2 Burning questions on my mind - Calling all DVC Financial Experts!

As we start approaching 2042, shouldn't maintenance fees start to level off or even decline? Reason behind my thinking is that we shouldn't be funding long term maintenance on a property that we don't own past 2042. I understand that a portion of maintenance fees fund annual expense, but another portion also funds things that are longer term expenses.
 
As we start approaching 2042, shouldn't maintenance fees start to level off or even decline? Reason behind my thinking is that we shouldn't be funding long term maintenance on a property that we don't own past 2042. I understand that a portion of maintenance fees fund annual expense, but another portion also funds things that are longer term expenses.
While agree the Capital Reserve budget may see some decrease, I imagine annual operating costs in all the other categories would dwarf any amount that would be decreased under long-term costs. Things like insurance, legal fees, housekeeping, utilities, etc., all tend to go up regularly over time. Those costs will be passed on to owners accordingly.
 


While I don't think this will actually happen to BCV/BWV. Imagine if in the last 5 years, they offered a 15 year extension at $15/ppt. Which I think they did with OKW. If you're holding onto that contract, that value just got bumped up tremendously. So while unlikely to happen, I do see people holding on for potential for something to occur.

"Unlikely" is crazy optimistic in this case.

When Disney did offer a $15 per pt extension for OKW, the value offered was zero for the next 35 years. The present value of those additional years was much, much less than the $15 price. Prices were lower back then as OKW resales tended to be in $70s-80s. Most owners balked at that price - some considered using the money for a small resale with points that could be used immediately instead of waiting several decades.

If they did offer an extension for a 2042 resort, the price will most likely again seem ridiculous to most owners. You need to apply a "Disney inflation" factor to that 2006ish $15. (A 1 day ticket was around $65 per day back then.) I don't expect that DVC will offer extensions, but if they did, it would likely be priced over $100 per pt.

(I would add that I agree with the notion that most timeshares have resale value that tracks with the difference between rental value and annual dues.)
 
Guides love to use the line about how "Disney will take a hit on 'locking in pricing' for 50 years because we know you'll come back year-after-year and spend money at the parks. That's how Disney will make back this money."
Have they actually said this?

New construction timeshares are sold with a profit margin of roughly 70-80%. While they may advertise DVC as being a long-term savings, and perhaps for the customer it is, the fact of the matter is that they basically front-loaded all of their profit into the first year. That's a crazy favorable business model. If I could open any business today and have my profits guaranteed for the next 50 years with the promise that my customers would pay my expenses, no matter what they were (with possible hidden profits for my subsidiaries as well) I would sign up for that in a second.

I don't like the thought of Disney making it sound like they are doing us a favor by losing money on the sale of DVC. The fact is that it is a highly profitable division of the company.

I'm not suggesting that it is likely, but if things get bad enough and they cannot fill rooms its definitely possible. They would likely be creative with it (discount + gift card + free dining, etc....), so that they don't have to advertise the price is so cheap.
I agree with this. Last recession, around 2009, friends of mine paid full rate for four nights at an All Stars resort. It was typical rack rate around that time, maybe $130 a night or something. However, they also got free park tickets for their stay, three additional nights, free park tickets for those three additional days, and free dining for their entire stay. So if anyone looks at it, Disney didn't discount the room rate one bit. But that still remains the sweetest deal I've ever seen. I've been chasing it ever since. Call me Ishmael.
 
"Unlikely" is crazy optimistic in this case.

When Disney did offer a $15 per pt extension for OKW, the value offered was zero for the next 35 years. The present value of those additional years was much, much less than the $15 price. Prices were lower back then as OKW resales tended to be in $70s-80s. Most owners balked at that price - some considered using the money for a small resale with points that could be used immediately instead of waiting several decades.

If they did offer an extension for a 2042 resort, the price will most likely again seem ridiculous to most owners. You need to apply a "Disney inflation" factor to that 2006ish $15. (A 1 day ticket was around $65 per day back then.) I don't expect that DVC will offer extensions, but if they did, it would likely be priced over $100 per pt.

(I would add that I agree with the notion that most timeshares have resale value that tracks with the difference between rental value and annual dues.)

I expect them to offer an extension before it gets to less than 15 years left on the contracts ending in 2042. They don't want their direct contracts to have to compete with what look like dirt cheap contracts on the resale market and that is what contracts even at BCV will look like compared to newer properties when there are 15 years or less left on them. It could actually happen much sooner than that. There is a remaining year number that will be the turning point in enough people's minds that it just doesn't make sense, even under the influence of pixie dust, to spend $19,000-$23,000 for a week at BWV or BCV. When Disney can't attract buyers at those prices anymore they will completely stop ROFR on those locations. As soon as the resale buyers see that Disney is no longer ROFRing anything at those locations, what resale buyers are willing to offer at those locations will drop dramatically.
 
