Future of DVC Resale Prices

Discussion in 'DVC-Mousecellaneous' started by nickspace, May 29, 2009.

  1. nickspace

    nickspace DIS Veteran

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    What do you think DVC contract prices will look like in 10-20-30 years? How will that impact DVC as a whole?
     
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  3. CarolA

    CarolA <a href="http://www.wdwinfo.com/dis-sponsor/index.

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    This is not a popular view but I expect that in the long term we will see a BIG decline. Right now prices are kept artifically high for timeshares by Disney's ROFR. If there are very few years left on the contract I don't expect Disney to keep "defending" the property and why would someone pay a lot of a short term ownership?
     
  4. Mtnman44

    Mtnman44 DIS Veteran

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    They are fixed term leases so the market value on the current crop of properties is guaranteed to go down over time.
     
  5. stefanospops

    stefanospops DIS Veteran

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    Even Disney is careful to advise you that this is not to be treated as an investment, meaning points will depreciate over time.
     
  6. JimMIA

    JimMIA A little Miami humor...

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    I think Carol's right.

    As a matter of fact, I think they are necessarily letting ROFR slip quite a bit right now because of the economy. If the lesson learned from this year's experience is that their sales don't suffer much, I'd look for them to continue to relax ROFR until they see a negative effect on their "new" sales...which might not ever happen.

    Nobody knows what resale prices will be a few years from now, but much lower-than-now prices certainly would not surprise me. We purchased DVC with the attitude that our initial purchase price was gone, never to be seen again. I think in a few years, people who expected to get 70-80% of their purchase price back will be in for a rude awakening.
     
  7. alamode

    alamode Mouseketeer

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    If anyone knows how to make money it's Disney. I can see new sections to existing resorts propping up interest (like SSR's treehouses), contract extensions like OKW, and future resorts both within Disney and in other key tourist places (like Hawaii and Washington DC). While the economy is currently lowering prices (I just sent in a contract for SSR today at $69/point), the economy is cyclical, and once Disney sees an uptirn coming, I'm sure they'll find many new ways to help us DVC members part with our money.
     
  8. AKV707

    AKV707 <a href="http://www.wdwinfo.com/dis-sponsor/" targ

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    Clearly with the end date for each contract, the resale value will ultimately decline. I do also think that when the economy improves, Disney will exercise rofr again more frequently and in the short run, prices will increase.

    With the end dates of BLT, AKV, and GCV, those values will take longer to decline.

    Of course DVD could always offer extensions on more of the 2042 properties. Who knows.
     
  9. JimMIA

    JimMIA A little Miami humor...

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    I really doubt that DVC cares at all whether we get any of our money back. They care about profit. The only reason why they exercise ROFR is to maintain a more narrow gap between new prices and resale. If the incentive ever goes away, you'll see big differences in ROFR practices.

    I can think of at least three circumstances which would cause DVC to either to reduce ROFR levels, or abandon ROFR entirely:
    1. They build as many WDW DVC properties as they can, and therefore no longer need to support the WDW prices. They could simultaneously reduce the home resort booking advantage to one month, but keep the 4 month advantage at properties they were still selling or had just sold out. In that scenario, there would be little advantage to owning at WDW.
    2. Their experience during this downturn tells them that ROFR is not really necessary -- that new properties justify their own high prices without ROFR support.
    3. As we get closer to 2042, ROFR simply gets to be too much of a burden because they can't resell ROFR'd points for enough to make the process worthwhile.
     
  10. DisneyWalker44

    DisneyWalker44 DIS Veteran

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    Disney's sales aren't affected by the price of contracts on the resale market. Just on the number of owners who choose to sell.
     
  11. Opie100

    Opie100 <a href="http://www.wdwinfo.com/dis-sponsor/" targ

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    I always thought that ROFR was a way for Disney to make money vis-a-vis arbitrage selling to people on the waiting list (at a higher price). Am I wrong?
     
  12. TammyAlphabet

    TammyAlphabet DIS Veteran<br><font color=red>Life Member - "excl

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    If points get really cheap, people will buy them just to exchange out for cruises.
     
  13. Dean

    Dean DIS Veteran<br><a href="http://www.wdwinfo.com/dis

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    Not necessarily true else there would be no reason for ROFR. DVD will sell more retail contacts if they can convey that the savings resale is relatively small comparatively and if they create uncertainty whether a given contract will pass ROFR. Certainly there is an inherent value with DVC that will prop up values to a degree. What ROFR does from a buyer standpoint is preclude the fire sale situations that we see with many timeshares.

    This issue of value later in the contracts has come up a number of time. Based on length of contract, most RTU timeshares start to tail off when you get under 30 years. That decline is normally steady and gradual with no remaining value once you're within 2-3 years but it depends on specifics such as residual payments that may be pending. There have been a number of people on DIS that have argued prices would be much higher than expected due to the price of Disney rooms. I understand the logic but don't agree with it for the most part due to the uncertainty involved, maint fees and the closing costs. How many people have we seen that haven't bought DVC when it clearly made sense for them, they simply couldn't pull the trigger to buy or take the chance on the long term.
     
  14. nickspace

    nickspace DIS Veteran

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    Excellent point!
     
  15. nickspace

    nickspace DIS Veteran

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    There is also the issue of a person's life span. I think that Disney strongly took this into consideration when they initially planned out DVC. I know that when my SSR contract expires I will either be expired or only a few years away from heaven. By that time my contract will be winding down and it will not be an important issue for me. I will be close to 90 years old at that point.

    As for my HH contract, which I am waiting to pass rofr, I pray that I will still be active when that expires.
     
