At what point is it too much?

[DiznyMagic]

Hi guys,

I just want your input on this...At what point (if at any) do you think it may become too expensive to buy into DVC? I heard points will be up to 80.00 per point soon. We became members two years ago and are taking our first cruise with points but I know every time they call me to buy more I really struggle to figure out a way to do it (because ofcourse you always want more points). I guess there is always the option to stay with your original points.. but it sure is nice to have extra and not have to borrow!

[spiceycat]

with me it is more the place - I love the BC, so I will definitely add on there. However I don't care for the DI so no I won't there. After the BC it would have to be the Polyn or AKL to get another add on out of me. and I don't think that will happen.

[DVCDAVE]

There are several variables in determining at what point it becomes to expensive to buy in to DVC.

1) The cost of Hotel reservations, in particular where you would normally stay.

2) How long you stay.

3) How frequently you return to WDW.

4) How much time is remaining in the DVC program.

Obviously points 1-3 are unique to each person and you should do the math as it pertains to you. Most people feel they break even in 5 to 6 years. Some less, some slightly more.

[ZerasPride]

Hi there DiznyMagic, a fellow Clevelander here!

DH and I were discussing this very topic yesterday. He is no Disney fan and even though he agreed to our initial purchase, I don't think he would agree to any add-ons. I think I'd like a modest add on at either WLV or the BCV. Our home is Hilton Head and I love it there but I never thought it would be this nerve racking to wait for the 7 month window to open and have my plans sort of "on hold" until I know I can get something on property. I don't regret my purchase one bit and in some ways I'm glad we don't have more points than we do at Hilton Head. If I can (one day) convince him to add-on, it will definitely be on property. Of course, we'd have to add on enough to cover us for a 1 bedroom off season at WLV or BCV for at least 6 nights to satisfy me and that would take 155 points. With banking and borrowing that shouldn't be a problem every 3 years which is all I think we'd really need.

Anyway, I didn't mean to go on and on. Just wanted to say we have discussed this issue in depth at my house and DH feels we have enough and besides our budget really cannot take an add on at this point. I don't like the idea of always being in the "red" so to speak and always borrowing points but I guess that's exactly what we will be doing as I hope to book the cruise for our 10th anniversary next year. I guess I could have bigger problems so I'll stop whining. I am happy and truly grateful we have any points at our disposal but as you mentioned, it should would be nice to have lots more! :D :D

Lisa

[Granny]

This thread started with the phrase "at what point...."

I agree with everyone's assessment, but I can't see adding on points in another 10 years or so, unless the price starts dropping. I know 30 years of use is still a lot, but at some point (the thread starting phrase) it won't be worth it to add on.

Let's say resort rack rates keep rising. But let's also say that DVC keeps increasing the price. So in 10 years they are selling EPV or whatever, at $100 per point. That doesn't make sense to me, even though it may be cost justified by the resort rate increases.

"At some point", they will price themselves out of the premium people are willing to pay to stay on-site, especially with fewer use years each year.

[Orky15]

One more clevelander speaking here!!!!

I am EXTREMELY tempted to buy a BC add on before they go up in price... I know that I can't afford it though, and my fiance wouldn't approve of adding on before we even took our first DVC trip.

[DiznyMagic]

Wow great to hear that I am not the only one thinking along these lines. If you do your homework and are willing to stay at a moderate resort AND if you can only afford to go once a year to Disney (which the average family is lucky if they can do a once a year trip) then I agree, DVC will price themselves out. I am sure that they have had to think about this especially as the years progress and the club starts to near its end.
But for now I will also stop whinning and at this rate we may only afford to go every other year so that we can bank/borrow. I guess it could be worse!

Thanks for your input!

Great to hear from so many Clevelanders!! :D

[ZerasPride]

It is nice to know there are fellow Clevelanders out there in cyberland who love Disney as much as I do!

