Future of DVC Resale Prices

[arthur06]

IMO, as Disney keeps adding more properties, the price will fall. The fewer the properties the more Disney would protect the exclusivity of the DVC. And, in the early years there weren't nearly as many resales. The more owners, the more resales.

Once the initial purchase is made, why does it matter to Disney who pays the MF's? Disney is in the market to mass produce a DVC to as many owners as possible.

One of the biggest reasons I bought DVC (I bought resale), was that I knew if I ever wanted to sell it, there would be a buyer. Even if I have to be cheap, and Disney snatches it up, it still sells.

 

[Dean]

IMO, as Disney keeps adding more properties, the price will fall. The fewer the properties the more Disney would protect the exclusivity of the DVC. And, in the early years there weren't nearly as many resales. The more owners, the more resales.

Once the initial purchase is made, why does it matter to Disney who pays the MF's? Disney is in the market to mass produce a DVC to as many owners as possible.

One of the biggest reasons I bought DVC (I bought resale), was that I knew if I ever wanted to sell it, there would be a buyer. Even if I have to be cheap, and Disney snatches it up, it still sells.

We haven't seen evidence of your first point. I would concur that off property options carry that risk far more than those at WDW/DL. Numbers available at a given resort will affect prices somewhat as will size of the resort, price paid by the seller, maint fees and RTU expiration. Thus far we haven't seen overall numbers alone affect the issue but I'm sure in the extremes it would but I think we have seen lower demand locations (SSR) affect price to a degree. Each and every resale contract that is actually sold is one that could have been a retail purchase so each one is a loss. The dues don't go to DVD but rather to DVC and if they have non performing contracts, it's the members that pick up the tab, not Disney or DVD itself. DVD could care less other than as it affects the overall press and health of the system.

 

[Goofy DVC]

I guess I like to dumby things down. The entire ROFR process is about one thing and one thing only. Economics 101: The laws of SUPPLY AND DEMAND.To me, that rule answers all the questions about ROFR.

 

[AKV707]

Jumping in with a few points as I see them.

I agree that ROFR gives us the perception of some value security. It is mentioned by guides at the time of an initial purchase, and even though a new buyer is not thinking about selling, rofr gives them some comfort that what they are spending will not evaporate too quickly.

It is in Disney's interest to exercise rofr when needed. As Dean has said, it can help to drive more traffic to a direct purchase rather than a resale. But if resale prices fall far below retail as they are now, it makes the buyers decision to go resale easier. For example, buying OKW direct is $101 per point. OKW resale is around $70 per point. A $31 difference. Clearly the market is driving the price. But when the economy improves, isn't it in Disney's business to use rofr to push the resale prices higher? They are likely making almost no money right now on direct add ons at the "sold out" resorts because the difference in price is so huge.

So I do believe that as the economy improves they will once again use rofr more often.

As an AKV owner, with no interest in BLT, I am interested in eventually a BWV add on. We love the F&W and we love the BWV. So, wouldn't DVC and my guide prefer I buy from them? Provided I found a resale contract in my UY with the right amount of points, right now there is no reason to buy direct.

Since people will not always be solely interested in new properties, I think DVC will use rofr to make the convenience of a direct purchase, where you can get your use year, the exact number of immediately available points, and easy financing (if you want it) attractive even at a higher price than resale.

Without rofr, they will convince almost no one to buy an older resort directly. That would have to be an income loser at some level.

 

[Dean]

So I do believe that as the economy improves they will once again use rofr more often.

Certainly, no doubt there are some economic realities here. It takes money to absorb those points by buying ROFR and I said earlier, DVD is actually competing with itself on the sales side when it does so. I'd estimate the spread has to be around $20 a point for them to break even if $$$ alone were the issue, it's not as I pointed out earlier. However, it's much easier to absorb a contract you can sell again in a couple of weeks as a sale that wouldn't have happened otherwise than 10 you may not be able to sell for a year or two or even more at a resort you have a lot of inventory at. Don't you think you can buy a GM car from certain dealers right now very cheaply.

 

[gkrykewy]

In the short (post-downturn) to medium term, I would expect resale prices of sold-out resorts to increase at least at the rate of inflation; higher if cash rooms rates increase at a faster pace. In the very long term as contracts approach expiration, obviously values will decline significantly.

This assumes that broader events (such as energy shocks) don't endanger the entire WDW operation.

 

[WilsonFlyer]

If points get really cheap, people will buy them just to exchange out for cruises.

I don't recall seeing anyone respond specifically to your post.

Remember that DCL is not DVC and they set (albeit negotiate to an extent since everything inside Disney proper is certainly incestual to an extent anyway) the exchange rates for points to cruises. Same is true for on-site non-DVC hotels. They won't allow exchange rates that effectively kill their own cash business.

