Do you think that DVC will offer extended contracts to current owners?

[FLYNZ4]

Do you think that DVC will make offers to extend the life of existing contracts for the non-SSR resorts?

Here is an example: I own a hangar for my airplane as part of a condo association. We own the physical buildings, but we lease the land from the airport... and we have ~30 year lease for the property. Occasionally, when the lease dwindles to 20 years remaining... the condo association renegotiates the lease with the airport... pays them additional money in exchange for an extended lease (30 yr)... then charges each condo owner a fair share of the cost for the extended lease.

Hence... you might expect to pay $30K for hangar with a 30 year lease... and then another $10K each 10 years to extend the lease back out to 30 years.

I think it would be good for owners with 38 years remaining to have this option available to them... and it almost certainly would be great for DVC.

DVC is one of the few timeshare condo associations where the equity has actually increased... and a amazingly, this is done even though it is a RTU type of contract.

However... it is also clear that this has to reverse itself sometime in the future.... this is certain because the ticking clock dictates that the residual value (equity) will dwindle to zero eventually.

By allowing the option of extending the contract length... DVC members would be able to protect their equity... and DVC would have a cash cow of simply collecting additional revenue without the costs of construction, marketing and sales. Unless there is something in the governing documents that I do not know about, I would speculate that there is a good chance this might happen in the future.

By contrast... if DVC does not offer this option... then I think that the current condos will enter a slippery slope of equity erosion. This one is difficult to predict, but it will be accelerated by DVC offering new resorts with longer contracts. I think a lot of the erosion will be a result of perception vs simple economics. At 38 years currently remaining... it still is not too bad from a perception standpoint. However, in another 10 years... I think that most new customers for DVC contracts will have lifespan expectations longer than the contracts they buy. I think this will play very heavily in their decision process since people who buy Disney... often want to pass that experience on to their children... and I know that for a lot of people.... maybe the majority... they value the eventuality of passing their DVC memberships on to their children/grandchildren.

Comments or other speculations?

/Jim

 

[Beca]

You have much more experience with this than me...but, I think that could be very messy. If some people opt to continue their "lease" and others do not, then DVC has to try and resell those units. If the additional time added is short (10 years or so), then how much could they really get for them? If it is longer, how many people are going to buy? Then, there is also the inflation factor. If these resorts are in good shape at the end of the term, Disney could buy them back, use them as hotels, and probably get a lot more for them (based on inflation of going rates).

The only thing we might see is an addition to equal SSR, and any future resorts...but, that is really iffy.

All being said...I would extend points in a heartbeat!!! I would LOVE to be able to pass this on to my children!!!

Of course, who knows what the future will bring. Disney has always been an innovator. Maybe they will come up with an option we cannot imagine.




Beca

 

[wisbucky]

Extending the existing contracts for DVC owners could result in Disney loosing money. Reason being is that when lets say OKW has ended it current time span of the DVC members (38 years) Disney will most likely reconstruct a new resort in it's place and tear down OKW. Keeping a 40 plus year old resort up will begin to cost more than the dues are worth or can cover. Those who own OKW now would most likely want to renew now for OKW instead of another resort. I dont see Disney setting a set price to extend your contract. They would if possible extend it per point cost. In 38 years I can easily seeing the cost per point being well over $150.00 maybe even over $200.00. Would you want to pay that much for OKW or for a brand new resort?????? If Disney called me today and said we will extend your contract for 10 years and the cost per point is less than $80.00 I would buy into it. But I certainly wouldnt want to pay $150.00 per point when my contract is about to expire for only 10 more years. Otherwise I might as well buy into a new resort.

This is just my opinion.............

 

[CarolMN]

Originally posted by wisbucky
Extending the existing contracts for DVC owners could result in Disney loosing money. Reason being is that when lets say OKW has ended it current time span of the DVC members (38 years) Disney will most likely reconstruct a new resort in it's place and tear down OKW. Keeping a 40 plus year old resort up will begin to cost more than the dues are worth or can cover. ...(snip)...

I don't think I agree with you about building new resorts to replace the exsting resorts. IMHO, DVC is doing a very good job of keeping up the DVC resorts. I believe that DVC will continue to charge members the amount of dues necessary to continue keeping the resorts in excellent condition right up to the end of our contracts.

40 years old does not necessarily mean that a building needs to be razed and replaced, especially if it has been well maintained. In 2042, I think Disney will either take back the resorts and rent the rooms for cash just like any other on site resort, or they will sell new 50 year contracts to whoever wants to buy them.

