North Carolina Resort Points in a New Direction

In 2018 New Bern, located near the Outer Banks of North Carolina, was devastated by Hurricane Florence and the resort community was heavily damaged. The Resort at Fairfield Harbour sustained extensive damage from high winds and flooding associated with Florence. This damage caused 100 of the 142 units to undergo substantial renovations and repairs leaving the units closed for over six months.

“One year later, our five associations have recovered and we are back in business,” said Aaron Maune, president of Resort Management Group that manages the Sand Castle Village Condominium, Windjammer Villas Condominium, Windjammer Villas II Condominium, Fairfield Harbourside Condominium, and The Fairways Condominiums.

Along with these renovations, the master association representing the condominium associations decided to take their sales strategy in a new direction and established the Premier Resorts Collection. Premier is offering a new product that is attracting a lot of interest in the industry — a membership program in which members purchase points in lieu of a fixed week deed. The number of points varies on their individual vacation plans but typically ranges from 25,000 – 50,000 RCI Points. Members must also join the RCI Pure Points Program in order to enjoy the product.

The points in the program are derived from the RCI point value of the interval inventory contributed by the individual condominiums. Each resort has a proportionate share of the total amount of points based on the intervals it has contributed. That share determines how much of the sales proceeds and annual fees they are entitled to. The inventory is held in trust by FNTC America and the program is managed by Resort Management Group. Among other things, the trustee performs annual audits to be conducted to ensure the product is not oversold.

Resort Management Group, LLC engaged the law firm of Gallagher, Callahan & Gartrell, PC to create the program and Harbour Partners, LLC to market and sell the points.

When asked about the program, Lee Johnson, President of Harbour Partners said, “What makes the product unique is the member enrolls for a four-year period with the right to re-enroll in successive four-year increments for a minimal fee.” Otherwise, the points are returned to the inventory pool. “Consumers like the simplicity and flexibility of the points while simultaneously enrolling in a program that does not require a perpetual obligation of maintenance fees,” added Johnson. If financing is desired, it is completed through a credit card program or it is held in-house.

Resort Management Group’s Vice President Sarah Herrmann and Johnson were attracted to this concept for a number of reasons. Herrmann explained, “We were facing a lot of resistance from consumers with the traditional product and needed something new. With the hurricane renovations behind us, the time was right for a fresh approach.” Johnson confirmed, “Consumers didn’t like the less attractive week intervals, high maintenance fees, deeded ownership, and the long term commitment.” Both said that the simplicity of the product is a real sales point. Also, they are selling one product for all five resorts which makes everyone’s job easier. The program is modeled so that additional resorts can join.

For the resort associations, it is the equivalent of a short term rental of their inventory. They get a return on the contributed intervals based on their point value. The amount received will be less than if they sold all their inventory to consumers and received the full maintenance fees, but doing that successfully is highly unlikely, and the program expects to generate significant income to the resort through a revenue share of sales, an increase in the number of sales, and an increase in collection rates.

For the manager, its tasks are not much different from those of a traditional program. It keeps the sales and membership records, issues certificates of membership prepares the annual budget and collect the fees. It has broad powers to administer the program and coordinates its activities with the trustee. However, all booking is done through RCI, therefore allowing for a seamless reservation process for the members. Herrmann emphasized, “It is important to assemble a good legal team to make sure the program is properly established”.

For the sales team, this product is not treated as a timeshare in North Carolina. As a consequence, the program was easier to establish, the documents are simple and consumers enthusiastically embrace the flexibility of the membership. Consumers sign a membership agreement with a 5-day rescission period and are given a disclosure statement that thoroughly explains the program. A website is also set up to provide more information. Johnson said, “His team is energized to have a hot new product to sell.” Johnson also commented that the product is perfect for legacy resorts.
For Resort Management Group and Harbour Partners, this was an ideal solution to the problems they were facing and the program is off to a great start.

John Funk is a principal in the law firm Gallagher, Callahan & Gartrell, P.C. in Concord, New Hampshire.