We have already seen points trade-outs increasing over time. This trend will likely continue (with adjustments for economic conditions) and the curve will likely increase with respect to cash dollars to cruise points.

Remember that these trade-outs were never promised to you long-term. Expect them to disappear completely as we near the end of the lease terms due to the overall value loss to the entity allowing trade-in.

This whole concept of an expiring lease on a timeshare is going to be interesting to watch transpire as we approach lease ends and not just because of resale prices. There are a lot of things that will be impacted. Has any company actually been through lease expiry or will Disney be the first? (Dean, all?) Hmmm...

I suspect that Disney's intent was to always continue to extend the contracts indefinately (and to milk dollars for it over time) to keep any of the above from happening but after what was apparently somewhat of a debackle over the OKW extensions, it is my opinion that Disney is going to have to figure out a way to extend the leases and make sure that virtually everyone is a taker, even if that means extending them for dues only or some very insignificant charge.

Fortunately (and intentionally, I'm sure), Disney has learned early on what not to do (OKW extensions). My bet is they are hard at work on a second plan even as we discuss this.

 

[AKV707]

Fortunately (and intentionally, I'm sure), Disney has learned early on what not to do (OKW extensions). My bet is they are hard at work on a second plan even as we discuss this.

Interesting point. I do think they will attempt to extend the 3042 contracts. I also agree that they have to do it better than OKW. It will be interesting. IF they don't, imagine what could happen.

 

[DisneyWalker44]

I suspect that Disney's intent was to always continue to extend the contracts indefinately

Another option would be for Disney to slowly start buying back most of the contracts.

I honestly think Disney doesn't know what it's going to do. The world, Disney and DVC could all be very different 30 years from. Until they see how things are going, they can't know what the best option is.

Disney knows they are going to have to do something. It will be chaos to have the whole think come to a sudden stop - one day working, they next day gone. But they can put this on the shelf as something to start thinking about in 2035 or so (conveniently, when done of the current DVC bigwigs will be there.)

 

[DisneyWalker44]

I do think they will attempt to extend the 3042 contracts.

Not me. A thousand and fifty years is enough for any resort

 

[arthur06]

There was a post earlier today by DVCMike with a link to an Orlando Sentinel article that said DVC's profit for fiscal year was $190 million.

Disney knows what they are doing. It is far to large for Disney to just sort of wing it. Disney has a plan, whether it works or not is a different story. They are expanding outside of WDW, so those results are still to be determined.

I would suspect that many/all of the 2042 resorts will offer an extension. If Disney decided not to offer extensions on those properties there will be a lot of "homeless" owners out there. Disney IS the draw for central Florida. I know that if Disney wasn't there, I would have never been there. And, if the 2042 resorts were to go away, then there would just be some other timeshare step in to try to get your money. And, we all know Disney wants your money.

The more ambitious Disney gets with future projects, the more I feel "safe" with my decision to purchase. Regardless of what DVC does, I know myself, wife, and kids will have a lifetime of memories.

 

[CarolA]

There was a post earlier today by DVCMike with a link to an Orlando Sentinel article that said DVC's profit for fiscal year was $190 million.

Disney knows what they are doing. It is far to large for Disney to just sort of wing it. Disney has a plan, whether it works or not is a different story. They are expanding outside of WDW, so those results are still to be determined.

I would suspect that many/all of the 2042 resorts will offer an extension. If Disney decided not to offer extensions on those properties there will be a lot of "homeless" owners out there. Disney IS the draw for central Florida. I know that if Disney wasn't there, I would have never been there. And, if the 2042 resorts were to go away, then there would just be some other timeshare step in to try to get your money. And, we all know Disney wants your money.

The more ambitious Disney gets with future projects, the more I feel "safe" with my decision to purchase. Regardless of what DVC does, I know myself, wife, and kids will have a lifetime of memories.

How can we be "homless" owners? In 2042 my "ownership" goes away. I won't be an owner.

I don't expect more extensions. Those who tried to sue etc over the last one because Disney had to comply with Florida law proably saw to that LOL!

Even if they do, I won't extend so... poof!

 

[CarolA]

I guess I like to dumby things down. The entire ROFR process is about one thing and one thing only. Economics 101: The laws of SUPPLY AND DEMAND.To me, that rule answers all the questions about ROFR.

I don't agree.

As a general rule the laws of SUPPLY AND DEMAND on timeshares say that prices DROP like a rock. ROFR creates an "artifical" base price IMHO and if it's gone then we go to true supply and demand and then we know... until it goes away we don't.

You can look at the Marriott properties. Some of them have a ROFR and some don't. Pricing on resale is higher on those that do..... Same "product" and should be same "supply/demand" (in some cases these products are very close to each other for example)

 

[Brian Noble]

Carol, you can't generalize from other systems to Disney, because each is different. Starwood hasn't used ROFR for years (or doesn't have it, depending on the resort), yet quality Starwood properties in high-demand/low-supply places maintain respectable resale prices. Properties in overbuilt locations with lots of competing options haven't.