I don't think DVC will offer contract extensions. Guess it doesn't matter much to me anyway as I will be 90 by then. If I'm still alive, I'll not likely be in good enough shape to travel to WDW every year.

JMHO. YMMV.

Best wishes -

 

[Chuck S]

Because of my age, it wouldn't make a big difference to me, either. If I had to guess, I would say "No" they will not offer contract extensions for several reasons. In 38 years, technology advances may make the current building obsolete, in other words, a full rehab to bring them "up to date" may be more costly than it is worth, so tearing down the existing structures may be cheaper then a rehab (this is happening today in many locations). They would, I'd guess, totally demolish the DVC resorts and sell them as "new". If, on the flip side, the buildings themselves are in good enough shape that a "simple" rehab will bring them up to the standards of their more modern counterparts, Disney will basically get an almost "new" resort for very little investment to with as they please. They would have the potential to be very lucritive rental units. Either way, it is a win/win situation for WDW, assuming that the parks continue to be a major vacation destination. And Disney wouldn;t have to worry about the legal aspects of a contract "extension".

 

[FLYNZ4]

If in fact you are all right (and I am not challenging that)... then we should start thinking about the best time to sell our current contracts, and replace them with new longer term contracts at newer resorts. In otherwords... sell our existing resorts when the value hits the peak... and replace them with the longer term resorts who's value is likely to increase over time (for a while).

Lets look at OKW as an example. In 1991 the points could be purchased for $51/pt with 50 years remaining. Now 13 years later... the same points cost about $70/pt resale ($84 from DVC) with 38 years remaining.

However... the price/point has to start decreasing one of these days... it may continue to go up for a while... it may hold flat for a while... or it may start decreasing.

I do not think the fact that the resale price will decrease can even be debated. If we look at the year 2042... the value by definition will have dropped to zero... so the price has to go down sometime between now and then.

However... a decreasing resale price at resort X, does pose a problem for DVC who wants to sell new memberships... so it is not really in DVC's best interest to let the erosion happen either. It is just bad business for them to have the confusion of "cheap points" vs "expensive points" out on the market.

As I said in another post... I purchased SSR because of the 50 year contract. At some point in the future (maybe 10+ years)... I expect that DVC will have a new contract date that is 50 years from that point. If Disney does not start selling extensions to contracts... it might be a good time to sell my SSR points and replace them with whatever new resort is opening at the time.

/Jim

 

[Beca]

I think the "value" of your purchase depends on many factors other than money (at least, for me!!). I purchased DVC KNOWING that at the end of my term, my investment would be worth NOTHING. I am SOOOOO okay with that!! I want my DD to be able to "grow up" with Disney!

Now, on another thread, you can read about me panicking (I'm SURE that is spelled wrong ) about with SSR becoming so large, all of our choices could be limited. With that in mind, I am MORE than willing to ride the "depreciation wave" just to get the home advantage of the resort that I love!! DVC is probably going to continue growing, and I would rather spend the next 38 years at my favorite resort, than worry about my resale value, and not get to stay at the resort of my choice at peak times (or, in the future...possibly any time!).

I think if I worried more about money, I would take the advice to "sell" at an appropriate time...but, if I worried more about money, I'd probably have a lot more of it than I do!!!

I'm just going to enjoy the years that I have, and sadly "kiss it goodbye" when my ride is over.



Beca

 

[FLYNZ4]

Originally posted by Beca
Now, on another thread, you can read about me panicking (I'm SURE that is spelled wrong ) about with SSR becoming so large, all of our choices could be limited. With that in mind, I am MORE than willing to ride the "depreciation wave" just to get the home advantage of the resort that I love!! DVC is probably going to continue growing, and I would rather spend the next 38 years at my favorite resort, than worry about my resale value, and not get to stay at the resort of my choice at peak times (or, in the future...possibly any time!).

I'm just going to enjoy the years that I have, and sadly "kiss it goodbye" when my ride is over.
Beca

Beca,

But if DVC was to offer a mechanism to extend your contract... you would have the best of both worlds. You could have a property that does not depreciate in value (assuming you chose to renew your contract to 50 years)... and you would have your favorite home resort too.

