First Riviera ROFR

[MattB2G]

I don't think we will see the Restrictions going anywhere, they will be added to each new resort going forward. I just hope the whole Trust System is limited to the Cabins.

We have VGF & AKV contracts that will take us till I'm in my 80's and 90's, the question will come up if we purchase a new resort to give to our kids after we are gone.... but we love your current point contracts and resorts.

 

[airjay75]

Yeah, I would love to think that 10-15 years in the future, direct sales will start to suffer so much Disney relents and says, welp, we learned our lesson, we're reversing resale restrictions, but I think it's unlikely. I just don't think most people buy direct worried about resale value and, even if they do, just knowing they can get SOME value on resale will probably give them the comfort they need. And, the beauty of ROFR is that, should resale prices become so low that it scares off direct buyers, Disney can try to increase them a bit, but not so much that it isn't profitable for them to flip them. And, if that doesn't work, they can implement some sort of point washing system. The resale restrictions just give them so much more control over the entire market. Without the resale restrictions, they lose a lot of control over the resale market and even lose control over the direct market because they are essentially competing with those resale contracts.

I would love to be wrong.

 

[DanCali]

...but those prices take so long to reach break even plus your exit is purposely devalued. You aren’t reselling what you bought - it becomes much less of a product.

You have this concept in finance /accounting of "payback period" that corporations to determine how long it will take the business to recover the initial expenses of an investment. It's calculates as (initial investment)/(average annual cash flow or profit). A timeshare owner might look at (initial cost)/(annual savings vs rental or rack rate costs) and, like you said, the breakeven point takes much longer for a direct purchase because of that bigger numerator.

But the difference is also that with corporate investments, the initial investment retains its value or it may actually increase in value, while a DVC contract is (i) guaranteed to go to zero at expiration, or (ii) if you sell early, you will lose a lot of money if you bought a restricted resort direct. So minimizing that potential capital loss in the event of a resale should matter too if the financial aspect matters at all.

Will restrictions hold? Probably, because other timeshare developers concluded that it's worth it and kept them. But other timeshare developers also offer incentives like point washing to appease some more informed buyers. And they pay a lot of money for people to attend high 90- to 120-minute high pressure pressure presentations. DVC used to be different, and that may be changing. I don't see how you keep the restrictions and not change in other ways.

 

[RivShore]

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You aren’t reselling what you bought - it becomes much less of a product.

To what portion of direct buyers? I would guess 90% plus of direct buyers have no clue about resale and are just taken with the idea of saving big money (per the marketing material) and staying at deluxe resorts without having to worry about ever increasing rack rates. This group probably also thinks they will hold it forever so resale is irrelevant.

Then there's the very small group who knows about resale and knows a good bit about DVC and still buys direct because it works for them and Riviera is just the perfect place for their family but they want other options too (me). When we did the math on our purchase, we ignored resale value because nothing is certain about that value a decade or 2 down the road (as others implied). We knew it would save us money after x number of years and, at the time, we compared cramming 5 of us in a POR room vs a spacious suite at RIV or the occasional 2 bedroom at lower point resorts. A no brainer in our case, resale restrictions or not.

I just don't think most people buy direct worried about resale value and, even if they do, just knowing they can get SOME value on resale will probably give them the comfort they need.

So minimizing that potential capital loss in the event of a resale should matter too if the financial aspect matters at all.

 

[Carouselofplanning]

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To what portion of direct buyers? I would guess 90% plus of direct buyers have no clue about resale and are just taken with the idea of saving big money (per the marketing material) and staying at deluxe resorts without having to worry about ever increasing rack rates. This group probably also thinks they will hold it forever so resale is irrelevant.

Then there's the very small group who knows about resale and knows a good bit about DVC and still buys direct because it works for them and Riviera is just the perfect place for their family but they want other options too (me). When we did the math on our purchase, we ignored resale value because nothing is certain about that value a decade or 2 down the road (as others implied). We knew it would save us money after x number of years and, at the time, we compared cramming 5 of us in a POR room vs a spacious suite at RIV or the occasional 2 bedroom at lower point resorts. A no brainer in our case, resale restrictions or not.

Your point is built on a flaw: “90% plus of direct buyers have no clue about resale”.

