How Long To Recoup Your Initial DVC Cost?

[ELMC]

I would actually argue differently. I can't speculate how most people learn about DVC, but I learn about DVC because the Grand Californian rack rates cost $500 plus tax per night, and as I try to find cheaper ways to stay there, I found out about DVC and VGC.

This is a valid point. My contention, however, is that you are in the minority. Friends of mine who know I own DVC and know what it is about still book directly through Disney or through a travel agent when they choose to visit. I would suggest that whatever motivated you to come to these boards and learn more about Disney and DVC is what motivated you to make this informed decision regarding your lodging. We DISers are a small minority of Disney fans out there, and the DVC board is a small subset of the DIS. My evidence of this is the fact that Disney continues to sell out of those $500 rooms with cash guests.

I agree with you that the rental price per point is mostly a function of supply and demand within DVC rather than direct booking prices. However I think direct booking price does have an effect on rental points in the long run. We are talking about products that are almost perfect substitutes.

I agree that they are almost perfect substitutes. But I wonder how many people are actually aware of this. Obviously my position is that the number is very small. As always, I could be wrong about that. Like I said before, after reading The Ultimate Guide to WDW by Len Testa I found out about the benefits of rope drop and using a touring plan. I usually log all the superheadliners I want to experience and five or six other attractions within the first two hours of the park opening. You would think that most people would follow this strategy instead of waiting 45-90 minutes for a ride. But they don't. www.touringplans.com 's own research suggests that less than 1% of guests have been introduced to this information. Fastpass is about as easy as can be, but people jump on line to wait 60 minutes for an attraction that has a FP return time 70 minutes out. I have no idea why they do this, but they do. Perhaps it's a combination of not knowing and not caring. Just because something exists, doesn't mean people are going to take advantage of it. I think that the percentage of Disney visitors that are truly educated in all things Disney is very, very small.

I am curious as to why you think direct booking and rental DVC are two completely separate customer bases. Just because the vast majority of direct booking customers are unaware of DVC rental option doesn't mean they are not driven by the same economic motives when they become aware of the option. Don't the DVC direct sales people try to pitch the savings by comparing to booking direct? Didn't we buy DVC because it's a cheaper way to stay at a Disney property? Then how can direct booking prices have no impact on DVC?

I agree with all the points you make above. I think you may have misinterpreted my position on this. A point was brought up that DVC point rental prices are influenced by direct booking prices. I don't believe this to be true. I think that the price of DVC point rentals are controlled by basic economic principles, among other things. I also think the point rental brokers have an enormous influence over the fair market value of rental points.

To answer your question, my opinion is that the vast majority of people who book Disney rooms direct have no knowledge of the option to rent points. I also think there is another group who knows about this but feels it is too risky. For the most part, though, once someone discovers this option, they typically cease being a customer who books direct. It is at that point that they either become point renters (and realize the savings to be had) or they become DVC owners (by comparing long term ownership to long term renting). Once they enter this space, they cease to become direct booking customers, in my opinion. That is why I feel they are two separate customer bases. One group has no knowledge, and the other group gains the knowledge and (for the most part) enters a different marketplace, the point rental market.

Disney is well aware of the point rental market, yet they rarely seem to react to it. If they did, I feel there would be a much smaller difference between cash room prices and the cost of staying in that same room using rented points.

 

[k3chantal]

It would be interesting to have solid numbers on how many people know about DVC and also know that they can rent points. I think the numbers are really very small. If you watch closely to who is responding or asking questions on these boards, it is a rather very small community of faithful people. How many more people are out there that interested? What do you think; the top 5% or 2% of people can afford to even rent points from DVC owners? Or do you think that extends to the top 10% of our population?

Most people I know can certainly afford to own a contract yet they do not know or care about DVC and certainly do not know that they could rent points. In fact, a good majority of these people own cabins up at Tahoe and find Disney something they do once a year, if that.

Even when my friends ask me for information about DVC or Disney, in general, I never mention renting points.

I bought my contract in O8'. We go to Disneyland often without using our points. Even as they were building the villas at the Grand Californian the average CM knew nothing about DVC or the discounts I should have received from my card, even as I am holding a Portable Perks pamphlet. Certainly, this has changed, as of last February, I found much better educated CM's about DVC.

