was taking one of the baths, along with my thoughts, a hawk was flying high above me, moving from Live Oak to Live Oak. There was no sound, save of the soughing of the oaks and pines. The scent of cucumber and a slight odor of something vegetable, probably the mud in the bath, were all that I was aware of. When the mud bath and massage session was over, I felt as if my body had been freed from all the stress armor I wear.

The sense of peace, brought on both the complement of external environment and interior design, stays with the guest or the member or the owner. Here, everything else that used to matter, seems so far away.

Maybe the consensus of philosophers and economists were right all along – that it takes anger or sadness to change minds, attitudes, verbiage. And what has changed through seven month’s time is a movement from a recession (small case letters, November 2008) to a Recession (in caps, May 2009) with an accompanying movement from resignation to an irritating resentment that, like the Swine Flu, seems more viral than ever before. The severity of the economy, accentuated by bank bailouts of such horrendous proportion that, it is said, all of our children will be indentured servants for years, and the emergence of the Madoff story, showing how trust and trusts, can be Ponzi-ed into oblivion, have changed attitudes of resignation to attitudes of anger in ways we are just beginning to understand.

Those who work in the luxury field, whether it is in luxury hospitality, hotels, branding or shared residences, have noticed a sea change, a movement from objectifying to personalizing, implying the idea of luxury is neither changeless nor timeless, nor above the fray as once thought, but scalable and adaptive to present cultural norms. The vocabulary, especially the definition of luxury, is moving away from the Wall Street model of conspicuous consumption – cars, watches, diamonds – to a softer version, one that gels more with Main Street – family, authenticity, the scarcity and primacy of time.

“I have strongly recommended to my clients not to even the use the word luxury. It has become so overused. For some projects we have worked on, we actually went through the press releases to soften the word or remove it,” says Linda Bruno, Managing Director for Consultare, a consultancy group for the luxury hotel industry.

Softening and removing might not have been as much of an option a few months ago as it is now. In the Pre- Madoff/TARP world, it could be argued that defining luxury moved along a more objectified BRAND bandwidth, with high end magazines telling us what to buy, where to go and what to wear. But now – how many luxury print publications have ceased? Executive Living, Executive Decision, Ocean Drive, Trump, Trump World, Ascent, Distinction, the list goes on. According to Folio, ad sales in recent months have faltered consistently in many of the high end shelter magazines. What can be inferred here? Only an arguable possibility: that aspirationals may be getting tired of seeing the brand stuff of which the inspirationals lives are made.

In one of the last issues of Portfolio, another magazine that will publish its last issue soon, an article was written by a TARP wife, a woman whose luxurious lifestyle was underscored for years by her wealthy banker husband, whose bank has been given billions in bailout money. Understandably, she prefers to remain anonymous. Her Essay deals with how the meaning of luxury has changed for her: “I haven’t even looked at Spring clothes. Keeping up with fashion seems somehow decadent in this new era, like getting Botox injections or catered dinners.” How does she see her life now? In addition to turning down invitations to gala events where they will be asked for donations they don’t have extra for anymore, eating out less frequently, combined with having to actually cook, staying home and watching TV reruns, this is what defines her life — a life, she says, of relative luxury. This means her house is not in foreclosure, and they can still afford things they need. Of course, she is angry, not only because of this turn of events, but also because of her husband’s turn from good physical health to less so, a man who now apologizes each day for losing so much of their money and making so many mistakes.

Given such a scenario, how do you think they feel when they receive in the mail, glossy, elite lifestyle and home magazines, touting the brands they had last year, and have no longer?

Due to such a nagging irritant, the root systems, definitions and presentations of luxury are changing. What is emerging, due to the shock and awe of the world economic collapse, Madoff, and the bank bailout, is a something, well, positive.

New thinking – with the touch points of authenticity, honesty, transparency, genuineness, mindfulness of brand and product has begun to replace the old words of luxurious, extravagant, lavish, elite, one of a kind, dreamlike.. and the like. The luxury experience used to mean selling the dream, but now it is in process of becoming more an offer – to obtain a transformatory experience of awareness, of eco-sensitivity, of education, perhaps a green experience, or, one of philanthropic substance and consequence – something that changes a person from the inside out, not vice versa.

There are some companies that get this, and have changed their marketing and sales messaging to reflect this growing awareness – one that has done this so well is Exclusive Resorts, the largest and best known Destination Club now in existence, with a $2B Real Estate portfolio and over 3000 members. Their online and print advertising defines luxury through the scarcity of time. Time with children before they grow up, time with grandparents so children will remember and time that can be crafted into significant memories. These ideas are the new definitions of luxury.

Abercrombie & Kent Residence Clubs, a dimension of the famed tour operator Abercrombie & Kent, also has the ability to carry their members to places that will create eco-sensitive, educational memories. Other companies, Exquisite Safaris being the major one, takes their clients to areas in Africa where they can come to know the villagers, and create a strong understanding of their needs, allowing new forms of philanthropy to ensue. In all of these cases, luxury is being redefined not in terms of how much but of how well, not in terms of artifice, but of authenticity, thereby beginning to redress the antagonisms of our ailing systems.