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MTMom
02-14-2002, 05:42 PM
Is there any "magic formula" to calculate the savings you'd get by buying into DVC?

We have spent $6000 two years in a row for Disney Cruise Line land/sea vacations, and are trying to figure out the bottom line.

Can anyone help me out?

BTW, sorry about the many, many posts lately on the DVC forum.

Dean
02-14-2002, 07:06 PM
It's such a personal decision that it's hard to come up with a good rule of thumb. It's not going to save you money on the Cruise portion though and is actually less value than using cash for the cruise. For the exact situation you quote, you need to consider where you stayed and what your overall vacation habits are as well then assign a price to that based on a DISCOUNT from the rack rates. For fun, also compare points price to cash with the cruise but I think you'll come out ahead on cash there. We can easily give you the points for the cruise and help you with a value and points cost for a "comparable" DVC stay for the land portion. I'd use the DVC resorts and not The Disney Collection option to stay at places like AKL or the GF.

Just for example, a moderate can be had at around $100 per night or less (frequently less) and AKL for $185 per night including Tax and WLV as low as $165. The 3 day cruise is 214 for 2 for Category 9 and the 4 day is 248 for summer. Additional children (3-12) are 50 and 63 each and adults (and children 13 and over) are 56 and 69 each. So putting it all together a 4 day stay at WLV for summer will be 52 points in a studio and a 3 day cruise will be 314 points for a category 9 or 364 overall. You could have had this stay for around $2600 to $3000 round numbers. Of course you could have used DVC for the onsite and then pay cash for the cruise if that was better. DVC might work out better for higher priced cabins which tend to be discounted less.

Lisa P.
02-14-2002, 07:11 PM
If you would plan to use DVC points regularly for the Disney cruise, I'm afraid you wouldn't find it as valuable. That is a benefit subject to change. How many points would be needed to take the cruise and add your land package?

If a purchase (40 years) costs you $60/point (resale) plus annual maint fees of $4/point, it's safe to say that you'd be paying at least $6/point for usage. With all the lost opportunity cost (interest dividends or added loan interest costs), some people say the cost of DVC is more like $8-$10 per point. It's certainly higher for those who will pay $80 per point in the near future.

So take your points cost for your anticipated vacation usage with the points. Multiply it by 6 or 8 or 10 and you will be able to compare it to your expenses when paying cash. Use the same category room and the same time of year for your same (or comparable) hotel room stay. Remember that there can be specials, discounts and incentives when paying cash for cruises and hotel stays.

boudreaux0
02-14-2002, 07:23 PM
I created a very in depth spreadsheet that can show you savings. It take into account the increase in room rates and in your annual dues. If you would like it give me your email address and I will send it to you. It is in Excel format.

Tinkrbell
02-14-2002, 08:40 PM
boudreauxO- I would love an email of that spreadsheet. I have tried several times to "figure it out", and we too have spent thousands on years of Disney vacations, but never seem to take the plunge and buy into DVC.
Thanks

pluto109
02-14-2002, 08:50 PM
cost of a point is around 5.00,including dues ..okw studio in jan is 8 pts..=40 dollars...cash price 250 +tax...:) :bounce: :bounce: :bounce:

John.Disney
02-14-2002, 11:00 PM
<i>Is there any "magic formula" to calculate the savings you'd get by buying into DVC? </i>

I don't know if it's magic but if you make enough assumptions you can hammer it down. I'll compare a studio at VWL to a Woodsviev room at WL because I think that is about as close as you can get to equivalency. Here are my assumptions...

# of points purchased...250
Cost per point...............$70 (current BCV cost)
Dues today per point....$3.77
What you get................2 weeks in a studio, Dream season, 40 years
WL Woodview cost today... $160 (discounted Dream season)
Inflation (discount) rate..... 3%
Dues Inflation rate.............. 4%
Hotel Room Inlation............ 5%

Cummulative Present Value Table:

Column 1- Actual Cash Flow for DVC purchase
Column 2-Cummulative Present Value of CF for DVC purchase
Column 3- Actual Cash Flow for paying cash for your hotel
Column 4-Cummulative Present Value of CF for paying cash for your hotel