I truly don't think an add on is in our future no matter how attractive DVC makes the incentive for BCV. I know there is a thread on this board asking us to guess at what we think the incentive will be. For me to do an add-on, it would have to be a "no payment for 12 months" deal (lol!) or its probably not going to happen. Like you DiznyMagic and Orky15, we will have to allow the points we own to pacify us. I will say this, one of the reasons I felt purchasing in the 150-200 point range was sufficient was because I convinced myself we'd only be doing Disney trips every other year and that looks like it will have to be a possibilty or at the very least we'll be at our beloved Hilton Head every year (where we won't have to worry about park tix and such). Oh well, again, I'm just grateful we have any points and hope to be able to use them in good health for a long time to come! :)

Lisa

[IslandHap]

I think when we get to the "at what point" point, Disney will offically address the 2042 question.

It seems, IMHO, that this will probably occur in the next 5-12 years. If Villas @ Eagle Pines, or Disney's Downtown Villas (DI), begin a DVC II program, then Disney will have to address the 2042 question at that time.

I don't think Disney is too worried about raising the price per point so much that it hurts sales. Even if DVC units are not selling, CRO is renting them out.

[BeckyV]

ZerasPride- I own at BWV and VWL and have thought about buying more points at HH. I also thought about just trading points with someone who wants to go to WDW when I want to go to HH. That would eliminate waiting for the 7 month window.

[DiznEeyore]

Well, for us, they've hit that point with the next increase. Dh and I had lengthy discussions about doing future add-ons, and came to the conclusion over the weekend that whatever we own before the price goes up to $80 per point is what we will own for the run of DVC. Thus, we did a small add-on today, and are content. :) I suspect we are in the minority, tho! ;)

[Eeyore2U]

I think as long as it is cheaper to add on then pay rack or discounted rates in the hotels it will be worth it. I keep asking DW to add on at BCV but she says our 150 @ BWV and 150 @VWL are enough. :rolleyes: I want more!!!! :D

[Dean]

It will be a price vs quality vs length of time remaining calculation for anyone who should consider DVC anyway. Obviously there are those that DVC is not right for now at any reasonable price. For full price based on current situations, I'd say that anything less than 30 years starts to beg the question. There will be a market likely up until the last 3-4 years or so but it will be at an ever reducing price. That's why I said that Eagle pines would need a longer lenght of use than 2042 as it was very unlikely to be sold out before it reached 2012 and now I'd say that possiblity is even less likely than before, if it ever even happens. Regardless of the guides hype about EP still being a go, I don't see it happening, at least not nearly on time.

Prediction is that DVC will be selling for roughly around the same price as today or a little less (maybe $50-55 pp) with 20 years left after inflation and will decrease by around $2 per year for the next 10 years and then by around $3 yer year for the last 6-7 years.

[Granny]

Dean...

I think we're agreeing that after another 10 years the value relationship of the current DVC will change.

The only thing that could keep propping up the prices at that point would be a whole bunch of inflation. I'd rather have a devaluing DVC asset than that!!!!!

[Dean]

Originally posted by Granny
The only thing that could keep propping up the prices at that point would be a whole bunch of inflation. I'd rather have a devaluing DVC asset than that!!!!! True but the end result is the same. The overall value will start to decrease. That's why I hope that IF they offer an extension, they do it by 2010.

[ZerasPride]

I'm glad I came back to this thread one more time! Becky and Amy you've both given me lots to think about and I thank you. Trading with another DVC member who doesn't own at HH but who would be looking to stay there and I on Disney property is a great idea. I also like the notion of perhaps making a modest cash point purchase before the increase and then with banking and borrowing, I'd have enough of my own points for occasionally on-site stay. DH has already told me he doesn't want to accompany me when I go down to Disney so all I'd really need is enough points for a studio every two or three years.

Again, thanks guys, it's nice to have so many options! :D :D

Lisa

[HarrietSLP]

For dh and I , the point of too much appears to be now. We have been vacationing at Disney since the early 70's but now like to travel and explore other places as well. We still like to have our annual Disney fix but have no plans to purchase more pts in the near future. Also.....the maintenance fees have increased dramatically ( as we expected) at Vero and I don't want to have several hundred dollars of maintenance fees every month. Right now....we are happy with our 260 pts and certainly will not buy more at $80 a pt. I'll look for a resale first before I buy more points from Disney.

