A serious discussion on future 'guestimates' of MF's..

[Pluto777]

Read the original post. The poster said he/she didn't think "most people" gave enough consideration to MFs. I was responding to that, specifically. We considered buying DVC a couple times. Went on the tour, got all the books, etc. MFs were downplayed by the guides AND the book. Future increases were noted in tiny fine print. I never seriously considered their impact on the total cost of owning. I had to do the math myself to get an idea of what we were looking at spending over the long term. When you hear 3% increase in MFs per year, and MFs are in the vicinity of $5, you shrug like "eh, that's nothing."

Your table illustrates the potential problem with MFs. Disney leaves the "annual increase" amounts completely open to whatever they want it to be. Unless I'm wrong and your contract states that there is a maximum percentage they will raise them. Using your 5% scenario, your nightly cost of a studio jumps up to almost $800! That's insane! What happens if Disney decides MFs are going up 8% one year, 10% the next year, etc? You are at their mercy.

We decided DVC wasn't for us. I have a real problem with how Disney markets it as a way to save on vacations. It's not. Why would Disney want that? DVC is lucrative for Disney, not the owners.

You wrote "Disney leaves the "annual increase" amounts completely open to whatever they want it to be." I'm not sure thats the case; isn't there is an annual meeting and dues are decided then? Also I'm not sure how accurate that chart is, but again, when you project decades into the future you need to be careful; while $800 a night for a room may sound crazy to you now, consider what a room cost anywhere onsite at WDW in the 1970's - about 40 years ago - then look at that price TODAY. How much was a room in say the contemporary in 1978 vs a room at Contemporary in 2018? I think you will find that the prices that Disney can get away with charging - and people are STILL WILLING TO PAY, are astounding. As long as demand for a product increases, a seller can raise the price...

 

[Ben E N]

You wrote "Disney leaves the "annual increase" amounts completely open to whatever they want it to be." I'm not sure thats the case; isn't there is an annual meeting and dues are decided then? Also I'm not sure how accurate that chart is, but again, when you project decades into the future you need to be careful; while $800 a night for a room may sound crazy to you now, consider what a room cost anywhere onsite at WDW in the 1970's - about 40 years ago - then look at that price TODAY. How much was a room in say the contemporary in 1978 vs a room at Contemporary in 2018? I think you will find that the prices that Disney can get away with charging - and people are STILL WILLING TO PAY, are astounding. As long as demand for a product increases, a seller can raise the price...

In the 1970's you could get a room in the Contemporary for as cheap as $60 per night. This has been told to me by two separate, unrelated, people who did so themselves. Ha! And you could buy a mixed drink in their lounge for $2.50! (http://passport2dreams.blogspot.com/2015/09/the-contemporary-resort-in-1970s.html) In 40 years when I tell people that I was only paying $5 per point in MFs, they will find it hard to believe. When I also tell them that my house was only $300-400k, that will also shock them. Of course, a lot more than just the value of money will be different then. It just goes to show you that comparing costs of periods longer than 10 years or so apart really doesn't make a ton of sense. It is better to look at how prices change in relation to inflation, if that comparison is at all possible.

 

[Pluto777]

DVC MF's are based on costs.

Disney hotels are the one's that can go to whatever they feel the market will allow.

AKV - I find the total budgeted amount a better indication of what owners are paying.
Administration and Front Desk $5,771,613

Animal Programs $2,575,870

Annual Audit $14,500

DVC Reservation Component $46,439

Fees to the Division $46,716

Housekeeping $7,552,827

Income Taxes $143,321

Insurance $452,279

Maintenance $5,230,975

Management Fee $3,783,093

Member Activities $1,414,890

Security $551,509

Transportation $3,640,221

Utilities $2,052,152

Bill

As others have said on this thread, I am still trying to unlock the mystery of MF fees. Some seem to feel that Disney can 'charge whatever they want' on MF's; I don't believe that is the case. In this very helpful example Bill gives us there are specified costs (I must say however "Maintenance $5,230,975" is a mystery to me, since the whole fee is supposed to be 'maintenance', could someone help me understand that?). The reason I began this thread was to understand and project the LIKELY FUTURE COSTS of these MF components into the future... Where for example, are the property taxes cost? I heard thats a large component but don't see it here, Also Management Fee $3,783,093 & "front desk" (better at least be an Oak desk at $5,771,613!) seems like quite a bit high, no?

 

[hlhlaw07]

Sorry, forgot one assumption. I used 150 points per week because if you look at ALL the DVC resorts over a set week in July, you need an average of 150 points per week. People don't generally ONLY stay at their home resort so I wanted to use a more likely scenario of booking various properties.

