DVC Price Support in Troubled Times

[checkwriter]

With all that is going on with our economy, I decided to conduct a hugely unscientific analysis of DVC resale listings on the Timeshare Store website to see how they compared to what was listed a year ago.

About one year ago (October 10, 2007) there were 182 listings posted on the website. Today there are 312.

This obviously doesn't account for any increase in supply (more AKL, for example) between then and now. Still, it's more than a 70% increase in the number of listings.

This made me think about what the resale market would be like if Disney didn't support it by maintaining an artificial price floor below which it will not allow a private sale to take place. Seems to me there would be a lot of bargains out there but for Disney taking up the slack. And it also suggests that Disney's going to be buying back a lot of memberships in the next year or so.

I wonder if the benefits of this potential membership glut will filter back to buyers; perhaps it already has, and explains the better-than-expected incentives being offered now for BLT.

Just some Sunday-morning ruminations . . . .

 

[Stacy's a freak]

I tend to agree about the incentives, etc. I hope my comment won't be looked at as opportunistic in the bad sense but I, for one, hope the prices go down so I can scoop something up. I am definitely hestitant to spend a lot of money in this economy, but isn't this how people make money? I have also upped my 401k contribution in the hopes of buying more shares for less money. I may be flamed for trying to capitalize on other people's misfortune but it could also be looked at as my little contribution towards helping boost the economy.

 

[calypso*a*go-go]

This is exactly why I sold one of my OKW contracts a few months ago. I wanted to buy at another resort but wanted to sell some of my existing points first as I was afraid if I waited I'd get less for the the points I was selling...but still have to pay more for what I was buying (only because the newer resorts tend to go for a higher price per point).

ROFR will be very interesting over the next few months. I mean honestly, can Disney really afford to buy back very many contracts with so many irons in the fire?

 

[SamIAm21]

I am dying to buy about 200 pts into the new BLT! I just can't pull the trigger in this economy. It just doesn't make sense at this point to put myself about $22,000 in debt. Debt is the one thing you don't need any extra of in this economy.

Arrggh, I waited so long for BLT and the economy has to go and tank right now!

 

[tjkraz]

This made me think about what the resale market would be like if Disney didn't support it by maintaining an artificial price floor below which it will not allow a private sale to take place. Seems to me there would be a lot of bargains out there but for Disney taking up the slack.

I doubt that.

As long as Walt Disney World stands as a viable vacation destination, there will be demand for DVC points. If Disney completely phased-out ROFR, there may be some noticeable drop in price. However, the basis behind DVC is sound--getting Deluxe on-site accommodations for pennies on the dollar.

We could certainly debate specific price points until the cows come home, but DVC will never find its values mirroring the likes of Wyndham (for which you can often buy contracts for under a thousand dollars on eBay.)

Disney Deluxe accommodations start around $400 per night plus tax. A comparable DVC room starts around 11 points per night. With dues under $5 per point, DVC members are paying as little as $50 per night for a similar room to that $400+ deluxe. Even without ROFR, there will always be a market for the right to acquire access to such substantial savings.

And it also suggests that Disney's going to be buying back a lot of memberships in the next year or so.

In order for that to happen, there needs to be an offer accepted lower than DVC's ROFR threshold. Although the volume of contracts listed is higher than previous levels, we really have no way of evaluating how serious/desperate people are to sell.

In other words, just because there are 100 Saratoga Springs contracts listed doesn't mean people are going to continue pushing their asking price lower and lower.

Additionally we don't know at what level DVC would intervene and take the contract.

I wonder if the benefits of this potential membership glut will filter back to buyers; perhaps it already has, and explains the better-than-expected incentives being offered now for BLT.

"Better-than-expected incentives"???

In all the years I have been following DVC, these are the worst sales incentives they have ever offered. Prices are at an all time high. The incentive is only $5 off per point and that's for a resort that owners won't even be able to occupy for 11 months or more. Frankly those are terrible terms.

I'm a little surprised people are even buying now because, IMO, pricing will only get better as time goes on. I know that was the case with AKV--incentives improved 3-4 months into sales. Fool me once, shame on you. Fool me twice, shame on me.

 

[checkwriter]

Sorry, this post was a duplicate of my post just above.

 

[checkwriter]

tjkraz, I'm not sure we're really disagreeing on much here. Perhaps it's just a question of perspective.

I think the price support that the ROFR provides would be a great comfort to DVC owners in this kind of a market. Knowing that there is a ready buyer for DVC points must offer some peace of mind to people who may be concerned about the value of their membership.

I agree that speculating what prices would be absent the ROFR is a waste of time. My point was simply that Disney creates a floor by employing the ROFR, and removing that floor would probably cause prices to drop. By how much, who knows?

It will be interesting to see what percentage of resales are interrupted by Disney exercising its ROFR, and how that compares with what's happened in the past. Does anyone keep metrics on this sort of thing? I agree that my "hugely unscientific" (my words) comparison is not a valid way to measure how eager people are to sell.

That said, point contracts are generally more fungible than traditional real estate, since you don't take into account things like neighborhood, home condition, decor, view, or school district when you purchase. They're a bit more like a commodity, though there are variations (use year, banked/borrowed points, dues rebates) that can differentiate one 200-point Saratoga Springs contract from another. And since they're more of a commodity, where you have a higher supply of the commodity being offered for sale in a market with lower demand, it's reasonable to expect some price depression IF those sellers are ones who are eager to sell. If they're simply testing the waters, then they'll stick with their asking price until a buyer comes along (like the neighbor down the road whose house has been on the market forever at the same asking price).

Finally, I was imprecise when I used the word "incentives." What I was thinking of was the per-point price, which pre-launch rumors said would be significantly higher than it turned out to be. I frankly didn't give much thought to the incentives. It will be very interesting to see whether pricing/incentives get better as time goes on. I would not be surprised to see your prediction of better deals down the road come true.

 

[mel&me]

I wonder if the benefits of this potential membership glut will filter back to buyers; perhaps it already has, and explains the better-than-expected incentives being offered now for BLT.

Just some Sunday-morning ruminations . . . .

I would have to agree with your hypothesis. The resale market has got to dictate to a certain degree on Disney intensives for their sales. It has a direct affect on each other.

Disney Deluxe accommodations start around $400 per night plus tax. A comparable DVC room starts around 11 points per night. With dues under $5 per point, DVC members are paying as little as $50 per night for a similar room to that $400+ deluxe. Even without ROFR, there will always be a market for the right to acquire access to such substantial savings.

Numbers off slightly, You have the buy in price also. This adds about $1.5 to $2 a point over the term of contract. Also 11 points get a studio, Cash reservation on a studio around $300 a night taxes included.
It still is a great deal and considerably less even at $77 a night.


One thing I always wondered about is the resale market in another 15-20 years. The contracts are getting shorter term. How will Disney handle that. Obviously the price per point is going way down. Will they still ROFR or just let them go. Not that it matters. I still won't sell, I will die with my DVC.
Maybe get some cheap points then to play with.

 

[doconeill]

Am I the only one that believes that ROFR is NOT to provide price support, but rather to keep DVC as the primary source for points?

If DVC knows it can sell points at a certain price (someone has already asked for a particular number of points for a particular UY at a particular resort), and there is a contract in ROFR that meets the requirements at a low enough price point, they would exercise ROFR and turn the points around.

If DVC is seeing less interest in sold-out points, I would expect that ROFR is far less likely to be exercised, and from what people are saying on the boards more contracts seem to be making it past ROFR.

Now, ROFR does have an effect of artificial price supports, but I think it is more of a side effect.