How do you determine the "value" of your points?

[rljslo]

Is there an equation or formula that is used to determine the value of your points?

I ask for two reasons:

1) I generally hear the comment that if you use your points outside of WDW (i.e. passport collection, a cruise) that it is not a good use of points and that cash would be cheaper.

2) If you ever need to rent your points to other people, how do you determine a fair rental price/per point?

I know there is probably an easy answer - my brain has decided to take the day off today.

Thanks!

 

[Sandisw]

Many people that want to come up with a "value" for the points use the market rate for rentals.

For example, if the current market is bearing $10/ppt average on rentals, many use that.

Others determine it based on cost of the points, amortized over the lift of the contract, plus MF"s.

And others, like me, value my points simply as points to be used to cover vacation, whatever that is.

For example, I now own 210 points. I bought them to cover my yearly trips to WDW. However, if one year I want to trade out and go somewhere else, I will use points to do so. In my case, any other trip would take the place of WDW that year. To me, it doesn't matter if I spend 210 points to stay 6 nights at WDW or I use 210 points to go on a 5 night cruise.

My purpose for buying in was so that my OOP costs for vacation over the years is covered. If that happens to be a trade to someplace else, than that is fine with me. Of course, our plan is not to go elsewhere very often so that certainly helps.

 

[RobDoc]

Is there an equation or formula that is used to determine the value of your points?

I ask for two reasons:

1) I generally hear the comment that if you use your points outside of WDW (i.e. passport collection, a cruise) that it is not a good use of points and that cash would be cheaper.

2) If you ever need to rent your points to other people, how do you determine a fair rental price/per point?

I know there is probably an easy answer - my brain has decided to take the day off today.

Thanks!

Personally, I "value" my points at what my maintenance fees were this year. I would use that figure when computing the value of a cruise, a stay at a WDW resort or for a Conciege Collection resort.

If I were renting my points, I would use the same "value" and then add some return - which would likely place a rental value, in my case, in the $10-12 range.

I know many place a "value" at the level they would use to rent their points and I have no argument with that except I would then also place a "value" of my time to effect that rental to use the cash to pay for the same trip.

In our case, we broke even on our DVC membership back in 1997 - so all reservations since that time have been based only on the cost of the maintenance fees for that year. We have used our points for Concierge Collection reservations and found that to be a great "value" based on the maintenance cost of those points. We have never rented any points.

I'm sure others will offer their own logic and "value".

Enjoy the decision process.

 

[nytimez]

I don't have great math skills. But I made a calculation of how much ownership would cost me -- the buy-in + maintenance fees over the life of the contract -- and how many points I would have, also over the life of a contract. Then I divided the total cost by the total number of points... and I think it came out to around $8 or so a point, I can't quite remember any more but it made sense at the time. That means a room that costs 15 points a night is really costing $120 a night by that calculation.

I'm sure there are other ways of doing it. Probably better ways of doing it. But that's what worked for me.

 

[cseca]

The way I calculate price/pt =

[Purchase price / (# points bought x # of years of membership)] + maintenance fee

This means every year my price/pt changes, and hoping the rental market goes along with it (although rental market hasn't really changed in a loong looong while).

 

[BeesKnees]

That is tough because there are many answers.

What is it worth if I sell? According the market about $73ish a point.

What is it worth if I rent them out. The market says around $10

What is its tangible value? 30 more years of vacations less the maintenance fees.

What is it worth to me? Priceless.

To tell you the truth I don't think about it much. I am so comfortable with the decision and I value it so highly I don't need to put a dollar amount on it. I know it is not the cheapest way to vacation at disney but I don't care.

If you haven't purchased and you are considering it keep telling yourself that you can have a disney vacation for less money. You can't have the same experience but you can have a vacation there. It is a big financial commitment and you should be stubborn about making it. Then if you do, you won't regret it.

 

[tjkraz]

My own opposition to using points outside of DVC is based simply upon the fact that you can get greater value at the DVC resorts. If you compare the cash prices to points for both DVC hotel rooms and other options like cruises or non-DVC resorts, you typically do not get nearly as good of value outside of DVC.

