Breaking Even

[4luv2cdisney]

That is interesting. Are you sure you are calculating your yearly cost and fees together?

Yes. My cost per point (because I bought direct and very recently at a resort that ends in 2042) is embarrassingly high.... but 2 standard studios for 5 nights are only 50 points each at BWV for 12/16 - 12/21. 100 points x $13.15 = $1315.00 (that's 2 studios $657.50 each).

Honestly, I did a whole spreadsheet on how much my "typical" stay w/b costing with various DVC resorts. They ranged from around $1200 (OKW) to nearly $1,900 (VGF). Rack rate for same dates at POR is over $2800. Even if you discount that 35% your staying at VGF for the price of POR.

Free dining was great.....but it's value has started to diminish. Some is because we aren't cramming 4 to a room anymore, but also because they started increasing the ticket requirements and in some cases room views, and the final straw for me was knocking mods down to QS.

I know they can take benefits away at will (just like they can take discounts away at will) but $559 AP is a pretty fantastic deal and I'll just have to keep my fingers crossed that a decent AP discount stays around at least long enough for me to recoup my initial purchase. I'm fine with figuring my purchase cost into calculations right now. But I'm keeping track of my savings. Once I've recouped buy in, I consider my room rate to be dues only. At that point, no discount will compare.

Also, I get what you're saying about "owning nothing" if you hold your contract til the very end (as I likely will with a 2042 end) but many will sell long before theirs expire and they do own the value of that. Many have sold for higher than they've paid.

 

[kboo]

....
I know they can take benefits away at will (just like they can take discounts away at will) but $559 AP is a pretty fantastic deal and I'll just have to keep my fingers crossed that a decent AP discount stays around at least long enough for me to recoup my initial purchase. I'm fine with figuring my purchase cost into calculations right now. But I'm keeping track of my savings. Once I've recouped buy in, I consider my room rate to be dues only. At that point, no discount will compare.

Also, I get what you're saying about "owning nothing" if you hold your contract til the very end (as I likely will with a 2042 end) but many will sell long before theirs expire and they do own the value of that. Many have sold for higher than they've paid.

Agree - that's how we looked at it as well (as well as probably all the other ways people are discussing here). And for the size of rooms we have ended up booking that works out to about 7-9 trips.

That said, the part about forcing one to plan vacations farther out is actually a plus for us. Looking for the 30%-35% pin codes was stressful at times, and only worked when we wanted to travel at off times. As we started looking at Disney vacations cabined by school vacation times, DVC started making more sense for us. A lot of things have happened in our lives (friends and family members passing away too young, mostly) that have made us realize that the time we spend making memories as a family is more important.

And for anyone reading this and thinking about buying DVC - I reiterate, *my* considerations are that this is money we would be spending on vacations anyway, and we can afford to pay without financing anything.

As for the idea of why Disney would convert hotel rooms to DVC, and why HH, Vero, and AUL, a friend of mine once remarked while we were skiing that ski resorts are not about skiing. Lift tickets are not how they make the big, long-term money, and not the money they can count on. Rather, it is real estate developments: selling houses and condos (and some timeshares) with different levels of access to the skiing. Considering that DVC is designed to run at close to 100% occupancy, selling points is probably the best way to recession-proof your hotel. If someone doesn't already have the sunk cost of DVC in there, and they are considering whether/where to take vacation, it's easier to not take a vacation that isn't already "paid for," or instead of staying deluxe this year, look at a mod of value.

HH, VB and AUL are great ways to cross-sell the Disney brand *and* command a higher price than the market would otherwise bear. VB makes sense because it's close to Port Canaveral, so you could stay a few days before or after your Disney cruise. HH for golfers, and AUL for Hawaii. Hotel rooms are cheap and home rentals are cheap in Hawaii, but the additional amenities (the Disney touch!) and the concept that the stay is already "paid for" make more travelers go to Hawaii, and more new travelers at that. (I personally love Hawaii and have been many times despite living on the East Coast, and no way would I ever choose to spend a whole week on Oahu.)

And a timeshare is a lower entry cost than buying a vacation home. Even after the 2008 crash, a $500k condo at the VT ski resort where I had that conversation with my friend was down to about $250k, still a lot more expensive to buy in, AND harder to rent.