You think “90% plus” of direct buyers DON’T ask themselves the question during the purchase consideration “What happens if I can’t afford this anymore?” or “we don’t like Disney as much for whatever reason, now what” and learn that they can sell it via resale? And then make the connection in their brain “hey if I can sell my contract, that means I can buy someone else’s too?” You think 90% plus of people don’t think about this? Of course not. Look Riviera is a beautiful resort but its resale value ALREADY suggests the restrictions have devalued its contracts. And it’s new. Wait a while and see where the price goes.

 

[byurick]

Try striking up a conversation with folks in the parks you see in the lounges or wearing DVC merchandise. I can tell you from my experiences they don't have a clue how any of this works and I'd consider them the average owner.

90% probably isn't high enough.

 

[DanCali]

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To what portion of direct buyers? I would guess 90% plus of direct buyers have no clue about resale and are just taken with the idea of saving big money (per the marketing material) and staying at deluxe resorts without having to worry about ever increasing rack rates.

90% probably isn't high enough.

DVC is not a public company so we don't know the actual number.

However - if you had to guess - what percentage of sales go to existing owners vs new owners? Because I would think that many existing owners eventually realize (if they didn't upfront) that what they bought for full freight is not the same product when they go to sell it, and is therefore worth a lot less.

Again, DVC is not a public company, but Marriott is and they report that about 70% of buyers are existing owners (link - see page 7). That number is probably a lot higher than most people would have guessed. With Disney's brand loyalty, their number may be even higher.

we ignored resale value because nothing is certain about that value a decade or 2 down the road (as others implied).

I don't know what happens 10 or 20 years down the road, but I know what happens after 10 days... When you buy direct an unrestricted Poly for ~$200 you lose about 25% if you turn to sell it after 10 days. When you buy direct a restricted resort like Riviera say for $180 you lose about 45% after 10 days. If those depreciation rates happened on a new car, people wouldn't buy them (it takes a new car 3-4 years to lose 50% of its value).

 

[RivGirl]

This post was obviously generated by AI.

I was thinking the same. Look at all of those AI dashes

 

[RivShore]

Your point is built on a flaw: “90% plus of direct buyers have no clue about resale”.

You think “90% plus” of direct buyers DON’T ask themselves the question during the purchase consideration “What happens if I can’t afford this anymore?” or “we don’t like Disney as much for whatever reason, now what” and learn that they can sell it via resale? And then make the connection in their brain “hey if I can sell my contract, that means I can buy someone else’s too?” You think 90% plus of people don’t think about this? Of course not. Look Riviera is a beautiful resort but its resale value ALREADY suggests the restrictions have devalued its contracts. And it’s new. Wait a while and see where the price goes.

Not sure if our guide was unique back in 2019 but he brought up (without prompting) that DVC was not your average timeshare and that Disney would buy back your contract if you decide it's not working for you anymore, so you would never be stuck with it like other TS's. I think that statement would sooth those few that might have that question.

I know its hard for us analytical types to believe but most people do no research before a buy like this. As @byurick noted, any owners we have struck up conversations with had no idea there was a rental market or a resale market.

 

[Brian Noble]

I’m really curious if the restrictions hold over the long term.

Yes. Yes they will.

I think consumer behavior will dictate they either can’t raise direct prices at restricted resorts as often or as much OR they lower the restrictions.

We already know what consumers will do when a timeshare is worth very little (or even zero) on the resale market. The other developers have already paved that trail. People still buy. Most of them are happy. A few decades later, when they are done with it, they either sell it for peanuts or (more commonly) give it back for nothing. Heck, a few even pay a little bit for the privilege of giving it back.

This isn't my opinion. This is what actually happens on the sales floor at Wyndham etc., quarter after quarter, year after year. If resale value mattered, Wyndham would never sell another point. Yet they do.

You think “90% plus” of direct buyers DON’T ask themselves the question during the purchase consideration “What happens if I can’t afford this anymore?” or “we don’t like Disney as much for whatever reason, now what” and learn that they can sell it via resale?

Correct. That's exactly what doesn't happen.

The way to understand this: Timeshares are sold not bought. Approximately no one* wakes up in the morning with a plan to buy a timeshare without first having spoken to a timeshare sales agent. Instead, they are on vacation with their family, having the time of thier lives. A helpful agent explains how they can bottle this vacation magic for years to come---for themselves and a future generation or maybe even two---at a very affordable monthly payment.