<pre>
Today ($17,500) ($17,500) $0 $0
1 ($950) ($18,422) ($2,486) ($2,414)
2 ($988) ($19,354) ($2,611) ($4,875)
3 ($1,028) ($20,294) ($2,741) ($7,383)
4 ($1,069) ($21,243) ($2,878) ($9,941)
5 ($1,111) ($22,202) ($3,022) ($12,548)
6 ($1,156) ($23,170) ($3,173) ($15,205)
7 ($1,202) ($24,147) ($3,332) ($17,915)
8 ($1,250) ($25,134) ($3,499) ($20,677)
9 ($1,300) ($26,131) ($3,674) ($23,492)
10 ($1,352) ($27,137) ($3,857) ($26,362)
11 ($1,406) ($28,153) ($4,050) ($29,288)
12 ($1,462) ($29,179) ($4,253) ($32,271)
13 ($1,521) ($30,214) ($4,465) ($35,311)
14 ($1,582) ($31,260) ($4,688) ($38,411)
15 ($1,645) ($32,316) ($4,923) ($41,571)
16 ($1,711) ($33,382) ($5,169) ($44,792)
17 ($1,779) ($34,459) ($5,427) ($48,076)
18 ($1,851) ($35,546) ($5,699) ($51,423)
19 ($1,925) ($36,643) ($5,984) ($54,836)
20 ($2,002) ($37,751) ($6,283) ($58,314)
21 ($2,082) ($38,870) ($6,597) ($61,861)
22 ($2,165) ($40,000) ($6,927) ($65,476)
23 ($2,251) ($41,141) ($7,273) ($69,161)
24 ($2,341) ($42,293) ($7,637) ($72,918)
25 ($2,435) ($43,456) ($8,019) ($76,748)
26 ($2,533) ($44,630) ($8,420) ($80,652)
27 ($2,634) ($45,816) ($8,841) ($84,632)
28 ($2,739) ($47,013) ($9,283) ($88,690)
29 ($2,849) ($48,222) ($9,747) ($92,826)
30 ($2,963) ($49,442) ($10,234) ($97,042)
31 ($3,081) ($50,675) ($10,746) ($101,340)
32 ($3,204) ($51,919) ($11,283) ($105,722)
33 ($3,333) ($53,176) ($11,848) ($110,189)
34 ($3,466) ($54,445) ($12,440) ($114,743)
35 ($3,605) ($55,726) ($13,062) ($119,385)
36 ($3,749) ($57,019) ($13,715) ($124,117)
37 ($3,899) ($58,325) ($14,401) ($128,941)
38 ($4,055) ($59,644) ($15,121) ($133,858)
39 ($4,217) ($60,975) ($15,877) ($138,872)
40 ($4,386) ($62,320) ($16,671) ($143,982)
</pre>


continued...

John.Disney
02-14-2002, 11:01 PM
continued...


As you can see, the cummulative savings are significant and the break-even point (with these assumptions) is roughly 11 years. I would be happy to plug in <b>your</b> assumptions and re-post the results. You might also want to include how often you plan on using points for non-DVC resorts as I can factor that in. You will find that the savings can decrease rapidly if you plan on using the points for cruises etc.

If you used a $99 moderate instead of a WL room in the example, the break-even goes out to 22 years.

If on top of this you assume 20% of your points will be used for non-DVC resorts, the break-even goes out to 27 years.

If on top of this you assume dues and hotel rooms only go up with inflation at 3%, DVC expires before you break-even.

Post your assumptions and we'll see what you get!

John

PS I can also factor in the opportunity cost of investing the money but suprisingly I've found that this does not drastically alter the final results, although it depends on the assumed return. The reason for this is that although you will have more money to invest <b>up-front</b> if you don't join DVC, you will have less money to invest <b>each year</b> for the next 40 years because you'll be paying cash for a hotel room instead of paying dues. Eventually these yearly savings surpass the initial cost of DVC (your initial <b>investment</b> if you <i>don't</i> join) and you start making more money on these saving than you would have by paying cash and not joining DVC. The break-even point will move out marginally (due to investing up-front versus paying into an annuity), but the savings (earnings) in the end can be tremendous. IOW, by including these calculations, DVC actually becomes an even better deal from a financial standpoint (assuming normal returns).

Dean
02-15-2002, 05:48 AM
John has the most realistic set of numbers I've seen in a while. The only things I'd add to the numbers are that I personally would need to assume the investment rate of return, would use the same inflation for all items and just to let you know that you can skew the numbers in favor of buying DVC is you avoid weekends as the points are much lower during the week. This is a good way to downplay those that say you'll break even in 4-8 years, it's unrealistic for most of us. 15-20 is far more realisted to think of break even on buying DVC or not. Good luck.

MTMom
02-15-2002, 07:50 AM
OK, what assumptions should I provide to you?

We are considering buying into the BCV, and historically, we have stayed in a Garden View Poly room for 4 days, then take a 3 day cruise. We are thinking that in the DVC, we would buy in at the minimum points, and use them for the WDW section of our trip, then just pay cash for the cruise. We usually travel in off -peak, or shoulder times. What other info do you require from me in order to run those numbers?