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Have they actually said this?

[snip]

I don't like the thought of Disney making it sound like they are doing us a favor by losing money on the sale of DVC. The fact is that it is a highly profitable division of the company.
My first guide said exactly this. But she also printed out the financial incentives sheet with a date added to the top of the page a few days from that day, telling me that the prices were only good until the end of the week. A quick google search proved this to be untrue. During our conversation, she also pulled the slick used-car-salesman move of telling me that my costs each year "....would only be... [writes "$7.26/pt/year" on a piece of paper and slides it across the table].... your annual dues"; a subtle suggestion that on a 150 point contract would cost only a little over $1,000/year for 50 years. What she stated was factually true, what she intimated, was not.

She's still selling timeshares for Disney today, so I imagine her methods work.
 
I expect them to offer an extension before it gets to less than 15 years left on the contracts ending in 2042. They don't want their direct contracts to have to compete with what look like dirt cheap contracts on the resale market and that is what contracts even at BCV will look like compared to newer properties when there are 15 years or less left on them. It could actually happen much sooner than that. There is a remaining year number that will be the turning point in enough people's minds that it just doesn't make sense, even under the influence of pixie dust, to spend $19,000-$23,000 for a week at BWV or BCV. When Disney can't attract buyers at those prices anymore they will completely stop ROFR on those locations. As soon as the resale buyers see that Disney is no longer ROFRing anything at those locations, what resale buyers are willing to offer at those locations will drop dramatically.

I think it is highly unlikely that they will offer an extension at the Epcot DVC resorts. The land there is way too valuable. OKV, SSR, some other DVC sites make sense. OKV and SSR will always be resorts.
That prime land next to Epcot though. Lots of things they could do with it.

I could see an extension at BRV to co-term it to CCV's length. I have no idea what they'll do with HHI and VB.. They'll probably sell them off.

IF they ever did offer an extension at BCV or BWV, I would expect it to be really expensive

I conservatively estimate that DVD's gross profit margin on selling a new resort is above 60%. Taking back BCV, refurbishing it, and selling it as a brand new resort would make them so much money it wouldn't even be funny. (BLT was around 140M to build and they sold about 600M dollars worth of points. Call BLT 200M all in. Not bad. Riviera is rumored to be around 350M to 400M to build and they'll sell over 1 billion dollars worth of points there (6.7M total points there)) I guess one could argue that selling an extension is almost pure profit as dues pay for upkeep, refurbishment, etc. I still don't see it happening at the 2 Epcot resorts though.
 
I think it is highly unlikely that they will offer an extension at the Epcot DVC resorts. The land there is way too valuable. OKV, SSR, some other DVC sites make sense. OKV and SSR will always be resorts.
That prime land next to Epcot though. Lots of things they could do with it.

I could see an extension at BRV to co-term it to CCV's length. I have no idea what they'll do with HHI and VB.. They'll probably sell them off.

IF they ever did offer an extension at BCV or BWV, I would expect it to be really expensive

I conservatively estimate that DVD's gross profit margin on selling a new resort is above 60%. Taking back BCV, refurbishing it, and selling it as a brand new resort would make them so much money it wouldn't even be funny. (BLT was around 140M to build and they sold about 600M dollars worth of points. Call BLT 200M all in. Not bad. Riviera is rumored to be around 350M to 400M to build and they'll sell over 1 billion dollars worth of points there (6.7M total points there)) I guess one could argue that selling an extension is almost pure profit as dues pay for upkeep, refurbishment, etc. I still don't see it happening at the 2 Epcot resorts though.
Oh, I think the extensions will be expensive. I would expect it to at least be $125 per point at BCV on a 15 year extension. They could probably get more than that.
 
As a financial nerd, doesn't this loosely correlate to stock options as well? In the last 5 years, contract prices wil drop. But the bottom will be supported by potential. It's the reason stock option contracts don't truly go to zero until actual expiration and will still retain some value. The value in an unknown, close to expiration DVC contract is that Disney MAY offer something. That could be in the form of an extension, first rights on a new offering, etc. To some, it will be worth something to hold onto that expiring contract for the hope of gaining that advantage.

