Is Disney Trying to Cut Down on the Resale Market, or Keep it Strong?

[ziravan]

People would just turn into under the table commercial renters. If resale ever got cheap enough, it would directly compete with any hotel business, not the timeshare at Disney business. The balance is close enough right now that I ended up renting to get into Disney, and convinced someone else to rent via David's as opposed to getting a room at the Contemporary. The poster said that a 1 BR at BLT was similarly priced to a regular room at CR. That's with today's rates. If things get cheaper, it ruins the balance between renting and purchasing hotel rooms. Disney cannot write small scale rentals out of their contract. It's built into it. They could ROFR every single contract out there, but that would once again drive the price of those up again.

Disney needs resale to stay high for many reasons. To keep their direct prices justifiable, to keep the Disney name at a premium, and to make the current and future hotel rates justifiable.

Other timeshares that are worthless resale find ways to discourage renters.

Let’s brainstorm some ways:

1. Guest certificate fee. Wyndham gives a few free then changes $99 if owner doesn’t physically check in:

2. Reservation fee. Wyndham charges $29 per transaction:

3. 60 Day FP window fee. $10/guest/day if member not on reservation.

4. No free parking if member not on reservation.

5. $75 MDE fee one way per person if member doesn’t physically check in.

6. If member not on reservation, any change must be complete cancel/rebook.

7. magic bands $15/pp if member not on reservation.

8. No EMH if member doesn’t physically checked in.

9. Threaten brokers with cease/desist. Using a broker is cause for immediate cancel with loss of points associated with reservation. When some idiot renter calls WDW with a question about their rental and it’s cancelled, they’ll scream bloody murder for their money back. Only, you’re out the points. Enough of an issue to make it an issue. (This is not much different than cancel if RCI rental).

That was just a quick brainstorm. The mouse tolerates renting because Florida law requires it. But. If DVC ever decides to come at renting, they have the means to fire for effect.

For 4 people on a 100 point, studio reservation for 6 nights, those restrictions added $1150 or $11.5/point to reservation. With $6/pp MF, the break even cost to rent would be $17.50/point.

 

[John-DVC]

Other timeshares that are worthless resale find ways to discourage renters.

Let’s brainstorm some ways:

1. Guest certificate fee. Wyndham gives a few free then changes $99 if owner doesn’t physically check in:

2. Reservation fee. Wyndham charges $29 per transaction:

3. 60 Day FP window fee. $10/guest/day if member not on reservation.

4. No free parking if member not on reservation.

5. $75 MDE fee one way per person if member doesn’t physically check in.

6. If member not on reservation, any change must be complete cancel/rebook.

7. magic bands $15/pp if member not on reservation.

8. No EMH if member doesn’t physically checked in.

9. Threaten brokers with cease/desist. Using a broker is cause for immediate cancel with loss of points associated with reservation. When some idiot renter calls WDW with a question about their rental and it’s cancelled, they’ll scream bloody murder for their money back. Only, you’re out the points. Enough of an issue to make it an issue. (This is not much different than cancel if RCI rental).

That was just a quick brainstorm. The mouse tolerates renting because Florida law requires it. But. If DVC ever decides to come at renting, they have the means to fire for effect.

For 4 people on a 100 point, studio reservation for 6 nights, those restrictions added $1150 or $11.5/point to reservation. With $6/pp MF, the break even cost to rent would be $17.50/point.

There is significant risk in such drastic tactics. The current model of building a new DVC unit regularly is working. They keep DVC full, the parks are full, the hotels are full... Not sure if they really want to mess with that. Other timeshares don’t have to worry about keeping the parks and loyal fan base happy.

 

[thelionqueen]

Amen! I like the way you think! I only have 180 points but some day I will add.....resale! I was tempted with rushing for the 25, but it didn't work out and I am fine with it.. I don't think the perks would have helped me enough anyway.