Thank you so very much for your honest and realistic number crunching. That is EXACTLY what I was looking for.

vacationman
02-15-2002, 08:34 AM
Even using points for a cruise is not so bad an idea. Try this scenario:

Buy 300 points resale at $58 per point (incl. maint and taxes and closing costs) with 300 points available this year, 300 more in Oct this year. These deals are out there.

You would have spent $17,400. Add in the cost of funds at a hardy 7%, your cost after two years would be $19,921.26. Add in maintenace and taxes for two years at $2,100.00 and your total in is now $22,021.26.

Now, you take a 7 day Western Carribean cruise during Peak Season in a Category 6 (that's with a veranda - very nice). Your family of four is two adults, one teenager and one under 12. Without transfers, airfare and travel insurance, that would cost you $5,515.08. In points it would be (2002 point chart) 772 points.

As of October, you have 600 points available and you borrow the remaining 172 from the next year (Oct. 2003 allotment) for the cruise. You now have 128 points left to use before you would get your next 300 in Oct. 2004.

That 128 could get you a full week at a VWL studio during dream season or five days in a one bedroom at OKW during peak season.

Upon hitting your second year, you decide to sell your points. Here is the subjective part - I will assume you could sell your points at $53 per point (net). That would be $15,900.

You have now saved $5,515.08 on the cruise costs and at least $700 on your stay at VWL (assuming you could have gotten that room for $100 per night - likely higher). That's $6,215.08.

Subtract the money from the sale of your points and what you did not spend for the VWL stay and the 7 night West Caribbean cruise and your grand total cost would be negative $93.82 - so you wuld be up almost $100. That's better than real break even in just two years.

Of course, breaking even is not the point. The longer you stay a DVC member, the better it gets.

I know there may be something I missed, but anyway you look at it, if you like to go to Disney properties with any regularity, DVC is a bargain.

Dreamfinder2
02-15-2002, 09:01 AM
Being simpleminded as I am about finances (I am not an accountant nor the son of an accountant):rolleyes: , when we were obsessing over the "to buy or not to buy," I didn't factor in an investment rate of return, assuming I would've invested DVC funds into something else. It was easier for me to think of our DVC funds being "anyway money," money I would be using toward vacations anyway, and therefore not investing.

For us, that made DVC even that much more attractive, but I wouldn't cast you in our autobiography. Is DVC a "gut" decision or a well-reasoned, thought out decision? In our case, it was a combination of both.:)

vernon
02-15-2002, 09:05 AM
Nice spread sheet John, I did something similar to see how it worked for me before I bought in.

MTMmom, I don't know what days of the week the cruise/WDW breaks usually work out to but as Dean correctly says it does make a big difference to your cost effectiveness. If it works out that you spend the weekends on the boat, then DVC is going to be a much more attractive option than if the boat is midweek and the land time covers a Friday and Saturday. As you'kll see if you check on the DVC points cost calculator a weekend is about 2.5 times the cost of a weekday. If your 4 day stay at WDW is all on weekdays a studio is going to cost between 32 points and 60 points for most of the year ( excluding Christmas) whereas a 4 night day which has a Friday AND a Saturday in it would cost between 56 and 105 points. Just to clarify any stay including a weekend will ALWAYS cost almost double that of a stay with no weekends USING THE SAME SEASONS.

Tinkrbell
02-15-2002, 09:51 AM
If the break even point is 11 years based on $70/ppt at todays rates for a remaining 40 years.

What will it be at the proposed $75 or $80 /ppt with less use years?

Also when do you think that DVC resales will no longer be marketable? 35years? 30? ...??

Thanks for all of the info. :) You are making my decision alot easier.

John.Disney
02-15-2002, 09:55 AM
Okay, first off it is worth noting that 150 points is way too many points for four days at the BCV in a room equivalent to a Garden View Poly room. So you will not save money if this is all the time you would otherwise spend in a Disney Resort.

If you don't mind spending more and just want to know if you're getting a good 'value' for your money, we can still do the analysis. You have to assume either a longer 'land' stay in a BVC studio, or you have to let me know what it is worth to you staying in a 1br or 2br villa versus the Poly room on a per night basis (I can estimate this for you if you wish, I avoided this problem in my example by using the 'roughly equivalent' accommodations of a VWL studio vs. WL Woods View).

I think it is important to make a distinction between two important questions...

1) Is DVC a good economic value in its own right?

2) How expensive is DVC relative to what <b>you</b> would otherwise be spending on vacation accommodations?