Now, not everyone bites on the sales pitch. But those who do are NOT thinking about what happens if they don't want it. They are thinking about all the possible future vacations they take---and the vacations their children and grandchildren will join them for. They feel great about this decision they just made. And it turns out people do not look for reasons why their decisions---the ones they feel really good about---are wrong.

I'm a "frequent flyer" over on the Timeshare Users Group discussion boards. We might get a handful of people a week, tops, who come and ask if the timeshare they just bought is a good idea. Almost universally, they are told that timeshares are a great idea, but buying from the developer usually is not, with a few very specific exceptions. And even then, a suprrising number of people argue with us---becuase they want their decision to have been the right one, even though they could still rescind.

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*: This seems completely bizarre to those of us on this board, because we do make this decision. But we are not Most People.

 

[RivShore]

I don't know what happens 10 or 20 years down the road, but I know what happens after 10 days... When you buy direct an unrestricted Poly for ~$200 you lose about 25% if you turn to sell it after 10 days. When you buy direct a restricted resort like Riviera say for $180 you lose about 45% after 10 days. If those depreciation rates happened on a new car, people wouldn't buy them (it takes a new car 3-4 years to lose 50% of its value).

No one is going into this thinking they will be selling in 10 days, no one. And no one is looking at that with new cars - no one would be buy a new car if they did!

Again, you are assuming the general buying public is us, who analyze and compare every purchase to death (guilty!). Most are just not that good at math lol.

 

[Brian Noble]

We already know what consumers will do when a timeshare is worth very little (or even zero) on the resale market. The other developers have already paved that trail. People still buy. Most of them are happy. A few decades later, when they are done with it, they either sell it for peanuts or (more commonly) give it back for nothing. Heck, a few even pay a little bit for the privilege of giving it back.

It is worth noting that most people in this situation are perfectly happy with how things turned out. They had ~20 years of affordable vacations, they had a great time, and for whatever reason they don't want it anymore. By then, they know the score---timeshares are a way to prepay for vacation lodging at a discount, not an investment. And, they've gotten their money's worth in great family memories.

People here get wrapped up in resale value, in part because DVC is one of the few with enough organic demand vs. supply that they are still worth something. But, also because it is "deeded property" and people think of that as an aseet. But it's not an asset. It's a consumable. You buy it, you use it, and when you are done you throw it away. And, that day is coming for all of us, no matter what. For some of us, that day is no later than February 1st, 2042.

As another TUGger puts it: Timeshares are a TOY. You are buying at TOY. Treat it like a TOY.

 

[RivShore]

But it's not an asset. It's a consumable. You buy it, you use it, and when you are done you throw it away. And, that day is coming for all of us, no matter what.

That is really the only way to think about!

 

[DanCali]

No one is going into this thinking they will be selling in 10 days, no one.

Sure - but if you're starting 45% down after 10 days, it's unlikely to get much better.

I don't know about others, but I'm happier to pay $330 direct for VGC knowing I can resell it in 1-3 years for 75%-80% of that amount, than I am to pay $180 for Riviera knowing I'll be lucky to get 50% back.

 

[Tumnus]

Sure - but if you're starting 45% down after 10 days, it's unlikely to get much better.

I don't know about others, but I'm happier to pay $330 direct for VGC knowing I can resell it in 1-3 years for 75%-80% of that amount, than I am to pay $180 for Riviera knowing I'll be lucky to get 50% back.

As others have said - no one buys it with the thought of what they will do when they sell it. This is just flawed thinking.

 

[Brian Noble]

Well, some people do. But enough do not that low (or no) resale value is not a barrier to selling timeshares.

 

[DanCali]

Well, some people do. But enough do not that low (or no) resale value is not a barrier to selling timeshares.

And if more people thought like that, there may be less incentive for a developer to decimate resale values.

 

[airjay75]

Yeah, I very much considered the resale value when I had my first purchase back in April. I remember having the conversation with my guide after our tour at RIV and I was like, ok you’re telling me I can buy Poly without them or RIV with them? Ok, show me the Poly island tower please.

Then, I mulled it over for 7 days. Booked a 1-night cash stay at RIV. And ended up concluding, resale restrictions be damned, I want what I want!

If DVC were a timeshare like others where you basically have to pay to give it away, I’m not sure I could have talked myself into it.

I think it’s a fair bet that the vast majority of new DVC purchasers don’t do anywhere near the analysis that we on this board do. And, even if they do, they may similarly decide, I want what I want.