Well now that is incorrect as well. If you take a straight average of the point requirement for a week in July (meaning add up all the point requirements and divide by 14 resorts) then the average point requirement is 133, and that's not including the Value studios at AKV. Without the outlier of VGC (at 194 points for that week in July) the average is 128. For WDW resorts the majority are well under 150 for that week in July with only Poly and VGF being more than 150. Taking away Poly and VGF, the average point requirement is 120. And while 133 (average across all DVC resorts) is only 17 points off from 150, over the life of the contract that's a lot of points (i.e. money) left on the table.

 

[wnielsen1]

As others have said on this thread, I am still trying to unlock the mystery of MF fees. Some seem to feel that Disney can 'charge whatever they want' on MF's; I don't believe that is the case. In this very helpful example Bill gives us there are specified costs (I must say however "Maintenance $5,230,975" is a mystery to me, since the whole fee is supposed to be 'maintenance', could someone help me understand that?). The reason I began this thread was to understand and project the LIKELY FUTURE COSTS of these MF components into the future... Where for example, are the property taxes cost? I heard thats a large component but don't see it here, Also Management Fee $3,783,093 & "front desk" (better at least be an Oak desk at $5,771,613!) seems like quite a bit high, no?

What is commonly called maintenance or management fees is really 3 categories: Operating expenses, real estate taxes and capital reserves. Without looking at Bill's numbers too closely, he likely gave you the operating expenses. The management fee of $3.8 million is almost certainly the Disney profit (they aren't managing the property for free) and the front desk fee of $5.8 million is not really the physical desk, but rather the expenses of operating the front desk - mostly labor costs.

Edit: dvcnews.com has a great breakdown of all of the resorts and the various line items and what the categories mean. Check it out here: http://www.dvcnews.com/index.php/dv...atic-content/content/3961-2018-resort-budgets

 

[Pluto777]

What is commonly called maintenance or management fees is really 3 categories: Operating expenses, real estate taxes and capital reserves. Without looking at Bill's numbers too closely, he likely gave you the operating expenses. The management fee of $3.8 million is almost certainly the Disney profit (they aren't managing the property for free) and the front desk fee of $5.8 million is not really the physical desk, but rather the expenses of operating the front desk - mostly labor costs.

Edit: dvcnews.com has a great breakdown of all of the resorts and the various line item and what the categories mean. Check it out here: http://www.dvcnews.com/index.php/dv...atic-content/content/3961-2018-resort-budgets

Thx for the explanation. What do you (or anyone knowledgeable) think of the animal expenses? Are they manageable or will they become a overly burdensome thing in the future on MF's?

 

[wnielsen1]

Thx for the explanation. What do you (or anyone knowledgeable) think of the animal expenses? Are they manageable or will they become a overly burdensome thing in the future on MF's?

Personal opinion? I think they will be manageable. They seem to be stable and I don't see that changing. Disney has been managing the AK theme park for 20 years now and managing the animals on the adjacent land at AKV is not much different. They know what is required. There will be the typical inflationary impacts, of course, but I wouldn't expect anything unusual.

 

[miTnosnhoJ]

DVC MF's are based on costs.

Disney hotels are the one's that can go to whatever they feel the market will allow.

I agree, but not only that:
The categories that make up the DVC MFs also apply to the hotel rooms for a similar square footage room.
The room cleaning components will be even higher, due to daily cleaning for hotel rooms.
The soft goods and furniture replacements for hotel rooms may be on an accelerated schedule compared to DVC - due to increased wear and tear.
The real estate taxes may be computed differently, since there are games they can play for hotel vs. residence, but the relationship is likely to be stable.

So the DVC increase should always be the same or less than the imputed increase that is included in the hotel rate.

So I am not going to share in the anxiety about this.

 

[tjkraz]

Now, when you break that down, into our "week long July vacation scenario", the average nightly cost for that Studio is $466.13. That is close to the rack rate average for all the Deluxe resort Standard Rooms. And it's WAY more than I have ever paid (or will pay in the future) for a "standard view room" at a Deluxe resort. I just don't see the savings, sorry.

Where is the value in comparing costs on the basis of a 45-year average?

Nevertheless, your $412 room (2018) with the same 3.5% annual increase averages $968 per night over 45 years...more than twice your DVC average listed above.

And if you spent 7 nights in that room annually for the next 45 years, total cost would be $305,074.

 

[wnielsen1]

And if you spent 7 nights in that room annually for the next 45 years, total cost would be $305,074.

Hi family! This family meeting is to notify you that all future vacations are cancelled.

 

[Ben E N]

Hi family! This family meeting is to notify you that all future vacations are cancelled.

45 years from now, $305k will not be all the much money. Probably a year's salary for the majority of white collar workers. Comparing today's money to what we will spend in the future is kind of silly. There are many variables that will play into how much money will grow throughout the future, but some sort of yearly inflation is almost an absolute guarantee.