I think the answer to the first question is almost always yes (unless you assume annual dues go up <b>much</b> faster than hotel prices), and can be illustrated quite easily by comparing 'equivalent' accommodations.

I think the answer to the second question varies greatly. It is my unscientific opinion that when people join DVC, in many cases, they end up spending <b>more</b> on their accommodations. But since they are getting excellent <b>value</b> for the extra spending, they consider it a great deal.

If you think this applies to you, all I need from you is...

1) What discount rate would you like to use?
2) At what rate do you expect annual dues to increase?
3) At what rate do you expect hotel prices to increase?

...and I will estimate the rest and provide the analysis for you.

Otherwise, you are better off paying cash for those four nigts at the Poly every year, as this will cost much less than joining DVC.

John

DVCDAVE
02-15-2002, 10:15 AM
JOHN.DISNEY; I may be wrong, as I don't have a historical, but I remember seeing posts before on this forum that indicated the inflation rate for the Disney resorts was much higher than the 5% you used in your assumptions. If my memory serves me correctly I thought I remember it was in the 10 to 11% area. I've tried to get to the Disney Vacation & Reservation website this morning, but it seems to be down. I just want to see what the rate changes will be from 2002 to 2003.

Further, why wouldn' you use the cash cost of the exact room you would be using in DVC...ie: the cash cost of a studio at VWL instead of a WL hotel room ? otherwise you are comparing to unlike rooms. A WL room is a HOTEL room, a DVC Studio has a Sink, Coffee maker Microwave and a refridgerator. In addition, there are also perks, like free use of the sauna, workout room, and free video rentals, including some discounts. Therefore I contend that the cash comparison rate should be $269 per night NOT $169. If we make comparisons, it seems we should compare apples to apples.

Then again; it is only my opinion.

John.Disney
02-15-2002, 10:48 AM
<i>The only things I'd add to the numbers are that I personally would need to assume the investment rate of return</i>

If I have time over the w/e I will illustrate what I was writing about last night. Overall, it does not have a significant effect on the break-even date (pushes it out 1-2 years).

You are correct in wanting to factor in a higher investment return (my analysis implicitly assumes a 3% return in its discounting, which is too low). I am simply trying to say that it doesn't have a large effect on the break-even date. What you lose by not investing the money upfront you make back by having more money to invest annually, because you are paying dues (low cost) campared to cash (high cost) for your resort every year.

<i>would use the same inflation for all items</i>

So would I, but I find many people disagree, which is why I used the numbers I did.

<i>This is a good way to downplay those that say you'll break even in 4-8 years, it's unrealistic for most of us</i>

Seems a bit of a stretch to break-even that fast. You have to be careful not to confuse apples with oranges. As I said in my previous post, you must make a distinction between the <b>value</b> of DVC and your personal vacation habits. If you compare a 150 point contract to an annual one month stay at the GF concierge, then of course you will save a fortune with DVC and breakeven in under a year. It may be true, but its is not a <i>fair</i> comparison. You have changed your vacation habits.

John

John.Disney
02-15-2002, 11:04 AM
<i>What will it be at the proposed $75 or $80 /ppt with less use years? </i>

Small price changes do not have a large affect on the breakeven dates. The biggest factors are the assumed inflation rates for annual dues and hotel costs.

<i>Also when do you think that DVC resales will no longer be marketable? 35years? 30? ...?? </i>

My opinion is that this is closely tied to Disney's marketing efforts. As long as they are pushing DVC at the resorts, parks, and in the media, there will be a strong market for resales. When they are done building though, my guess is you'll see a significant drop off in demand for resales.

Your guess is really as good as mine.

John

Terry S
02-15-2002, 11:15 AM
John.Disney.... I sent you an E-mail with my numbers asking if you wouldn't mind doing a speadsheet for me. (if you don't mind) I do want to compare apples to oranges even though I know its not really a fair estimate. But, I want to know what I would have spent on BC hotel rooms if I had never bought into DVC. Thanks.

John.Disney
02-15-2002, 11:56 AM
<i>I may be wrong, as I don't have a historical, but I remember seeing posts before on this forum that indicated the inflation rate for the Disney resorts was much higher than the 5% you used in your assumptions. If my memory serves me correctly I thought I remember it was in the 10 to 11% area.</i>

I've heard the same thing but I've never seen any evidence to prove it. If someone has data points of old hotel rates I'd be very interested in seeing them. The very limited evidence that I have (CR and FW) is that hotel prices have gone up 6-7% annually over the last 20-30 years (inlaws save the funniest things re: FW, CR is hearsay but I believe accurate). It is worth noting that the US has enjoyed the largest economic expansion in its history over those 20 years. And where there was a shortage of hotel rooms 20 years ago, there is over-developmemnt today. I am willing to put in any numbers you like, but I think 10% is much too high, maybe 7%?

