What Goes Up Must Come Down...

Gravity, Economics and the Destination Club Conundrum
-Susan Kime

The function of economic forecasting is to make astrology look respectable = John Kenneth Galbraith

Be greedy when others are fearful, be fearful when others are greedy
Warren Buffett

Gravity, Gravitas

Very few times in the history of ideas, especially in physics, astronomy and astrophysics, do the creative thinkers in those respective sciences agree on anything: but Kepler, Newton, Einstein, Hawking and even Warren Buffett all threw objects into the air, and in all cases those objects fell to earth, thus, allowing all the thinkers realize that gravity has a lot to do with everything.  Warren Buffet recently likened our economy as sinking into a darker side, and noted the basic tenet of action/reaction, stimulus/response: what goes up must come down. This is how it is with just about everything, unless we live on a planet with no gravity.

In a certain perceptual, though myopic way, many of us assumed that we have lived for years on this gravity-free planet, assuming that the force did not affect us. Many threw metaphorical apples into the air, and saw them go higher and higher. They expected they would go higher until they were out of sight. These people expected the economy would always grow, and potential club members would always have interest in destination clubs, ready to be convinced of the rightness, the sexiness of the Destination Club idea. In addition, sales projections – 2, 5, and even 10 years out  would always be larger than they were now.  The assumption of growth without limits is the assumption, of flowing without ebbing, of expansion without contraction, of a gravity-free world.  The problem is, we live on Earth. And where there’s gravity, there is eventual deflation. And now, for the first time in the short history of the destination club industry, potential club members wish to hold on to their money, existing members often want redemption, and not in the Judeo-Christian sense. Most all the apples, tossed in the air in the past few years have fallen to the ground with a great leaden thud. What were we thinking? Did we think growth would go on forever?

The Urban Land Institute’s Emerging Trends 2009, states: “ “The credit crisis and ensuing recession promise to drag real estate markets into a difficult period marked by value losses, rising foreclosures and reduced property revenues …After an unprecedented meltdown, housing values should all hit bottom during the year, followed later by correcting commercial sectors..”

In addition, luxury consumer confidence as measured by Unity Marketing's Luxury Consumption Index continued its downward trajectory in the third quarter 2008. The LCI dropped 10.7 points to reach an historic low of 40.3 points, the lowest level ever since Unity started measuring affluent consumer confidence at the end of 2003. 
"Unity Marketing's most recent survey of luxury consumers, conducted Oct. 3-8th 2008, following the bailout and during the recent stock market upheaval, shows that affluent consumers' negative feelings about the economic situation are translating into changes in their shopping behavior," said Pam Danziger, president of Unity Marketing, a consumer insights firm that specializes in the luxury consumer mindset. “Findings in this survey of 1,161 affluent consumers include: some 56 percent are spending less on luxury now as compared with twelve months ago, and fifty-four percent expect to spending less on luxury in the next twelve months.”

Posted:
10/12/08
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