I was tempted too.... not gonna lie but when I saw the price I kept comparing it to how many more points I could get resale. Couldn’t do it

 

[ziravan]

There is significant risk in such drastic tactics. The current model of building a new DVC unit regularly is working. They keep DVC full, the parks are full, the hotels are full... Not sure if they really want to mess with that. Other timeshares don’t have to worry about keeping the parks and loyal fan base happy.

I agree.

That’s why I believe that they’ve taken a passive approach. Tweak the edges and if it hurts resale too much, we’ll re-evaluate.

And what have they learned from their tweaking? That they haven’t been nearly as aggressive as they could be.

This 2/25/18 changes is merely round 2.1; it’s closing a loophole in the 4/4/16 restrictions.

The next set of restrictions, which I expect sooner than later, will test the limits of how much pressure they can put on resale. It’ll be very aggressive in that respect.

I think it’ll be later this year. Clear the deck before Riviera goes on sale.

My point is so many people say DVC (more appropriately DVD) wants resale to stay high. I seriously doubt that. Being afraid of the risk of tilting the table too far, too fast is one thing:

But they DO want the table tilted. The issue is less how far than it is mediating the risks in doing so.

 

[mort1331]

I would say that they do want resale to stay high, if not higher than current. If resale is high, then people, lots on here, turn and say for couple of extra bucks I get perks, quicker easier closing and UY I want.
If resale gets too low, then those advantages start to fade away. People start saying that the perks are not worth the extra money.
We see it here everyday, small contracts, the difference is small so I will buy direct.

 

[ziravan]

I would say that they do want resale to stay high, if not higher than current. If resale is high, then people, lots on here, turn and say for couple of extra bucks I get perks, quicker easier closing and UY I want.
If resale gets too low, then those advantages start to fade away. People start saying that the perks are not worth the extra money.
We see it here everyday, small contracts, the difference is small so I will buy direct.

Depends on the perks.

Theoretically, the larger the gap between resale and direct, the more DVC can make on flipping contracts, the more they can afford to offer.

Would you pay $80/point more for direct for current perks? Maybe not. How about for 4 APs per year (this is a perk actually offered in the beginning)? Extra FPs? Etc etc.

 

[the_grinch]

i understand perk can and have been changed or taken away ,but if Disney totally changes perks why would someone pay a premium for the perks if they can not trust them to be there in the future.as of now Disney has grandfathered people into the new rules but if they pull the rug out of all those resale contract why would i believe they will not do it aging?

 

[chicagodisneyguy]

I don't think DVC will do anything earth shattering until they have decided to end new construction. They have shown in the last 25 years that added revenue via ROFR has not been a priority. Selling existing new resorts has been priority #1. Once adding new resorts has run it's course, focusing on increasing revenue via sold out resorts would theoretically be their bread and butter. That is when I think they would make an effort to increase the spread between resale and direct. I'm not sure how many more WDW resorts they are planning post-Riviera. But right now I don't think the perks would make economical sense at a spread of $70, $80, or $100+ which is some people's worst case would be.

Adding a perk like 4 free AP per year could warrant a huge spread. But all that perk does is move park ticket revenues from the WDW Parks division to the DVC division. Maybe they would do it for a 5 year period or 10 year period, but i think net/net after paying the parks division for those passes they are probably making the same amount of profit. The fact that free passes isn't an incentive we've seen in a long time makes me think it's not really the most profitable for either division.

I'm sure Disney would love to buy contracts at $30 and resell direct at $200. But as long as the economy stays strong and CRO continues to increase, I think there will always be a floor on resale prices DVC will have trouble pushing below. If they can sell resorts at $200 direct, there will always be a group of people who can't afford that, or don't value the perks enough, that will line up to pay $100 to $125.

My prediction for the next decade or so is they might tinker a few more times and add more restrictions that favor direct. But I don't think they will major enough to crash the resale market. It might widen the spread more than we're accustom to but I also think direct prices will continue to rise. So even with a widening spread, resale prices could also rise. And worst case, BLT resale prices drop to $50 and I triple my 200 pts to 600pts WIN/WIN lol

 

[ziravan]

I believe DVC wants to keep pushing down resale in favor of direct.

