At what point is it too much?

[Granny]

I'm going to throw my opinion in with Dean on this one. I'm not a timeshare expert but I don't see the value proposition as maintaining after another 10 years.

Bottom line....is something with 30 use years worth as much as 40 use years. There are some practical matters to this. I bought last year and I expect my contract to take me through the end of my life (I'll be 86 so that's close enough ). Those who are in their late 20's or their 30's will see the current DVC take them into their 60's or 70's.

That will change in 10 years, and decrease every year thereafter. At some point, the value must decrease.

And one other point that will probably get me in trouble. I happen to think that WDW and DVC are enjoying a lot of prosperity due to the boomers who are fairly well-off and ridiculously nostalgic (I include me in that description). I'm not sure that AS MANY of the Gen X'ers and such will be willing to pay for the magic of staying on site. If demand drops, value drops.

Go ahead and take shots at this opinion. Or poke holes in my argument. I promise not to take any of it personally.

 

[John.Disney]

<i>I've also seen DVC contracts offered for sale and a price accepted for $40 per point though DVC did offer to buy that one back and they ended up at $50 pp</i>

Dean or anyone else,

Why couldn't the two parties above submit the paperwork to Disney at $50 per point and arrange seperately for a $10 per point brokerage fee to go to the Buyer? Isn't this what happens with broker resales except the broker keeps the money in this case? This seems to penalize buyers for not going through one of the three brokers who apparenty have a corner on the DVC resale market.

I'm looking into resales, but I don't think I can pay $60 per point at OKW knowing that the seller is only going to see $50-52 of that. If I am able to find a seller at $55 per without a broker, why should I have to worry about Disney's ROFR just because the seller isn't going through a broker charging $1,000+ and including the fee to inflate the per point contact amount submitted to Disney?

<i>Once DVC no longer cares about propping up the value, the target price will drop significantly</i>

I think that it's much more than just propping up the price through ROFR. With all the marketing they are also propping up the general interest. My guess is that the vast majority of prospects who buy into DVC in the resale market only do so after seeing a tour with a DVC sales guide. There's no way of knowing how far prices might come down, but demand will certainly fall off if the tours and models an $99 off sight specials go away.

John

 

[vernon]

Dean, I respectfully agree to disagree as most of this is guesswork on future costs I won't bore people by continuing that pointless debate.

I do disagree with you strongly on the breakeven for most people being 15-20 years. virtually every person I have spoken too, either in person or via posts, has come out less than 10 years. If there is anyone who thinks their break even is closer to 20 I'd love to see how they come to that figure, IMHO unless you are being very careless with your points use I can't see how that is possible. You have to compare on a like for like basis ( or at least a moderate on site resort) to give some fair result, where is your next comparison? staying in a tent once every 10 years? that would be much cheaper but doesn't give a fair reflection.

 

[Dean]

John.Disney, the way the ROFR works is that you agree to a price with a seller, sign a contract and then submit it to DVC. DVC then decides if they want to buy it at that price or not. The seller and broker get the same but the buyer loses out. They should get all of their money back but obviously that wasn't the goal. Of course every contract is different in terms of points availability, maint fees, broker costs, etc. I've always wondered what would happen if you submitted some type of contract that was impossible for DVC to match. Say a timeshare trade plus/minus cash or something like that. You could of course come up with a side deal for the seller to return a portion of the proceeds. If DVC buys it back, they send a check to the broker and a check to the seller directly. They previously gave one the chance to resubmit but apparently aren't doing this anymore.

Vernon, no problem. It truly depends on exactly how you compare. If you stay on Friday/Sat nights, DVC is a horrible deal. If you stay in a studio only and during the week, it's certaily a good deal. I'll bore you with a few simple numbers just to illustrate somewhat. I'll ignore inflation as the value of a DVC room, the value of the money invested vs paid for DVC, the cost of the alternative arrangement and the dues should even out over time.

Purchase price of 150 points currently $12250 as this will give you a studio for a week consistently. Yearly dues at VB (highest dues) is $600 per point. Cost of a moderate currently is as low as $84 per night but that number is too low to use, so lets assume $119 plus 11% tax (current tax but may go down by currently proposed laws). That gives you $925 per year cost for 7 days. That's a savings of only about $325 per year and it will take 34 years to break even in that situation.

I realize this is a hard example and extreme to a certain extent but I think the most fair one to look at true value of as close as you can get apples to apples. IF you stay off property, you can get a 2 BR nice timeshare consistenly for around $700-750 per week and you will never break even. If you stay only S-F, you are better off. If you compare to Deluxe accomodations, you are better off. Buy cheaper, get free passes, enjoy the luxury of extra space, etc all factor in. I just wanted to illustrate that the break even in 4 to 8 years is comparing to DVC rack rates, assuming a visit every year to WDW the same length as you do with DVC and usually assumes either the DVC room costs or a DX hotel. That is, frankly, more unrealistic than my bare bones example. Again, ok to disagree.

 

[vernon]

Vero is $600 per point dues YIKES , I'm presuming you mean total per year $600 LOL.

