How Important Are Those Twelve Extra Years?

[tjkraz]

sir even if they ran away from the timeshare business there is little chance they will runaway from these resorts on Disney property surrounding all this valuable real estate..........i am just sorry.........to suggest that is as close to ludicrous as it gets.........i do think your arguement may wash for HH or VB because they are offsite...........but the places on WDW property will never be let go to a secondary owner

Dr T. never suggested that Disney would sell the land. But the possibility always exists that they could farm out administration of the program.

Disney Vacation Development (DVD) built the resorts. Disney Vacation Club (DVC) is simply a non-profit organization created to administer the program. They handle bookings, point tracking, trades with other entities, and so forth. It would be well within their power to disband DVC and farm-out the MANAGEMENT of the timeshare program indefinitely.

You're certainly welcome to argue "Disney would NEVER do that", but bear in mind that 40-50 years is a loooooong time. You should have seen the (justified) paranoia here a year ago when Comcast made its bid to buy Disney. Who's to say whether Comcast would have wanted to stay in the timeshare management business or not? Who's to say whether the next Disney suitor or even Michael Eisner's replacement will have the same opinion of timeshares?

Shoot! Right now, DVC is the best thing Disney has going. Their hotels are not all that profitable. The DVC members are PREPAYING for their rooms for the next 50 years (at SSR). AND...they pay MFs each year. Why would Marriott be in the timeshare buisiness if pre-selling rooms wasn't profitable? If WDW tanks, everyone that owns DVC will still be going to Orlando until 2042. Or am I missing something?

A couple of issues:

1. There will certainly be some saturation point at which the market for DVC points isn't what it used to be. Some people (more knowledgable about timeshares than me) have publicly stated that they believe SSR will be the last DVC resort. I don't necessarily agree, but I also don't know that they can continue building and selling points for the next 40 years until the contracts at the first wave of resorts revert back to DVC.

2. Every time they sell points to a new DVC member Disney loses a cash customer. Even if a market for DVC still exists 10 years down the road, the Disney beancounters may ultimately realize that building additional DVC resorts would do irreparable harm to their cash flow on the existing resorts.

Whatever the reason, if Disney decides to stop building new resorts, ROFR probably goes away and the "value" of DVC contracts will be....???? Nobody knows.

As for the statement that the resorts "aren't that profitable", I'd be curious to hear the basis for this statement. Attendance levels at WDW were up significantly in 2004, and by all reports I've read, many of the guests are staying at Disney resorts. Even Annual Passholder discount codes (which have been around forever) seem to have fewer and fewer rooms available to book at the discounted rates.

As long as DVC and the cash resorts can peacefully coexist, and DVC points continue selling, everything will be hunky dorey. But what happens when the cash resorts begin to see noticable declines in occupancy which can be traced back to DVC? I don't see them shuttering the Grand Floridian just so they can keep building DVCs...

the majority are saying flat out that the 12 years dont matter because they will not be here to use those years. They arent saying they'd rather have 12 less years at a resort they love more.

The 12 additional years have the potential to be valuable to us in a number of ways:

1. If our children want the contracts, they can have them.

2. If a time were to arrive when we would consider selling, it would probably be in about 20 years as our children are leaving the nest. Which would be more valuable in 2024:
A. One of the older resorts with 18 years remaining.
B. SSR with 30 years remaining.

All things being equal, I'll put my money on the latter.

We own at SSR, and the 12 additional years were just one of the reasons we decided to buy. I have absolutely no regrets. If it's the only destination available when I am 70, so be it. We'll still be staying for a fraction of the cash rates and the resort is an example of Disney Imagineering at its finest.

 

[TarraLee]

Extra 12 years were a big deal to us because we are in our mid 20s now and want to enjoy WDW in our retirement!

 

[rinkwide]

And the other thing I think about is...how many of us (vacation) like our parents did?

Excellent point. I have never, and will never, turn to the back seat of my car and persuasively announce that "the world's second largest ball of twine is only four short hours away".

 

[disworldnum1]

Since becomng a member in 99 i have seen AKL,BCV and now SSR open.If the trend continues over the next 5 years you will see other resorts open up and be the flavor of the month.maybe they wll offer lifetime memeberships.I have already seen resales for SSR and the price is not going up.Whatever resort you buy starts depreciating the day you sign the closing.Enjoy whatever resort you buy for the resorts sake,then if you can leave it to someone who's as nuts as we are about Disney thats great I think all this other figuring out about cars .trusts and the extra 12 years are just ways to justify our purchases to ourselve to see what great deals we got.

 

[mmjm]

There have been a lot of good comments on this question regarding age and home resort. I own OKW and recently purchased some additional SSR pts on the resale market. We usually dont travel to WDW during peak times (ie xmas, thanksgiving, and school breaks) so waiting for the 7-month window has not been a problem therefore purchasing at my favorite resort was not an issue.