You can look at the Marriott properties. Some of them have a ROFR and some don't.

My take is different---prices are lower on properties that Marriott doesn't exercise. But, those properties are primarily older, and in locations where better options exist. Sometimes, those better options are newer Marriott properties. Still looks like supply/demand to me.

I've read a couple of economic analyses of ROFR. The value is generally to the rightsholder, not the person who bargains away the right---in other words, Disney wins at the expense of the seller. Effectively, the rightsholder is exempt from having to competitively bid, and that depresses prices slightly comapred to what they would be if Disney had to bid competitively. The fact that ROFR prices are "known" limits that effect somewhat, and if information about Disney's bid price were perfect and public, the effect would go away (because then they'd be competitively bidding again.)

What ROFR does do is ensure that Disney gets first crack at any transactions at below-market prices that arise due to the inefficiency of the market. It doesn't increase prices if the market is efficient. It also increases efficiency in an inefficient market (exposing the transactions to a new bidder) and that does tend to increase prices somewhat.

But, the positive effect of ROFR to the seller is only to the extent that it makes an inefficient resale market more effecient. As time goes forward, and these markets are easier to establish and information about them becomes more widely known, any positive *or* negative effect goes away, and the price settles at its supply/demand equilibrium.

 

[DisneyWalker44]

As a general rule the laws of SUPPLY AND DEMAND on timeshares say that prices DROP like a rock.

Huh? I don't see the supply and demand logic that would give timeshares magic propertics that cause resale prices to fall like a rock.

Not all timeshares drop like a rock. When the do, it's some combination of

- rules that make resales less valuable
- high pressure sales techniques that get people to pay a lot more than the timeshare is worth in the first place.

Absent that, there is no reason for timeshare prices to collapse just because they are a timeshare. If the management company treats retail and resale owners the same, and sells the timeshare for a fair price in the first place, the timeshare should retail a reasonable amount of value.

 

[CarolA]

Huh? I don't see the supply and demand logic that would give timeshares magic propertics that cause resale prices to fall like a rock.

Not all timeshares drop like a rock. When the do, it's some combination of

- rules that make resales less valuable
- high pressure sales techniques that get people to pay a lot more than the timeshare is worth in the first place.

Absent that, there is no reason for timeshare prices to collapse just because they are a timeshare. If the management company treats retail and resale owners the same, and sells the timeshare for a fair price in the first place, the timeshare should retail a reasonable amount of value.

And don't you think that in 15 to 30 years the value of a Disney "original" end use time share has a "reason" to collapse. As in "you are buying an expiring asset. I expect by the last five years you won't be able to GIVE the things away!

 

[DisneyWalker44]

And don't you think that in 15 to 30 years the value of a Disney "original" end use time share has a "reason" to collapse

Collapse? No.

I expect resale prices to gradually go down as we get closer to 2042.

 

[nickspace]

There was a post earlier today by DVCMike with a link to an Orlando Sentinel article that said DVC's profit for fiscal year was $190 million.

Disney knows what they are doing. It is far to large for Disney to just sort of wing it. Disney has a plan, whether it works or not is a different story. They are expanding outside of WDW, so those results are still to be determined.

I would suspect that many/all of the 2042 resorts will offer an extension. If Disney decided not to offer extensions on those properties there will be a lot of "homeless" owners out there. Disney IS the draw for central Florida. I know that if Disney wasn't there, I would have never been there. And, if the 2042 resorts were to go away, then there would just be some other timeshare step in to try to get your money. And, we all know Disney wants your money.

The more ambitious Disney gets with future projects, the more I feel "safe" with my decision to purchase. Regardless of what DVC does, I know myself, wife, and kids will have a lifetime of memories.

Great Thought!

 

[nickspace]

And don't you think that in 15 to 30 years the value of a Disney "original" end use time share has a "reason" to collapse. As in "you are buying an expiring asset. I expect by the last five years you won't be able to GIVE the things away!

I do not agree because that all depends on what Disney does in the period leading up to that time. I am also sure they will offer add on's before we get to that point.

 

[Dean]

If the management company treats retail and resale owners the same, and sells the timeshare for a fair price in the first place, the timeshare should retail a reasonable amount of value.

But that's the rub. Few companies treat resale owners the same and actually none sell for what would be a truly reasonable price up front and that includes DVC at the present time, IMO. Certainly companies like Disney, Marriott, Hilton, Hyatt, Westin and the like come the closest overall; one can argue which ones do better overall. There are many reasons and much of it is lack of knowledge and understanding of the product by the masses and inflated prices by the development company (not management company). There is a wide spread from those companies I mentioned above to many of the rest as a generalization.