Annual Due Increase Question

[themouseknowsall]

I am considering buying into DVC but am concerned about the annual due increases.

Does anyone know if there is a cap?

I was attempting to figure out the total cost assuming a 5% annual due increase each year over the life of the timeshare. However, I was alarmed that this would put the total cost over 50 years to be roughly $200,000.

Thanks in advance to anyone who can help me on this.

 

[Sandisw]

Yes, the fees can go up as much as 15% per year. However, in the history of DVC, the rate increase has been more like 3 - 4%.

 

[dizfan]

Welcome to the boards!

For reference, here's a link to annual dues historically...
http://dvcnews.com/index.php?option=com_easyfaq&task=view&id=51&Itemid=148

 

[DisneyWalker44]

The noticed in my paperwork that the cap at VGC is 20%! not 15%. Of course, even at 15% we are in a world of hurt very quickly.

In the end, it's all about trust. Do you trust Disney to manage the resorts well? Do you trust them to keep costs "reasonable." They've got a 16-year history that is pretty darn good, so I'm willing to take the chance.

PS - Anyone know for sure if BLT still has the 15% cap, or is it 20% too?

 

[disneynutz]

I am considering buying into DVC but am concerned about the annual due increases.

Does anyone know if there is a cap?

I was attempting to figure out the total cost assuming a 5% annual due increase each year over the life of the timeshare. However, I was alarmed that this would put the total cost over 50 years to be roughly $200,000.

Thanks in advance to anyone who can help me on this.

Just think what the cost of a room will be through Disney in the future. The room prices have increased more than 5% per year for the past several years plus you pay tax on the room.

That's why buying into the DVC only makes sense if you would be vacationing at WDW every year or two anyway.

 

[DebbieB]

The noticed in my paperwork that the cap at VGC is 20%! not 15%. Of course, even at 15% we are in a world of hurt very quickly.

In the end, it's all about trust. Do you trust Disney to manage the resorts well? Do you trust them to keep costs "reasonable." They've got a 16-year history that is pretty darn good, so I'm willing to take the chance.

PS - Anyone know for sure if BLT still has the 15% cap, or is it 20% too?

Regarding the "trust" factor, they don't exactly profit from dues, so there isn't an incentive to raise the costs unnessarily. They do get a management fee which is a % of the total but the other items they don't profit from. The expenses are audited. So for example there isn't an incentive for them to increase the housekeeping or front desk expense portion of the dues if it really isn't necessary. Plus if dues increase by a large amount, it will discourage new sales.

 

[YourEveryDayAdam]

Disney, by law, is not allowed to make a profit from the annual dues. They can not just arbitrarily decide to raise the dues for everyone in order to make money.

In the entire DVC OKW annual dues history (the longest running DVC resort), the average annual increase of dues has been 3.43%. Yes they CAN increase it by as much as 15% each year, but they aren't allowed to increase it because they feel like it.

 

[jlewisinsyr]

I was attempting to figure out the total cost assuming a 5% annual due increase each year over the life of the timeshare. However, I was alarmed that this would put the total cost over 50 years to be roughly $200,000.

Now go compare it to what you would be paying on a hotel room (of equal size, so if you're getting a studio at DVC, use a regular room, if you're getting a 1 bedroom, consider it almost 2 rooms) with a 4%-5% increase annually. It's all relevant and in the scheme of things, the dues although they make up the majority of the cost of the time share ownership are not nearly as expensive as a hotel room over the long run.

 

[YourEveryDayAdam]

Now go compare it to what you would be paying on a hotel room (of equal size, so if you're getting a studio at DVC, use a regular room, if you're getting a 1 bedroom, consider it almost 2 rooms) with a 4%-5% increase annually. It's all relevant and in the scheme of things, the dues although they make up the majority of the cost of the time share ownership are not nearly as expensive as a hotel room over the long run.

This is correct. See this thread I started that compares all the costs and possible DVC purchase scenarios:

http://www.disboards.com/showthread.php?t=2137102

 

[DisneyWalker44]

Regarding the "trust" factor, they don't exactly profit from dues, so there isn't an incentive to raise the costs unnessarily. They do get a management fee which is a % of the total but the other items they don't profit from. The expenses are audited. So for example there isn't an incentive for them to increase the housekeeping or front desk expense portion of the dues if it really isn't necessary. Plus if dues increase by a large amount, it will discourage new sales.

As I said, I trust Disney; wouldn't have bought into DVC if I didn't. But there is huge potential for abuse.

As you point out, their fee - which is $millions a year - is a percentage of the expenses. The more of our money they spend, they more profit they make. But the bigger issue is that almost everything they spend our dues on goes to other parts of Disney. Even if Disney Vacation Club Management Corp doesn't make extra profit if they pay too much for housekeeping or front desk support, Disney still does. All the audit really does is check the math and make sure (or at least try and make sure) there isn't blatant fraud going on. The audit isn't going to stop Disney from overpaying it's share of transportation expenses.

So far, through 16+ years, Disney doesn't seem to be ripping us off (thought I'm not convinced they negotiate the absolute best deals from Disney). And if that track record isn't enough, your final point is a good one. "Fair" maintenance fees are important to new sales. As long as Disney is still selling, they got motivation to be careful with the fees.

 

[Jason@dvcstore]

The noticed in my paperwork that the cap at VGC is 20%! not 15%. Of course, even at 15% we are in a world of hurt very quickly.

In the end, it's all about trust. Do you trust Disney to manage the resorts well? Do you trust them to keep costs "reasonable." They've got a 16-year history that is pretty darn good, so I'm willing to take the chance.

PS - Anyone know for sure if BLT still has the 15% cap, or is it 20% too?

Thanks for sharing about 20% increase at VGC. That is news to me as I thought all the resorts had the same cap of 15%.

Jason

 

[Deb & Bill]

And don't forget about special assessments. If there were a big problem at one of the resorts that wasn't covered by insurance, they could assess members a special fee to cover that expense, such as a drastic increase in taxes, etc. And when they need to renovate, those costs are usually covered by reserve funds which are part of the dues.

 

[Mtnman44]

This is not really an issue. Big deal if Disney has a self interest in the dues. They have a self interest in the ticket prices and the restaurants too. No one seems to be worried that they will jack those prices thru the roof. They can't because the market won't allow it. If they jacked up the dues, they would lose a bunch of owners and be left holding the bag on those points. Plus, they would be driving consumer money to the competition at the same time. I'd be alot more concerned about taxes getting jacked up in some form.

 

[disneynutz]

This is not really an issue. Big deal if Disney has a self interest in the dues. They have a self interest in the ticket prices and the restaurants too. No one seems to be worried that they will jack those prices thru the roof. They can't because the market won't allow it. If they jacked up the dues, they would lose a bunch of owners and be left holding the bag on those points. Plus, they would be driving consumer money to the competition at the same time. I'd be alot more concerned about taxes getting jacked up in some form.

Not necessarily true. Once Disney sells DVC points, they are sold for good unless they exercise ROFR, foreclose on the interest, or buy them back for less than half price.

 

[Mtnman44]

Outrageous dues would drive many to sell in the market for cut rate prices, or simply walk away. DVC would have to either buy them all via ROFR or tolerate a huge market value drop, neither of which is in their best interest, regardless of whether or not they have "sold out" all DVC resorts. Bottom line, they need members to pay for operation of the resorts. High Dues = fewer members, exisiting or new.