HARRIET
DVC Member '96 Vero & OKW
Next trip: DVC 10th Anniversary Cruise 4/7-4/11

[vernon]

If as most people seem to agree the break even is somewhere between 4-8 years then I don't see why DVC reaches a point where it is uneconomical with 30 years to go (i.e.2012). We have to all agree that the current price cuts are a reaction to Sept 11 and are likely to be an anomoly. As long as hotel rates increase , then there is no reason why DVC costs shouldn't increase at a similar rate for at least another 20-25 years.

I don't agree with the argument that DVC costs will decrease rapidly over the last 20 years of it's existance UNLESS you think that WDW room rates will be the same in 2040 as they are now, even with a moderate inflation of 3% per year, a room which currently costs $150 a night will be $447.85 ( plus tax) a night by 2040.

Lets says for example a studio at OKW, as they roughly go for $150 a night ( if you're lucky) at the moment, and inflation IS only 3% a year so the room is $447 a night in 2040 a 10 night stay in $cost is 4470 plus tax at 15%= $5140. Points cost will be 150. If you work that dues increase at the same rate as hotel rooms ( although they have historically increased at half the rate of hotel rooms) dues are going to cost 1663 per year . 5140-1663 = 3477. 3447/150 = $23.20 per point ( and you have enough points for a holiday the following year at a cost of dues alone)

If you borrowed the points from the next year ( i.e. use the last two years of points for one booking) then as long as you buy your DVC points for less than $46 per point you are saving money. It might seem a slightly long winded way of saving money but I don't think inflation will be that low and if DVC points are where Dean predicts ( less than $10 per point) I think people are going to be happy to save $2000 for a bit of paperwork ( and have a cheap holiday the next year).

While the sums may not be as good as people who have already bought remember, they still add up. DVC STILLS breaks even in most cases less than 8 years.

I know there are people keen on DVC 2 , but I think having two different entities is messy and IMHO Disney don't need it. I think you will see maybe one more resort after Eagle Pines ( finish about 2020) and then Disney will wait for 2042 to elapse before reselling the current resorts. They will first offer the DVC owners that remain a "discounted price" to renew and will then start sales to the general public a couple of years later. All this is speculation on a LONG time into the future about the future of DVC

But to come back to the original question
At what point? If you do your time/value of money there is no reason for the points cost of DVC to reduce for at least 25 years and IMHO 30 years is more realistic. The only reason for this to be unsound reasoning is if the price of WDW hotels decreases over a long period of time. I don't think that is likely, but it isn't impossible. Moderate inflation is sufficient to keep DVC value, IMHO deflation is more damaging to people's assets and wealth than a small and manageable general cost of living inflation (see Japan's current problems)

[DVCDAVE]

VERNON;

You have made the best argument I've heard in a long time. I also agree with you about DVC II, I never understood why, with 40 years to go why Disney would worry about starting DVC II, then there would be two products competeing, the 'old, dusty, run down, and well used DVC', and the brand spanking new, modern, DVC II. What ?, makes no sense to me, it would automatically deflate a succesfull, and well selling product. I wouldn't let my marketing department touch it with a 10 foot pole, hence they wreck it.

[Dean]

I'm afraid I disagree with Vernon at every turn. I look at this as a timeshare ownership and to a certain extent like a financial investment. In large part it depends on what you are comparing to and what one's vacation and specific WDW vacation habits have been as well as family size and makeup. Those that would go to WDW every year and stay for 5-12 days in a Deluxe hotel will have a far different comparison than someone who would go once every few years and maybe stay off site part of the time or at most stay in a moderate. You must also compare to discounts and should never use the rack rates. While the best discounts may be fleeting and hard to come by, there will always be some type of discount even during Xmas most years. It also depends on your savings habits. Someone who always takes nice vacations but can never save any money will look at things much differently than myself who saves every month (even before I pay my mortgage) and took the money out of savings to buy both DVC contracts. Those of us that had the free passes will also fare far better than those that didn't.

