DVC Membership Appreciation???

[GSW85]

I know that a timeshare should not be purchased as an investment.

Does anyone have any historical information as to how values have held up from initial offerring price and where they stand today in the resale market?

 

[Chuck S]

Because of Disney's Right of First Refusal, it has kept the price of resales at an artificially high level compared to most other timeshares. Using that type of info to "justify" could backfire if Disney, for whatever reason, decided it was no longer interested in exercising their refusals.

 

[larrytau]

Good point, Chuck. But, what would cause Disney to be no longer interested in exercising their refusals? Certainly, there is sufficient demand now for them to be very interested; just read all the Disboard comments about folks clamoring for sold out resort points!

One reason to be NOT interested: extremely high MF structure. Given Disney's past performance, this seems unlikely. Vero Beach might be a problem, given its location. We have been seeing this problem because of the much lower resale cost per point.

Another reason to be NOT interested: a flooded market with resales, possibly occurring around 2042. Maybe 2032? Should be interesting to see how Disney handles this "succession" process and the cannibalizing of "old" resorts.

Other reasons??

 

[Chuck S]

As we grow closer to the end date for the original contracts (2042) the interest in purchasing at those resorts will fade. I suspect that Disney will end their ROFR repurchases a few years (or more) before the end of those contracts...unless they are going to offer existing owners a great deal on extensions.

If, for some unknown reason, Disney decides to not build any more DVC resorts, I would look for ROFR to be dropped at that time.

 

[Granny]

I agree with Chuck....they will drop ROFR if they quit selling unless the price is so low that they can still make money reselling it themselves.

And there will come a point when it won't help much anyway. Right now, SSR contracts expire in 2054 and all others in 2042. So the difference between a 47 and 35 year contract might not be that much in a buyers mind. But when it gets to, say, 30 years on an SSR contract and 18 years on all others then it might be very hard to justify.

Does anyone have any historical information as to how values have held up from initial offerring price and where they stand today in the resale market?

The initial price has risen over the years, but I can tell you for sure that in 2001 VWL sold for $72 per point and is now sold in the $80-$85 per point range. I bought BWV for $62 per point in 2002 and its current resale price is in the same range.

But as Chuck (and you) indicated, buying DVC as an investment that might appreciate would probably not be a good idea.

 

[doubletrouble_vb]

I wouldn't count on ROFR supporting the price in any timeframe. I purchased VWL just ahead of the price increase from $72 to $75. Resales for 150 point contracts were running almost exactly the difference between buying new from Disney and buying resale plus the closing costs. A wee bit less for OKW over BWV but I wasn't interested in OKW/HH/VB. What happens? VWL is a small resort and Disney announces BCV. Everyone wants BCV and it doesn't seem that Disney is all that interested in ROFR. Resale prices stagnate but the price of BCV was rising. Once BCV is sold out and Disney is between resorts as well as continuing into the sales of SSR Disney has become more active with regard to ROFR.

My belief is that with the announcement of a sizeable CRV Disney's interest in ROFR will subside again with the resultant stagnation of resale prices (and they may in fact fall a bit).

The moral...you should assume that your DVC will lose 50% or more of its value as soon as you purchase it...and every year that it doesn't count your lucky stars. Lately DVC resale prices have looked a bit more like the stock market with BCV prices in the stratosphere with the other resorts settling around individual price points.

 

[BigBahamaDada]

All --

I'm a prospective DVC'er. And in the process of hatching a purchase plan, I've been building some financial models. These models are more for my peace and mind (and entertainment - really) than anything, as the emotional decision to purchase and enjoy has been made. But thinking through Disney's ROFR and the interaction with the lease deadlines is just fascinating. High praise for the Disney MBA that perfected this business model.

While I agree with much already said in this thread, I'm unsure that DVC is either (a) inflating the resale market or (b) would stop exercising its ROFR even if it were to stop selling DVC. And I think the reason for this is the incredibly strong secondary market (i.e. cash paying hotel guests) for the rooms represented by points.

To a great degree, I think the resale market for DVC is driven by the cash value of staying at the hotel, rather than a plan by Dis to inflate rates for future DVC resorts. As room rates appreciate, so to must the resale value of the DVC points. If this were not the case, no rational DVC owner would sell their points -- rather, they would (and, judging from ebay listings, some already do) rent the use of the points and pocket the difference.

For the same reason, as long as DVC could purchase a contract, then turn around and rent the nights represented by that contract to cash visitors at a higher rate, then Disney will have an incentive to exercise its ROFR when the sale price is, in its estimation, undervalued. And that incentive would remain, whether Disney continues to build DVC resorts, or not.

