A perspective on the $92 vs. $96 OKW contracts

[Doctor P]

I've been thinking about the issue of DVD only charging a $4 differential between 2042 and 2057 contracts. Here's my take: Disney is valuing the 2057 contracts at $96 per point. The valuation of the 2042 contracts is a red herring and somewhat irrelevant now. Disney is now selling OKW as a 2057 contract and that is what they want people to buy. Someone who buys resale right now is able to get an OKW contract for in the range of $70-72 per point. Assuming that those persons buying now are ineligible for the special pricing, Disney can offer them the 2057 contract for $25 per point more, which puts the cost of the resale at just about exactly what Disney is selling the points for directly. Disney, IMHO, IS valuing the additional years at $25 per point. They need to sell those extensions, and selling the extensions to existing members is much cheaper than finding buyers for the ROFR'ed or other contracts still in inventory. Hence, the discount to $15 per point (not to mention goodwill with existing owners). Still not sure what the best move for us will be, but I don't think the $4 differential is really something to get upset about. Even my most expensive add on is still an OK bargain if you add $15 to the cost (I think it would come out to $99 per point), so I don't think I am getting nailed as compared to a new buyer. Plus, new buyers have to pay closing costs.

 

[dianeschlicht]

I hadn't thought of it that way, but you could be right! I'm still not going to add the 15 though.

 

[mydogdrew]

Unless you recently bought OKW @ $92. If so, you're looking at $107 for a 50 year contract.

 

[CarolMN]

I'm not an OKW owner, but if they offer the same deal for BWV, I doubt I will accept it. My reasoning:

The only reason I would want the extension would be for resale value. (Don't want the extra years and do not want to pass on to the heirs).

As I think this through, I have to remind myself that I bought a prepaid vacation plan and have already "broken even" - that's comparing what we would have spent (on a mod or a deluxe with an AP discount) to the price we paid for DVC. Essentially, we're now staying once or twice a year in DVC accomodations on dues only.

Even if we don't extend, I really don't think the value of a BWV contract will reach zero in the next 5 - 10 years. That's the most likely time we will sell. The contract will still have 28-29 years left to go. So we'll still get some "gravy" no matter what .

So the question needs to be (for us) what return do I think I will get if I give DVC $15 per point now and sell in 5 years?

Assuming I can get 8% (which I consider a a very reasonable return), $1 now will be worth $1.47 in 5 years. Do I think a BWV contract that expires in 2057 will sell for approx $125 per point in 5 years? (I'm assuming an average resale price now is $85, which is probably on the low side). To me, $125 per point for a resale is pretty "iffy".

I think I'd rather put my money into something else - either better/more vacation experiences now or a less risky (more diversified) investment.

Interested to read anyone else's math on the resale angle.

I get the "leave it to the kids" and "I will still want to go to WDW in 2042 and beyond" reasons, but they don't apply to us.

 

[mjy]

I'm not an OKW owner, but if they offer the same deal for BWV, I doubt I will accept it. My reasoning

Carol:

All I can say is PRECISELY! Those are pretty much my reasons as well. Don't really have heirs to worry about. Will be older than I want to be (if I live the length of my present contract) to be vacationing regularly to Florida. By that time, I'll either be living there or drooling somewhere else!

 

[BWV Dreamin]

Carol:

All I can say is PRECISELY! Those are pretty much my reasons as well. Don't really have heirs to worry about. Will be older than I want to be (if I live the length of my present contract) to be vacationing regularly to Florida. By that time, I'll either be living there or drooling somewhere else!

Ha! Ha! Ha! Hmmm......I hope not! I am watching very closely whats happening with the resales with OKW. This will be a big factor just what changes happen with the 2042 resales.

 

[Granny]

I'm not an OKW owner, but if they offer the same deal for BWV, I doubt I will accept it. My reasoning:

The only reason I would want the extension would be for resale value. (Don't want the extra years and do not want to pass on to the heirs).

As I think this through, I have to remind myself that I bought a prepaid vacation plan and have already "broken even" - that's comparing what we would have spent (on a mod or a deluxe with an AP discount) to the price we paid for DVC. Essentially, we're now staying once or twice a year in DVC accomodations on dues only.

You've pretty much summed up my feelings on the topic as well. I'm not worried about resale value...as you say, I'm probably pretty close to "breaking even" though I never would have stayed in 2BR villas on cash. Still, we think we won't have any problem getting our money's worth out of our contracts.