Of course DVC isn't strictly about the dollars, otherwise non of us would likely own. You must look at your personal habits and financial situation. Most should also consider the lost earnings on the purchase price as well as the interest paid if one financed. Type of room utilized, weekends vs weekday and season of travel will have a large affect on the numbers. Expecting a break even in 4-8 years is a best case scenario and not realistic for most people. For most regular visitors who did not have park passes, I'd guess one is looking at between 15 and 20 years in most situation. Obviously there are variables inpossible to account for and those that will vary from one family to another.

As for DVC 2, it really doesn't matter as any DVC resort will be included in the overall club regardless of date of expiration.

In terms of end of time resale value, again, I look at it much like I would any other timeshare. When you note that closing costs will increase, likely more than room costs will, that the price is somewhat articificially high because of the ROFR as well as the continued selling of new resorts and that the maint fees late in the course are likely to be far higher according than they are now; I stand behind my original evaluation. WDW rooms will not continue to increase above the rate of inflation and actually have come down overall within the past 7 months, even before 9/11. BW studios have been available at far less than the $150 Vernon noted though specials will be variable and not available at all times. Also a 40 year old room will be far less according than a 5 y/o room even with adequate upkeep.

I've seen MX timeshare (on the DVC exchange list) with 6-7 years left sell for $1500 for a 2 BR for a high season week even when there was the promise of a cash residual at termination worth 2-3 times the purchase price. I've also seen DVC contracts offered for sale and a price accepted for $40 per point though DVC did offer to buy that one back and they ended up at $50 pp, this was about 2-3 years ago and a member of this BBS. I've seen OKW contracts offered for sale and a price accepted of $50 per point within the last month with current and banked points though the deal fell through related to a divorce situation. I've seen BW offered for $54.50 per point this week with current (about half of them) and upcoming points intact (Summer 2002) available. Whether DVC would or will let these deals go through is the question but the fact is there are those out there willing to sell for far less than is batted around this board. Once DVC no longer cares about propping up the value, the target price will drop significantly. I've bought 9 timeshare weeks over the past few years and in every case, I could have sold immediately for more money than I paid.

[Granny]

I'm going to throw my opinion in with Dean on this one. I'm not a timeshare expert but I don't see the value proposition as maintaining after another 10 years.

Bottom line....is something with 30 use years worth as much as 40 use years. There are some practical matters to this. I bought last year and I expect my contract to take me through the end of my life (I'll be 86 so that's close enough ;) ). Those who are in their late 20's or their 30's will see the current DVC take them into their 60's or 70's.

That will change in 10 years, and decrease every year thereafter. At some point, the value must decrease.

And one other point that will probably get me in trouble. I happen to think that WDW and DVC are enjoying a lot of prosperity due to the boomers who are fairly well-off and ridiculously nostalgic (I include me in that description). I'm not sure that AS MANY of the Gen X'ers and such will be willing to pay for the magic of staying on site. If demand drops, value drops.

Go ahead and take shots at this opinion. Or poke holes in my argument. I promise not to take any of it personally. :)

[John.Disney]

<i>I've also seen DVC contracts offered for sale and a price accepted for $40 per point though DVC did offer to buy that one back and they ended up at $50 pp</i>

Dean or anyone else,

Why couldn't the two parties above submit the paperwork to Disney at $50 per point and arrange seperately for a $10 per point brokerage fee to go to the Buyer? Isn't this what happens with broker resales except the broker keeps the money in this case? This seems to penalize buyers for not going through one of the three brokers who apparenty have a corner on the DVC resale market.

I'm looking into resales, but I don't think I can pay $60 per point at OKW knowing that the seller is only going to see $50-52 of that. If I am able to find a seller at $55 per without a broker, why should I have to worry about Disney's ROFR just because the seller isn't going through a broker charging $1,000+ and including the fee to inflate the per point contact amount submitted to Disney?

