I don't mean to split hairs, but I disagree with your interpretation.
On page 2 of the T&Cs, II defines the term "Host Accommodations" as "the resort into which the Individual Member has been issued a Confirmation."
On pages 8-9 of the T&Cs, II specifies how the "Host Accommodations" are permitted be used. There, the T&Cs are specific that "Host Accommodations may be used only by the Member and accompanying guests, unless a Guest Certificate is obtained from II."
It's quite clear, in other words, that the Member and his or her entire travel party are entitled to use the Host Accommodations without a guest certificate. II never specifies that Host Accommodations are associated with a specific unit as assigned by the resort; rather, II clearly specifies that the term refers to the use of the resort itself.
The wording you bolded does appear to confuse the issue, but it is only applicable to cases where there is a "failure to secure a Guest Certificate where required for a guest of the Member when the Member does not plan to occupy the Host Accommodations." And that, according to II's own definitions, does not apply to the scenario being discussed.
Disclaimer: IANAL, just a regular citizen who insists that companies abide by the same T&Cs their customers do, especially when the companies' own lawyers wrote them...