If you reach a point where you have absolutely no desire to visit one of the DVC resorts, using the points for an occasional cruise isn't the worst thing in the world. But I think it would be foolish to specifically BUY points which are earmarked for frequent cruising or to use points for a cruise or non-DVC option when you would be equally satisfied with a resort stay.

As for renting value, the simplest answer is whatever the market will bear. Currently it's $10-12 per point, but you need to work much harder to get on the high end of that figure.

Now, if you're talking about renting to a friend or family member, I suspect you'll want to lean toward the low side of the rental market. Don't know how astute the friend/relative may be, but the last thing you want is for the to discover that you are charging more than a stranger on the DIS.

 

[BeesKnees]

My own opposition to using points outside of DVC is based simply upon the fact that you can get greater value at the DVC resorts. If you compare the cash prices to points for both DVC hotel rooms and other options like cruises or non-DVC resorts, you typically do not get nearly as good of value outside of DVC.

I could not agree more. DVC properties are the place to use them. We did a cruise on points and regretted it because we started thinking about all the vacations we could have had. That is not to say that we would never do an exchange, we might. But we would know going in that we are trading two vacations for one so we better choose wisely.

 

[DebbieB]

Keep in mind that except for Disneyland you will be hit with a $95 reservation fee outside of DVC. Knowing that I can get my BWV boardwalk view 1 bedroom for 27 points weeknights in October (40 weekend), I'm not going to put out 44/66 for a Yacht Club standard view or 52/78 for a GF garden view (almost double!).

 

[BeesKnees]

Keep in mind that except for Disneyland you will be hit with a $95 reservation fee outside of DVC. Knowing that I can get my BWV boardwalk view 1 bedroom for 27 points weeknights in October (40 weekend), I'm not going to put out 44/66 for a Yacht Club standard view or 52/78 for a GF garden view (almost double!).

I agree with this too. We were sentimental and wanted to stay at the poly again on points... we regretted it so much.

Hmmm... apparently I am a cautionary tale of mistake made.

 

[rljslo]

Thanks for all the responses.. If we ever have a year where we can't go to WDW, I think when it comes to family and friends we would either give them the points for free (especially if we have reached the break even point) or ask for a small amount that we could put towards that years maintenance fee.

I was more trying to figure out what to do if you end up with 10, 12, 15 points that you have already banked but can't end up using (I would hate to leave "points on the table"

Big picture, though - I don't think we ever would plan to use DVC outside of WDW - I was curious about everyone's reasoning regarding the value. In the end - the trip itself is the "value"... Every trip we've taken to WDW has left us feeling thrilled and amazed. Can't wait to settle on a contract!

 

[Jaaron2]

This is a very simple equation... We own 550 points and we calculate it in this manner.......E=m2 / enjoyment

 

[speicher46]

I realize it is not a very scientific way of doing things but I just figure $10 per point. The best use of these is at the WDW resorts. As an example,using this $10/pt conversion, you will see that it is usually better to use cash for a cruise.

 

[com_op_2000]

Bought in '93 at the only resort available OKW.
Every time I stayed, I called the front desk and inquired how much I would be paying if I were staying in that room paying cash; keep a running total = X.
Original Purchase + MFs each year until they = X
That took less than 4 years until they equaled out.
I figure that from that point on, I am now on the plus side of the register. MFs are not that bad for the amount of points I have. Even if I had to sell my points now I would still earn more that I payed for them. I use my points on any stay that I choose to go on, including DCL, RCI, etc. DW and I travel as we choose, we stay using points if we want to or we pay.
My motto: Do whatever makes you and your family happy. (From Haunted Mansion DVD)

 

[Mgeris]

I originally posted this a couple of days ago on another post, but it applies here also . . .

*Warning* boring financial discussion follows

As for your comment about the ROFR and resale prices. Remember the ownership of a DVC interest is not perpetual (it ends at a given year).

This leads to an inevitable issue that will have to (or has begun to) arise at some point (I would love input/opinions from other financially savvy individuals on the point). DVC continues to raise the purchase price and has used ROFR to "prop up" the resale price but the value of any contract has to decline over time and equal zero when it expires.

