DVC Direct Economics

[broncofan]

Wanted to see what this community thinks of the direct pricing these days. For my part, we've owned since 2008 (250 pts at AKL). When we bought ($94/pt), we thought of it as locking in the potential to stay in a 1BR for ~ $250-$300 per night (dues were a lot lower way back then) vs staying in a hotel room at a moderate resort for just a little less. Made it seem really attractive.

We only recently became interested in adding on as our family has grown, so we looked at both direct and resale. Our analysis was that either VGF or RIV direct using a 5% cost of capital you'd be looking at a one BR for summer at somewhere around $800/night all in with direct.

I'm curious to get the Disboard feel on this - my analysis is that the cost per point at around $200pp for 200 points and point charts have gotten so high that it just doesn't feel worth the upfront cost anymore... hence we bought SSR resale despite the restrictions and the earlier end date. What says the Disboard community - are direct points and point charts too high to be a good value anymore? Particularly interested in the thoughts of those who maybe look at this a little differently than I do.

 

[Epcot Forever Forever]

Wanted to see what this community thinks of the direct pricing these days. For my part, we've owned since 2008 (250 pts at AKL). When we bought ($94/pt), we thought of it as locking in the potential to stay in a 1BR for ~ $250-$300 per night (dues were a lot lower way back then) vs staying in a hotel room at a moderate resort for just a little less. Made it seem really attractive.

We only recently became interested in adding on as our family has grown, so we looked at both direct and resale. Our analysis was that either VGF or RIV direct using a 5% cost of capital you'd be looking at a one BR for summer at somewhere around $800/night all in with direct.

I'm curious to get the Disboard feel on this - my analysis is that the cost per point at around $200pp for 200 points and point charts have gotten so high that it just doesn't feel worth the upfront cost anymore... hence we bought SSR resale despite the restrictions and the earlier end date. What says the Disboard community - are direct points and point charts too high to be a good value anymore? Particularly interested in the thoughts of those who maybe look at this a little differently than I do.

It’s not the point charts. VGF actually has one of the more favorable point charts compared to cash rates (while SSR actually has the least!) if you look at the annual sum of all daily cash rates divided by total points needed to book the room for the year)

But the direct buy in price is just outrageous now. I can’t make the math work at all for a 1BR at several resorts. Others will quibble with using a cost of capital (I just ignore them now) but everything I learned in my MBA program says I’d only be hurting myself not to. And for some dates even the 2 bedrooms don’t come up positive.

Furthermore, I sincerely doubt Riviera will keep its massive cash rate premium over the long haul. So I think the value will actually get worse over time.

I expect we will mostly stay in 1BRs, which are the hardest rooms to make work mathematically. I held off buying for 3 years until I could find a resale contract I thought the math worked for. If I stay at SSR and Disney is running 35% off the room I will typically save between 15% and 30% using a 4% cost of capital. If I use my SSR points to stay at AKV or BCV or BWV etc that number can reach 50%.

But most importantly (assuming dues stay within my expectations) I will always save double digits vs a 35% off sale, and that mattered the most to me.

With direct I’d be trying to pick days just to save any money at all, and I’m not doing that:

 

[MyDogTink]

Writing as I think.

1. I suppose when doing a look-back, the baseline usually seems more attractive and you may regret not getting in on the original deal. Ex- I was in Disney with my parents and toured OKW when it was the only DVC resort. My dad had colleague who was an original owner and I believe the incentive then was free tickets to the parks for 10 years. My dad and I looked again when BWV went on sale and bought. We compared our price point to what OKW was a few years back + incentives and regretted not buying then.

2. The price difference right now between resale and direct has such contrast. Even when factoring in that resale comes with restrictions, less or no member benefits, and possibly shorter life span, it’s hard not to really consider resale over direct.

3. When thinking abt direct vs resale now as opposed to when you bought direct, is part of the equation that there’s more of a resale market today than then?

 

[broncofan]

Others will quibble with using a cost of capital (I just ignore them now) but everything I learned in my MBA program says I’d only be hurting myself not to. And for some dates even the 2 bedrooms don’t come up positive.

Unless someone has keeping a briefcase full of cash in their basement as their only alternative to DVC, not including a cost of capital just isn’t correct way to evaluate the economics of DVC. Even more so if someone is borrowing - then they need to use a higher cost of capital to reflect the interest costs.

 

[broncofan]

Writing as I think.

1. I suppose when doing a look-back, the baseline usually seems more attractive and you may regret not getting in on the original deal. Ex- I was in Disney with my parents and toured OKW when it was the only DVC resort. My dad had colleague who was an original owner and I believe the incentive then was free tickets to the parks for 10 years. My dad and I looked again when BWV went on sale and bought. We compared our price point to what OKW was a few years back + incentives and regretted not buying then.

2. The price difference right now between resale and direct has such contrast. Even when factoring in that resale comes with restrictions, less or no member benefits, and possibly shorter life span, it’s hard not to really consider resale over direct.

3. When thinking abt direct vs resale now as opposed to when you bought direct, is part of the equation that there’s more of a resale market today than then?