<i>Once DVC no longer cares about propping up the value, the target price will drop significantly</i>

I think that it's much more than just propping up the price through ROFR. With all the marketing they are also propping up the general interest. My guess is that the vast majority of prospects who buy into DVC in the resale market only do so after seeing a tour with a DVC sales guide. There's no way of knowing how far prices might come down, but demand will certainly fall off if the tours and models an $99 off sight specials go away.

John

[vernon]

Dean, I respectfully agree to disagree as most of this is guesswork on future costs I won't bore people by continuing that pointless debate.

I do disagree with you strongly on the breakeven for most people being 15-20 years. virtually every person I have spoken too, either in person or via posts, has come out less than 10 years. If there is anyone who thinks their break even is closer to 20 I'd love to see how they come to that figure, IMHO unless you are being very careless with your points use I can't see how that is possible. You have to compare on a like for like basis ( or at least a moderate on site resort) to give some fair result, where is your next comparison? staying in a tent once every 10 years? that would be much cheaper but doesn't give a fair reflection.

[Dean]

John.Disney, the way the ROFR works is that you agree to a price with a seller, sign a contract and then submit it to DVC. DVC then decides if they want to buy it at that price or not. The seller and broker get the same but the buyer loses out. They should get all of their money back but obviously that wasn't the goal. Of course every contract is different in terms of points availability, maint fees, broker costs, etc. I've always wondered what would happen if you submitted some type of contract that was impossible for DVC to match. Say a timeshare trade plus/minus cash or something like that. You could of course come up with a side deal for the seller to return a portion of the proceeds. If DVC buys it back, they send a check to the broker and a check to the seller directly. They previously gave one the chance to resubmit but apparently aren't doing this anymore.

Vernon, no problem. It truly depends on exactly how you compare. If you stay on Friday/Sat nights, DVC is a horrible deal. If you stay in a studio only and during the week, it's certaily a good deal. I'll bore you with a few simple numbers just to illustrate somewhat. I'll ignore inflation as the value of a DVC room, the value of the money invested vs paid for DVC, the cost of the alternative arrangement and the dues should even out over time.

Purchase price of 150 points currently $12250 as this will give you a studio for a week consistently. Yearly dues at VB (highest dues) is $600 per point. Cost of a moderate currently is as low as $84 per night but that number is too low to use, so lets assume $119 plus 11% tax (current tax but may go down by currently proposed laws). That gives you $925 per year cost for 7 days. That's a savings of only about $325 per year and it will take 34 years to break even in that situation.

I realize this is a hard example and extreme to a certain extent but I think the most fair one to look at true value of as close as you can get apples to apples. IF you stay off property, you can get a 2 BR nice timeshare consistenly for around $700-750 per week and you will never break even. If you stay only S-F, you are better off. If you compare to Deluxe accomodations, you are better off. Buy cheaper, get free passes, enjoy the luxury of extra space, etc all factor in. I just wanted to illustrate that the break even in 4 to 8 years is comparing to DVC rack rates, assuming a visit every year to WDW the same length as you do with DVC and usually assumes either the DVC room costs or a DX hotel. That is, frankly, more unrealistic than my bare bones example. Again, ok to disagree.

[vernon]

Vero is $600 per point dues YIKES , I'm presuming you mean total per year $600 LOL.

I think you're wrong to use 150 points as a cost for a week. On OKW a week in choice season is 90 points, in adventure 90, in Dream 100 in magic 120. ONLY at Xmas does the week come to 155 points. IMHO while I love OKW as a resort it's lack of proximity to parks and facilities mean it is the best comparison to a moderate resort, if you want to use the points cost for BW or VWL then you have to use the $$ cost of a delux.

You can't just ignore inflation when calculating a forward value of something

I will agree if you only plan to stay Friday or Saturday nights then DVC is poor value, I don't know of anyone that bought DVC with that intention, but they might exist.

[joepoe]

Long-time lurker here. As an accountant, I figured out the present value of our 270 pts at BWV by taking the current rack rate of $4600 for a 2BR for a week and assuming 3% inflation per year only. I calculated our points are worth $173,000! That is what our 40 years of vacations are worth in todays' dollars!
Secondly, using the same 3% inflation, I figured the rack rates will be $15,070 to stay at BWV for a week in 2042. That year alone is worth $56.00 per point again using our 270 points! My next project will be to see where the point is over the next 40 years that the price per point cannot go up any further. The price per point will have gone up 27% since we bought in June 2002 at 63 pp. That's 5% per year. Not bad.

