Does Lack of ROFR Degrade Your DVC Ownership?

[BWV Dreamin]

According to DVC Fan site, there have been no ROFR’s since December ( or possibly early January, someone correct me if wrong). While this has been a win for buyers obtaining contracts at some really great prices, how has it effected owners projected resale values? One would think the longer there is no ROFR, the more prices should drop. But are owners dropping their prices, and if so how significantly? Just how low could resale prices drop over time with no ROFR? Could this be Disney’s end game in finally dismantling the resales business?

 

[tom1944]

Not mine

I purchased it to use not to resell.

 

[Ruttangel]

The lower the resale value the less likely an educated buyer will buy direct, so I would say it hurts Disney to not ROFR. Is that enough sales for them to worry, maybe not.

In any case, there has to be a lower limit to each resort where it will make sense to buy resale against whatever else e.g. cash stays/direct purchase/rentals and at that point even brokers might buy them up and just keep renting the contract until it is sold.

 

[pianomanzano]

I think there were a handful of ROFRs in January just for Copper Creek (or might’ve occurred in Dec and reported in January, not certain).

I don’t understand how no ROFR could dismantle the resale business. If anything it’s killing there own business, particularly for the sold out resorts. People will continue to purchase resale if prices keep staying (and going further) down. I have no incentive to purchase direct with these discounted resale prices. I already have some direct points that will give me accessibility to future resorts.

DVC made a lot of weird decisions last year that shows why they’ve effectively stopped all ROFR. They bought back way too many points at sky high prices like ROFRing Saratoga in the 130s and 140s. At the same time they raised direct prices for SSR and OKW to 200/pt. At a time when you could get newer resorts like VGF or RIV for $7/pt more (not even factoring in incentives), they killed demand for their own product. If you’re buying direct VGF was (and probably still is) a no brainer: cheaper dues, longer contract, better priority booking window, and higher resale value. It’s no wonder they still are holding more than 100k of the points they bought back in 2022.

I can see how some may perceive some sort of degradation with the drop in value, but if you intend to keep the contract until expiration then you’re getting a great deal on joining or adding points now. If one is worried about low resale value, just take the contract to the board sponsor. They know how to get high prices for sellers. I can take a recent contract I just bought for an immediate $15/pt profit through an instant sale there with a potential $35/pt+ profit if I list based on their recommended list price.

 

[Sandisw]

Doesn’t bother me because I went in not wanting or caring if i could sell my contract down the road for any amount of money.

Being near WDW, I know their will always be a buyer who will take it off my hands, and most likely foe more than $0!

With VDH confirmed to have restrictions, I think we may be seeing the long term strategy play out to keep resale and direct different, and DVD may not have the same reasons for ROFR they once did.

But, right now, I think it may have more to do with a financial aspect and having plenty of points in their control to use the way they need them.

 

[bobbiwoz]

…
With VDH confirmed to have restrictions, I think we may be seeing the long term strategy play out to keep resale and direct different, and DVD may not have the same reasons for ROFR they once did.
…

The same restrictions as RIV?

 

[Nursemanit]

Prices will go back up now that AP are back with a promise they will be offered periodically in the future. I am already seeing it in Poly resale.

 

[Sandisw]

The same restrictions as RIV?

Correct! The multi site POS was updated a while ago and that does indeed include that information. …

Discussing here..
Thread 'News: Disneyland Hotel Villas to have Resale Restrictions'
https://www.disboards.com/threads/news-disneyland-hotel-villas-to-have-resale-restrictions.3916385/

 

[bobbiwoz]

@Sandisw Thank you!

 

[broncofan]

The lower the resale value the less likely an educated buyer will buy direct, so I would say it hurts Disney to not ROFR. Is that enough sales for them to worry, maybe not.

In any case, there has to be a lower limit to each resort where it will make sense to buy resale against whatever else e.g. cash stays/direct purchase/rentals and at that point even brokers might buy them up and just keep renting the contract until it is sold.

Agree with this. It sure seems to me like they just overbought last year during the "revenge travel" phase of the pandemic recovery! Gave them more room inventory to sell for cash and they likely assumed they could turn the contracts for a nice profit selling direct. As things slowed down they've cut way back to generate cash but it must be hurting the direct sale volume to have contracts going at $50 - $100 per point less than direct.

Take SSR as an example - they bought back a whole lot of points 1H 2022. Don't have the point numbers but it was just over 300 contracts. Eventually, even at the tepid rate of 1500 - 2500 points per month of direct sales for SSR they will run down their inventory and decide to start buying again - just a question of when they get their inventory down to the level they are targeting I believe.

 

[MsChristy12]

We bought into a home resort that's not as popular as others (at the moment/current market), but we never once thought about the resale value because that's not our end game. DVC to our family isn't an investment, it is a luxury product that is pre-paid and with future discounted deluxe resort stays. If we are happy with it until the end, we'll just let the contract expire and by then, we have already gotten all our buy-in money worth plus a whole lot more.