Also, if you're going to pump this up I think you have to pump up the dues inflation number. I know that OKW had a jump in the beginning but has been flat for several years now. How's the track record of the others?

<i>Further, why wouldn' you use the cash cost of the exact room you would be using in DVC</i>

Seems perfectly reasonable to me. Again, I'll plug in any number you like. The reason I didn't use rack rates at DVC resorts in that one example is because they are artificially high due to extremely limited demand. Disney is picking off the top of the utility curve here which doesn't apply to most guests in my opinion. The main difference (in the lower price at WL) is that at WL there is no artificial demand from timeshare owners keeping the supply short. The other differences you mention (gym, kitchenette, etc.) make the studio more attractive so I should probably bump the WL price a bit ($40?), but not up to rack rates IMO.

<i>If we make comparisons, it seems we should compare apples to apples. </i>

Agreed, but Disney prices the DVC resort rooms at artificially high rental rates to pick off the small part of the population that is price-insensitive because they know they only have limited rooms to fill. My understanding is that at times it is not unusual to get 50% off these rental rates for residents of Southeastern states and especially Floridians. I think you are absolutely correct in your logic, but you need to adjust your math to take these facts into consideration.

I will whip-up an adjusted analysis to see what we get over the weekend, thanks for your comments!

John

CRobin
02-15-2002, 12:05 PM
John,Disney, I think you hit it on the head with comparing the value of your vacation pre and post DVC.

I just did a quick calculation from my own records and saw that between DW and I and various ressies made for family, we spent 25 nites in 2001 in a DVC resort.

But that's a far cry from spending 1 week annually at the YB as we did for many years!

Plus, you're also eating more meals at Marrakesh and buying annual passes, car rentals, plane fare, etc.

This will never be a simple calculation, but, as you and Dean have pointed out, while some can work their calculations to show a quick payback, it's not apples to apples.

Still, nothing makes me feel better than getting that room charge statement with no room charge!

:D

John.Disney
02-15-2002, 01:32 PM
<i>The very limited evidence that I have (CR and FW) is that hotel prices have gone up 6-7% annually over the last 20-30 years </i>

Just to be clear, this was comparing to rack rates. If I take the current discount rate off mousesavers, the rates have only gone up 4-6% over that time period.

Again this is limited info, but my guess is that the 10% figure is not realistic (although I know timeshare salespeople like it). They would have to have been giving rooms away 20 years ago for it to be accurate.

For example, the Grand Floridian opened 14 years ago. The current AP rate for a garden view is $230-258. With an average price increase of 10%, the implied 1988 rate would be $60-68. I think it is safe to say that rates were never that low even with a large discount (the implied rack rate would be under $100). I could be wrong though and as I said would be curious to see some real data points.

John

MTMom
02-15-2002, 01:35 PM
but I'll try my best to understand. First, I suppose that I didn't mention that we were also interested in a week during the summer at the Vero Beach or Hilton Head properties.

The additional info you requested to crunch the numbers for me:

1) What discount rate would you like to use?

Uh, I've always used a travel agent, can you help me out on this?

2) At what rate do you expect annual dues to increase?

Plug in the maximum that Disney is contracted to use.

3) At what rate do you expect hotel prices to increase?

Can you choose this for me also (haven't a clue)?

I hope that you're not spending too much time on this, but I do want you to know that you are GREATLY appreciated!

RickW
02-15-2002, 01:49 PM
Another way to look at it (I like John's Analysis, mine looks at the same question on a yearly cost basis instead of a break even basis):

This is how I decided that DVC was a good deal for us. I didn't really care about a break even point, I just wanted to see how much it was actually "costing" us.

Here were my assumptions:
We bought in at $55 per point.
We assumed that if we invested the $12000 instead of buying DVC, we could make about 8% interest over the long term. (This is the value that my financial planner uses for my retirement planning.
I calculated based on taking a bit of that $12000 each year and spending it on vacation so that in 2042, we would just hit $0. (Kind of like a reverse mortage payment.)

You can take this info and put it into Excel with the following formula:
=PMT(0.08,42,55,0,0)
(This is the payment amount for 42 years for $55 with 8% interest.)

This gave us a value of $4.58 per point per year. If you add the maintenence of $3.23 (for OKW), you get a total "cost" of $7.81 per point. I round this up to $8 per point and then use that for comparison.