While I don't think this will actually happen to BCV/BWV. Imagine if in the last 5 years, they offered a 15 year extension at $15/ppt. Which I think they did with OKW. If you're holding onto that contract, that value just got bumped up tremendously. So while unlikely to happen, I do see people holding on for potential for something to occur.
I guess there is a bit of a correlation to stock options. The contract holds an intrinsic value up until a certain point and there’s no guarantee of future value. The more I look at some of these listings on the resale market the more I start to ask “what’s in it for me to buy this contract?” Specifically, contracts that expire in 2042 that are being listed at $140+ per point. I get that there’s an unquantifiable dollar amount placed on having certain home resorts versus others and I think that makes the equation even more difficult. Also, the fact that dues will only continue to increase in cost while the value of the contract will continue to decline in the not so distant future makes matters even more complicated.
I’m not looking at this as an “investment” but rather an opportunity cost exercise. If I forgo the $40-50k upfront cost of a DVC contract that would work for my situation I can instead invest that money and 20 years still have that principal plus market growth. And yes, every year I would be paying out of pocket for my Disney resort stays but the idea is if I’m saving and investing properly the “break even” point really shouldn’t exist.
 
I think it is highly unlikely that they will offer an extension at the Epcot DVC resorts. The land there is way too valuable. OKV, SSR, some other DVC sites make sense. OKV and SSR will always be resorts.
That prime land next to Epcot though. Lots of things they could do with it.

I could see an extension at BRV to co-term it to CCV's length. I have no idea what they'll do with HHI and VB.. They'll probably sell them off.

IF they ever did offer an extension at BCV or BWV, I would expect it to be really expensive

I conservatively estimate that DVD's gross profit margin on selling a new resort is above 60%. Taking back BCV, refurbishing it, and selling it as a brand new resort would make them so much money it wouldn't even be funny. (BLT was around 140M to build and they sold about 600M dollars worth of points. Call BLT 200M all in. Not bad. Riviera is rumored to be around 350M to 400M to build and they'll sell over 1 billion dollars worth of points there (6.7M total points there)) I guess one could argue that selling an extension is almost pure profit as dues pay for upkeep, refurbishment, etc. I still don't see it happening at the 2 Epcot resorts though.
Add to this the fact that point charts at both these resorts will be going UP! UP! UP!!! :)
 
The 2042 resorts will certainly become cheaper as they get closer to their expiration dates, but with Inflation, rising lodging costs and such, I can imagine being able to buy BWV resale today at $125 per point and still being able to sell for at least $125 per point in 2030.

It would be difficult to sell a 2042 contract for anything meaningful when there's about 5 years left on the contract since the buyer has to factor in closing costs and annual dues with the purchase price against cash stays or point rentals. Any owner who hasn't already sold their 2042 contracts by then are better off renting their points than selling in those final years.

But, at least for BWV and BCV, it's not like prices will plummet to abysmal numbers when there's still 10-15 years left on the contract. There are plenty of people who would love to pick up a decade's worth of BWV and BCV stays. There are plenty of people who aren't Disney fanatics but are parents with infants or toddlers that want to enjoy DVC at prime Epcot locations with a reasonable buy-in and would be totally fine with the contract expiring when their kids are older children/teens ageing out of Disney. I mean, imagine if BCV or BWV were expiring in 2029 instead of 2042 so we can use today's dollars. What would you pay for BWV or BCV now? I just cannot imagine, even if expiring in 10 years, that BWV or BCV would sell today for less than a VB or HHI contract. Who today would turn down 100 points at BCV for $75 per point? Even if expiring in 10 years, that contract would sell!

VB and HHI won't be worth much. BRV will be cheap points but not as bad as VB and HHI. But BWV and BCV will still have decent value in 2030 due to their prime locations and wide appeal.

Just my opinion.
I would pay MORE per point than going rates today for a 10 year expire for a contract. I am the example you gave (young family, unknown vacation needs for teens). The 2060 commitment for BLT makes it hard for me to commit.
 
I’m not looking at this as an “investment” but rather an opportunity cost exercise. If I forgo the $40-50k upfront cost of a DVC contract that would work for my situation I can instead invest that money and 20 years still have that principal plus market growth. And yes, every year I would be paying out of pocket for my Disney resort stays but the idea is if I’m saving and investing properly the “break even” point really shouldn’t exist.

plus maintenance fees, less your out of pocket costs for your hotel stays. You kind of mention it afterwards, but the out of pocket costs must factor into the calculation, otherwise its not a fair comparison. The idea is your taking your starting principal and investing it. You then pull funds every year out of the investment to pay for your vacations. At the end, if you still have funds in your investment, your strategy wins. If you run out of money before the end, DVC wins.

If you simply take the principal and invest it for 20 years, then use another source of money to pay for the vacation, your now introducing new money into the equation. It would take a lot for DVC to beat both investing your purchase price plus another income stream.
 
They can't extend and change the point charts, or make the resort not O14 under current restrictions. An extension, straight up, leaves the condominium declaration in place.