At best, I believe that they’re agnostic about what impact that might have on resale value.

At best.

 

[John-DVC]

Depends on the perks.

Theoretically, the larger the gap between resale and direct, the more DVC can make on flipping contracts, the more they can afford to offer.

Would you pay $80/point more for direct for current perks? Maybe not. How about for 4 APs per year (this is a perk actually offered in the beginning)? Extra FPs? Etc etc.

That’d be some nice perks. Honestly I would hope they take a positive approach to encouraging direct sales like the ones you’ve mentioned above. That’s a win win for everyone imo. Even now I don’t see a huge reason to go direct unless it’s at the ultra high price resale resorts. If it’s within $30/pt it may be worthwhile to just go direct and avoid the hassle. Add some passes in and it’s even more enticing.

I’d like to know the spread between parks, movies, DVD revenue. I think that will help paint the picture of how much DVD matters in the overall business.

 

[Dean]

With the move to the 75 point minimum to get direct benefits, there seems to be a lot of talk about Disney trying to cut down on resale contracts. I can see some logic to them trying to do this, but actually think that they want to keep the resale market strong, as it benefits them to have strong resale value more than to get a few extra bucks here and there via a direct sales contract.

Why they would want to keep it strong:

1. When people buy in, they for the most part know that they can sell their contracts for most of their value back, if not a profit. A strong resale market ensures this. If the resale market were to dip significantly, it would give more people pause about buying in. I know that the strong resale market acted as a bit of a safety net when I bought my points. I never plan to sell them, but it is comforting to know that I will be able to if the need ever comes up. This is not the case with many other timeshares.

2. Allowing people to easily sell their contracts if they are priced right on the resale market cuts back on foreclosure costs. It also ensures that MFs are nearly 100% covered, meaning that they can keep their dues as low as possible, and make this a stronger selling point for those looking to buy in for the first time.

3. ROFR still allows them to flip a contract whenever they want. By having people sell their points when they are done with them, Disney ensures themselves a limitless supply of points at any resort that they want to sell.

4. A strong resale market justifies an increase in direct sales prices, which ultimately benefits Disney. They just raised their prices on all of their resorts except for Vero, which happens to be the cheapest priced resale contract right now. While these high prices may push a few more people to consider resale for now, they will have no choice but to buy new if they want to get into Riviera. Disney makes the most money off of new property sales, not flipping ROFR'd contracts for new ones. If BCV resales are going for $195/pt, then Disney will have no problem moving Riviera points for $225 or more each. If, on the other hand, BCV were selling for $100 on the resale market, it would drive many more people to look there than to even consider spending $180 per point at Riviera.

There are also reasons why Disney would want to undercut the resale market, but I find those to be a lot less convincing. I think this move to 75 points is just their way of making sure that they get their piece of the pie, but also allowing others to get theirs in order to benefit everyone. I may be reading this wrong, but that's how I see this all working out.

They don't want a strong resale market, they want the perception of good resale/exit options. What they want is for every new buyer to buy retail at the highest price possible. A resale market may be a necessary evil to that end in most situations but that's not an absolute. Take Westgate a few yeas ago and their ROFR (not sure where they are now on this). As I understand it they were enforcing ROFR on properties where it wasn't a legal option and they were demanding the commission when they didn't list it. I know many of the resale companies simply stopped listing their properties. While I don't expect DVD to get that aggressive or that successful, never say never, esp where timeshares are concerned.

 

[Ben E N]

They don't want a strong resale market, they want the perception of good resale/exit options. What they want is for every new buyer to buy retail at the highest price possible. A resale market may be a necessary evil to that end in most situations but that's not an absolute. Take Westgate a few yeas ago and their ROFR (not sure where they are now on this). As I understand it they were enforcing ROFR on properties where it wasn't a legal option and they were demanding the commission when they didn't list it. I know many of the resale companies simply stopped listing their properties. While I don't expect DVD to get that aggressive or that successful, never say never, esp where timeshares are concerned.

