Grand Residences Points-Based Memberships FAQs

  1. Why is Grand Residences making changes to the original product?

Grand Residences has had many challenges selling its inventory due to changes in the industry and its traditional customer.

Grand Residences needs to increase its sales pace in order to meet its financial obligations, to continue (a) offering its 5-star services, (b) secure additional funding to finish the construction of phases 3 and 4 and (c) have a healthier financial performance as a whole.

To do this, the project needs to adapt to the new conditions in the market as well as the customer that is interested in buying it. After reviewing many alternatives, we have settled on these two changes:

  • Reconfiguration of phases 3 and 4 into smaller units, Deluxe Suites, which we believe have a higher demand among new buyers
  • Launch of Points-based memberships backed by Grand Residences inventory and offering the benefits of the new Signature Club Elite membership, that will allow members access to Grand Residences at a lower entry price point while at the same time maintaining the pricing of the resort at the current levels.
  1. What does the fractional industry performance look like and how does it affect Grand Residences?

The fractional industry took off between 2000 and 2003 with its glory time peaking in 2008 right before the financial crisis. The industry performance went from $329 million in 2000 to $2.3 billion in 2007, an astounding increase of 600% in just eight years. Sales have decreased significantly since then, down to $516 million in 2016. Over the past four years, sales worldwide have plateaued instead of bouncing back as was expected.

The main factors causing the declining sales performance of the fractional industry are external and more related to general economic tendencies such as: uncertainty of economic and political conditions, lack of consumer financing and decrease in home equity funds for cash payments.

  1. What new trends are showing up in the fractional industry as a result of the 2008 financial crisis and its impact on sales performance?

New trends in the fractional industry include:

  • Private Residence Clubs like Grand Residences becoming Fractional Interests Projects (lower quality / inferior services)
  • Smaller shares
  • Smaller units
  • Mixed use (whole ownership, hotel, homesites and resort timeshare)
  • More variety of locations (beach, ski, city, etc.)
  • More owner benefits, especially rentals and exchange
  1. Who is the new customer of Private Residence Clubs (PRC) and of Grand Residences?

The customer that used to buy PRCs is not doing so anymore mainly due to a combination of:

  • Uncertainty of economic and political conditions
  • Lack of consumer financing
  • Decrease in home equity funds for cash payments
  • Concern about conspicuous consumption of high-end discretionary items
  • The introduction of several moderately-priced rental-type destination clubs which captured these customers’ attention

At Grand Residences specifically, we have tried several strategies over the years to sell both to members and non-members and the reality is that Royal Resorts members are the ones that have mainly purchased Grand Residences. For the past 34 months, only 12% of all Grand Residences sales have been to non-members.

Given the entry price point of Grand Residences, only a limited number of Royal Resorts members are able to afford it and this pool of prospects is finite and reaching its end.

  1. Why are the units of phases 3 and 4 being reconfigured into smaller Deluxe Suites?

Evidence suggests that there is great demand for smaller units. Grand Residences already offers a wide array of larger residences, and offering a number of smaller units will help us offer a product that adapts to the needs of various customers.

Additionally, smaller units allow us to lower the product cost to a level where selling points-based memberships is financially viable

  1. Will Grand Residences stop selling fractions?

No, Grand Residences will continue offering fractional agreements with President’s Circle benefits. Points-based memberships are an additional product that will be offered together with the benefits of the new Signature Club Elite Membership as an alternative way of enjoying vacations at this exclusive property

  1. What are the differences between a fractional agreement and a points-based membership?

Points-based memberships will not have the same benefits as a fractional agreement:

  • Points members will not have guaranteed use of a specific unit or season. They are able to request reservations based on availability.
  • The points-based memberships will not include residual rights.
  • The points-based memberships have a duration of 40 years.
  • Points-based memberships have a Signature Club Elite membership attached to them with different benefits to those of President’s Circle

However, Points members will have the same obligations as a fractional owner in the sense that they are required to pay an annual Club Service Fee based on the amount of Points owned and they need to follow the same rules and regulations when staying at the resort.

  1. Why is the entry price to Grand Residences being reduced?
    • To make it more accessible for our current Grand Residences prospects
    • To adapt our product to the realities of the market and the new customer who is looking for a more flexible product such as a Points-based membership, similar to The Royal Haciendas and The Royal Cancun Points Clubs
    • Financing for large amounts ($150K+) as required for a Grand Residences fractional product is virtually non-existent, limiting the number of prospects who can afford this product
    • It allows us to offer upgrades to our members by allowing them to ”test drive” the product for a lower entry price and upgrade later
    • Convert many renters to members with much larger commitment than a $400 rental rate per night
  1. What is the entry price of a Points-based Membership?

The Entry price for Points-based Memberships starts at $45,000.

  1. Will lowering the entry price point decrease the value of the resort?

No. The entry price is what is being reduced and not the price per Point, the overall value of the resort, quality or services. Points members will be able to enjoy Grand Residences by investing fewer dollars. However, if they want to have the same level of usage that Fractional owners have, they will need to make a similar investment. The price for being able to book a two-week stay at Grand Residences using Points will be similar to the price of a two-week fraction in a comparable unit and season.

  1. Will Points members pay less Club Service Fee than fractional owners?

No. Club Service Fees will be similar between the two products when comparing similar unit configurations and seasons.

  1. How will these changes affect my fractional agreement and benefits?

The new Deluxe Suites configuration of phases 3 and 4 and the launch of points-based memberships will not affect you when staying at Grand Residences or your President’s Circle benefits:

  • You will continue receiving all the benefits of your President’s Circle membership and Grand Residences fractional agreement
  • The usage of your inventory will continue operating under the same policies and you will still be able to participate in the Credits overlay program to add flexibility to your stays
  • The fractional product that has been sold so far will continue selling in the future with the same conditions and benefits

However, in order to create Grand Residences points-based memberships that work alongside our vacation ownership points memberships, it was necessary to adjust the current credit values in the Signature Club for Grand Residences.

  • This adjustment will not affect your transactions within Grand Residences, as you will keep the same exchange power that you had before.
  • However, when you request a reservation to stay at our other Vacation Ownership resorts, your exchange power will appear to be reduced.
  • To compensate for this, we have put a discount in points in place that will come into effect whenever you wish to make a reservation. This discount will improve your exchange power for reservations at our other Vacation Ownership properties.
  1. When will the sale of Grand Residences Points-based Memberships begin?

We will begin selling Grand Residences Points-based memberships as of May 28, 2018