 

[miTnosnhoJ]

As for the idea of why Disney would convert hotel rooms to DVC, and why HH, Vero, and AUL, a friend of mine once remarked while we were skiing that ski resorts are not about skiing. Lift tickets are not how they make the big, long-term money, and not the money they can count on. Rather, it is real estate developments: selling houses and condos (and some timeshares) with different levels of access to the skiing. Considering that DVC is designed to run at close to 100% occupancy, selling points is probably the best way to recession-proof your hotel. If someone doesn't already have the sunk cost of DVC in there, and they are considering whether/where to take vacation, it's easier to not take a vacation that isn't already "paid for," or instead of staying deluxe this year, look at a mod of value.

I agree with you. DVC is like a huge stream of reservations that should be stable even in the event if a terrorist attack, a market crash, or even an alligator attack. It is a great hedge against a sudden decline in the hotel business.

The other thing to consider is the DVC enables Disney to build resorts at a much higher Return On Assets and Return on Equity.
When they finance a hotel, they can go out on the public debt markets and get long term debt for maybe 1% to 2%. But when they create a DVC property, they have a temporary construction loan, but then they have the property financed without tying up any capital at all. Or to put it differently, they use our capital, not their capital. The cost of capital for a consumer is much higher than theirs, but the consumer is much less sophisticated in calculating their cost of capital. Hence we use measures such as Break Even Points which obscure the time value of money. There is a huge amount of value created by marketing a timeshare, and only a portion goes to the members in the form of lower cost vacations over time.

Having said that, I have no complaints. It has been good for our family, and it seems to be much better run than the typical high-pressure timeshare.

 

[hlhlaw07]

And for anyone reading this and thinking about buying DVC - I reiterate, *my* considerations are that this is money we would be spending on vacations anyway, and we can afford to pay without financing anything.

This made me laugh! If I remember correctly, you are an attorney like me, and I am starting to have the same inclination of slipping in little disclaimers in my posts too. Wouldn’t want someone to read a post that clearly represents my opinion on the matter and take it as gospel that DVC could save them money or that they should buy and they will be fine financially no matter what.

 

[kboo]

This made me laugh! If I remember correctly, you are an attorney like me, and I am starting to have the same inclination of slipping in little disclaimers in my posts too. Wouldn’t want someone to read a post that clearly represents my opinion on the matter and take it as gospel that DVC could save them money or that they should buy and they will be fine financially no matter what.

There's a few of us here - sometimes a little easy to spot.

 

[kboo]

PS - @hlhlaw07, are you JAG? I thought I read something about deploying soon. If so, how do you factor in being able to stay at Shades of Green? I have a friend who is a reservist (with twin girls) who also loves WDW, but has put together split stays between SOG and Poly or another deluxe resort, and he doesn't think it is worth it to spend the $ for DVC.

Though to be fair, he hasn't stayed in anything larger than a hotel room/studio, and has already put himself on the list to rent points if we ever have any left over. Ha. As if!

 

[hlhlaw07]

PS - @hlhlaw07, are you JAG? I thought I read something about deploying soon. If so, how do you factor in being able to stay at Shades of Green? I have a friend who is a reservist (with twin girls) who also loves WDW, but has put together split stays between SOG and Poly or another deluxe resort, and he doesn't think it is worth it to spend the $ for DVC.

Though to be fair, he hasn't stayed in anything larger than a hotel room/studio, and has already put himself on the list to rent points if we ever have any left over. Ha. As if!

I am JAG. We have never stayed at shades of green, but I have had a couple of reservations a few times and ultimately ended up cancelling them and going with 2BR Villas. We generally do not stay in hotel rooms with only one sleep space. So we would need 2 rooms at shades of green and then hope to actually be given connecting rooms. With the rate being based on rank, we are in the highest price category. It generally only comes out a little cheaper than getting a 2BR Villa through Disney with the military rate. So we have always gone that route. Plus, shades of green doesn’t have King beds, which is also another negative.

In the end, DVC seemed like a no brainer for us as we were already staying in DVC accommodations and while we could stay else where much cheaper we just don’t vacation that way.

Oh and for anyone else reading, I am paying cash for DVC, have a fully funded retirement plus a TSP, both of my kids’ college education is taken care of through the GI Bill, and the only debt I have is a mortgage that my renters pay. YMMV.

 

[kboo]

I am JAG. We have never stayed at shades of green, but I have had a couple of reservations a few times and ultimately ended up cancelling them and going with 2BR Villas. We generally do not stay in hotel rooms with only one sleep space. So we would need 2 rooms at shades of green and then hope to actually be given connecting rooms. With the rate being based on rank, we are in the highest price category. It generally only comes out a little cheaper than getting a 2BR Villa through Disney with the military rate. So we have always gone that route. Plus, shades of green doesn’t have King beds, which is also another negative.