I think you're wrong to use 150 points as a cost for a week. On OKW a week in choice season is 90 points, in adventure 90, in Dream 100 in magic 120. ONLY at Xmas does the week come to 155 points. IMHO while I love OKW as a resort it's lack of proximity to parks and facilities mean it is the best comparison to a moderate resort, if you want to use the points cost for BW or VWL then you have to use the $$ cost of a delux.

You can't just ignore inflation when calculating a forward value of something

I will agree if you only plan to stay Friday or Saturday nights then DVC is poor value, I don't know of anyone that bought DVC with that intention, but they might exist.

 

[joepoe]

Long-time lurker here. As an accountant, I figured out the present value of our 270 pts at BWV by taking the current rack rate of $4600 for a 2BR for a week and assuming 3% inflation per year only. I calculated our points are worth $173,000! That is what our 40 years of vacations are worth in todays' dollars!
Secondly, using the same 3% inflation, I figured the rack rates will be $15,070 to stay at BWV for a week in 2042. That year alone is worth $56.00 per point again using our 270 points! My next project will be to see where the point is over the next 40 years that the price per point cannot go up any further. The price per point will have gone up 27% since we bought in June 2002 at 63 pp. That's 5% per year. Not bad.

BTW we (ME, DW and 3 DD) are looking to buy a re-sale at OKW. We like the change of pace from BWV, the roomieness and the fact that points go further there. We also like the 11 month booking window- our only sticking point is we are already spending 5 grand a vacation on airlines, ticket media and misc stuff. Can we justify spending more?

Joe P. BWV 98

 

[joepoe]

[QUOTE. The price per point will have gone up 27% since we bought in June 2002 at 63 pp. That's 5% per year. Not bad.

So sorry... I meant the price will have gone up 27% when they raise the price to $80 in June. We bought in Oct 98...

JP

 

[joepoe]

We will reach break-even next year, after 6 years and 7 trips.

 

[CRobin]

somewhere in between.

Deeply discounted rooms have been easy to find for the last 9 months, but try getting a deal on a deluxe (more comparable to DVC) when times are good.

At the same time, using rack is a bit unfair, for the same reason. I doubt anyone is paying rack today.

I've worked my own math, using conservative inflation, rack less 25% and potential returns on a present investment, and still come in at the 8-10 year range, much faster if you make more trips

 

[Dean]

Vernon, you know how high those VB dues can be. LOL.

As I've pointed out at every turn, you can manipulate the numbers in almost any way you want to. Variables include how often you'd go IF you didn't own DVC, where you'd stay for CASH, your family size, length of stay, timing of your stays, etc. It also depends on whether you financed, home resort, when you bought, savings habit, did you have free passes and purchase price.

My example was on the extreme side but not in the outragous category. One can currently find moderate rooms for $84 per night and $119 or less has been the rule if you leave out Premier times, even for summer. True a Moderate is not exactly comparable to BW or WLV nor is it to OKW but I suspect that'w where most of us would stay if we didn't own DVC. One can also shift the numbers by taking into account dining costs. Of course there are all the hidden costs that we all encur because we end up going more, staying longer, have "extra" money to spend since the rooms are covered, etc. If you include using DVC for the DCL, DC, etc; the numbers look even worse.

joepoe, $11250 would be worth around $273000 in 40 years and $82000 in todays dollars if you assume 8% return and 3% interest, both reasonable assumptions form an acconting perspective. I realize that one might have spent the money from the earnings on vacation which would erode the actual amount one would have at the end of 40 years. As for taking the rack rate of a 2 BR for 7 days, that's a chunk. One can also find off site timeshares or similar oportunities where one would never break even with DVC. I know that there is more to this equation than money, else many of us would never have bought. I just don't want the newbies and potential members thinking they are going to automatically going to break even in even 8-10 years. One could take the same $4600 you'd spend in a year for a DVC 2 BR, buy a nice Marriott with yearly fees less than half DVC and stay in a timeshare every bit as nice as DVC every year for 40 years or more. To some it's worth paying for on property but for many others it's not. Some actually prefer not to stay on property even when visiting WDW, for a variety of reasons. Also to think that DVC maint fees long term will only go up by inflation is likely a bit optimistic. I know they really haven't even gone up that much the last 2-3 years but I'm sure down the line there will be some pretty hefty increases.

From my perspective, DVC will never make sense from a strict financial standpoint. At best I view it as a break even. What it does do it give me the chance to stay in nicer, larger, on site accomodations consistenly, something I could not do before.

Just trying to point out there are many ways of looking at this and not all put DVC as the best alternative even for those that regularly go to WDW.

 

[joepoe]

Thanks, Dean. I appreciate your perspective, (and everyone's).
You've obviously done your homework and looked at this from many angles.

Joe

 

[PamOKW]

Bottom line....is something with 30 use years worth as much as 40 use years.

I'm not sure when this very reasonable line of thinking will kick in. Today, people are paying 47% more than the original purchasers for 20% less use time (40 vs. 50 years at $75 vs. $51 per point.)