Are Disney's rental discounts hurting DVC value? (long, sorry)

[gotribe]

Just got back from a week at a BWV 1BR.
Had not been to WDW in 15 years.

I "rented" the unit through Disney using the "Fairytale package" that gives you 7 nights and park passes for the price of 4. Loved everything about the stay. Went to DVC sales presentation and got the SSR pitch, but fell in love with BWV.

Came home and have read about 12 pages of messages here. Scanned some resale sites. I think DVC looks like a great option for my family since we could probably do this trip every year. I am most impressed that DVC points appear to be an appreciating asset. I was already to buy somewhere until I got out the calculator.......

When you take the costs of the park passes out of my bill, I essentially paid $1,700 ($240 a night) for my "preferred view" 1BR unit (tax included). This would have cost 200 points for a DVC member. Therefore, the DVC member would pay over $14,000 up front plus slightly over $800 in annual fees for that same week each year. The "yearly renter" can make up the $900 difference in the annual vacation "cost" by just earning 6% annual interest on the $14,000 that the "yearly renter" would save and keep invested.

"Fairytale" introduced me to a DVC property.
"Fairytale" made me obsessed with booking another trip to WDW.
"Fairytale" made me want DVC points now!
"Fairytale"-type discounts were unprecedented for Disney, but now that that veil has been pierced, I find myself torn between DVC membership and waiting for the next "Fairytale" discount.

My two questions.....

1. Once any retailer begins to discount, they generally continue to offer discounts to retain the price-sensitive customers it wanted to attract with the discounts in the first place. It is likely that Disney will discount rental rooms again in the future. Are you concerned that this will cheapen the DVC membership value?

2. What do you think the price per point will be in ten years? My fear is that they will stop (temporarily or permanently) building new DVC properties. My guess is that Disney then will not exercise ROFR anymore since they will have no need to keep the price per point inflated for their developer sales. Values of DVC memberships on the resale market will fall. We know this won't happen in the next 3 years with Eagle Pines coming soon, but is anyone else concerned about this possiblity happening once Eagle Pines is sold?


I would appreciate anyone's opinion on these concerns.

Does anyone know if the person who dreamed up the "Fairytale" promotion got promoted or fired now that the results are in?

I don't mean to denegrate your purchases at all. You guys got in early at great prices, and have made a shrewd decision to join DVC. At this stage, I am concerned I may be "buying high" in an uncertain market when I could just continue renting.

Please help me get over this last little hurdle between me and my DVC purchase.

Thank you very much.

 

[PamOKW]

The travel industry and WDW have been in rough shape ever since 9/11. They are working with both the terrorism problem and the problems with the economy. Most articles stress how even though U.S. visitors are coming back to WDW, the overseas travelers still need a lot of convincing. Europe and Japan were a big part of the WDW tourist base.

If things turn around, Disney will probably not offer these deep discounts. If the world situation stays poor, discounts will be out there. You have to consider whether you want to count on discounts lasting 40-50 years and/or how much effort you want to put into chasing them down.

I think DVC has at least one and maybe two more WDW resorts already in their minds. In the first ten years, prices basically doubled so, maybe, we can expect the same in another ten years.

You know for certain that resort prices will continue to inch up yearly even if discounts continue. DVC points to stay at DVC resorts remain the same. Dues also have a history of increasing at a much slower rate than resort prices.

Next up.....

 

[Maistre Gracey]

Well, first.... WELCOME to the DIS boards, gotribe!
I could go on for a year about the value of DVC, but I will spare that for my 'reserve back-up' later in this thread...

For now, I will just say that many here bought DVC for a lifestyle rather than a financial thing.

DVC is a way of vacation lifestyle, not an investment...

 

[castleri]

Well said Maistre Gracey-
Welcome to the boards gotribe
I would never be able to stay in the same quality units on cash reservations that I do with DVC.
From a financial standpoint I think based on the reasales I have looked at my contract is now worth 12-14% more than when I purchased (did not have to finance so that makes a difference ) and I have had great vacations for the $650-$700 I pay in dues a year. I am considering buying more points ( it is addictive) so I can have more trips and longer stays and never have to worry about "will there be discounts and packages available when I want to go. My stay at AKL for 12/25-12/28 is because of the great AP discount AND I didn't have enough points for those three nights. I can't count on another discount like that and now that I think about it that money would have bought some points that I could use for 50 years.(if I live to 110)

Could you tell me where I can get that 6% return on my money these days without too much risk? Of course if I buy another contract next month I won't have any money to invest.
Whatever you ultimately decide - may you have many more good trips to Disney.