The biggest factor for me to purchase at SSR was the addtional 12 years. On the resale market buying at SSR versus one of the original resorts will only cost anywhere from 2 to 8 dollars more per point depending on which resort you may be considering. A 200 point contract could run an addtional $400 to 1600 dollars, for me it was a no brainer for the addtional 12 years, especially if you are under the age of 35. At my age I will be close to 80 when my OKW contract expires and going to disney will probably not be in the cards, but hopefully my kids and grand kids would use it.

 

[simpilotswife]

The extra 12 years would not matter so much if the price were significantly higher. It costs almost as much to buy a contract that is going to expire in 37 years (this month) as it does to buy a property that is going to expire in 49 years. Why would anyone not want to make that extra investment of $10-$15/point for what is an additional 30% in the amount of time left on the contract?

Certainly buy where you want to stay is a great mantra to have but this is a significant difference that should not be discounted.

 

[jarestel]

The extra 12 years argument is an interesting speculative exercise, but I'd be extremely surprised if the majority of DVC members ever even get to the end of their contract as owners. DVC is pretty much a discretionary purchase and when situations change ( divorce, death in family, college tuition, job loss, down payment for better primary home, get tired of rising maintenance fees or just get tired of going to WDW, etc ) it's the discretionary items that tend to get the heave ho first. 2042 is still a LONG time away and 2054 even longer and to sit here today and imagine what will float our boats that far down the road is, as I say, interesting, but may not necessarily bear any resemblence to what will actually happen. We should resurrect this thread in 40 years and see how many of us accurately predicted our DVC futures.

 

[sjdisneywedding]

The extra 12 years argument is an interesting speculative exercise, but I'd be extremely surprised if the majority of DVC members ever even get to the end of their contract as owners. DVC is pretty much a discretionary purchase and when situations change ( divorce, death in family, college tuition, job loss, down payment for better primary home, get tired of rising maintenance fees or just get tired of going to WDW, etc ) it's the discretionary items that tend to get the heave ho first. 2042 is still a LONG time away and 2054 even longer and to sit here today and imagine what will float our boats that far down the road is, as I say, interesting, but may not necessarily bear any resemblence to what will actually happen. We should resurrect this thread in 40 years and see how many of us accurately predicted our DVC futures.

I agree with you, but theres not much in life thats predictable. Why short change yourself on dvc when you dont have to

 

[rinkwide]

Why would anyone not want to make that extra investment of $10-$15/point for what is an additional 30% in the amount of time left on the contract?

Sorry to answer your question (a rhetorical one at that) with a question, but it's fun to play devil's advocate; Why would anyone want to spend $10-$15 on something that's only worth about $2?

 

[sjdisneywedding]

Sorry to answer your question (a rhetorical one at that) with a question, but it's fun to play devil's advocate; Why would anyone want to spend $10-$15 on something that's only worth about $2?

well heres a question first. How do you come to the conclusion that the points are worth only $2? Are you saying they are worth $2 per year? The $10-15 more for the intial cost is a one time fee

show me the math that shows where a point at one of the older resorts for say an initial cost of ohh I dont know $75, is worth more than a point at SSR for an initail cost of $85

 

[crisi]

The 12 additional years have the potential to be valuable to us in a number of ways:

1. If our children want the contracts, they can have them.

2. If a time were to arrive when we would consider selling, it would probably be in about 20 years as our children are leaving the nest. Which would be more valuable in 2024:
A. One of the older resorts with 18 years remaining.
B. SSR with 30 years remaining.

All things being equal, I'll put my money on the latter.

But all things are not equal. For one thing, there is the supply demand equation. SSR has more points available. Currently few are on the resale market, but 20 years from now there will be plenty. But VWL has very few (relative) points available....so the small resorts should have their prices held higher for longer due to the "supply" issue. Obviously at some point the original resorts are worth nothing and SSR is worth something on the resale market. But that point may be further down the line than expected.

 

[Mike]

well heres a question first. How do you come to the conclusion that the points are worth only $2? Are you saying they are worth $2 per year? The $10-15 more for the intial cost is a one time fee

show me the math that shows where a point at one of the older resorts for say an initial cost of ohh I dont know $75, is worth more than a point at SSR for an initail cost of $85

If I wasn't working on 2 hours of sleep I could probably explain this better. But look at it this way. If you bought 300 pts and the price difference between resale and SSR was $10 you are talking about a $3000 difference in your investment right now. You have 2 choices: pay the $3000 and get the extra 12 years or buy a resale and invest the extra $3000 for the next 38 years. Let's say you get an average 8% return on your investment over that 38 year span (certainly within reason). So at the end of the DVC contract for the original resorts you would either have 12 more years of vacations at SSR or $55,876. That is the real choice. Which is better? That's up to the individual to decide.