I think there is still a ton of "nasty" options that Disney has at its disposal, but I also do not expect them to use it. A lot of people are willing to overlook fading paint, run down monorails, $20 hamburgers, etc, because they love the "Disney way". I'm not saying that they will never be able to make moves like Wyndham, just that it probably is not in their best business interest. I agree that the perception of a strong resale market, without actually having much competition, is ideal for Disney. In order for them to do that, they need to continue, or maybe slightly tweak, the resale process. If the ROFR process took two months instead of one, that may drive more people to go direct instead of resale, without opening blocking the resale process. They also most likely want to limit the amount of contracts on the resale market, as that drives prices up due to lack of supply.
Like you said, though, never say never. It's kind of fun to think about because there are so many variables involved. Our opinions of course mean nothing to Disney in making their decisions.

 

[thelionqueen]

Take Westgate a few yeas ago and their ROFR (not sure where they are now on this). As I understand it they were enforcing ROFR on properties where it wasn't a legal option and they were demanding the commission when they didn't list it.

Could you clarify this? Not sure what you mean about legal option. Thanks

 

[Ben E N]

Could you clarify this? Not sure what you mean about legal option. Thanks

He would know more than me, but in looking into myself it looks like Westgate has it written into their contracts that they get a piece of the pie, in the form of a commission, every time someone sells via resale. If they ROFR it, they obviously keep the commission for themselves. This makes it so they are constantly paying $1000 or so less for every ROFR than the typical buyer would be paying on the resale market.

 

[thelionqueen]

He would know more than me, but in looking into myself it looks like Westgate has it written into their contracts that they get a piece of the pie, in the form of a commission, every time someone sells via resale. If they ROFR it, they obviously keep the commission for themselves. This makes it so they are constantly paying $1000 or so less for every ROFR than the typical buyer would be paying on the resale market.

Ahhhh ok that makes sense. I’m still fuzzy on the note about not being a legal option.

 

[Ben E N]

Ahhhh ok that makes sense. I’m still fuzzy on the note about not being a legal option.

I'm sure there were those who were upset about the policy, and did not feel that it was properly laid out in the contract language.
It's moves like this and what Wyndham pulled that gives timeshares such a bad name. It's also why I think Disney would not pull a move like that. Tweaks, yes, but not an overall "sticking it" to sellers. It's hard to balance giving their own customers such a hard time in the name of making a profit while advertising the program using Goofy's smiling face on a billboard. Any changes that DVC makes impacts the Disney name as a whole, so they have a lot more riding on it being a more or less positive experience for everyone.

 

[Eansdad]

They’re comparing direct to CRO, not resale. If they tanked resale values, they just wouldn’t mention them.

Honestly, if they tanked values so hard that they could ROFR them dirt cheap and resale them at current prices, they could afford a ton more in perks to both make the money and tank the resale market.

Try this:

Necessary 160 (more likely 320) points direct to qualify, no grandfathering resale:

1. Free APs.

2. 2 extra FPs per day/per guest when member checks in.

3. 50% off dining plans.

4. 2 extra hours in a different park each night (different park than EMH park).

5. Lounge in each park, each lounge with concierge type concessions.

How on earth will they pay for all that? By acquiring ROFR at $20/point and reselling at $150.

They could make that profitable, but to do so, they’d have to destroy the resale market.

Yeah yeah, it’ll always be a room. So is Wyndham and I paid $1200 bucks for 399,000 points, total, including transfer fees and closing. That’s about 3 weeks in a 1 BR at Bonnet Creek.

If DVC acquired 150,000/month at $20 and sells them at $150, that’s $250 million/yr. plus the $350 mil/yr they’re making at new resorts (another 150k/month). They would be the only market, for all intents.

It would be enough for them to dedicate $150,000,000 to perks and still increase their annual profit by 50%.

If I’m the DVC VP, and DVC sales are now bringing in $450 million, net, instead of $350 million, I’m the king. (More because much of that $150 mil in perks is adding to the bottom line of other divisions.)

Screw resale.