I'm also on Team "maybe BRV to get BRV and CCV on the same cycle and eventually same Condo Association."
And on Team "maybe minimal renovation and re-sell BWV and BCV with All New Point Charts" depending on the economic conditions.
 
plus maintenance fees, less your out of pocket costs for your hotel stays. You kind of mention it afterwards, but the out of pocket costs must factor into the calculation, otherwise its not a fair comparison. The idea is your taking your starting principal and investing it. You then pull funds every year out of the investment to pay for your vacations. At the end, if you still have funds in your investment, your strategy wins. If you run out of money before the end, DVC wins.

If you simply take the principal and invest it for 20 years, then use another source of money to pay for the vacation, your now introducing new money into the equation. It would take a lot for DVC to beat both investing your purchase price plus another income stream.
I've done this calculation with, as you stated, using internal funds to pay for the annual stays. Depending on assumptions (interest rates, maintenance fee increases, etc.) the breakeven is anywhere between 20-30 years. Some of the outliers have the breakeven as soon as 15 years and as late as NEVER. The truth is probably somewhere there in the middle, but if given the choice to plunk down a huge chunk of change for the possibility of long-term savings or simply keeping my money, I'm going to keep my money every time. It's why I sold my VGC contract even though we love DL. Yes, I'll be paying more each time I go, but I also got $190 per point for a $150 point contract. It's going to take decades of visits to erode that money down to zero, which is where it was when it was tied up in DVC.

Again, I hate to sound like such a downer. DVC is a great product and I love it. But at these prices, the value is just not there. My issue is that it is still being sold as a value proposition. If you choose to look at it as a wonderful timeshare with great room configurations and an AMAZING online booking tool, that's great. I might even buy into that. But I'm from 2012 DVC, where it was still being sold (accurately) as a huge savings alternative. And it's just not that anymore.
 
I've done this calculation with, as you stated, using internal funds to pay for the annual stays. Depending on assumptions (interest rates, maintenance fee increases, etc.) the breakeven is anywhere between 20-30 years. Some of the outliers have the breakeven as soon as 15 years and as late as NEVER. The truth is probably somewhere there in the middle, but if given the choice to plunk down a huge chunk of change for the possibility of long-term savings or simply keeping my money, I'm going to keep my money every time. It's why I sold my VGC contract even though we love DL. Yes, I'll be paying more each time I go, but I also got $190 per point for a $150 point contract. It's going to take decades of visits to erode that money down to zero, which is where it was when it was tied up in DVC.


Not sure what variables you are using, but even being pretty pessimistic, the breakeven in my quick calculation right now had me around 9-10 years on a SSR contract (comparing to staying at SSR).

Variables used


Maintenance Fees inflation = 4.5%
Hotel Inflation = 4.5%
13 days per year @ $300 per night cash rate in July
200 points @ $100 per point
8% growth by investing purchase price + maintenance fees.

I understand that SSR is the most economical choice, so the break even only gets worst from there. But it goes to show that there are some resorts that really can be had at a steal of a price.
 
As we start approaching 2042, shouldn't maintenance fees start to level off or even decline? Reason behind my thinking is that we shouldn't be funding long term maintenance on a property that we don't own past 2042. I understand that a portion of maintenance fees fund annual expense, but another portion also funds things that are longer term expenses.
This is my opinion only, but I feel DVD has the right to expect brand new furnishings and renovations when they get the resorts back in 2042. The Members started with brand new, so that’s the way it should be returned.
Sort of like renting a car... they give you a full tank, and you give it back with a full tank.
 
Not sure what variables you are using, but even being pretty pessimistic, the breakeven in my quick calculation right now had me around 9-10 years on a SSR contract (comparing to staying at SSR).

Variables used

Maintenance Fees inflation = 4.5%
Hotel Inflation = 4.5%
13 days per year @ $300 per night cash rate in July
200 points @ $100 per point
8% growth by investing purchase price + maintenance fees.

I understand that SSR is the most economical choice, so the break even only gets worst from there. But it goes to show that there are some resorts that really can be had at a steal of a price.
I don't disagree with what you've laid out here and I think we both agree that you have chosen the best-case scenario. If you run the same numbers at different pricing/maintenance fee tiers (BWV resale, BCV resale, BLT resale, RIV direct, CCV direct, etc.) I'm sure you will find it gets much grimmer much quicker.
 
This is my opinion only, but I feel DVD has the right to expect brand new furnishings and renovations when they get the resorts back in 2042. The Members started with brand new, so that’s the way it should be returned.
Sort of like renting a car... they give you a full tank, and you give it back with a full tank.
Very interesting perspective. Keeping with your car analogy, I see it differently. I view it more like a lease...you get a brand new car and you return it with three years of wear and tear, a ton of mileage, and some minor dents and dings.
 

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