 

[sjdisneywedding]

If I wasn't working on 2 hours of sleep I could probably explain this better. But look at it this way. If you bought 300 pts and the price difference between resale and SSR was $10 you are talking about a $3000 difference in your investment right now. You have 2 choices: pay the $3000 and get the extra 12 years or buy a resale and invest the extra $3000 for the next 38 years. Let's say you get an average 8% return on your investment over that 38 year span (certainly within reason). So at the end of the DVC contract for the original resorts you would either have 12 more years of vacations at SSR or $55,876. That is the real choice. Which is better? That's up to the individual to decide.

I totally understand your view point and your description

but I'm not looking at investing, inflation, interest etc etc etc. All that is absolutely impossible to predict with any accurracy.

if you take out all that and look at price per point over the life of the contracts

if you buy an older dvc even at $70 per point you are paying $1.89 per point per year plus maintenance

at SSR at $85 per point you are paying $1.73 per point per year plus maint

if buy old resort direct from Disney you are at $2.41

If you can get me a guarenteed 8% return then please let me know where, quite possibily that 8% could be half that or maybe even nothing at all. I mean even if you could get that 8% then you have to start loking at what 58k in 38 years is equivalent to in toadys world and on and on and on.

 

[tjkraz]

But all things are not equal. For one thing, there is the supply demand equation...

It's all speculative at this point. I'll still take the contract with 70% more years left. Meet me in 20 years and we'll figure out who was right...

 

[jarestel]

I agree with you, but theres not much in life thats predictable. Why short change yourself on dvc when you dont have to

Because I don't need or want the extra 12 years. With the inevitable rise in DVC maintenance fees over the years, I wouldn't be surprised if the maintenance dues that will be paid between 2042 and 2054 were greater than my initial buy-in price.

 

[timC]

If I wasn't working on 2 hours of sleep I could probably explain this better. But look at it this way. If you bought 300 pts and the price difference between resale and SSR was $10 you are talking about a $3000 difference in your investment right now. You have 2 choices: pay the $3000 and get the extra 12 years or buy a resale and invest the extra $3000 for the next 38 years. Let's say you get an average 8% return on your investment over that 38 year span (certainly within reason). So at the end of the DVC contract for the original resorts you would either have 12 more years of vacations at SSR or $55,876. That is the real choice. Which is better? That's up to the individual to decide.

Good comments. Reasonable assumptions. I totally agree.

If SSR is where people really want to stay, then by all means, buy into SSR. Otherwise, there are too many variables that can come up between now and then that could turn your disney dream, into a financial liability. Better off going with the shorter lease and free up the capital for other life priorities.

 

[sjdisneywedding]

Good comments. Reasonable assumptions. I totally agree.

If SSR is where people really want to stay, then by all means, buy into SSR. Otherwise, there are too many variables that can come up between now and then that could turn your disney dream, into a financial liability. Better off going with the shorter lease and free up the capital for other life priorities.

people, free up what capital? through disney SSR is 85 per point after discounts, sold out resorts are 89! thats a loss of capital

resales, SSR around 80 others anywhere from 72-78. wheres all this extra money to invest?

the same variables can come up no matter which dvc you buy, the extra 12 years dont mean a thing, ohh except for the fact that iif you need to sell the extra 12 years will bring you more in return

 

[timC]

people, free up what capital? through disney SSR is 85 per point after discounts, sold out resorts are 89! thats a loss of capital

resales, SSR around 80 others anywhere from 72-78. wheres all this extra money to invest?

the same variables can come up no matter which dvc you buy, the extra 12 years dont mean a thing, ohh except for the fact that iif you need to sell the extra 12 years will bring you more in return

Buy SSR through Disney - $85
Buy others (resale) - $72-$78

That's a $7-$13 delta. That $7-$13, will have no added vacation value, until 2042. In the mean time take that money and invest it... If you still want to vacation at WDW beyond 2042, then just buy an SSR resale after the resale price has collapsed. Absolutely no reason to buy now... This approach is lower risk, higher reward, and you'll still get at least 40 years of vacations at the best resorts.

 

[sjdisneywedding]

Buy SSR through Disney - $85
Buy others (resale) - $72-$78

That's a $7-$13 delta. That $7-$13, will have no added vacation value, until 2042. In the mean time take that money and invest it... If you still want to vacation at WDW beyond 2042, then just buy an SSR resale after the resale price has collapsed. Absolutely no reason to buy now... This approach is lower risk, higher reward, and you'll still get at least 40 years of vacations at the best resorts.

like i said buy SSr through resale for 80, wheres the difference in money I ask again

then show me this guarented investment

 

[crisi]

Its an $8 delta in resale currently. 200 points thats $1600. I get a guarenteed 15% at my ESOP at work (its a great deal actually). I get a guarenteed 18% not having that $1600 in credit card debt and guarenteed 6% not having it in my mortgage.

Or I can spend it now. That $1600 right now in opportunity cost - my husband wants a new PC. My kids want a trip. I'm going to Vegas with my girlfriends. We'd like to rebuild our deck, or finish our basement - $1600 won't do much of that, but its a start. I have plenty of places to put $1600 now that aren't "Disney Vacations in 39 years."