Help me make sense of Disney’s logic on direct sales

[VdoesDisney]

Looking at the recent price increase for SSR and upcoming min point increase for blue card, does anyone else think these increases will actually hurt direct sales?
I was considering adding direct to have some unrestricted points but the increases are making it significantly less appealing to do so.
I know there was a frenzy to buy SSR before the increase, and there will likely be a frenzy to get to 125 points before June 3rd, but when the dust settles I think these changes will hurt direct sales, they’re just making it more expensive to buy direct while providing no tangible benefit whatsoever, IMO these moves may actually drive more people to resale.
Thoughts? What am I missing here? Is this all in preparation for a predicted tsunami of sales when VGF2 goes live?

 

[Bjaiken77]

I think the logic is that if Disney is going to grab contracts via ROFR, and it’s their right to do that, they are going to need for there to be an adequate profit margin for selling it back to the public. Should they be grabbing contracts and elevating the price when they sell it back? I think that’s a different conversation. For existing owners, you can look at it as an investment protection, but I think they take it too far.

With respect to VGF2, they’d much rather sell you points they don’t have to buy back and have a ton in inventory.

 

[Jwaire]

Most DVC sales are direct. While folks like DVC Resale Market have really made inroads, most people don't even know about resale. I had no idea you could purchase a DVC contract via resale until I randomly came across The DIS's DVC show (before it was DVC Fan) on YouTube and I've been looking at DVC since 2004.

Saratoga Springs' price increase is based on demand, the growing popularity of Disney Springs and a reaction to the positive reviews of its refurbishment.

I do think annual passes are coming back. They may be slightly different, but WDW is massive compared to DLR and AP holders don't make up a significant percentage of visitors like DLR. DVC knows their members want this perk.

Disney is slowly getting back to "normal." Maybe we'll see more direct perks coming back in 2022.

 

[Where'sPiglet?]

Looking at the recent price increase for SSR and upcoming min point increase for blue card, does anyone else think these increases will actually hurt direct sales?
I was considering adding direct to have some unrestricted points but the increases are making it significantly less appealing to do so.
I know there was a frenzy to buy SSR before the increase, and there will likely be a frenzy to get to 125 points before June 3rd, but when the dust settles I think these changes will hurt direct sales, they’re just making it more expensive to buy direct while providing no tangible benefit whatsoever, IMO these moves may actually drive more people to resale.
Thoughts? What am I missing here? Is this all in preparation for a predicted tsunami of sales when VGF2 goes live?

I think people have said this for the last few minimums and price increases, and it doesn't seem to be hurting them too much. It's kind of wild, really.

 

[chalee94]

With respect to VGF2, they’d much rather sell you points they don’t have to buy back and have a ton in inventory.

For VGF2, their margins will be much, much higher than ROFRed SSR contracts.

I would agree with Jwaire that the big reason for the SSR price increase is simply that the demand is there.

 

[davidl81]

I wonder if the SSR increase was more to push direct sales to RIV than anything else. Right now sold out resort sales make up a bigger percentage of new dvc sales than any other time. DVC makes much more money selling the new resorts.

 

[ForWhomTheMouseTolls]

I wonder if the SSR increase was more to push direct sales to RIV than anything else. Right now sold out resort sales make up a bigger percentage of new dvc sales than any other time. DVC makes much more money selling the new resorts.

Definitional. More points than ever or in the older resorts.

 

[Sunnyore]

I wonder if the SSR increase was more to push direct sales to RIV than anything else. Right now sold out resort sales make up a bigger percentage of new dvc sales than any other time. DVC makes much more money selling the new resorts.

I know they rather sell Riviera then sold out resorts, but why bother having incentives for sold out resorts if they truly want to discourage people from buying them? I feel like the price increased because they knew they can still sell it at $180. I happen to really like SSR and glad its one of my home resorts.

And I doubt any of these increases is hurting direct sales. Resale isn't looking so great in terms of savings right now unless you bid and the price you want gets accepted. I still see lots of people buying in via direct and I bet they will still buy in at 150 min for blue card.

 

[Prince John Robin Hood]

Bumping the minimum to 150 prior to DLT going on sale makes sense. It will encourage people to buy more points than they might have otherwise since Disneyland trips tend to be shorter.

 

[ForWhomTheMouseTolls]

Logic is it was always too low. People are buying for studios, which are really not abundant outside of Poly and the new VGF building. People may want the studios, all it does is make booking 2BRs difficult for those of us who bought in for bigger room types.

 

[VdoesDisney]

Most DVC sales are direct. While folks like DVC Resale Market have really made inroads, most people don't even know about resale. I had no idea you could purchase a DVC contract via resale until I randomly came across The DIS's DVC show (before it was DVC Fan) on YouTube and I've been looking at DVC since 2004.