I guess it comes down to the fact that we didn't buy DVC as an investment that we want to protect the value of. We bought it as a consumable asset that we will continue to use, hopefully until 2042.

I understand people wanting to protect the value of their ownership, but I'm not willing to put more money into DVC just to keep the resale value up. I can see where it makes sense for some people...I'm just not one of them.

 

[dianeschlicht]

I'm not an OKW owner, but if they offer the same deal for BWV, I doubt I will accept it. My reasoning:

The only reason I would want the extension would be for resale value. (Don't want the extra years and do not want to pass on to the heirs).

As I think this through, I have to remind myself that I bought a prepaid vacation plan and have already "broken even" - that's comparing what we would have spent (on a mod or a deluxe with an AP discount) to the price we paid for DVC. Essentially, we're now staying once or twice a year in DVC accomodations on dues only.

Even if we don't extend, I really don't think the value of a BWV contract will reach zero in the next 5 - 10 years. That's the most likely time we will sell. The contract will still have 28-29 years left to go. So we'll still get some "gravy" no matter what .

So the question needs to be (for us) what return do I think I will get if I give DVC $15 per point now and sell in 5 years?

Assuming I can get 8% (which I consider a a very reasonable return), $1 now will be worth $1.47 in 5 years. Do I think a BWV contract that expires in 2057 will sell for approx $125 per point in 5 years? (I'm assuming an average resale price now is $85, which is probably on the low side). To me, $125 per point for a resale is pretty "iffy".

I think I'd rather put my money into something else - either better/more vacation experiences now or a less risky (more diversified) investment.

Interested to read anyone else's math on the resale angle.

I get the "leave it to the kids" and "I will still want to go to WDW in 2042 and beyond" reasons, but they don't apply to us.

Yep! We too!

 

[JimC]

I'm not an OKW owner, but if they offer the same deal for BWV, I doubt I will accept it. My reasoning:

The only reason I would want the extension would be for resale value. (Don't want the extra years and do not want to pass on to the heirs).

As I think this through, I have to remind myself that I bought a prepaid vacation plan and have already "broken even" - that's comparing what we would have spent (on a mod or a deluxe with an AP discount) to the price we paid for DVC. Essentially, we're now staying once or twice a year in DVC accomodations on dues only.

Even if we don't extend, I really don't think the value of a BWV contract will reach zero in the next 5 - 10 years. That's the most likely time we will sell. The contract will still have 28-29 years left to go. So we'll still get some "gravy" no matter what .

So the question needs to be (for us) what return do I think I will get if I give DVC $15 per point now and sell in 5 years?

Assuming I can get 8% (which I consider a a very reasonable return), $1 now will be worth $1.47 in 5 years. Do I think a BWV contract that expires in 2057 will sell for approx $125 per point in 5 years? (I'm assuming an average resale price now is $85, which is probably on the low side). To me, $125 per point for a resale is pretty "iffy".

I think I'd rather put my money into something else - either better/more vacation experiences now or a less risky (more diversified) investment.

Interested to read anyone else's math on the resale angle.

I get the "leave it to the kids" and "I will still want to go to WDW in 2042 and beyond" reasons, but they don't apply to us.

Very nice post Carol!!

 

[JimC]

I've been thinking about the issue of DVD only charging a $4 differential between 2042 and 2057 contracts. Here's my take: Disney is valuing the 2057 contracts at $96 per point. The valuation of the 2042 contracts is a red herring and somewhat irrelevant now. Disney is now selling OKW as a 2057 contract and that is what they want people to buy. Someone who buys resale right now is able to get an OKW contract for in the range of $70-72 per point. Assuming that those persons buying now are ineligible for the special pricing, Disney can offer them the 2057 contract for $25 per point more, which puts the cost of the resale at just about exactly what Disney is selling the points for directly. Disney, IMHO, IS valuing the additional years at $25 per point. They need to sell those extensions, and selling the extensions to existing members is much cheaper than finding buyers for the ROFR'ed or other contracts still in inventory. Hence, the discount to $15 per point (not to mention goodwill with existing owners). Still not sure what the best move for us will be, but I don't think the $4 differential is really something to get upset about. Even my most expensive add on is still an OK bargain if you add $15 to the cost (I think it would come out to $99 per point), so I don't think I am getting nailed as compared to a new buyer. Plus, new buyers have to pay closing costs.

Very interesting perspective. Could very well be right on.