I have listened to opinions that DVC will probably not offer contract extensions... and the arguments seem OK... but I remain unconvinced that they will avoid this. By offering extentions... they get to sell the same property over and over, recognizing the immediate cash income of the extension. I also think they could refurbish/replace condos... or entire buildings one at a time. That would allow continuous improvement of a resort.

/Jim

 

[Beca]

Originally posted by FLYNZ4
Beca,

But if DVC was to offer a mechanism to extend your contract... you would have the best of both worlds. You could have a property that does not depreciate in value (assuming you chose to renew your contract to 50 years)... and you would have your favorite home resort too.


/Jim

All I can say is...I sincerely hope that you are right, and I am wrong!!!!!



Beca

 

[First Wave]

Look at it financially. Why would DVC extend the term? They can start all over at $150/pt (or whatever the market will bear) in 2042.

How about the folks that are buying Saratoga Springs right now at $95/point.? When the rest of the resorts expire on January 31, 2042, where are they going to go??? Only SSR and any new resorts (Eagle Pines) that may be built.

Seems fairly clear.

 

[FLYNZ4]

Originally posted by First Wave
Look at it financially. Why would DVC extend the term? They can start all over at $150/pt (or whatever the market will bear) in 2042.

I am not sure that I understand your comment. I am looking at it financially... In fact, I am only looking at it financially.

It gives DVC an opportunity to sell (and sell again, and again)... the same property to the same owner. Clearly this is better for DVC than waiting till 2042. They can create as many DVC resorts they want between now and 2042... limited only by how many memberships they can sell. They do not have to wait until 2042 to tear it down and build again.

This is all upside for DVC... and it would be a huge win for those who really love their current resorts yet want to protect their equity from erosision.

/Jim

 

[tjkraz]

I don't think that even DVC knows what they will do as 2042 approaches.

But look at it this way. If memory serves, OKW alone represents around 12 million DVC points. BWV is around 7 million more, and I have no idea how many are at the other 2042 properties.

That's an awful lot of points to immediately have available for sale. If a significant percentage of DVC owners chose not to renew, DVC would be stuck trying to peddle the points (again) or trying to rent the rooms through CRO.

It may even end up being a resort-by-resort decision. It would be very easy for them to assume control of BWV, BCV and VWL assuming those resorts still have a long-term future at WDW. OKW they may choose to bulldoze in favor of something else.

 

[OCDisney]

I don't think there will be an extension for many of the same reasons already listed. But I'll throw out another idea.

Divide DVC-1 from DVC-2. Think about it -- they might have to do this at some point to ensure a clear division of resale and add-on price points and trade rules.

Perhaps the recent announcements of SSR phase III combined with new potential for offsite resorts will be a catalyst to making DVC 1 & 2 have to perform more restriced 'trading' like other trading to other timeshares.

If they start selling new resorts world wide with 2054 end dates some kind of division seems likely IMO. Otherwise owners of orginal DVC-1 might start compaining that they cannot even go to WDW unless they reserve more than 7 months out.

 

[FLYNZ4]

The DVC-2 idea is interesting. I am not thrilled if DVC starts building more off-site resorts. I bought DVC for the onsite properties, and if they get diluted with off-site proerties, it would make it much harder to get reservations within WDW.

Resorts off of WDW are a dime a dozen... and anyone wanting off-site options could buy other condos at small fraction of the cost of DVC. I own other condos, and my average per-night cost of staying in very nice (GC, or 5*) resorts averages under $50 night for a 2BR or 3BR. These are the exact same resorts that we can trade into using our DVC points through II.

/Jim

 

[Dean]

As to whether Disney will want to extend, depends on how valuable it would be to Disney to have the resorts back vs extra visitors. The logistics of extending would be difficult as it would require a vote of the members and for most members to ante up with dollars. I'd guess it take a fairly low amount of dollars to get members to keep it going, say $10 pp in todays dollars. But it would be very complicated it appears to me.

 

[nhwanderer]

Someone mentioned in another thread that Disney is planning to become more active in the resale market. If that's true, it would put them in a position of having more control over points that change hands...which, I think, may happen more frequently as the owning population gets older. Then, they can more easily change their policies with regard to continuing contracts, etc.

I'm not savvy enough to figure this through with numbers, etc. It just struck me as an interesting possibility.

nhw

 

[TheRustyScupper]

1) I'm not sure this will be based upon selling DVC rooms.
2) I think the decision will be overall tourism at WDW.
3) If WDW can fill hotel rooms, then DVC will convert to hotels.
4) It WDW can't fill hotel rooms, then a DVC-2 sale is probable.