 

[Doctor P]

gotribe,

Welcome to the DVC board! Taking your numbers, the fallacy of the math you use becomes quickly evident.

Let's assume that you start with $14,800 in the bank (i.e., you have the money for the first year's dues). We will assume away inflation (inflation in room prices actually has historically made DVC look BETTER, so we will be conservative).

Year 1: Cash outlay: $1700; interest received: $888; remaining bank balance: $13,988.

Year 2: Cash outlay: $1700; interest received: $834.72; remaining balance: 13,122.72

Year 3: Cash outlay: $1700; interest received $787.36; remaining balance: $12210.08

Year 4: Cash outlay: $1700; interest received $732.60; balance: $11242.60

Year 5: Cash outlay: $1700; interest received $674.56; balance: $10,217.16

Year 6: Cash outlay: $1700; interest received; $613.03; remaining balance: $9130.19.

Year 7: Cash outlay: $1700; interest received: $547.81; remaining balance: $7978.00

Year 8: Cash outlay: $1700; interest received: $478.68; remaining balance: 6756.68.

Year 9: Cash outlay: $1700; interest received: $405.40; remaining balance: $5462.08

Year 10: Cash outlay: $1700; interest received: $327.72; remaining balance: $4089.80

By year 13, your balance will be wiped out, and you will still be paying your $1700 out of pocket, while the DVC member has 26 more years (or more with SSR) of dues only payments of $800. That 26 years of saving $900 per year is $23,400 without interest, or more than enough to pay for the disadvantage in the earlier years.

The fallacy in the math you suggested is that you must use a declining balance (assuming an apples to apples comparison of vacationing each year) for the money you don't lay out up front.

Best wishes!

 

[goofy4tink]

This is coming from someone really new to this. I'm waiting for all my paperwork to go through for BWV. We have always poo-pooed the whole timeshare idea. After our last trip this past August, my dh seemed to have been bitten by the 'Mouse' so to speak. He started the whole process. I finished it. I am a complete Disney fanatic. Is this expensive? Yep. But, we would normally stay in the moderates unless a great deal, such as FTP, allowed us to stay deluxe. We did, and now we are spoiled!! My dh figures that the money spent is worth it since it forces him to vacation. He just doesn't seem to find the time on a regular basis. With DVC, he will find the time! He gets to stay in a terrific resort in a great room/rooms. My dd and I can travel without him to these same great rooms if we want because it's all paid for. There will be some visits that we just hang at BWV and not do a park. I figure that after the 5 yr mark we'll be almost even. And after that point, well, I just love the thought of staying at BWV for a week for about $550!!!! And yes...I am already thinking about adding on!! We have historically gone to WDW every other year. But now it looks like a trip of some sort every year is in order. Disney is very wise!!!

 

[mbb]

The day we signed our papers, we read that there is a meteor that may hit the Earth in 2015....my DH said "can we book that far ahead - 'cause I wanna be getting every bit out of those points!"

Meteors, terrorists, bad economy.... We take our refuge in planning, and having!, wonderful, memory-making vacations with family and friends. With DVC, we can do that.

 

[lat]

I am a DVC owner and we stay at both DVC and other WDW deluxe resort properties. I have gotten great rates for our Labor Day's stay 3 weeks ago at Poly concierge and the upcoming trip at GF (though we are now staying at OKW for this trip). I can say that I am extremely happy with my DVC ownership. I have the flexibity of either staying at other resorts or DVC depending on what appeals to us and the rates. I don't have to worry if there is any AP or discount rates out knowing I will always have a place to stay on site. For the points that I end up not using, I can rent them out.

It is the best of both worlds.

 

[Zurg]

Micky loaths to discount. He will when he has to but the Mouse is real good at keeping rates up. Once the travel industry recovers discounts will go and rates will rise. DVC locks those rates.

 

[RobDoc]

Welcome to the DIS, gotribe.

In addition to the great analysis aleady provided, another flaw in the original assumption is that you have chosen to "take the costs of the park passes out of" your bill without knowing the actual "cost" of that component. Disney doesn't break down packages into "room" and "passes" and neither should we when doing these computations. The Fairytale offer you used had the two packaged together. Had you asked for only the room- you would have been quoted the going rate for the room and it would have been more along the line of $390 per night (plus tax).

Had you gone to the parks and asked to buy passes without getting the room, you would have paid the full rate.