The biggest thing would be is could they sell all those points quickly to recover the money lost by people not staying in those rooms? The reason why a strong resell market is needed for Disney as opposed to hotel chains is the amount of money spent at the parks. How many DVC people spend a week at the DVC and 4-6 days at the parks possible with a meal plan? That's all money lost. The other hotel timeshares could care less where you go as long as you book with them. Not to mention how many DVC families bring other families into the system? Rent them the points and they then buy their own. Disney has a direct need for a strong resell market. If anything were to happen like the housing market collapse when DVC resales were everywhere dirt cheap Disney would take years to recoup the amount of revenue lost from those DVCs if they did not have a resale market.

I also think with this round of "sanctions" against resales they hurt themselves in the long run. 75pts at $180/pt or $13,500 is a little much to ask for most people on the "perks". As a resale I would take less trips, 1 bigger trip vs several smaller or splurge with pts on a 1 or 2 bedroom, instead of getting an AP or take 1 trip and rent the rest of the points. 25 was a good number for them as it got a lot of resale buyers to also buy in through Disney. They would have been better limiting the new sales to only the newest resorts or a premium per point for the 1st 25pts then going for 75pts. For most if they wanted to buy in through Disney they would have instead of the resale market.

 

[PatMcDuck]

The perk in the beginning, when we joined, was free park hopper passes for length of stay, for 1/2 number of capacity the room could hold. So for our 2BR reservations, we got 4 passes. (Studios and 1BR for 2, etc). There were 6 of us, so this was huge. I remember calculating it saved us roughly 25% off what we paid to buy in (150 points at OKW, late 1995). Add to that, we cooked most meals in the room, (and we needed 2 hotel rooms anyway, we bought DVC for the 2BR units).

 

[Mosescan]

I think whatever DVC does has a lot less effect on the resales market than some people think. The market price is driven strictly by supply and demand. The only effect Disney has that mildly effects the market price is exercising their ROFR. Some may be willing to pay a little more per point to ensure a given contract gets through ROFR. Other timeshares have lots of competition. There are literally dozens of systems and resorts out there all competing for the same clients. Massive supply with limited demand, hence their value is poor. I own a massive number of HGVC points. I could stay in a 2 BR during high season for over a month but I still bought DVC. Why? Because I want the Disney experience for my family. Disneys only competition is Disney! Disney is massively popular. There is limited supply and high demand that is why the prices are high. I didn't buy a timeshare, I bought a Disney experience. The demand will always be there. If Disney could somehow drive down the price of resale points to $20/point, how many of you would be lining up to buy a massive number of points? I don't have to stay in a value studio anymore because now I can afford enough points for a 3 BR villa for a month! Demand for resales would skyrocket and price would go right back up.

As someone noted earlier, the only thing that effects prices is an economic downturn, but that effects direct sales too.

Ironically I believe this move to 75 points direct will actually hurt their direct sales. I, probably like a lot of other resale buyers, would have gladly purchased 25 points direct to get perks. I highly doubt I will ever purchase 75 points direct to get those perks. The $5-6K extra it would cost me is highly unlikely to be worth any perk I can get. It may convince a few people that have limited knowledge of the resale market to purchase direct instead but I believe that they will lose a significant amount of extra small contract business from the resale buyers.

 

[.landry]

it seems to me that you have 2 pools of people who buy into DVC. Those like me, for whom buying direct really adds no value because the perks are just not useful. I plan really far ahead and fly so the chances that my trip would coincide with MM or other members only events is slim and APs are almost never going to be economical for us even if we were to take 2 smaller trips per year. I also think that people who buy resale know that the exchange is a waste.
Then you have the frequent flyers who go to the parks more often for whom the AP discount is really useful, have a higher chance of being around for member only events and like using the exchange.
I would only buy direct if the perks were better. If Riviera is fantastic and they make the perks really good and useful to the pool of people like me, I would absolutely think about a direct buy in.
Im not sure if this is exactly how it works but I think I remember that if there are still points left over that havent been used by a month out, DVD rents those points out as cash rooms? Maybe moving that window forward to 2 or three months out (when most non-dvc folks are making plans) would net them more cash?