In the end, DVC seemed like a no brainer for us as we were already staying in DVC accommodations and while we could stay else where much cheaper we just don’t vacation that way.

So ...with the military rate, what's your timeframe for "breaking even"?

 

[crisi]

I am JAG. We have never stayed at shades of green, but I have had a couple of reservations a few times and ultimately ended up cancelling them and going with 2BR Villas. We generally do not stay in hotel rooms with only one sleep space. So we would need 2 rooms at shades of green and then hope to actually be given connecting rooms. With the rate being based on rank, we are in the highest price category. It generally only comes out a little cheaper than getting a 2BR Villa through Disney with the military rate. So we have always gone that route. Plus, shades of green doesn’t have King beds, which is also another negative.

In the end, DVC seemed like a no brainer for us as we were already staying in DVC accommodations and while we could stay else where much cheaper we just don’t vacation that way.

Oh and for anyone else reading, I am paying cash for DVC, have a fully funded retirement plus a TSP, both of my kids’ college education is taken care of through the GI Bill, and the only debt I have is a mortgage that my renters pay. YMMV.

And it sounds like you are a perfect DVC candidate.

 

[mustinjourney]

There's a few of us here - sometimes a little easy to spot.

you hide it fairly well -- I don't think I ever realized you were one of us. hahaha

 

[WALTSAGOD]

SEMPER FI
0311

 

[kboo]

I am JAG. We have never stayed at shades of green, but I have had a couple of reservations a few times and ultimately ended up cancelling them and going with 2BR Villas. We generally do not stay in hotel rooms with only one sleep space. So we would need 2 rooms at shades of green and then hope to actually be given connecting rooms. With the rate being based on rank, we are in the highest price category. It generally only comes out a little cheaper than getting a 2BR Villa through Disney with the military rate. So we have always gone that route. Plus, shades of green doesn’t have King beds, which is also another negative.

In the end, DVC seemed like a no brainer for us as we were already staying in DVC accommodations and while we could stay else where much cheaper we just don’t vacation that way.

Oh and for anyone else reading, I am paying cash for DVC, have a fully funded retirement plus a TSP, both of my kids’ college education is taken care of through the GI Bill, and the only debt I have is a mortgage that my renters pay. YMMV.

I just ran into my reservist friend ... I need to let them know how DVC works for you. They didn't even know about Kid's Nite Out and the concept of having an adult night while at WDW!

 

[bakerworld]

Have to agree the break even point is forever moving ... roving ... like a chimera. End result: the main wage earner of the household is happy. Side note: we gave a 6N LV BL to a family member in exchange for RT transport to Manhattan Port. He never stopped thanking us and spent the rest of 2017 doing additional 'payments'. Believe me, NY traffic and understanding the correct bridge, etc. we felt we were adequately compensated. He looked into purchasing a membership and walked away from it because he can't justify the initial payment. Whatever, he can stay at CBR and we'll stick with BL, BC and AK.

 

[lovethesun12]

You all think you have it rough calculating the break even point? Try factoring in the ever fluctuating Canadian dollar

 

[frabjous]

DVC ownership requires the second, but "magical" numbers can really mislead.

Figures don't lie but liars do figure I don't think anyone in this discussion is trying to mislead, and the data itself isn't misleading. The discussion of break-even point, which is a value assessment, is orthogonal to affordability. You can have something of great value that you can't afford, and something affordable that is of limited worth. Arguablly, it's just as problematic to not analytically quantify the value of a purchase, as it is to determine whether or not you can afford the purchase. Quibbling over the assessment approach is fair game, and leads to a better understanding of the facts. On the other hand, rejecting it out of hand with sweeping statements doesn't add clarity, even if the intention is honorable.

There is a very big difference between each one time trip to Disney and a commitment to a DVC contract that is going to cost you $20k up front and then the cost of Disney and dues every year. If you make the decision each year "can I afford to go to Disney" and go, that's a whole different decision than "can I afford to regularly go to Disney for the foreseeable future."

Sure, but that's just a scale difference. If you apply the same logic, then using funds for individual trips is also potentially unwise since the purchaser can not see the future, and that per-trip 10k saved and/or invested might have made the difference in someones solvency, in the event of a future crisis.

Buying DVC with debt, and having to sell it at a loss isn't a cost in the past - its a future cost - a commitment to a spend that you can't keep.

