Are DVC Restrictions Affecting Resale Prices?

[CraigInPA]

I feel DVD is trying to take most of the value out of resale contracts to drive the price low enough that they can ROFR most if not all of the contracts to repackage them as direct. There is going to be times the price point will exceed this and some will pass but not at the same level as previous resorts. Just look at what prices they ROFR some contracts for now compared to what they repackage and sell those points for direct. If the new restrictions drive the resale value of the newer resorts 20% lower than what resale’s have been historically DVD in my opinion will ROFR most if not all.

That's a self-defeating prophesy. If DVD ROFR'd the vast majority of resale contracts because the price dropped 20%, the price would rise because people would then be competing with DVD. i.e., DVD has now shown they will pick up contracts at a certain level. So, for mere mortals to buy in the resale market, they'd offer more. So, the price would rise back to a higher level where DVD doesn't ROFR most of the resale contracts.

 

[CarolMN]

I feel DVD is trying to take most of the value out of resale contracts to drive the price low enough that they can ROFR most if not all of the contracts to repackage them as direct.........

No responsible executive would invest the amount of cash required to ROFR all the contracts that come up for resale. Disney has multiple investment opportunities with better ROI, and IMO, this one wouldn't even make the list. Resale prices have gone through periods of very low prices in the past and Disney did not increase its ROFR activity. I can't believe they would start that now, especially since the size of the market is so much larger!

 

[Bearval]

No responsible executive would invest the amount of cash required to ROFR all the contracts that come up for resale. Disney has multiple investment opportunities with better ROI, and IMO, this one wouldn't even make the list. Resale prices have gone through periods of very low prices in the past and Disney did not increase its ROFR activity. I can't believe they would start that now, especially since the size of the market is so much larger!

They will if,the resale price drops to or below what the resort cost to build per point.

 

[Bearval]

That's a self-defeating prophesy. If DVD ROFR'd the vast majority of resale contracts because the price dropped 20%, the price would rise because people would then be competing with DVD. i.e., DVD has now shown they will pick up contracts at a certain level. So, for mere mortals to buy in the resale market, they'd offer more. So, the price would rise back to a higher level where DVD doesn't ROFR most of the resale contracts.

You obviously didn’t comprehend my post. DVD is trying to drive the resale prices to a point where the ROI for using their ROFR makes sense. There will be contracts where people will drive the price over this point but it will not be like the legacy 14, with the legacy 14 you are buying into the “ club” with resale Riviera you are buying just Riviera. You will also see people who will put a lot of value in buying direct to get all of the benefits of buying direct.

 

[Bearval]

No responsible executive would invest the amount of cash required to ROFR all the contracts that come up for resale. Disney has multiple investment opportunities with better ROI, and IMO, this one wouldn't even make the list. Resale prices have gone through periods of very low prices in the past and Disney did not increase its ROFR activity. I can't believe they would start that now, especially since the size of the market is so much larger!

You have to look back when all that was going on at times, take what was going on during the recession. Fantasy land was in the planning/developement stage and Disney needed the resources to fund this project. The didn’t leave much funding to do do a lot of ROFRs on the cheap.

 

[Bing Showei]

You obviously didn’t comprehend my post. DVD is trying to drive the resale prices to a point where the ROI for using their ROFR makes sense. There will be contracts where people will drive the price over this point but it will not be like the legacy 14, with the legacy 14 you are buying into the “ club” with resale Riviera you are buying just Riviera. You will also see people who will put a lot of value in buying direct to get all of the benefits of buying direct.

You clearly don’t comprehend CraiginPA’s response. What happens when Disney ROFR’s go up? Just look at the ROFR thread. People offer more. Price goes up. ROI goes down.

Disney cares only about selling new properties. The margins there are much sexier than playing in the resale sandbox.

 

[crvetter]

You clearly don’t comprehend CraiginPA’s response. What happens when Disney ROFR’s go up? Just look at the ROFR thread. People offer more. Price goes up. ROI goes down.

Disney cares only about selling new properties. The margins there are much sexier than playing in the resale sandbox.

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.

 

[Bearval]

You clearly don’t comprehend CraiginPA’s response. What happens when Disney ROFR’s go up? Just look at the ROFR thread. People offer more. Price goes up. ROI goes down.

Disney cares only about selling new properties. The margins there are much sexier than playing in the resale sandbox.

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

 

[crvetter]

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

To sell the direct points at new builds and to allow them to charge "ugprade" fees for old builds. That would be my guess.

 

[Bearval]

To sell the direct points at new builds and to allow them to charge "ugprade" fees for old builds. That would be my guess.

Bottom,line is we will all find out in a couple years when the first resales hit the market. It is all going to depend what people,are willing to pay for restricted points.