It would also be interesting to see demographically speaking how many people know about renting points from DVC owners. I would venture a guess that that number is even smaller in California than the rest of the country.

What will be more interesting as time passes, is whether more people become first time buyers of DVC as the economy improves; therefore not needing to rent points, or whether they choose to continue to rent points at a satisfying rate and amount to current DVC owners.

 

[Galun]

To answer your question, my opinion is that the vast majority of people who book Disney rooms direct have no knowledge of the option to rent points. I also think there is another group who knows about this but feels it is too risky. For the most part, though, once someone discovers this option, they typically cease being a customer who books direct. It is at that point that they either become point renters (and realize the savings to be had) or they become DVC owners (by comparing long term ownership to long term renting). Once they enter this space, they cease to become direct booking customers, in my opinion. That is why I feel they are two separate customer bases. One group has no knowledge, and the other group gains the knowledge and (for the most part) enters a different marketplace, the point rental market.

Now I see what you mean by two separate customer bases, and I agree completely. You just described our path to revelation. We booked direct twice without knowing better, and about to do it a third time. We probably will still do it for this July 4th because we cannot become owners in time, but I don't think we will ever book direct again.

Earlier you said that DVC rental rates are determined by supply and demand within DVC point rental market, and I agree with that. However, I do think direct booking prices have a big influence on the DVC point rental market. I agree that only a very small percentage of people are aware of DVC, and an even smaller subset of that are aware of DVC point rental option. Let's put some arbitrary number, say 0.1% of disney visitors. When Disney raise direct booking rates, it's going to drive some people (like myself - $500 for a week night, are you freaking kidding me???) to look for alternatives, and eventually discover DVC. Since the vast majority of people are not aware of DVC rental option, small changes in awareness can mean big changes to the DVC point rental market. In my example, if an incremental 0.1% of people is interested in DVC point rental, then the demand pool in the DVC point rental market had just doubled. Of course I am just making up numbers, but I do think that awareness in DVC point rental is very low, and so directionally any incremental change in awareness driven by direct booking prices is going to be meaningful.

 

[Dean]

I agree that it is a combination of economics and psycholog, with the vast majorit of timeshares being sold from the psychology side and for us board junkies the economic side. Which is the bigger group will tell you what factor is more important.

Even here where the info is available people can't get away from their emotions. You don't have to go far for proof, basically for the next post for someone that bought a full size contract retail at a resort available resale for access to the excluded options, financing or comfort level.

I wills say that for the average person not educated in such matters, DVC is much closer to a fluid system than most timeshares but still not that close.

Timeshares, including DVC overall, are sold, not bought and I believe that emotions are the largest factor but again even more so for non DVC than DVC buyers. I think a common mistake those of us make that frequent such boards is assuming everyone has a similar knowledge base and it's definitely not the case whether it be DVC or any other timeshare resort or system.

k3chantal, I'm sure DVD has that info, they just don't release it.

 

[AllieV]

Don't know if anyone mentioned this, but David's Rentals is now up to $14 a point. That can impact the calculations of renting vs buying. A lot of people predicted David's wouldn't increase for a while.

 

[Dean]

Don't know if anyone mentioned this, but David's Rentals is now up to $14 a point. That can impact the calculations of renting vs buying. A lot of people predicted David's wouldn't increase for a while.

But the owner wouldn't get that much. David's will tend to get more because people will be more comfortable buying from a business than individual.

 

[brertoad]

Based on simple math of what we were spending and what we paid up front for DVC, our contract would pay for itself in about 4 years. However, I think we're probably going to break even sooner than 4 years.

 

[AllieV]

But the owner wouldn't get that much. David's will tend to get more because people will be more comfortable buying from a business than individual.

No sorry I wasn't clear. I meant that the price of rental is higher so payback would be quicker if you buy vs rent. It also indicates that renting will go up more than people had predicted which makes buy-in more attractive.

 

[ELMC]

Based on simple math of what we were spending and what we paid up front for DVC, our contract would pay for itself in about 4 years. However, I think we're probably going to break even sooner than 4 years.

