Are DVC Restrictions Affecting Resale Prices?

[Frederic Civish]

Question - Disney could own much more than 2% right? Do we think they would want to own more? Are they buying up to own and sell as cash rooms? Cash rooms have more profit margin - and can be integrated into their system so won't take much additional work? Could that be what is going on?

I don't think they are buying to increase their ownership so they can rent them out. MAYBE. They would have to pay the Membership fees on all of those, but Maintenance fees on a 20 point per night villa would come to about $150 (for that night), and they could rent it out for $450 to $550. Nice profit, but I don't think they need those rooms. In recent years, they have tended to spend money to convert Hotel rooms into DVC units, at places like Poly and CC. Why do that, and then buy back DVC units to turn them into Hotel rooms?

Another thing, if they were buying to rent out, why would they be buying much more OKW than AKV? The two resorts cost about the same, per point. And AKV is a significantly higher demand, higher rental price unit than OKW. So they are more likely to be able to rent out AKV units, and do so at a higher profit. On the other hand, they ARE taking a lot of AKV, and if they are taking a lot of OKW it might be mostly so that they can convert those over to the 'Extended Contract' units. So, it is a possibility.

 

[Jerry@dvcstore]

Really ????? because I saw a BWV contract on your site for $157. I also saw a few OKWs for $113-$118 and Poly for $165 (those are some pretty high listings)

I was referring to prices going down due to the recent change.

 

[Matty B13]

I don't think they are buying to increase their ownership so they can rent them out. MAYBE. They would have to pay the Membership fees on all of those, but Maintenance fees on a 20 point per night villa would come to about $150 (for that night), and they could rent it out for $450 to $550. Nice profit, but I don't think they need those rooms. In recent years, they have tended to spend money to convert Hotel rooms into DVC units, at places like Poly and CC. Why do that, and then buy back DVC units to turn them into Hotel rooms?

I don't think DVCM wants to get stuck owning a ton of points during the next down turn in the economy that they would have to pay MF's on and not be able to rent out either. I think a lot of people were surprised that 3 buildings of the Poly were converted from hotel rooms to DVC, which shows even if it is an iconic Disney resort occupancy rates aren't always high, especially when Disney wants to keep it's hotel rates so high. DVC practically took over almost 50% of the Wilderness Lodge for a reason.

 

[Bearval]

I don't think they are buying to increase their ownership so they can rent them out. MAYBE. They would have to pay the Membership fees on all of those, but Maintenance fees on a 20 point per night villa would come to about $150 (for that night), and they could rent it out for $450 to $550. Nice profit, but I don't think they need those rooms. In recent years, they have tended to spend money to convert Hotel rooms into DVC units, at places like Poly and CC. Why do that, and then buy back DVC units to turn them into Hotel rooms?

Another thing, if they were buying to rent out, why would they be buying much more OKW than AKV? The two resorts cost about the same, per point. And AKV is a significantly higher demand, higher rental price unit than OKW. So they are more likely to be able to rent out AKV units, and do so at a higher profit. On the other hand, they ARE taking a lot of AKV, and if they are taking a lot of OKW it might be mostly so that they can convert those over to the 'Extended Contract' units. So, it is a possibility.

Off topic here but who pays for the increased costs to have the rooms maid serviced daily when DVC rents them for cash?

 

[CarolMN]

Off topic here but who pays for the increased costs to have the rooms maid serviced daily when DVC rents them for cash?

My understanding is that Members pay for servicing the DVC villas. Keep in mind that by far, most of the villas rented for cash come from Member inventory - from Members who traded their points for something other than a DVC villa. While cash reservations do require daily servicing, this cost is one of the factors that goes into determining the "point cost" of the non-DVC options.

 

[crvetter]

My understanding is that Members pay for servicing the DVC villas. Keep in mind that by far, most of the villas rented for cash come from Member inventory - from Members who traded their points for something other than a DVC villa. While cash reservations do require daily servicing, this cost is one of the factors that goes into determining the "point cost" of the non-DVC options.

I’m a bit confused on your statement; however this is how I understand it. When a DVC room is booked for cash, part of what that cash goes towards is the daily servicing. Essentially the person, renting the room from Disney for cash, pays the daily room servicing that is above and beyond what is dictated to be received in our contracts. Disney does not and can not pass that extra cost to the association. They simply build it into the nightly cost.

 

[CarolMN]

I’m a bit confused on your statement; however this is how I understand it. When a DVC room is booked for cash, part of what that cash goes towards is the daily servicing. Essentially the person, renting the room from Disney for cash, pays the daily room servicing that is above and beyond what is dictated to be received in our contracts. Disney does not and can not pass that extra cost to the association. They simply build it into the nightly cost.

Not really. Let me try to explain more.

I don't know exactly how they include the additional housekeeping cost for cash reservations through CRO. But I don't believe Members who do not exchange out shoulder any additional housekeeping cost related to cash guests. Those Members who do exchange out pay those costs indirectly through the exchange rates.

It only makes sense that the housekeeping cost is included in the annual negotiations that set the point costs for the "Collections". Other factors probably pay a greater role (such as the cost of CRO booking service, the number of un-rented nights, discounts, advertising, etc.). All those things and probably others go into the the formula used to set the point cost of the exchanges and the amount of cash DVC gets to pay for the Members' exchanges out. Essentially, all those additonal costs impact the points required to exchange out of the DVC resorts. They are relatively high and have no "inflation protection". In the end, I think individual Members pay quite dearly for the ability to use points for non-DVC lodging and experiences. Those of us who do not exchange out, do not bear the cost.

 

[crvetter]

Not really. Let me try to explain more.