 

[crvetter]

Also considering these restrictions are now on a resort by resort basis (as they way defined in the new multi-site POS). I imagine they could unrestrict resale for one resort and restrict resales for other resorts. So lets say Riviera is a smash hit they will want to un-restrict resale there to help sell Reflections because at a certain point if resale owners can't trade out there won't be availability to trade in. The new multi-site POS does allow this since it defines the restrictions explicit to Riviera Resort and says they can lift them at any point they want. In the end everything is really meant to just make it easy for Disney to manipulate the system in way to make direct purchasing attractive on multiple fronts and many resorts.

 

[Bing Showei]

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

Mostly to differentiate the products, and to allow the guides to make the case that resale is an inferior product.

Pre-2011, there was no difference. Pre-2016 buyers didn’t see value in the product differences. Pre-2018 buyers had an inexpensive workaround. Pre-2019 buyers had a manageable workaround. Now the hope is this change will have more bite.

All changes were made to move direct sales. And they are progressively tightening the screws each time to do so.

If they were serious about moving sold-out resorts, there would be an organized uniform waitlist, and it wouldn’t be up to the individual guides to manage their own personal waitlists, which only some have been willing to do.

 

[DaveNan]

We may already be at the point where the gap between open market resale and DVC direct resale basically always justifies Disney buying them back from an ROI perspective. It just comes down to how much can Disney sell at their direct resale prices and Disney now wanting to hold a bunch of inventory (even though they could sell the cash reservations that is likely a different department). That could be why we see the "drunken monkey" effect on buy-backs. It has more to do with what specific inventory they want/need given their current holdings (resort, UY, point status) and less to do with are they making $55 or $50 per point based on a $105 or $100 price per point.

 

[Frederic Civish]

We may already be at the point where the gap between open market resale and DVC direct resale basically always justifies Disney buying them back from an ROI perspective. It just comes down to how much can Disney sell at their direct resale prices and Disney now wanting to hold a bunch of inventory (even though they could sell the cash reservations that is likely a different department). That could be why we see the "drunken monkey" effect on buy-backs. It has more to do with what specific inventory they want/need given their current holdings (resort, UY, point status) and less to do with are they making $55 or $50 per point based on a $105 or $100 price per point.

There is another trouble with ROFR, as far as Disney is concerned. They might be competing with themselves.

Yes, they can make some profit, but if they buy Old Key West through ROFR for $96 a point, and sell it for $156, they have a profit margin there of $60 a point. And you could say that this is $60 more than nothing. It is $60 more than they would get otherwise, but that isn't necessarily true. Disney might feel that, by selling OKW for $156 and making $60, they are giving up a sale of Copper Creek at $188. There isn't that much difference in price between the OKW at $156 and the CC at $188, and considering that CC will be running 10 years longer, you would think that most people would just go for CC. But there ARE the bargain hunters out there, who feel that 38 more years at OKW is worth $156, so they buy it. If OKW wasn't even on the table, those same buyers would undoubtedly go to Copper Creek to buy in.

Personally, I think that there is actually one single reason that Disney is going for ROFR of OKW to such a large extent, and it isn't to make profit. I think they especially are trying to buy up the contracts that will expire in 2042, so that they can resell them NOW on new contracts until 2057. This helps them avoid the problem of what to do with all the contracts that will expire in 2042, when the resort itself (OKW) will be still be going for another 15 years, before it ends in 2057. Those 15 years of points might be harder to sell then. By getting them and reselling them now, they won't have to worry about what to do with all the short contract OKW, and they won't have to cover the Maintenance Fees for all of those returned contracts.

I think that if it was just a matter of Disney taking ROFR to make a profit, they would be much more aggressive in the ROFR market. After all, they have months and months, if not years worth of people waiting on their waiting lists to buy those old resorts right now. They could take plenty of contracts for other resorts and spin them for an immediate profit. But if they did that, what would happen to sales of CC?

I think all future ROFR moves by Disney should be analysed with these possibilities in mind.

 

[Katie L]

There is another trouble with ROFR, as far as Disney is concerned. They might be competing with themselves.

Yes, they can make some profit, but if they buy Old Key West through ROFR for $96 a point, and sell it for $156, they have a profit margin there of $60 a point. And you could say that this is $60 more than nothing. It is $60 more than they would get otherwise, but that isn't necessarily true. Disney might feel that, by selling OKW for $156 and making $60, they are giving up a sale of Copper Creek at $188. There isn't that much difference in price between the OKW at $156 and the CC at $188, and considering that CC will be running 10 years longer, you would think that most people would just go for CC. But there ARE the bargain hunters out there, who feel that 38 more years at OKW is worth $156, so they buy it. If OKW wasn't even on the table, those same buyers would undoubtedly go to Copper Creek to buy in.

Personally, I think that there is actually one single reason that Disney is going for ROFR of OKW to such a large extent, and it isn't to make profit. I think they especially are trying to buy up the contracts that will expire in 2042, so that they can resell them NOW on new contracts until 2057. This helps them avoid the problem of what to do with all the contracts that will expire in 2042, when the resort itself (OKW) will be still be going for another 15 years, before it ends in 2057. Those 15 years of points might be harder to sell then. By getting them and reselling them now, they won't have to worry about what to do with all the short contract OKW, and they won't have to cover the Maintenance Fees for all of those returned contracts.