Number 3 is a good point, although we have friends who bought SSR resale in the 2008 crisis for around $55pp so it was an option. I never even looked at it though, because we looked at the direct purchase and thought it was a great deal. It was a presale too so there were some extra benefits - we got 250 SSR points for year one and a full allotment of AKV points for 2008 with no dues that we banked to 2009 UY,

 

[HyperspaceMountainPilot]

Unless someone has keeping a briefcase full of cash in their basement as their only alternative to DVC, not including a cost of capital just isn’t correct way to evaluate the economics of DVC. Even more so if someone is borrowing - then they need to use a higher cost of capital to reflect the interest costs.

So there are a lot of people who have 50-100k in a bank account in cash at all times. For those people, the cost of capital might legitimately be less than 1%, assuming it doesn’t mean they just keep other cash in the no yield checking (to backfill the money they put into DVC). For my family, current cost of capital is nearly 5%—but I also feel like historical performance of DVC has been a decent inflation hedge with lower risk than most of the stock indexes.

I would never advise anybody to put money they need to retire into DVC as an investment, but it seems like most people who have purchased it and hold it more than 10 years seem to be able to recover more than what they paid with a nice “coupon” of savings on vacation each year. I own stocks, bonds, real estate, commodities and DVC has some value in diversifying my investments, even if I doubt it will frequently beat the S&P500. Of course, another way of looking at it is making a huge, concentrated bet on Disney’s current and future management.

Re: direct v indirect— it probably depends where you buy— the current promotion on VGF direct brings it pretty close to resale on larger purchases (if you can get 22 UY points and sell them back)…and if you tend to eat and shop a lot in the parks, that 10% blue card discount starts to pay for itself very quickly.

 

[Sandisw]

Unless someone has keeping a briefcase full of cash in their basement as their only alternative to DVC, not including a cost of capital just isn’t correct way to evaluate the economics of DVC. Even more so if someone is borrowing - then they need to use a higher cost of capital to reflect the interest costs.

Not everyone cares to be that specific when doing the analysis. We were not because we Wanted a simple way to look at it. Based on our calculations and what we get, we felt it was still worth it to buy.

There is no one correct way because not everyone values the same aspect of it all. Now, for some, all that makes sense. But for us, the money wouod be used each year for enjoyment so that aspect that amounted to was not important or enough to sway our decision.

 

[Epcot Forever Forever]

Re: direct v indirect— it probably depends where you buy— the current promotion on VGF direct brings it pretty close to resale on larger purchases (if you can get 22 UY points and sell them back)…and if you tend to eat and shop a lot in the parks, that 10% blue card discount starts to pay for itself very quickly.

I don’t care for the math on VGF resale either though. The only way I’ll ever see the inside of that place is on my SSR points.

I could make a mathematical case right now for resale at SSR, OKWe, or BLT. Anything else I struggle with (AKV maybe but why wouldn’t you just buy SSR points to stay there?).

 

[Nursemanit]

Cash rates are a Disney myth - The contemporary tower and Beach Club/YC sell at cash rates. The rest of the deluxe properties have to be severely discounted to sell.
I would not be shocked to see VGF3 in the future as the cash side is still struggling with occupancy rates.

DVC is a way to convert former deluxe hotels to moderates- simple as that.

Buying direct or resale is simply a numbers game. If you want X points what is the difference in price. Last summer it was 4K for me - at times it was closer to 10k. With AP back most who go more than 10 days a year can save enough to make up a few thousand . But can you make up 10K if you only go 7 days a year ?

 

[HyperspaceMountainPilot]

Cash rates are a Disney myth - The contemporary tower and Beach Club/YC sell at cash rates. The rest of the deluxe properties have to be severely discounted to sell.
I would not be shocked to see VGF3 in the future as the cash side is still struggling with occupancy rates.

DVC is a way to convert former deluxe hotels to moderates- simple as that.

Buying direct or resale is simply a numbers game. If you want X points what is the difference in price. Last summer it was 4K for me - at times it was closer to 10k. With AP back most who go more than 10 days a year can save enough to make up a few thousand . But can you make up 10K if you only go 7 days a year ?

I can only speak to BCV, BWV, AKV, PVB, and VGF, but we have absolutely paid the high end of rack cash rates over the past few years. Almost all WDW resorts were totally sold out last year between Christmas and New Years.

They may be myths at times of the year we don’t travel but we tend to travel at Spring Break, Thanksgiving, and NYE.

 

[AnnaKristoff2013]

Wanted to see what this community thinks of the direct pricing these days. For my part, we've owned since 2008 (250 pts at AKL). When we bought ($94/pt), we thought of it as locking in the potential to stay in a 1BR for ~ $250-$300 per night (dues were a lot lower way back then) vs staying in a hotel room at a moderate resort for just a little less. Made it seem really attractive.

We only recently became interested in adding on as our family has grown, so we looked at both direct and resale. Our analysis was that either VGF or RIV direct using a 5% cost of capital you'd be looking at a one BR for summer at somewhere around $800/night all in with direct.