So, for our trip this year:
Sept 1-5 (S,M,T,W Nights) at Animal Kingdom Lodge Savannah view is 29 points per night. 29 * $8 = $224 per night.
Sept 5-8 DCL (Paying cash)
Sept 8-13 (S,M,T,W,Th Nights) at BWV 1 Bedroom Preferred view is 22 points per night. 22 * $8 = $176 per night.

Compare these prices to how much these rooms would cost if you were paying cash. (Remember that you need to add tax for the cash rooms, you don't have to add any tax to the DVC point "cost")

As for inflation, I figure that hotel costs will probably go up faster than dues, so I can just ignore it.

By the way, I realize that $55 per point for 42 years doesn't really apply to people who are looking to buy now so here are some comparisons:

$55 per point, 42 years: $4.58
$55 per point, 40 years: $4.61
$60 per point, 40 years: $5.03
$65 per point, 40 years: $5.45
$70 per point, 40 years: $5.87
$75 per point, 40 years: $6.29
$80 per point, 40 years: $6.71
$80 per point, 35 years: $6.86

Just add current maintence costs to these values for the particular resort you are interested in.

RickW
02-15-2002, 02:12 PM
By the way, if you are conservative in your investing and would prefer a different interest rate, say 6%, it gives you these values instead:

$55 per point, 42 years: $3.61
$55 per point, 40 years: $3.66
$60 per point, 40 years: $3.99
$65 per point, 40 years: $4.32
$70 per point, 40 years: $4.65
$75 per point, 40 years: $4.98
$80 per point, 40 years: $5.32
$80 per point, 35 years: $5.52

Again, add these values to the maintenance cost per point for the resort you are interested in.

Also, we used the formula in the above post as a partial decision on paying cash for our 3-day cruise. The cruise would have cost 94 points per person, or 188 points total, so by using points it would have "cost" $1504 (Cat 10). Since the price we actually got for the cruise was $917, caah was a much better way to go. (On the other hand, there was a DVC DCL special last year and we got a Cat 5 for the 7 day cruise for 290 points, which means that our 7 day cruise only "cost" $2320 and we got a $150 stateroom credit, so that cruise was a pretty good deal)

John.Disney
02-15-2002, 02:23 PM
MTMom,

<i>I hope that you're not spending too much time on this, but I do want you to know that you are GREATLY appreciated!</i>

Your welcome. I have a lot of fun crunching the numbers. I'll be at OKW in 9 days and what better way to spend the time than getting worked up over my upcoming BCV tour!

I think I understand your situation, but I will not use 15% (max)for dues inflation as this would unfairly skew the analysis (even though I geuss it is technically possible). If you plan on spending time at VB or HH anyway on an annual basis in addition to your 4 days at the Poly, I think DVC will work out great for you. I'll get back to the numbers from home over the weekend.

RickW,

That is a very interesting way of looking at it Rick.

<i>As for inflation, I figure that hotel costs will probably go up faster than dues, so I can just ignore it. </i>

I think your analysis is perfect so long as this turns out to be true. So far so good. I think most people would agree with you.

John

MTMom
02-15-2002, 02:34 PM
This is probably a silly, silly question, but what's the deal with 2042? How did they come up with this magic number? Is that when EVERYTHING (all DVC resorts) reverts back to Disney ownership, or does everyone just buy in for a 40 year run, with different ending dates for everyone?

If everything reverts to Disney in 2042, what will happen then? Will they already have another (or several) other timeshares up and running, with even farther out dates than 2042? This is mind boggling!

RickW
02-15-2002, 02:53 PM
Yes, all current DVC contracts end on January 31, 2042. It is assumed that at some point, perhaps with the resort after BCV, DVC will set the end date for the new resorts furter out, but no one really knows. There has been a lot of speculation on this board about exactly what will happen in 2042, but it's just that: speculation.

Tinkrbell
02-15-2002, 05:55 PM
MTMom-
I was told that the land contracts owned by DVD (Disney Vacation Development) was for 50 years based on the first time share that went up, OKW. Then the land reverts back to Disney Co.

Why they don't start fresh with each building, is anyones guess.
I asked about this several times, but I was never given a good answer.

RickW
02-15-2002, 06:32 PM
Originally posted by Tinkrbell
Why they don't start fresh with each building, is anyones guess.
I asked about this several times, but I was never given a good answer.

I would assume that the answer to this question is simply:
They aren't having any trouble selling the resorts with the 2042 end date, so why would they need to move it back?

I would imagine that in about 5-10 years the 2042 date might start effecting sales. At that point you would definately see new resorts opened with a new end date.

JVL1018
02-15-2002, 10:12 PM
Originally posted by boudreaux0
I created a very in depth spreadsheet that can show you savings. It take into account the increase in room rates and in your annual dues. If you would like it give me your email address and I will send it to you. It is in Excel format.