5) Business is business !
6) WDW needs to fill rooms.
7) Whatever will fill the DVC rooms will decide the outcome
8) The advantage of DVC is once a room is sold, it is booked.


My Personal Opinion:
I don't believe WDW will be able to fill enough rooms if/when DVC rooms become available as hotel space. Additionally, hotel space is dependent upon economic conditions and booked rooms can evaporate quickly in an economic downturn. Therefore, a DVC-2 type of sale will be a business must.

 

[FLYNZ4]

I am pretty amazed at how well DVC has done keeping the resale value high... which is good for owners. After figuring in the cost of closing, the price differential between buying through DVC or buying on the resale market is very small, especially when compared to most other timeshare companies. The other company from which I own T/S property, the resale price is about 50% of the developer price. Others properties have a resale price of about 25% of the developer price.

For existing owners, this high value is good for us, and DVC has done a spectacular job in maintaining the high value... and I think they always will.

Someone mentioned in another thread that Disney is planning to become more active in the resale market. If that's true, it would put them in a position of having more control over points that change hands...which, I think, may happen more frequently as the owning population gets older. Then, they can more easily change their policies with regard to continuing contracts, etc.

If DVC was to get more active in the resale market like suggested in the previous post... Disney would have another tool to keep the prices from eroding. They could buy existing contracts... convert them to "new 50 year contracts"... and then sell them at a higher price. Assuming that they offered sellers a fair price... this could be used to keep high economic value in the existing resorts as they age.

Of course, the trade-in value of the existing contracts would have to decline as remaining years are removed from the term... but I also think that DVC could use this same mechanism to allow current members to buy contract extensions.

I still remain convinced that the economic windfall of such a program is too great for DVC to pass up. Disney never misses a beat. I would speculate that every 10-20 years... DVC would come out with new contract dates (like they did for SSR)... and then use that as a cash cow for upgrading existing contracts. I think that is especially true for the resorts like BCV and BWV that have such prime physical locations.

/Jim

 

[tjkraz]

Originally posted by FLYNZ4
If DVC was to get more active in the resale market like suggested in the previous post... Disney would have another tool to keep the prices from eroding. They could buy existing contracts... convert them to "new 50 year contracts"... and then sell them at a higher price. Assuming that they offered sellers a fair price... this could be used to keep high economic value in the existing resorts as they age.

Ahhh, you make it sound so easy.

I'm neither a lawyer nor a timeshare expert, but my understanding is that they would have have to take a LOT of legal steps in order to start extending contracts beyond 2042--assuming that it's even possible, which it may not be. There are a lot of laws on the books to protect people from shady timeshare developers. DVC may not fall under that heading, but they are still subject to the same operating rules.

I didn't see the other post about resales that was referenced here, but my take (feel free to debate) is that DVC would have little care for the resale market. As long as they can keep a reasonable differential between resale and new prices, they still hold the advantage of 12 more years on the contracts. And that advantage will continue to gain importance as we get closer to 2042.

They may take a different stance with regard to SSR resales. But the way new points are selling, why even worry about resales? As long as they exercise ROFR to keep people from buying the earlier resorts at something like $40 per point, it's hardly worth worrying about.

 

[ronw]

My first thought was to agree that extensions would be too messy. But then again it really depends on the long term plans for the property. I can't see Disney wanting to deal with renting all the rooms that would suddenly be available in Feb 2042. Also if the DVC program continued, they suddenly have 4 unsold (on-site) resorts at once. If they did offer contract extensions, they could avoid the problem of starting from ground zero . If a member did not want a contract extension those points would be available for resale in 2042. Members as a whole would not have to vote on it because the time frame affected would be after the current interest expires. It would be covered under a new offering - I don't know how far in advance you are allowed to sell interests - usually the rules apply to property not yet built.
DVC could generate considerable cash flow based on extensions and not be stuck with unoccupied resorts in 2042. But that would mean a commitment to maintaining the current resorts vs planning to tear them down and start over. Of course there is a certain "tidiness" about having everything end at one time - no commitments to provide anything and , thanks to the maintenance fees, 4 perfectly maintained resorts come 2042.
This is an interesting thread but the possibilites are so varied all we can do is wait and see.

I also agree with the poster who said they were totally OK with letting the contract run its term. I will have received all the value I bargained for and would not be dissapointed if extensions are offered or not. Only time will tell