I think that if it was just a matter of Disney taking ROFR to make a profit, they would be much more aggressive in the ROFR market. After all, they have months and months, if not years worth of people waiting on their waiting lists to buy those old resorts right now. They could take plenty of contracts for other resorts and spin them for an immediate profit. But if they did that, what would happen to sales of CC?

I think all future ROFR moves by Disney should be analysed with these possibilities in mind.

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 think they are calculating that folks will go direct if they get ROFRed enough - but I'm not sure they're right. Seller doesn't see lost value since they get it sold at the negotiated price, and as people get ROFRed they'll up their prices giving Disney more margin. If re-sale wasn't an option, we wouldn't be considering. The Disney direct prices require far too much horizon to break-even for us. Full stop. But I don't know if they have data to show that folks are not like us. As the economy has strengthened though, the values have gone up-up-up and I imagine they never thought they'd be able to have "sold out" resorts listed at as high as $225/point after they've been sold out for a decade. I don't think Disney calculated that folks wouldn't care much about the 50-year limit. *I* was surprised by folks not really caring - at least not while there is still 20 years+ left on contracts. At some point, the contract value drops dramatically, but I am not sure Disney knows when. All speculation, of course. Do y'all think I'm nuts?

 

[Katie L]

You clearly don’t comprehend CraiginPA’s response. What happens when Disney ROFR’s go up? Just look at the ROFR thread. People offer more. Price goes up. ROI goes down.

Disney cares only about selling new properties. The margins there are much sexier than playing in the resale sandbox.

Not only the margins - but having to show return on massive construction investment is important. Otherwise DVD says why are we even building more if people prefer the already-built resorts? And guides want jobs. And so do executives.

 

[DisneyinNJ]

No responsible executive would invest the amount of cash required to ROFR all the contracts that come up for resale. Disney has multiple investment opportunities with better ROI, and IMO, this one wouldn't even make the list. Resale prices have gone through periods of very low prices in the past and Disney did not increase its ROFR activity. I can't believe they would start that now, especially since the size of the market is so much larger!

Agreed. One other component that has not been addressed is the fact that an integral component of the return to DIS from DVC is the fact that it essentially creates captive, repeat vacationers. Recycling existing inventory does not generate incremental visitors (since those points have already been sold), but selling new developments does. ROFR is simply a tool for managing resale prices.

 

[NickBCV]

I've noticed a slight downtick in prices but nothing major. Previous poster is probably right that it's just an effect of the brokers having so much inventory. AKV has dropped a few bucks and I'm seeing SSR listed for under $100 a point which it was not all the way through Xmas. I blame this lousy economy. I'm looking to add on in a big way and was hoping there would be a bigger drop! People seem to have money to burn these days if CCV is having 200000 direct point sales months. On the flip side I haven't seen dramatic resale price increases on BLT like I remember seeing at VGF when it went over $200 direct.
View attachment 381279 What I imagine a VGF direct buyer looks like these days!

I am a VGF buyer and surprisingly that is very similar to what I look like. Hahahaha

 

[E2ME2]

I am a VGF buyer and surprisingly that is very similar to what I look like. Hahahaha

NickBCV-I love the Monocle !

Here's a thought that just hit me. We toured the new CCV Cabins a few weeks ago, and the guide mentioned an interesting statistic. He said that the recent developments with SWGE & ToyStory Land, etc. has taken
WDW from having less than 20% of their property developed, to closer to 40% developed. That's a huge increase in a few years. But what struck me is that there will still be more than 50% left for future development.
I'm not a prognosticator, but there's lots of Baby Boomers still retiring/snow-birding to Florida; they are living longer than ever; they have grandkids that they would like to take to Disney.....
Yes, I fall into that demographic, and maybe there is still a huge untapped market for Disney through 2054 !? Just speculating.........

 

[NickBCV]

NickBCV-I love the Monocle !

Here's a thought that just hit me. We toured the new CCV Cabins a few weeks ago, and the guide mentioned an interesting statistic. He said that the recent developments with SWGE & ToyStory Land, etc. has taken
WDW from having less than 20% of their property developed, to closer to 40% developed. That's a huge increase in a few years. But what struck me is that there will still be more than 50% left for future development.
I'm not a prognosticator, but there's lots of Baby Boomers still retiring/snow-birding to Florida; they are living longer than ever; they have grandkids that they would like to take to Disney.....
Yes, I fall into that demographic, and maybe there is still a huge untapped market for Disney through 2054 !? Just speculating.........

Your guess is as good as mine. I think it’s all speculation at this point. The way I look at is we have points and our kids love going to Disney (ages 6 and 10). If ever they tire of the Disney trips we will either sell completely or rent out our points until we think it is a good time to sell. It’s too bad Disney has taken steps to hurt the resale market the last few years but it is what it is.