If you get a chance I would love a copy of the spreadsheet.
My email is JVL1018@aol.com
Thanks so much!:D

John.Disney
02-15-2002, 10:38 PM
If you join DVC instead of paying cash for 1 Dream Season week at VB/HH as well as 4 <b>weekday</b> nights at Poly Garden View, and you therefore use points to stay at VB/HH and BVC, you will be in excellent shape (and need 170 points). You will never swap points out of DVC resorts or waste too many points on weekends. You shape up to be an ideal candidate for DVC. I will use the same inflation rates I used before (3% discount, 4% dues, and 5% hotel) and assume the following...

Cash cost of Poly.................$245 a night
Cash cost of VB/HH studio...$168 a night

The Poly rate is current AP +tax. The VB/HH rate assumes you rent points at $10 per point from a member (you can get <b>much</b> cheaper right now with AP or general codes but I'm assuming massive disccounting will only be around until the resorts sell out).

Here are the results...

<pre>
Today ($11,900) ($11,900) $0 $0
1 ($641) ($12,522) ($2,393) ($2,323)
2 ($667) ($13,151) ($2,513) ($4,692)
3 ($693) ($13,785) ($2,638) ($7,107)
4 ($721) ($14,425) ($2,770) ($9,568)
5 ($750) ($15,072) ($2,909) ($12,077)
6 ($780) ($15,725) ($3,054) ($14,635)
7 ($811) ($16,385) ($3,207) ($17,243)
8 ($843) ($17,050) ($3,367) ($19,901)
9 ($877) ($17,723) ($3,536) ($22,611)
10 ($912) ($18,401) ($3,713) ($25,374)
20 ($1,350) ($25,562) ($6,047) ($56,128)
30 ($1,999) ($33,449) ($9,851) ($93,403)
40 ($2,959) ($42,137) ($16,046) ($138,583)
</pre>


Your breakeven is roughly 6.5 years with these assumptions.

Your overall savings in present value terms is $96,446.

We can now make various adjustments...

continued...

John.Disney
02-15-2002, 10:41 PM
continued...

If your BCV stays fall on the weekend instead of during the week, your breakeven moves out to just over 8 years, and you would need 202 points (now might be a good time to mention that point requirements can shift between seasons at Disney's discretion, so these exact totals are just for analysis sake). Your total savings would go down to $88,515.

If on top of this dues increase by 7.5% (half of the contractual limt) instead of 4% (I mention this simply because you brought up the contractual limit, not because I expect it), the breakeven moves out to just over nine years (no big deal), however your overall savings goes down to $47,754. [BTW, if dues <b>did</b> go up at the limit of 15%, with hotel prices only going up 5%, DVC is more expensive by almost 400 thousand dollars. Needless to say, this is not a happy thought but I think you are safe.]

If you do as DVCDAVE might suggest and assume you would be paying rack rates everywhere, and hotel prices would go up 7%+ a year with dues only going up 4%, you would breakeven in under 5 years and save a quarter of a million dollars. Keep in mind though that for this to be true, a Poly Garden view would have to be going for $5,000 a night 40 years from now (not a typo). Sometimes the power of compound interest isn't obvious until you run the numbers. [At 10% annual increases, a Poly Garden view would be going for $15,000 <b>per night</b> 40 years from now, and your savings with DVC would be over half a million dollars.]

If you do as Dean might suggest and assume 3% inflation across the board as well as missed investment opportunity in the early years, your breakeven would be about 12.5 years. Your total savings however would go up because you would make more money re-investing your annual savings than you would lose by not being able to invest the upfront cost of DVC.

Lastly, going back to the original assumptions but getting 1br accommodations instead of a studio, you will need 328-384 points and the breakeven goes out to 12-15 years (basically doubles, but hey this is a big upgrade).

My opinion is that since you are going to be paying cash at a pricey Disney Deluxe resort (that costs more to rent than a DVC studio) as well as cash for DVC property at VB/HH anyway, DVC is the perfect substitute. The biggest impact in your case is that you are already planning on spending $2,200 a year at Disney, which is a fair amount of money when compared to a 170-202 point DVC contract. In comparison, in my original example I was paying $2,240 a year in exchange for a 250 point contract, which is what led to the breakeven being further out.

In general, if you replace expensive cash vacations with small DVC contracts, you will do extremely well. It's the people who replace two weeks at a moderate for a 250 point contract that will take 20+ years to breakeven.