There is a financial concept called the "Dividend discount model." It is usually applied to valuing stock prices but I think the concept can apply here. The model says that the value of a stock (replace with DVC interest) can be approximated by discounting (time value of money) all the future cash flows (in the case of stocks, future cash flow are dividends and future sales price, for DVC it would "value" received annually from your use of points.) If you determine the "resale" price of a DVC property like this you would expect the price to be declining the closer you get to the end of the "stream" of cash flows (for OKW 2042).

A couple of years ago (I must have been bored) I actually did this calculation. To represent value I used the "rental value of the points." So the stream of cash flows was the amount received by renting all the annual points minus the annual maintenance fees and then that "amount" discounted (time value of money) back to the current year. The calculation actually came pretty close to the resale value of the property at that time.

My guess is that Disney is not trying to "prop" up resale prices but is instead looking at every ROFR as an individual business decision. They probably have (I would) an internal algorithm that is adjusted regularly (based on a lot of factors, for example their current inventory) that they plug in the property, points, banked points and it give them an adjusted "price" for that contract. A contract with a lot of unused points is more valuable than a stripped one. If ROFR price is below their computed value they purchase the contract (simple business, net present value decision) if not, they let it pass.


The other night I also played a little with the original spreadsheet and started to change the "stream of cash flows" to be the published rack rate of DVC properties with a 40% (current PIN codes) discount.

Both "cash flow streams" gave very interesting info in relation to some current prices.

 

[McCrae]

The way the DVC guides calculate the price per point is:-

Price paid per point/ length of contract + Annual dues per point.

 

[william1375]

Well some numbers:

1) Disney will charge a member $15 rent per point (up to 24) to meet a reservation.
2) At David's you can rent points at $13 per point.
3) People rent points for $5-$13 per point here on the boards.
4) I just read a reservation at SSR would cost $2300 cash. This came to 196 points by my calculation so the value there was ~$11.74pp

Now for your simple cost to own points (without any interest) = Initial purchase price (averaged over life of contract) + Annual Maintenance Fees

Example: Points cost $85 per point and contract has 34 years remaining then the per year cost of ownership is $85/34yrs=$2.5 per year + Maintenance fees which will go up every year (assume $5) and your annual cost in 2010 dollars for those points is about $7.5 per point.

So for those trying to convince yourselves/spouse/significant other that it is a sound investment, you have the numbers! You can save over 30% ($7.5/$11.74=63.8% of cash cost) on your stay at a DVC villa using your points (this assumes resale purchase) and you like to treat yourself to Deluxe Accommodations.

I tried to keep the math straightforward as possible, while giving enough details to follow along the process.

 

[lmshaggard]

For someone without great math skills, you figured it out perfectly and the most complete way . It basically worked out to value prices for dvc resorts - woohoo!!

I don't have great math skills. But I made a calculation of how much ownership would cost me -- the buy-in + maintenance fees over the life of the contract -- and how many points I would have, also over the life of a contract. Then I divided the total cost by the total number of points... and I think it came out to around $8 or so a point, I can't quite remember any more but it made sense at the time. That means a room that costs 15 points a night is really costing $120 a night by that calculation.

I'm sure there are other ways of doing it. Probably better ways of doing it. But that's what worked for me.

 

[Brian Noble]

The way the DVC guides calculate the price per point is:-

Price paid per point/ length of contract + Annual dues per point.

Remember that "Guides" are, at the end of the day, trying to sell you something. Anyone with even a rudimentary understanding of the time value of money recognizes this as the sales ploy that it is. To put it another way: no bank in the known universe will lend you money with no interest for 40 years.

 

[william1375]

If you have to finance your purchase, you will pay 10-14% through Disney and other finance companies. You may find other creative means for financing a purchase at a significant savings. Now you mention time value money, your money sitting in the bank at .5% interest in a savings or <3% in some bond fund makes the cash purchase even more valuable as many long term owners have expressed that their membership points are just as valuable on the resale market as when they originally purchased the points.