 

[KAT4DISNEY]

As others have said on this thread, I am still trying to unlock the mystery of MF fees. Some seem to feel that Disney can 'charge whatever they want' on MF's; I don't believe that is the case. In this very helpful example Bill gives us there are specified costs (I must say however "Maintenance $5,230,975" is a mystery to me, since the whole fee is supposed to be 'maintenance', could someone help me understand that?). The reason I began this thread was to understand and project the LIKELY FUTURE COSTS of these MF components into the future... Where for example, are the property taxes cost? I heard thats a large component but don't see it here, Also Management Fee $3,783,093 & "front desk" (better at least be an Oak desk at $5,771,613!) seems like quite a bit high, no?

Maintenance Fee's is often used instead of Annual Dues which is what we actually pay and covers all expenses with ownership and operation of the timeshare. It's knowing the context a word is used in. So, Annual Dues are comprised of various components and one of those components is maintenance fees which covers costs to maintain the property. It would cover a variety of items - repairs of virtually anything - heating, air conditioning and plumbing as a couple of examples. Painting, pools, grounds and so on.

 

[KAT4DISNEY]

Thx for the explanation. What do you (or anyone knowledgeable) think of the animal expenses? Are they manageable or will they become a overly burdensome thing in the future on MF's?

Much ado about nothing with the animals IMO. There is a cost component to them but it should change no differently than any other cost.

 

[swimmer55]

We decided to purchase a DVC plan while onboard a cruise. After we got home we had our CPA calculate the total cost.
80,000 up front, 4,200 in annual fees that are estimated to increase 3.2% per year times 50 years came out to around $580,000.00.
The annual fees the last year would be around 21,000.00 since the increase is compounded.
That was a deal killer for us.
Any thoughts?

 

[disneynutz]

Sounds about right, don't forget your transportation, admission, food and extras cost at Disney.

Bill

 

[wnielsen1]

We decided to purchase a DVC plan while onboard a cruise. After we got home we had our CPA calculate the total cost.
80,000 up front, 4,200 in annual fees that are estimated to increase 3.2% per year times 50 years came out to around $580,000.00.
The annual fees the last year would be around 21,000.00 since the increase is compounded.
That was a deal killer for us.
Any thoughts?

Income goes up too. What will your income be in 50 years? In addition, did you need 500 points?

 

[John-DVC]

We decided to purchase a DVC plan while onboard a cruise. After we got home we had our CPA calculate the total cost.
80,000 up front, 4,200 in annual fees that are estimated to increase 3.2% per year times 50 years came out to around $580,000.00.
The annual fees the last year would be around 21,000.00 since the increase is compounded.
That was a deal killer for us.
Any thoughts?

Numbers are right but I think there may be a few ways to look at it.
-Time value of money of 580,000 over 50 years is not 580,000. The last 30 years more or less don’t have an impact. If we include inflation we should also include discounting.
-can assume sale after 5, 10, 15, 20, etc and guess a resale value. I think this will happen for many of us. The per day rate is reasonable. I think I will keep for 10 years and will get close to the resale value I purchased.
-would you go on vacations anyways for 4,200 per year? If so you end up in a similar spot (save on initial fee)
-beyond the numbers 50 years of family vacations is pretty successful life. Gotta say I’d be happy if it worked out that way.

 

[tjkraz]

We decided to purchase a DVC plan while onboard a cruise. After we got home we had our CPA calculate the total cost.
80,000 up front, 4,200 in annual fees that are estimated to increase 3.2% per year times 50 years came out to around $580,000.00.
The annual fees the last year would be around 21,000.00 since the increase is compounded.
That was a deal killer for us.
Any thoughts?

50 years ago:

Cost of Living 1968
How Much things cost in 1968
Yearly Inflation Rate USA 4.27%
Yearly Inflation Rate UK 4.7%
Year End Dow Jones Industrial Average 943
Average Cost of new house $14,950.00
Average Income per year $7,850.00
Average Monthly Rent $130.00
Gas per Gallon 34 cents
Average Cost of a new car $2,822.00
Movie Ticket$1.50
The Federal Hourly Minimum Wage is $1.60 an hour

http://www.thepeoplehistory.com/1968.html

 

[Ben E N]

50 years ago:

Cost of Living 1968
How Much things cost in 1968
Yearly Inflation Rate USA 4.27%
Yearly Inflation Rate UK 4.7%
Year End Dow Jones Industrial Average 943
Average Cost of new house $14,950.00
Average Income per year $7,850.00
Average Monthly Rent $130.00
Gas per Gallon 34 cents
Average Cost of a new car $2,822.00
Movie Ticket$1.50
The Federal Hourly Minimum Wage is $1.60 an hour

http://www.thepeoplehistory.com/1968.html

To further put that to into perspective, imagine the conversation people would have had with their financial planners back then. "In 50 years, annual dues are projected to be $2000 per year! How would we ever be able to pay that!?"

 

[The Jackal]

Back in 65-66 427 Shelby Cobras were selling for $7,000 new. Now try to find one for under $1,000,000.