I agree most people don’t know about resale at first, I had been going to WDW for 10 years before getting serious about DVC, during that time I had no clue resale was an option; however, once I got serious about it and did a basic Google search I immediately learned about the resale market, I think the old model Disney has been using, where people buy completely uninformed on site is not going to work long term, the new generation of buyers is far more comfortable with technology and less likely to make such a large purchase uninformed.

 

[VdoesDisney]

And I doubt any of these increases is hurting direct sales. Resale isn't looking so great in terms of savings right now unless you bid and the price you want gets accepted. I still see lots of people buying in via direct and I bet they will still buy in at 150 min for blue card.

This is the part that confuses me, I agree at $165/point direct SSR resale wasn’t looking so great, but most other resorts are significantly cheaper, I saved $10k going resale, that’s a substantial difference. Without meaningful discounts or real perks direct I just can’t wrap my head around why they’re able to increase the price and minimum without hurting sales.

 

[Yinn]

Looking at the recent price increase for SSR and upcoming min point increase for blue card, does anyone else think these increases will actually hurt direct sales?
I was considering adding direct to have some unrestricted points but the increases are making it significantly less appealing to do so.
I know there was a frenzy to buy SSR before the increase, and there will likely be a frenzy to get to 125 points before June 3rd, but when the dust settles I think these changes will hurt direct sales, they’re just making it more expensive to buy direct while providing no tangible benefit whatsoever, IMO these moves may actually drive more people to resale.
Thoughts? What am I missing here? Is this all in preparation for a predicted tsunami of sales when VGF2 goes live?

I actually think it helps direct sales. We all have to keep in mind SSR is a sold out resort. Disney doesn't need to hold much if any inventory and can afford to waitlist and supply that waitlist with ROFR. As @Bjaiken77 pointed out, the direct price had to be adjusted for an appropriate profit margin.

But SSR - widely published as the best value - is now within striking distance of the direct pricing of Riviera. Sure there's a lot of differences, but if I was a sales guide (I'm not) I would sure highlight that Riviera with incentives comes out to $186/pt at the 150 minimum. For $21/point more, you get 16 years more of contract at a brand new resort and the next generation transportation (Gondola) to two of the parks. That gap only gets smaller the more you buy too, going as low as a difference of $8/pt.

If you take a look at rental prices, you easily make the difference renting it out for just one year. In fact, if you end up not using again in those 16 remaining years and you rent out the remaining 16 years at $16/pt (conveniently forgetting to account for annual dues, etc.) that would net you $256/pt. It will actually pay for the entire contract and more. You don't get that option with SSR.

That's just one example of an opportunity to upsell a customer from SSR to Riviera, which they do hold inventory on, share our expenses, an incur marketing costs on as well. They can tug on other strings depending on the customer (access to new resorts, estate planning, taking the grandkids, etc.) as there's still plenty of ammo. and the more people they can upsell to Riviera, the better it works out for Disney DVC direct sales.

 

[RoseGold]

Disney is not stupid enough to sell direct points at resale prices. Resale, especially SSR, which is massive and has a ton of sales all the time, is a real open market. All the information is public, and the buyers set the price.

 

[Sandisw]

I am pretty confident they have a plan that they feel allows them to continue sales. I also have to believe that with what happened last year, plans and goals both short and long term have changed...its why we see what is happening with VGF, IMO.

RIV sold just over 88K in points in April. Not bad considering we are not yet back to normal and the AP hasn't yet come back. I think it was close to 70% of all sales. Now, with SSR being bumped up, and VGF going on sale in maybe 6 months, they have the ability to guide people to the two resorts that can be seen as the "flagship" of the two areas.

I know we always talk about blue card only, but there is a benefit for having direct points that can be used at RIV and future resorts...although, given COVID, future at WDW is farther off than planned.

I do wonder if something like we saw with the "get 2 free days" with a 4 day ticket purchase could come back as a regular perk? So far, very little, if anything DVD has ever done has stunted sales...slowed maybe...but even the resale restrictions have not thrown people off RIV to the extent they are worth removing.

Heck, even I bought them when I said two years ago there would be no way, not even for $50/point! LOL

 

[davidl81]

I agree most people don’t know about resale at first, I had been going to WDW for 10 years before getting serious about DVC, during that time I had no clue resale was an option; however, once I got serious about it and did a basic Google search I immediately learned about the resale market, I think the old model Disney has been using, where people buy completely uninformed on site is not going to work long term, the new generation of buyers is far more comfortable with technology and less likely to make such a large purchase uninformed.

