Effects of price increase?

[shantay1008]

Hi, everyone,
I got the DVC price increase postcard in the mail, and it made me wonder about how price increases affect sales and re-sales. Will the DVC resales prices increase a few dollars, too, the same day that DVC's prices go up? Are people hurrying to buy resales now before the prices increase? Any thoughts on this?
Thanks,
Shannon

 

[Granny]

Disney exercises its Right of First Refusal on any resale contracts that are too low to their liking. The ROFR has supported new sales pricing for many price hikes over the years.

So yes, Disney will most likely support increased pricing on new DVC points by increasing it's ROFR floor. In this manner, they prevent too large of a gap and too much demand for resales...which hurts its sales of new DVC contracts.

It's an artificial means to prop up resale values, which is good for anyone who wants to sell their DVC contracts. Otherwise, we'd certainly see a big drop in resale pricing as each elapsed year makes the contracts less valuable.

 

[JimMIA]

Usually, you will see a bit of a time lag between the price increase and the ROFR levels going up...but they will go up. Presumably, Disney doesn't want to penalize people whose deals are already working their way through the process.

Also, on the last price increase, I'm not sure Disney raised their ROFR levels as much as the price increase. They seem to be experimenting with the spread between ROFR and their direct "sold-out resort" pricing a bit. Maybe they're wondering whether they need to prop the price up quite as much as they have in the past. Obviously, as "new" prices continue to rise, ROFR support becomes more and more expensive, and more difficult to maintain.

 

[Granny]

Jim...you bring up a good point. Right now, the difference between a 48 year contract and a 36 year contract is probably not enough to keep people from going to resale for a non-SSR resort and Disney will continue to support via ROFR.

In a few years though, that 12 years will become more of an important part of the purchase decision (especially when it hits 41 years vs 29) and Disney probably won't need to prop up the pricing for new sales as much. It is at that point that I'm thinking the resale pricing (for DVC I) will drop dramatically.

Obviously, as "new" prices continue to rise, ROFR support becomes more and more expensive, and more difficult to maintain.

If Disney starts charging for closing costs, that could help defray the cost of exercising ROFR. So they can still offer up "sold out" resort points and make a few bucks, though it clearly won't have the return of selling new resort points.

 

[shantay1008]

Thanks, guys. So if a person were going to sell off an SSR contract, he shouldn't wait until after the price increase because the re-sale asking price might not be able to go up at all?

How about rental points? Will DVC members start raising the prices? Who leads that charge, anyway?

Just wondering....
Shannon

 

[Granny]

Thanks, guys. So if a person were going to sell off an SSR contract, he shouldn't wait until after the price increase because the re-sale asking price might not be able to go up at all?

My comments were really directed at DVC I contracts that expire in 2042.

I would think that Disney will exercise ROFR on SSR resale pricing very aggressively in order to protect new contract sales there as much as possible. So in the case of SSR, any price increase on new points should see a corresponding increase in the ROFR floor for SSR as well. Probably with the time lag that Jim pointed out.

 

[swissarmyknife]

Thanks, guys. So if a person were going to sell off an SSR contract, he shouldn't wait until after the price increase because the re-sale asking price might not be able to go up at all?

How about rental points? Will DVC members start raising the prices? Who leads that charge, anyway?

Just wondering....
Shannon

Selling off a SSR contract now means taking a huge hit. DVC exercises ROFR far less on those contarcts than they do for say BCV. Why exercise ROFR on a contract for SSR when DVC has there own new SSR contracts to sell? I am seeing SSR resale clearing ROFR at $84/pp fully loaded with banked points. Some for less. Seems DVC won't bother with those contracts unless the price gets way to low. Try getiing a BCV contract through ROFR at the low 80's.

Interesting thread.


Mary

 

[JimMIA]

How about rental points? Will DVC members start raising the prices? Who leads that charge, anyway?

HA! You must have missed some of our threads!

The truth is, IMHO, DVC owners are starting to realize that increases in both buy-in costs and maintenance fees warrant a rise in rental point prices. I think there have probably been two responses. First, many of the prices being offered on the Rent/Trade board are a little higher. I think you'll eventually see the "standard" price rise to $11.

More that that, though, I think more owners are changing their strategies to either making reservations on speculation during busy periods, or quoting the prices as X $s per night. Many of those rentals are probably migrating over to sites like eBay and others because owners can get better prices there.

ETA: Rental prices are obviously determined by supply and demand. Here on the DIS, there is too much supply and that makes it a bargain-hunter's delight.

 

[JimC]

Another thought is the demand Disney has for its sold out resorts -- especially the add-ons current owners seem interested in. ROFR is probably the main source of those points.