One data point that that would support this proposition, would be if the rate of appreciation at non-DW resorts, VB for example, were considerable less than the rate of appreciation at DW. I haven't researched any historical prices on this, but I would expect it to be the case.

And, assuming this to be true, that it is the demand for access to the DW parks that drives the value of DVC and hotel rates, I would further postulate that Disney won't be building any more off property DVC resorts.

There are some really interesting incentives at play here: but the bottom line for me is that DVC is much more attractive from a financial perspective because of the ROFR and the strong secondary market for on property hotel rooms. I'm sure such a secondary market exists for other timeshares -- but none of them have the seemingly bottomless pool of consumer demand that the Mouse has inspired. Location, location, location - right?

 

[Disneymurf]

Very well thought out response - for the business models....I agree with it all. However, I do not think the DVC should be considered an "investment" like a 401K, etc. Instead, for my wife and I, it represents an opportunty to pre-pay, if you will, our next three decades of vacations.

 

[chainkid]

Ii has been a great investment. I could sell my interest now and make a profit. So if the DVC loses its resale value in 2032., I'm still way ahead and have had some great vacations to boot. When you tire of going and if the market has tried up in those years you can still rent your points to cover maintenance fees. My concern with timeshares is that they become a dump and then you can't pay people to take them off your hands. Disney will never let this happen and closer to the end I suspect they will upgrade them to start all over again with new buyers who aren't dead like I'll be at that time unless I live to be 92. I can't foresee a down side at this point. Joan

 

[dumbo71]

Ii has been a great investment. I could sell my interest now and make a profit. So if the DVC loses its resale value in 2032., I'm still way ahead and have had some great vacations to boot. When you tire of going and if the market has tried up in those years you can still rent your points to cover maintenance fees. My concern with timeshares is that they become a dump and then you can't pay people to take them off your hands. Disney will never let this happen and closer to the end I suspect they will upgrade them to start all over again with new buyers who aren't dead like I'll be at that time unless I live to be 92. I can't foresee a down side at this point. Joan

What timeshares do you know of that are dumps? Also what makes you think DVC is a better maintained product than the others?

Timeshares by rule have maintainance plans built in, paid for by the members. No reason not to keep up with stuff, the members are paying it not the Resort.

I'd say in all reality DVC is the worst maintained Timeshare I've stayed at. I've stayed at Marriotts, Westin, Ritz Carlton and Royal Resorts. ALL were better maintained than what I've seen at DVC. Why? I'm not sure but I know with Royal Resorts the daily maid service sure helps as well as the cheap Mexican labor. DVC might have a higher occupancy rate.

Timeshare in general seem to be pretty well maintained from my stays.

 

[BigBahamaDada]

Disneymurf -- couldn't agree more that your DVC motivation shouldn't be as an investment vehicle. But, that being said, as I've hypothesized my way around the decision to purchase, I've been pleasantly surprised not to have discovered the money-pit that I was anticipating.

Chainkid -- to your general concern about timeshares going to pot as they age, I very much agree. And, prior to looking at DVC had scoffed at most timeshares for this reason. But, this concern is another area where the secondary (hotel guest) market is of great comfort to me.

 

[mic_KY_mouses]

What timeshares do you know of that are dumps? Also what makes you think DVC is a better maintained product than the others?

Timeshares by rule have maintainance plans built in, paid for by the members. No reason not to keep up with stuff, the members are paying it not the Resort.

I'd say in all reality DVC is the worst maintained Timeshare I've stayed at. I've stayed at Marriotts, Westin, Ritz Carlton and Royal Resorts. ALL were better maintained than what I've seen at DVC. Why? I'm not sure but I know with Royal Resorts the daily maid service sure helps as well as the cheap Mexican labor. DVC might have a higher occupancy rate.

I am not an expert on timeshares like some here on DIS are, but I feel strongly enough about this post to reply.

I think DVC properties are very well maintained.

You only have to look at the TUG or other resources out there to see that there are well maintained timeshare properties and there ARE dumps. The ratings are there in black and white. Disney properties always rate at or near the top over all.

 

[Dumbo]

Does anyone have any historical information as to how values have held up from initial offerring price and where they stand today in the resale market?

In June of 1999 my wife and I bought 150 points at Disney's Boardwalk Villas for $55.00 a point. Total price of $8250.00. Price per point was actually $65.00 but we sold back our first years points for $10.00 a point.

Since then we have had 7 years of Disney vacations. Take a look at the resale prices for Boardwalk Villas today and see what the prices are.

New DVC resorts are selling for $101.00 per point and going up.