I'm curious to get the Disboard feel on this - my analysis is that the cost per point at around $200pp for 200 points and point charts have gotten so high that it just doesn't feel worth the upfront cost anymore... hence we bought SSR resale despite the restrictions and the earlier end date. What says the Disboard community - are direct points and point charts too high to be a good value anymore? Particularly interested in the thoughts of those who maybe look at this a little differently than I do.

I agree. Direct is not worth it, especially if you want to stay in 1BR’s which are not hard to get with resale SAP’s. You are much better off buying resale and then even paying rack rate if you really want to stay in the Riviera (or other new resorts) versus buying direct, in my opinion.

Edit: In 30 years from now when DVC really no longer exists and these buildings are really just individual timeshares that are not part of an association but have a developer perk of letting you trade into other resorts? Maybe resale won’t be worth it then either (although I bet the resale prices relative to direct will be substantially lower at that point).

 

[hcortesis]

These discussions lead me to wonder if it is time to dump my all original BC points. I would keep my (all original) VGF points but as the 2042 date gets closer and closer, I keep seeing that zero value end point approaching. The decision is a little harder since I live in Canada and don't quite know the ease of getting that final 10% sale price back.

 

[mz-s]

These discussions lead me to wonder if it is time to dump my all original BC points. I would keep my (all original) VGF points but as the 2042 date gets closer and closer, I keep seeing that zero value end point approaching. The decision is a little harder since I live in Canada and don't quite know the ease of getting that final 10% sale price back.

If you don't want to be able to use those last 19 years of points, then yes sell it off.

Regarding the topic of this thread - I see buying DVC Direct as an emotional decision.

 

[Epcot Forever Forever]

If you don't want to be able to use those last 19 years of points, then yes sell it off.

Regarding the topic of this thread - I see buying DVC Direct as an emotional decision.

I see it like buying a luxury car. It’s basically financially unjustifiable by any metric but most people with the means to do it end up buying at least 1 because they want it. And that’s fine! People should spend their money on things they want! Just don’t pretend that it’s an investment.

 

[hglenn]

These discussions lead me to wonder if it is time to dump my all original BC points. I would keep my (all original) VGF points but as the 2042 date gets closer and closer, I keep seeing that zero value end point approaching. The decision is a little harder since I live in Canada and don't quite know the ease of getting that final 10% sale price back.

IMO, BC points are more valuable rented than they are sold at the moment....

 

[RoseGold]

Depends on how long you plan to hold. Pre-RIV and post-RIV DVC are different products. Maybe that will matter, maybe it won't. If you plan to have DVC pried out of your dying hands, I can see why you would buy direct.

But buying SSR still keeps your options open. You can always sell and buy into whatever that choice is, in the future.

 

[tom1944]

I keep running buying direct through my head for the reasons mentions above. It is both an emotional decision and while it might be financially unjustifiable, I want the luxury item especially as additional restricted resorts are built.

The decision on Poly will really matter to me as well as the announcement of the next WDW DVC resort to be built.

My practical side keeps thinking how I could dip my toe in the water on a small number of direct points to use every three years for some time in restricted resorts.

 

[davidhr]

Isn’t pretty much every DVC purchase (direct or not) emotional? Most of us (if not all of us) don’t need a timeshare. It’s a luxury product.

I see luxury products as something that will make you happy. If you have the disposable income to buy it and you want it, go ahead. Not all decisions have to make financial sense if you can afford it without affecting the rest of your finances.

If you care about perks and restrictions, go direct. If you care about getting the best deal, go resale. Whichever option you choose is perfectly fine.

As a lot of people in this sub care about the financial aspect of it, I’d go ahead and say that I don’t see a way how direct would make more sense than resale unless you can use the AP discount heavily for years.

Having said that, at the beginning I cared about the financials and then one day I didn’t. Sold my resale contract and bought direct. I hated the restrictions.

 

[tom1944]

Our plan is 1- bedroom stays. We have our initial trip in August at BLT.

We might find the 2 bathrooms to be a must have and the 1-bedroom perfectly fine. If that is the case our stays might just end up as BLT and Kidani. If that is the case direct points are not as necessary and I go back on the hunt for BLT resale points to use with my SSR resale points.

That works until a new restricted resort is built with 2 bathrooms in the 1-bedroom unit.

At least for me these decisions are a constantly changing process. Luckily, we have time before we make the next purchase.

 

[RunDisney Matriarch]

I can only speak to BCV, BWV, AKV, PVB, and VGF, but we have absolutely paid the high end of rack cash rates over the past few years. Almost all WDW resorts were totally sold out last year between Christmas and New Years.

They may be myths at times of the year we don’t travel but we tend to travel at Spring Break, Thanksgiving, and NYE.

Same at RIV, VGF, AKV, CCV, and BRV. We're finally starting to be able to take advantage of some promos (the 25% early summer discount covered the start of our summer break) but we're paying dearly to stay in the Disney bubble. We recently joined DVC and while our contract isn't big enough to cover all of our travel it has been nice to cover at least one RunDisney trip a year.