I don't know exactly how they include the additional housekeeping cost for cash reservations through CRO. But I don't believe Members who do not exchange out shoulder any additional housekeeping cost related to cash guests. Those Members who do exchange out pay those costs indirectly through the exchange rates.

It only makes sense that the housekeeping cost is included in the annual negotiations that set the point costs for the "Collections". Other factors probably pay a greater role (such as the cost of CRO booking service, the number of un-rented nights, discounts, advertising, etc.). All those things and probably others go into the the formula used to set the point cost of the exchanges and the amount of cash DVC gets to pay for the Members' exchanges out. Essentially, all those additonal costs impact the points required to exchange out of the DVC resorts. They are relatively high and have no "inflation protection". In the end, I think individual Members pay quite dearly for the ability to use points for non-DVC lodging and experiences. Those of us who do not exchange out, do not bear the cost.

I would agree with that statement. I just got from your post you were saying all members share that cost, but re-reading your post I see that I misinterpreted a section. I just didn't want a snowball effect of people thinking Disney was taking money from the associations for this cost. I agree they set the exchange rate lower for your points if you exchange because Disney has "costs" associated to renting the points out so I think the end user pays for it in their cash rate and Disney makes the exchanger bear some of that cost, maybe, by not offering market rate (but there might be other reasons they set it lower too). But all in all I'm sure it goes into the cash rate and Disney eats the cost for developer points and shares the cost with those that trade in their points, which is why I say it really is built into the nightly cost of the rooms.

 

[TexasChick123]

While the current list prices may not reflect it, I think that current resale prices of the L14 should go down. There are less years on them, AND you can no longer trade into Riviera. However, what I think versus what is actually going to happen may be two different things.

The point that L14 resorts are more valuable now than before is doesn't hold water for me. You could trade into all current properties before, and you still can. Nothing changed there with L14. Now, to say that the L14 resale contracts are more valuable than Riviera or Reflections resales with what we've been told, well on that I would agree. L14 are no more valuable now than they were 1.5 months ago. You actually get less resorts to trade into than before the restrictions. It's just my opinion, but I think that all we will see L14 resales softening some because of restrictions and a lot more because of a recession, whenever that happens. Riviera resale cannot trade into anything, so they will come up with a type of "add-on" that you buy directly from DVD where you can "qualify your points" to allow trades into everything at 7 months. That's how they plan to get a piece of the pie via resale. This add-on will simply be another cost you take into account when purchasing just like closing costs, maintenance fees, etc. All the documentation seems to point to that. Also, as has been said MANY times, that's the way a lot of other timeshares operate. Then, DVD can say, "If you want to be able to trade into all resorts, we will let you pay for that option when buying resale. If you're fine with just Riviera, Reflections, whatever, and purchase via resale then you don't have to buy it."

 

[KAT4DISNEY]

Not really. Let me try to explain more.

I don't know exactly how they include the additional housekeeping cost for cash reservations through CRO. But I don't believe Members who do not exchange out shoulder any additional housekeeping cost related to cash guests. Those Members who do exchange out pay those costs indirectly through the exchange rates.

It only makes sense that the housekeeping cost is included in the annual negotiations that set the point costs for the "Collections". Other factors probably pay a greater role (such as the cost of CRO booking service, the number of un-rented nights, discounts, advertising, etc.). All those things and probably others go into the the formula used to set the point cost of the exchanges and the amount of cash DVC gets to pay for the Members' exchanges out. Essentially, all those additonal costs impact the points required to exchange out of the DVC resorts. They are relatively high and have no "inflation protection". In the end, I think individual Members pay quite dearly for the ability to use points for non-DVC lodging and experiences. Those of us who do not exchange out, do not bear the cost.

Ultimately, yes, the member who trades is paying a premium but I expect the way the housekeeping is handled is that BVTC or some component of DVC pays for the daily housekeeping on the rooms they rent out thru CRO. In some cases DVC is getting the equivalent of $40+/pt when they rent the room.

 

[Liam518]

I agree with this. ROFR is specifically set in place not as a way to gobble up property on the cheap, but was a way to guarantee that prices aren't so low they hurt the brand of Disney or the condo association in general. This is exactly why many residential condos even have the language of ROFR to stop cheap condos from undervaluing the others. Disney already stated that they may offer those that buy in resale the opportunity to "upgrade" those points to full privileges. So if Disney wants to make extra cash that would be the way we intend to see that. But I agree with most that ROFR is only meant to prop up a base price Disney feels for it's properties. The ability to resale to those interested in joining DVC (at sold-out resorts) is the nice by-product.

Has there been anymore talk about “upgrades” to full point privileges? Or a link to a forum that discuss the possibility of this happening in the future? I’m in the middle of a resale purchase (if I pass ROFR ) And though I don’t think the benefits warrant the Direct purchase cost, I would be interested in “upgrading” if financially makes sense.

 

[AdamsMum]

Then tell me why DVD is puting in the new restrictions for resales then.

Nobody really knows that. I believe it's a misguided attempt to change the future of DVC and give them more control, they should have just started another "club". Some have said they could for a fee (upcharge) allow future resale purchasers to book at other resorts, other comments have been made. However, for DVD to ROFR all resale contracts would put them in the position of holding a huge inventory of points, and inventory costs money. As others have said, in periods where they are taking more contracts through ROFR, resale buyers just pay more. So to hold all of that inventory while trying to sell new their new resorts doesn't make sense. In addition to that, they would have to pay the maintenance fees for all of the points they're holding.

What they fail to recognize is that a healthy resale market makes it a more desirable timeshare to buy, and sales of their new resorts haven't been hurt by resale. I don't think anyone buys with the intention to sell later, but life happens. When buyers see that if their financial life falls apart they can sell their timeshare for not much of a loss, or at least their initial buy in, that's a good thing. I don't think any other timeshare on the market offers that.