I don't think anyone was discussing debt on this thread? I would generally agree that debt for a DVC initial purchase is problematic since it negates potential savings, and adds risk. However, even with debt, we don't know all the factors of a given reader. Perhaps they have more than adequate funds/assets but temporary liquidity restrictions, and the added risk is within their risk tolerance parameters. Perhaps they have a high income to debt ratio and can invest the principal at a return higher than a loan under favorable terms (a non Disney lender since the disney rates don't work for that). It might also be reasonable to time a rate hike. Granted these are not common scenarios.

There are some assumptions with purchase that you need to be careful of. "I can always rent my points" - in 2009 some people found that their points wouldn't rent - fewer people were going to Disney and Disney was discounting. "I can always sell for as much as I bought" - once again, if we crash, one of the first things that will see a huge reduction in price is the cost of DVC resales.

Absolutely, "past performance is not indicative of future results". All the typical qualifications around anything you do with your money apply. It's important to factor time into the risk factors though. Theres a good chance we will see a downturn at some point in the full length of a contract, and an equally good chance it will be followed by an upturn. The issue is of course the timing of when and if you have to get out. I agree that allowing padding for such events is important. Luckily aside from shock events, the effective price control Disney exercises, and the sheer demand helps mitigate the overall risk.

If your justification for purchase if something goes wrong - you get sick, you lose your job, you get divorced - is that you'll be covered by these things - caution should be exercised. These risks go down significantly over the life of your ownership - we've owned 15 years and at this point have all the value we need out of the contract (even though I believe we spent more money than we would have) so if we had to let Disney repossess the contract tomorrow, I'd still feel like I got a good deal. But for the first few years of ownership - if you have to sell, you risk a loss.

Yep. "Stuff" happens

 

[frabjous]

You all think you have it rough calculating the break even point? Try factoring in the ever fluctuating Canadian dollar

Interesting problem. Out of curiosity do you rent some portion of points as a hedge?

 

[lovethesun12]

Interesting problem. Out of curiosity do you rent some portion of points as a hedge?

We haven't purchased yet, but I've decided that will be our plan. Have a US bank account for sure and keep a "stash" in there in case the dollar isn't doing well for an extended period. Or take advantage when it is.

We go Easter every year for 8 nights (currently deluxe resort)/4 park days, and that won't change for a long time, due to our work schedules and the fact that is our favourite time to vacation. So the calculation would be easy for us if you take the dollar out of it

 

[Merlin Jones]

Here is what I believe. If I have to calculate how many trips to break even on my DVC purchase, then I should not have bought the DVC to begin with. I know that I am a cheapskate and I know that I am staying in a much much nicer hotel than I would be if paying cash. I am very happy with that.

Well said.

I am also a cheapskate, and since my job keeps me on the road a good amount each year, I would never pay for a hotel room, period. I'd simply use my hotel reward points (which I still do--don't own enough points to cover every FL trip). Even if I didn't have reward points, I would NEVER pay rack rate to stay on property when I can stay at a nice HGI for $90/night.

The problem is that a few years ago, our good friends (DVC members) invited us to join them at BLT one year. Completely ruined me, and particularly our (then) 5-year-old.

Since I'm too cheap to pay rack rates, and have become too spoiled to give up DVC entirely, I relaxed to the inevitable and bought in. So far, no regrets.

 

[Notimeforlove]

From my simplistic vantage point, I look at DVC resale cost per point compared to Dave’s rental price to determine pay off. This assumes I would use Dave’s rental points every time I visited, I go at least every other year, and that annual dues/resale/rental pricing stay more or less in line with each other over time (perhaps a bad assumption). Also ignores inflation, and opportunity costs. Trying to keep it simple.

Solve for X (# visits break even, allowing that the biggest gap can be two years):

X = resell price per pt / (rental price per pt - annual dues per pt)

Example:

Today’s resell price for Bay lake is about $140/pt with annual dues at $6.6/pt.

Dave’s home resort rents at $20/pt.

So X = 10.4 visits in today’s Bay Lake scenario.

 

[My3kids1989]

I haven’t made it past page 1 but I already go to disney a couple times a year without DVC! I’m in Iowa with an AP. Now I’m waiting for my ROFR for BWV and looking at one more DVC purchase. This post is funny, thanks for the laugh and all the ways I can justify my new purchase in many different ways. Can’t wait to be in the “club” haha officially

I calculated some but I know I love Disney and I’m going there no matter what.

ETA: waking up a zombie thread