  16. DisneyWalker44

    DisneyWalker44 DIS Veteran

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    If 100 people are selling their DVC contract, that's 100 contracts Disney won't sell out of inventory. Disney won't lose more than 100 sales even if resale prices plummet. Nor can Disney keep from losing the 100 by propping up resale prices. At best, Disney can ROFR a contract which means they lose one less sale to resale. But they now have one more contract to sell, so it doesn't help them sell inventory at all.

    Resale prices are set by the size of the market. Not the other way around. There are many reasons Disney uses ROFR. Trying to stop the loss of sales to resale isn't one of them.
     
  17. Dean

    Dean DIS Veteran<br><a href="http://www.wdwinfo.com/dis

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    Not necessarily. Not everyone who buys resale would have bought retail without the option of resale. And the very differential between resale and retail keeps some people out of the market for retail even if they don't buy. Certainly if there are only 100 contracts for sale, people can only buy 100 contracts at that time but there will be another 100 next month.

    ROFR isn't about making money on the resale but about keeping the differential to a manageable level and to create uncertainty, both effectively driving a portion of those looking at resale to retail. Without these goals, there is no reason for ROFR. It's certainly not in any way for the owners protection. No doubt it's a method of competing with themselves and that is the downside if they do buy buack. For DVC, the resale price over the years has been determined mostly by market forces about half the time and by ROFR mostly about half the time. Right now we're in a period where it's somewhat in between but more market forces as DVC has not been buying up contracts as readily or at the same prices as before. Plus they have more high demand options for sale (BLT, AKV) compared to when it was mostly SSR.
     
  18. DisneyWalker44

    DisneyWalker44 DIS Veteran

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    But if we accept this scenario, then low resale prices actually help Disney. If there are 100 owners who want to sell, and prices are low enough to attract 50 bottom feeders, that takes 50 units off the resale market. Now instead of losing 100 sales from people willing to buy retail, Disney can only lose 50.

    And that's how many contracts Disney loses. Doesn't really matter what the price is. Right?

    But Disney can't drive people away from the resale market. If 100 people need to sell their contract, then there will be 100 contracts sold. Disney can't prop up resale prices to eliminate those sales. If Disney tries to prop up prices to pull in the resale buyers, what are the resale sellers going to do? Shrug their shoulders and say, "oh well, I guess I won't sell." No, they'll just lower prices until they sell.

    Market equilibrium forces are powerful. If 100 people need to sell, prices will be driven to whatever level is necessarily to clear the market. ROFR can't make that go away unless Disney wants to buy up every contract (which doesn't do them any good.) By creating some extra demand, Disney can nudge the equilibrium price a bit, but that's about it.
     
  19. Dean

    Dean DIS Veteran<br><a href="http://www.wdwinfo.com/dis

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    I don't think we're far off our thinking but simply talking fine points here. There are those that would not buy except for the lower resale prices, we'll agree these do not affect DVC's retail sales directly though they still could indirectly. I think you're assuming that all contracts offered for sell will actually sell retail which is not true. There are many who never list due to info including the lower prices compared to what they paid, some contracts simply don't sell and a certain percentage will be bought ROFR which prevents at least one resale buyer each time, likely more because of behavior modification involved. I think you far underestimate the power of ROFR when used aggressively and DVD has used it aggressively at times, the rest of the time it simply prevents fire sales. Westgate has used ROFR to the point where many resale companies have refused to even list their units by insisting they get a sales commission as if they had listed them and by forcing ROFR rights where none legally existed.

    Actually I think DVD CAN drive people away from resale with ROFR and it's uncertainties as well as draw them away by offering incentives, easy financing, comfort and likely the largest weapon, that many don't even know the resale option exists until they've already made up their mind. Certainly there are a lot of other weapons DVD could employ, the largest group of which would be related to not allowing resale members access to certain perks that are above the contractual obligations.

    Given you don't think ROFR has much or any long term affect on retail sales or prices and it seems we agree they don't really make any money on those ROFR options purchased, what do you feel the purpose of ROFR is?
     
  20. DisneyWalker44

    DisneyWalker44 DIS Veteran

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    I was actually thinking through such a scenario. Disney could just ROFR every contract until all the major DVC resellers are out of business. They could get around market forces by destroying the market.

    1) People like it; they think it protects their investment. It doesn't matter whether it has as big an effect as people think. As long as people believe it does, it makes owning DVC more attractive.

    2) It provides for an orderly resale market. While I strongly believe equilibrium forces set overall market prices, it can be messy. Disney/ROFR greatly smooths things out and ensures that most trades happen within a fairly narrow band. An orderly secondary market makes DVC more attractive.

    3) This is minor, but Disney needs points for various reasons. ROFR is a good mechanism to get them.
     
  21. Dean

    Dean DIS Veteran<br><a href="http://www.wdwinfo.com/dis

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    Could they fund such a move to corner the market given the dollars involved, I doubt it. Also, buying them all up wouldn't kill the resale market, if anything it'd increase it. They'd have to make it onerous as did Westgate to actually kill the market and the fall out for them has likely been far worse than if they'd simply smiled and waived. It has hurt them in so many ways that you could not have imagined. It's actually advantageous to a resale agent to have ROFR because they get double commissions often (on the ROFR and on the replacement one). Interesting approach though. I think in number 2 your saying much the same thing I have been saying, that it's perception as much as the reality. Thanks for an interesting conversation, it's good to have someone willing to discuss the nuts and bolts of some of the nuances involved, there aren't many here willing or interested in doing so and what I prefer to do over the frilly stuff that generally comes along.
     

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