Dumbo

 

[chainkid]

Okay to answer Dumbo, I have stayed in several timeshares that I consider dumps. I work part of the year in the Dominican Republic and stay at the Coral Hilton Hotel. This is a timeshare part of Hilton. I have stayed in the past 5 years approx 15-20 weeks per year at this place because my Boss owns a 52 week membership in order to allow us to stay there when we are working.. I recently told him we would not go there anymore as the place has gone down hill so much I don't intend to spend my life living in a place like that.

I have stayed at timeshares in Aruba that I consider below my standards. I went to see a timeshare on Cape Cod about 15 years ago as part of a promotion and it was very nice then,. You should see it now. It is not kept up well. So I'm glad there are great timeshares out there but I won't be buying into to them as it is a big gamble and they are not always that easy to sell and get out from under those maintenance fees. I stand by my statement that some timeshares ARE DUMPS. So far DVC is not a dump. There are problems and I have experienced them but DVC isn't even close to a dump. If and when it is then at least I can sell it or rent my points to cover maintenance. Probably the only timeshare that I have personally experienced
that I feel is up to my standards when I travel is Marriot and I don't need t obuy there because I just use my points. I'm now staying at a Marriot in the Dominican Republic that is very nice and earning me lots of points so I have
the opportunity to use them on vacation rather than work.

In my view there is no downside to DVC as it is extrememly easy to sell and at least break even and probably make a profit if held onto for a few years. I could rent all my points for one year, make enough money to cover the cost of a brand new small membership. I could then rent those points to cover the maintenance fees. I don't have the time to do all this or the inclination but if I had a job where I could manage points. I tell my son that he doesn't have to worry about me leaving him a timeshare that will cost him a ton in maintenance. He can use what he wants and either sell or use the rent to pay for the maintenance on what he uses. Disney is still a major draw and I don't see that changing anytime soon. My only regret is that I didn't buy in earlier when they gave you free park passes. Those people really made a wise decision. I wish I had been that smart.

 

[DisDaydreamer]

- right?

Will you look at my portfolio?

 

[tubtruck]

Its highly unlikely that Disney will let any resort standard slide as this reflects on the whole place, they have a high standard to maintain, image is everything as soon as you let somthing slide you lose customers and gain bad press this is too expensive for them compared to maintaining the place.

 

[BigBahamaDada]

Will you look at my portfolio?

Ha! I've got enough trouble running my own, thank you very much.

And, I agree with Tubtruk that Disney has many, many incentives not to let the standards slide at any of the resorts. But, that being said, on this factor I would give a small preference for DVC property that is intertwined with deluxe hotels (e.g. VWL and AKV), rather than "stand alone" DVCs. I mean, you can't charge what Disney is trying to charge for rooms at AKL and have a neighboring property damaging the experience.

 

[Tigger031266]

Well lets see if I can get this math right.

I could sell it now for $93 per point which equals 14K.
I bought BCV 3 years ago for 11K ($73pp x 150 points).
Gross Profit = 3K

I had to pay $500 per year in Maint Fees for 3 years
Net Profit = 1.5K over 3 years = $500 per year

$500/11K = 4.5% ROI

AND I GOT 8 AMAZING VACATIONS TOOOOOO. Not too bad of an investment in my mind.

I could have put the 11K in a bank and made 4% or in the market and made 10% but it just would not have been as much fun.

 

[Minnie88]

And, assuming this to be true, that it is the demand for access to the DW parks that drives the value of DVC and hotel rates, I would further postulate that Disney won't be building any more off property DVC resorts.

There's a Wall Street Journal article entitled "The Magic Kingdom Looks to Hit the Road" that disagrees with this. I would post the link but apparently I'm not allowed to yet (not enough posts). Second to last paragraph reads "Disney's time-share business, Disney Vacation Club, is also plotting new locations. Outside of Florida, the company may consider locations such as California, Mexico and the Caribbean, says Mr. Rasulo. It could take several years for such new ventures to really move the needle, however."

 

[tjkraz]

For the same reason, as long as DVC could purchase a contract, then turn around and rent the nights represented by that contract to cash visitors at a higher rate, then Disney will have an incentive to exercise its ROFR when the sale price is, in its estimation, undervalued. And that incentive would remain, whether Disney continues to build DVC resorts, or not.

That may be true, but the ROFR level won't be anything near what it is now. I've read scattered reports of DVC approaching people to buy their contracts at prices in the mid-to-low $50s. That's pretty bargain basement compared to the $90+ prices they would seek in re-selling the points.

It's also worth noting that Disney resorts currently average an occupancy percent in the high 80s. And that rate is only reached with a variety of Passholder, AAA, FL resident, free dining, free ticket, and other discount programs.

While they may be at full occupancy during peak periods, the published occupancy level means that Disney still has thousands of resort rooms sitting empty most nights each year. There's not much incentive to add more rooms to their inventory if it just means additional vacancies.