 

[Sammie]

@Sandisw and I are always on the same page on this topic. We did not buy as any type of investment. We bought to use ours until the 50 years is up. I bought to get a discount on a 2 bedroom villa and we have saved so much money over the last 20+ years that I could give mine away and be happy. Resale value was never a factor when we bought or now.

 

[Brian Noble]

ROFR does not (directly) influence prices. The prices are set by a willing seller and buyer. The presence of ROFR does influence those prices, but the vast majority of buyers do not obsessively watch the ROFR process, and those who do often have a difficult time discerning the decision function used in many cases.

If Disney were an active bidder in the marketplace, they'd have more influence over prices.

ROFR seems to drive prices, because it is used much less often during a steep decline. But, I believe that's a consequence, not a cause--those steep declines are exactly when sellers outnumber buyers, and that negatively impacts Disney's desire to acquire inventory to sell.

The other important thing to know about ROFR: it is not a good deal for Disney--at least, not when compared to using the same capital to build and sell a brand new resort. The advantage of ROFR is a shorter time to commit that capital, but the returns are much lower.

 

[broncofan]

Great points Brian.. I had not thought this all the way through, but it makes sense that when there is a supply/demand imbalance driving steep pricing declines, there is not way for Disney to intervene in a way that makes sense for them. If they buy contracts using ROFR in an attempt to hold the price higher, supply goes up and demand goes down for resale, making the problem worse. Then, unless they cut their own direct pricing, inventory will build up on their end.

Makes perfect sense that the only reasonable thing for Disney to do is to wait until pricing settles at a level where supply and demand are balanced.

 

[BWV Dreamin]

Great points Brian.. I had not thought this all the way through, but it makes sense that when there is a supply/demand imbalance driving steep pricing declines, there is not way for Disney to intervene in a way that makes sense for them. If they buy contracts using ROFR in an attempt to hold the price higher, supply goes up and demand goes down for resale, making the problem worse. Then, unless they cut their own direct pricing, inventory will build up on their end.

Makes perfect sense that the only reasonable thing for Disney to do is to wait until pricing settles at a level where supply and demand are balanced.

But a contract is only worth what a buyer wants to pay for it….same criteria as in real estate. You can list your DVC contract at whatever price you want, but if the majority of offers are lower, well that is the real sales price rather than the perceived price. ROFR diluted that by buying back contracts. Will be interesting to see how low they go…

A 275 pt RR resale contract just passed ROFR at $115/ pt…….

 

[BamaGuy44]

I haven't been following DVC that long so I'm curious. Outside of the pandemic, has ROFR ever completely gone way for an extended period like this? Or is it kind of a normal cycle that occurs during economic downturns or at times when Disney just wants to conserve cash?

 

[Nursemanit]

I thought last year was one of the most aggressive ROFR in the history of DVC per the board sponsor.

I do think ROFR was putting a finger on the scale when used like it was last year - but just like when governments put their finger on the scale ( like in tariffs ) it tends to have very short-term positives and strong long-term negatives.

I think this current market is the normal supply / demand and we are just slowly deflating the bubble.

I also think Disney was stashing cash in points to mitigate the rapid inflation last year.

 

[HyperspaceMountainPilot]

It's a bit weird right...because by my math, if Disney can ROFR points (really anywhere with a long contract life) for $100pt or less, wouldn't it be very lucrative for them to acquire those points, rent them out as hotel rooms at prevailing Disney rates (which by my recent math is upwards of 20/pt) and then sell them again at some point in the future to someone who is willing to pay close to 2x that? I understand not trying to ROFR close to $200, but it seems like it makes economic sense for Disney (who unlike us, doesn't have large transaction costs, brokers, rental agents, etc.) to be buying at some level.

 

[BWV Dreamin]

I haven't been following DVC that long so I'm curious. Outside of the pandemic, has ROFR ever completely gone way for an extended period like this? Or is it kind of a normal cycle that occurs during economic downturns or at times when Disney just wants to conserve cash?

I have been a DVC member since 2007 and have never seen them go to “0” ROFR contracts for as long as they have gone this year. ROFR has been essentially non existent since January.

 

[Sandisw]

It's a bit weird right...because by my math, if Disney can ROFR points (really anywhere with a long contract life) for $100pt or less, wouldn't it be very lucrative for them to acquire those points, rent them out as hotel rooms at prevailing Disney rates (which by my recent math is upwards of 20/pt) and then sell them again at some point in the future to someone who is willing to pay close to 2x that? I understand not trying to ROFR close to $200, but it seems like it makes economic sense for Disney (who unlike us, doesn't have large transaction costs, brokers, rental agents, etc.) to be buying at some level.

It might be a good strategy if they were not building and trying to sell new resorts. They do not need to make money in this manner.

The points that DVD sells at resorts that are sold out is a very small part of monthly sales. So, spending all that just for potential sales down the road, or to try and do cash rentals, isnt needed.