John

John.Disney
02-15-2002, 11:41 PM
<i>Lastly, going back to the original assumptions but getting 1br accommodations instead of a studio, you will need 328-384 points and the breakeven goes out to 12-15 years (basically doubles, but hey this is a big upgrade). </i>

This can be very confusing. I upped the cash cost for hotels in this example under the assumption that you would be willing to pay cash for a 1br at VB/HH as well. If this is not the case and you want to compare to the original cash costs ($245 for Poly room and $168 for VB/HH room), the breakeven is actually 17-21 years. The range represents whether or not the BCV stays include the weekend days.

Furthermore, if you assume the same 3% inflation rate across the board (as Dean suggested), the breakeven is actually 21-30 years. The wide range is due to the two alternatives being so close in cost. In this last example, the oveall savings is less than $10,000.

As the breakeven point moves further away, the analysis becomes highly sensitive to small changes in the assumptions.

John

Dean
02-16-2002, 05:49 AM
John has done a lot of work for you and his way of looking at this is right on. His accounting is one of the few I've seen that I'm confortable with. I want to emphasize one thing. The savings of DVC assume you would travel to DVC most years and would stay at a Disney property (other than All Stars) most trips. DVC will never look favorable financially compared to most off site options. Off site to DVC, now that's an ever bigger upgrade! DVC doesn't save me money, it just allows me to have much better options and much more enjoyment along the way. Good luck.

nisiemouse
02-16-2002, 06:49 AM
Dean made a great point. My dh ran the numbers on a spreadsheet trying to talk me out of it and I have to admit he made some good points. However, I much prefer to stay on site. He thinks he will enjoy disney vacations much more especially as the kids get older if we have more privacy and room to spread out. We did decide to join and got a resale. I think there is also some savings to be noted if you can eat a liitle in the room. Having the refrigerator is a big plus for us. I enjoy nice meals out when I am on vacation so I am not talking about eating in the room all the time by any means. Like Dean said it is about much more options and enjoyment for your disney vacations. Good luck in making the best decision for you!:)

Cruelladeville
02-16-2002, 09:36 AM
John---You had asked about historical room rates at Disney. Since I have been going to Disney since 1974, I do have those rates. In 1974, the first year that we went to Disney, a room at Poly went for $60 per night for lagoon view. I believe that room is now going for about $345 a night, if I'm not mistaken. In those days there were no discounts on rooms, as the only hotels they had were Poly and Contemporary. The only people who got discounts were stockholders, so we bought stock to get the 20% summer discount on a room.
Also, you assumed in your calculations that dues would go up 5%, while the reality is that dues have actually gone up almost not at all since BW opened. This year our dues went up about 1 1/2 cents per point. I'm no mathematician, but I think that's far less than 5%, isn't it? That would mean that DVC actually becomes an even better deal than you had indicated in your posts, and makes me even happier that I bought into DVC when I did.:bounce:

John.Disney
02-17-2002, 02:14 PM
<i>In 1974, the first year that we went to Disney, a room at Poly went for $60 per night for lagoon view. I believe that room is now going for about $345 a night, if I'm not mistaken.</i>

That room now goes for $294, current AP rate (30% off rack). Which is a 5.84% average inflation rate (7.2% compared to current rack rate). Considering as you mentioned there were only a few games in town at that time (as compared to the massive development in the last 10-15 years), I wouldn't expect this inflation rate to continue 20-something years into the future.

<i>Also, you assumed in your calculations that dues would go up 5%, while the reality is that dues have actually gone up almost not at all since BW opened. </i>

I assumed a 4% increase but your point is well taken nonetheless. They set dues too low for OKW in the beginning but it appears they quickly learned their lesson with BCV starting at 3.77 and VWL at 3.62.

<i>This year our dues went up about 1 1/2 cents per point.</i> [at BWV]

And this year dues at VB went up 6.1% and dues at HH went up 5.1%. I think it is too soon to judge what will happen in the long run. The track record at BWV is the best so far, the other are pretty good as well but there is uncertainty over the next 40 years. Uncertainty demands a premium, just like required returns in the capital markets. I find that most people want to assume large increases in hotel prices which I see as unrealistic. The compromise I make is bumping up the dues inflation a little more than I expect.

What I <b>actually</b> expect is dues and hotels both to go up at roughly the inflation rate, perhaps a little slower for hotels due to over supply. But since I can find almost no one to agree with me on this I don't post those calculations here ;) .

<i>That would mean that DVC actually becomes an even better deal than you had indicated in your posts, and makes me even happier that I bought into DVC when I did</i>

You have already made out very well with BWV. If the dues keep going up at under 1% per year as they have over the past 5 years, you will save a fortune by the end of DVC!

Thanks for your comments and please post any old Contemporary rates if you find them, thanks...

John