Assuming you bought resale and have been paying rack rates, this is a definite possibility. As with any analysis, though, it's important that the numbers are honest and you are comparing apples to apples. If your old vacations were ten days but you only have enough points to stay for seven, or in a different sized room, then the numbers are skewed. I'm not saying this is the case with you, but I am naturally skeptical of analyses that have such short break even time frames.

 

[Dean]

No sorry I wasn't clear. I meant that the price of rental is higher so payback would be quicker if you buy vs rent. It also indicates that renting will go up more than people had predicted which makes buy-in more attractive.

Thanks for clarifying. I'm not sure David's has that large an impact on the overall prices though. The price of rental is only higher if you rent from David's or similar or for around the same price. However one point that is valid is that IF (big IF) the rate of inflation is the same for both sides, this will favor buying because the rental price will be more per point than the maint fee. Basically that $5 will compound at a lower amount than $10 and the 2 curves will diverge. Historically this hasn't been the case but who know for the future.

 

[brertoad]

Assuming you bought resale and have been paying rack rates, this is a definite possibility. As with any analysis, though, it's important that the numbers are honest and you are comparing apples to apples. If your old vacations were ten days but you only have enough points to stay for seven, or in a different sized room, then the numbers are skewed. I'm not saying this is the case with you, but I am naturally skeptical of analyses that have such short break even time frames.

Our contract was a resale, and it came with one year of extra points, it had all of the 2011 points still available for use. We used them up and got 13 nights out of it, including 3 nights at club level at AKL, theme park view at BLT, Boardwalk Views 2 nights, etc. So, right off the bat we got a huge benefit up front.

Even with 40% discount codes for FL AP holders WL and AKL was costing us about $225 OOP per night. So, if I strictly go by the $225 a night for deluxe (heavily discounted price) for 13 nights, I still come out breaking even at 4.27 years. By getting DVC, a 15 pt. deluxe studio would be costing us $95.10 a night. A 10 pt. deluxe studio would be costing us $63.40 a night. Pretty good savings!
I do believe that my numbers, with a 4 year recoup time, is an honest analysis for our situation.

With our contract we have enough points to actually stretch to 21 nights (theoretically if booking 9 pt Jambo value studios), which would greatly increase the speed at which we recoup our original expense, but it wouldn't be right to base my calculation on what we theoretically can do, because we don't vacation that way, I believe if I did do it that way it would break even at 2.6 years! Crazy, isn't it? But not going to happen.

 

[myxdvz]

I have to be honest, I didn't do all this Math crunching before I bought into DVC. I knew I had kids of an age where we're going to go to Disney at least every other year. I had $$$ to burn that time, and instead of buying another camera, a car or another lens - I decided to put my money on DVC.

However, since then - I did keep track of how much $ we've spent on our vacations with DVC vs $ we would have spent without DVC. At the time we book our trip, I also grab the rate of the rooms I book from WDW or rental rates if they're not yet available.

So my spreadsheet is not a "forecast", these are actual #s of $ we've saved. So far, the $ I would have already spent on the vacations we took from 2011 thru 2013 is already 83% of my original purchase price. My MFs are a wash since I rented some of my points. The rest will be recouped in 2 years tops. It's at 94% after our Springbreak 2014 trip.

If we rented, it would have been 50%. But we could never be renters though, can't commit to a date that far in advance without possibilities of cancelling. I've modified my dates and resorts many many times after booking. Our trips normally become solid once we have airfares booked.

This doesn't even account for the other "perks". If we include the savings from the PAP for a family of 5 ~$1500 and we'd have broken even by next year. And this is a retail purchase. How much more if we bought a resort other than BLT from resale?

So to answer the OP, at least for us - it took 4 years, 23 nights at various resorts, a free cruise on the Dream and discounted PAPs for 5 to recoup our original purchase price.

 

[brertoad]

This doesn't even account for the other "perks". If we include the savings from the PAP for a family of 5 ~$1500 and we'd have broken even by next year.

Good point. We saved $800 on our PAPs, we purchased them for 2012-2013, and vouchers for 2013-2014. I didn't include that in my estimate of our break even point.

We might not have even purchased the Premium Annual Passes at the $595 FL resident price, but we were already buying Annual Passes every year, so when we had the chance to upgrade for basically $30 for both of us, we did, and got a vouchers for our renewal this year. The timing was perfect for us when they ran the Q4 $399 PAP special.