There are also a decent amount of people who know about resale, but don’t feel comfortable in the process and the fact that it takes months etc. Where if they buy direct from Disney there is not several unknown people they deal with, wire money to title companies etc. it’s just paying Disney directly. Sure it will be more money, but that process is so much simpler that it is a legitimate benefit for a group of buyers.

 

[ForWhomTheMouseTolls]

There are also a decent amount of people who know about resale, but don’t feel comfortable in the process and the fact that it takes months etc. Where if they buy direct from Disney there is not several unknown people they deal with, wire money to title companies etc. it’s just paying Disney directly. Sure it will be more money, but that process is so much simpler that it is a legitimate benefit for a group of buyers.

It’s also what people value. If I bought more at WDW, I’d likely buy direct at either GFV or RIV. My Aulani resale contract is because while we love Aulani enough to own there and ensure 11 month window availability for what we want in a vacation, it’s not worth 205 a point, and if I want to use them at Disney, I’m fine with using them at 7 month window at a non-riviera resort. Put differently, the value made sense.

WDW specific points I can’t use at Riviera don’t make sense to me.

 

[808blessing]

I think Disney wants to anchor the big spenders as their best friends forever. They have Riviera/skyliner to draw on EP side and then the GF to accommodate the MK/monorail so I think the plan is to have people ride out their healthy retirement accounts in this way, with the idea they can legacy “the twins” to descendants. It’s like retirement eye candy. But gotta have the studios and tower options so you can feel “smart” going solo or as a couple sometimes. They want to attract the rich sensible crowd looking for a recreational outlet.

They had to up Saratoga because resales prices indicated it would hold, satisfy demand on their end, and so it would be a non-issue when they shifted upward to a “better value” in the twins.

 

[Brian Noble]

Looking at the recent price increase for SSR and upcoming min point increase for blue card, does anyone else think these increases will actually hurt direct sales?

They may end up selling points a little more slowly, but it may end up being more profitable.

One rule of thumb in the timeshare industry is that marketing expenses account for 40-50% of the cost of the product you are selling. That's astonishingly high. Having larger minimums/a higher price point narrows the range of people you are marketing to, and allows that marketing effort to be more focused. What's more, if you convince someone to buy now, they are buying at least 150 vs. the 125 minimum--so that marketing effort might be a little more difficult, but it is also a little more efficient. It is possible that the marginal effort to get people to sign on the line which is dotted is more than made up by the larger sales price.

I think the logic is that if Disney is going to grab contracts via ROFR, and it’s their right to do that, they are going to need for there to be an adequate profit margin for selling it back to the public.

The margin is still lower than you might think. Another rule of thumb in the timeshare industry is that the cost of construction is only 20%-30% of the cost of the product you are selling. If they were only breaking even on a $180/pt sale, that means that the resale market would have to be at or below $54/pt before ROFR is cheaper than building a shiny new resort. And, I'm sure there is plenty of profit, so the number is probably significantly lower.

 

[fumanchu2488]

They may end up selling points a little more slowly, but it may end up being more profitable.

One rule of thumb in the timeshare industry is that marketing expenses account for 40-50% of the cost of the product you are selling. That's astonishingly high. Having larger minimums/a higher price point narrows the range of people you are marketing to, and allows that marketing effort to be more focused. What's more, if you convince someone to buy now, they are buying at least 150 vs. the 125 minimum--so that marketing effort might be a little more difficult, but it is also a little more efficient. It is possible that the marginal effort to get people to sign on the line which is dotted is more than made up by the larger sales price.


The margin is still lower than you might think. Another rule of thumb in the timeshare industry is that the cost of construction is only 20%-30% of the cost of the product you are selling. If they were only breaking even on a $180/pt sale, that means that the resale market would have to be at or below $54/pt before ROFR is cheaper than building a shiny new resort. And, I'm sure there is plenty of profit, so the number is probably significantly lower.

Yes but all these sold out resorts are second purchases through the system. I don’t know much about the timeshare business in general, but your metrics seem reasonable for new properties. Once a resort is sold out the only reason DVC would have to sell again is pure profit. I am sure they are tracking demand side and gauging everything for sold ouresorts with ROFR and the open properties. There is essentially no or minimal cost to DVC to flip contracts through ROFR from marketing. Those budgets are probably accounted for by RIV.

Disney could just not even buy or sell sold out properties and be more than fine. Let the resale side do what it does and just collect maintenance fees for the life of the contract. I am sure ROFR is exercised as demand fluctuates. I think the increase at SSR probably speaks more to the lack of caring about resale and more to do with them worried about keeping a base cost to buy into WDW resorts that are in line with RIV and VGF2 in the future.