BTW we (ME, DW and 3 DD) are looking to buy a re-sale at OKW. We like the change of pace from BWV, the roomieness and the fact that points go further there. We also like the 11 month booking window- our only sticking point is we are already spending 5 grand a vacation on airlines, ticket media and misc stuff. Can we justify spending more?

Joe P. BWV 98

[joepoe]

[QUOTE. The price per point will have gone up 27% since we bought in June 2002 at 63 pp. That's 5% per year. Not bad.

So sorry... I meant the price will have gone up 27% when they raise the price to $80 in June. We bought in Oct 98...

JP

[joepoe]

We will reach break-even next year, after 6 years and 7 trips.

[CRobin]

somewhere in between.

Deeply discounted rooms have been easy to find for the last 9 months, but try getting a deal on a deluxe (more comparable to DVC) when times are good.

At the same time, using rack is a bit unfair, for the same reason. I doubt anyone is paying rack today.

I've worked my own math, using conservative inflation, rack less 25% and potential returns on a present investment, and still come in at the 8-10 year range, much faster if you make more trips

[Dean]

Vernon, you know how high those VB dues can be. LOL.

As I've pointed out at every turn, you can manipulate the numbers in almost any way you want to. Variables include how often you'd go IF you didn't own DVC, where you'd stay for CASH, your family size, length of stay, timing of your stays, etc. It also depends on whether you financed, home resort, when you bought, savings habit, did you have free passes and purchase price.

My example was on the extreme side but not in the outragous category. One can currently find moderate rooms for $84 per night and $119 or less has been the rule if you leave out Premier times, even for summer. True a Moderate is not exactly comparable to BW or WLV nor is it to OKW but I suspect that'w where most of us would stay if we didn't own DVC. One can also shift the numbers by taking into account dining costs. Of course there are all the hidden costs that we all encur because we end up going more, staying longer, have "extra" money to spend since the rooms are covered, etc. If you include using DVC for the DCL, DC, etc; the numbers look even worse.

joepoe, $11250 would be worth around $273000 in 40 years and $82000 in todays dollars if you assume 8% return and 3% interest, both reasonable assumptions form an acconting perspective. I realize that one might have spent the money from the earnings on vacation which would erode the actual amount one would have at the end of 40 years. As for taking the rack rate of a 2 BR for 7 days, that's a chunk. One can also find off site timeshares or similar oportunities where one would never break even with DVC. I know that there is more to this equation than money, else many of us would never have bought. I just don't want the newbies and potential members thinking they are going to automatically going to break even in even 8-10 years. One could take the same $4600 you'd spend in a year for a DVC 2 BR, buy a nice Marriott with yearly fees less than half DVC and stay in a timeshare every bit as nice as DVC every year for 40 years or more. To some it's worth paying for on property but for many others it's not. Some actually prefer not to stay on property even when visiting WDW, for a variety of reasons. Also to think that DVC maint fees long term will only go up by inflation is likely a bit optimistic. I know they really haven't even gone up that much the last 2-3 years but I'm sure down the line there will be some pretty hefty increases.

From my perspective, DVC will never make sense from a strict financial standpoint. At best I view it as a break even. What it does do it give me the chance to stay in nicer, larger, on site accomodations consistenly, something I could not do before.

Just trying to point out there are many ways of looking at this and not all put DVC as the best alternative even for those that regularly go to WDW.

[joepoe]

Thanks, Dean. I appreciate your perspective, (and everyone's).
You've obviously done your homework and looked at this from many angles.

Joe

[PamOKW]

Bottom line....is something with 30 use years worth as much as 40 use years.

I'm not sure when this very reasonable line of thinking will kick in. Today, people are paying 47% more than the original purchasers for 20% less use time (40 vs. 50 years at $75 vs. $51 per point.)