The Fairytale Package bundled everything together. True, a discount was certainly offered for those who accepted the package, but to find the actual room rate, you cannot simply deduct the rack rate for the passes (any more than you can simply deduct the rack rate for the room to find the real cost of the passes).

I'll suggest you might use $260 (tax included) as your discounted basis for the room rate. Disney has, at times, offered up to 40% discounts for AP holders on rooms. The $390 rack rate, with a 40% discount is $234 plus 11.5% tax= ~ $260. The room component for the 7 nights was more like $1820 at the least.

As for worrying about whether Disney will continue to support resale prices with ROFR or whether more resorts will be built- IMO, it doesn't really matter, as you shouldn't be purchasing expecting a financial return. DVC is not a financial investment (although many here could certainly realize a gain at this moment)- it is an investment, but I prefer to think of it as an investment in my family.

Enjoy!

 

[BriarRose59]

One thing I am looking forward to is, as much as I like to plan, it is hard to keep on the telephone or on the internet all the time looking for those great discounts. We have APs, AAA and The Disney Club. All offer discounts, but at different times. My time is too valuable anymore to have to sit on the phone with the reservations agent to see if any new discounts come up! I did this last year with a 2 BR at BCV. I wasted so much time on the telephone because I got the rooms at rack rate, then had to keep calling to see if there was a better rate for a couple of months until we finally got the AP rate. I am going to love calling at my 11 month window to set up a wonderful vacation at a fantastic roomy resort with a laundry room and kitchen facilities instead of wondering if I can rent the same room for cheaper if I call on the right day to get the best discount.

 

[Sabor]

Another big plus I find to being a DVC owner id that we have points that we need to use so we are always preparing the next trip. You can purchase APs than book three in a year span. than start the cycle again. I find with DVC it easier to spend time down in that area and take advantage of all it has to offer (Universal, IOA, SW etc. ). We are getting APs in Oct than going in March and September. We are envisioning our trip after that to be a No Disney Park trip , which I never would have dreamed about before DVC.
When we first purchased DVC it was difficult for me to leave my business (psychologically - I could always have it covered). But DVC was a prepaid vaction that forced me to vacation more (what a terrible thing). Another big $$ saver is the ability to not have to eat out. Alot of us love the Disney Restaraunts but with three kids we tend to eat in. I know this is not a vaction for all but we save about $1000 a trip by making meals in the room.

 

[sueg]

Both Zurg and Doc make excellent points. In the end a family will buy in or not based on their vacation needs and financial position. When we purchased in 1993 passes were included until 2000. That incentive was taken away quickly. So including ticket media into cost doesn't help. You wouldn't calculate food costs for your stay in your decision to purchase. Ticket media, depending on your use of the parks, is a recurring cost.

We looked at the package you used for our summer vacation.We were scheduled to spend a week in HH and were concerned about the weather. In 2002 we spent a week in the rain in HH. We discussed expanding the vacation to 2 weeks. We also knew we would be back in March 2004. We chose to use points for an OKW 1 BR. In the end the decision gave us flexibility to spend time in both resorts. We chose to get aps because we would be in the parks over 10 days in the 12 month period. The point I'm trying to make inefficiently is that packages do not give you the flexibility that DVC gives.And that is a strong incentive to use DVC

 

[CarolA]

I long ago decided that DVC was an investment in me. As such I don't worry about the gain/loss equation. My theory is that you should NOT buy timeshares as an investment hoping to make money. Yes, DVC has historically done very well with resale, but....

I don't regret my initial decision or any of my subsequent additions.

 

[DVC4US]

Another thought, (and someone correct me if I am wrong) but usually there are not so many DVC units available for cash rentals. But this year a lot of people used their points to take the DVC cruise so this opened up more units for the year. With this, the war in Iraq, and the after effects of 9/11 I think the Fairytale package is just a way for Disney to try to keep numbers up. Usually you do not see these great discounts.

We purchased DVC because we like the accomodations and we know that in the long term we will save money on vacatons.

LeiLani

 

[gotribe]

I appreciate your comments. You all make very good points. As someone who is self-employed, I will probably save more time (and money) with DVC rather than hunting down discounts, many of which don't allow for planning more than 6 months out.

I think you helped me realize that my personal break-even is probably 6 years out, which still makes DVC a good deal for my family. Although it may not appreciate like my house over the next 10 years, It's payoff in family enjoyment seems to be worth it.

This board is a tremendous resource, and I appreciate your time and efforts.

I will let you know when we have purchased our points.

Thanks...