Just bought into Rivera DVC, thinking of cancelling and buying non-direct.

[KAT4DISNEY]

This is a good example of an assumption I disagree with. While the paper towel example makes sense, it is not transferable to DVC points.

Let me ask it this way: How much would you pay for a RIV contract in which you do not receive points until 2054? Meaning you pay a price today, then receive/pay nothing for 34 years, and then your point usage & MF's begin in 2054 through 2070.

Here is an even clearer example: What if they sold two types of Riviera contracts?

• Contract A includes points in years 1-25
• Contract B includes points in years 26-50

Which contract would sell for more today? Both contracts cover the same time period of 25 years. Does that mean that should sell for the same amount of money today? The obvious answer is no. So just averaging out the purchase price doesn't make sense to me.

This is why I do not believe you can attribute the cost of the points evenly across the entire length of the contract. Points that are available to use sooner are worth more. Points that aren't available to use for 34+ years... how can we really place a value on those points today? I've decided that I can't. If you can, then more power to you (honestly; that's what I was saying earlier). But I can't.

Beyond that, when you factor in the extra cost of RIV through:

• More points needed through the points charts
• Higher MF cost per point

...RIV simply costs more. If you instead invested the difference of what you would have spent on RIV points, you end up with a sizable pile of cash in 2042, 2054, etc. I would rather have the cash at that point in time, and then decide if I want to buy in again at current market rates... Because as I've previously mentioned, 20-35 years is a very long time, and while I hope my family and I still love Disney then, I really can't say that with any degree of certainty.

And if you don't want to use the point charts, then that's another area we simply disagree on... I think you have to use them. If your plan is to use RIV as sleep-around points then there are definitely more affordable options.

This is the exact reasoning of the argument that the OKW extension cost too much or was done too early. At that time it was purchasing points for use 35-50 years from that offering and a lot of owners did not see enough value in that offer and/or pricing.

 

[zavandor]

This is the exact reasoning of the argument that the OKW extension cost too much or was done too early. At that time it was purchasing points for use 35-50 years from that offering and a lot of owners did not see enough value in that offer and/or pricing.

I was going to write the same. People didn't want to pay $1 per point per year for points that would arrive 35 years in the future.

 

[Bryan Burmeister]

I was going to write the same. People didn't want to pay $1 per point per year for points that would arrive 35 years in the future.

The funny thing about this, is that from an investment standpoint, I wonder what these will be worth for folks in nominal dollars who did choose to extend. In 2042, perhaps they could be worth 10 dollars per point per year. (or more). That would be a 6.8% annual rate of return, which isn't a bad deal at all for those who did extend.

 

[crvetter]

I was going to write the same. People didn't want to pay $1 per point per year for points that would arrive 35 years in the future.

I mean there is a slight difference between the group you are marketing to doesn't see a value in the product sold at that prices vs. their being no value in the product at that price. I would say at one point in time those that were offered the extension on OKW did put a value on points that were coming between 35-50 years, since they initially bought a 50 year contract. However, when offered the extension they were much older and weren't the right group to market too anymore. I would guess a huge limitation is that those members were just simply older and expect to be passed away or too old to go to Disney during that window (thus they found no value but not that there wasn't a value per se).

If DVC really wants to fix the OKW problem quickly it could offer the new owners of resale contracts (as they turn over) to extend the contract for the $30 a point they initially offered. This new group of resale owner is likely younger on average then the original owners of DVC thus more inclined to find value in those extra 15 years. Plus if this was an option more frugal younger DVC members would be inclined to buy OKW for this new "value." I would say $30 a point is pushing it a bit on what the fair cost should be of the points (based on an assumed inflation rate of 2%); however, it is still close to reasonable. Every person that buys a contract is implicitly assigning a value to future year points. The fair way to do this is take 1/(1+X)^Y for each year as the Discount Factor for that year, where X is your assumed discount rate and Y is the year you are calculating for. You then sum those up over every year of the contract thus Sum_(Y=0....n)[1/(1+X)^Y], this is weighted average of the years, SumYears (can be thought of as the discounted number of years).

So essentially the present value being implied on the points in a future year is PurchasePrice * [1/(1+X)^Y] / SumYears. Where SumYears is defined above and X is the assumed discount rate (you can even set that to your assumed investment rate) and Y is the year you want the present value of the point. This entire exercise is treating DVC essentially like an annuity where you are getting the same value out for a defined number of years, which it sort of is except instead of cash you get points.

 

[CanadaDisney05]

Alright, alright, alright. Who's ready for some math!!!

Example 1)

Assumptions

1) In this example, we are considering sleep around points. Point charts don't matter.
2) US Inflation rate = 2%
3) Maintenance Fees Inflation Rate = 3.5%
4) Purchasing 250 Points

SSR Direct Purchase Price = $165
RIV Direct Purchase Price = $170 (after incentives)

SSR 2020 MF: 6.765 PP
RIV 2020 MF: 8.308 PP

Results

If we discount all the future cash flows for each resort back into 2020 dollars, these are the results until 2054

SSR: $117,945.37 total cost
RIV: $136,688.49 total cost.
Difference: $18,743.12 in today's dollars

RIV will of course have an additional 15 years on the contract. So in 2054, the person with the SSR contract can pay $18,743.12 for a RIV contract to use over the additional 15 years. That works out to $74.97 PP in today's dollars.

Of course, with the restrictions, the issue becomes that in that final 15 years, the SSR owner is stuck at RIV, while the RIV owner has full flexibility. That is the qualitative aspect of this calculation. The other work around would be to buy CCV for $74.97 in 2054, but get two less years.

Example 2)

Assumptions

1) In this example, we are considering home resort points. Point charts matter. For simplicity, I chose 2021 "season 3" as the barometer for a 1 week stay in a standard 1 BR
2) US Inflation rate = 2%
3) Maintenance Fees Inflation Rate = 3.5%
4) Purchasing 260 points at RIV
5) Purchasing 199 points at SSR

SSR Direct Purchase Price = $165
RIV Direct Purchase Price = $170 (after incentives)

SSR 2020 MF: 6.765 PP
RIV 2020 MF: 8.308 PP

Results

If we discount all the future cash flows for each resort back into 2020 dollars, these are the results until 2054

SSR: $93,884.52 total cost
RIV: $142,156.03 total cost.
Difference: $48,271.51 in today's dollars

Same spiel as before. It works out to $185.66 PP in today's dollars to buy the RIV contract in 2054 to break even.

Now have at it

 

[CanadaDisney05]

Fine! I'll be the first one to comment on @CanadaDisney05 brilliant financial analysis.

Some observations:

1) If you are using the two contracts as home resort contracts, then it's pretty much a no brainer. SSR is much cheaper primarily because of the point charts. The cost to buy into RIV in 35 years would be more expensive (in today's dollars) than the buy in today.

2) If you are using them as SAP, it becomes a bit closer. I'd still personally take my chances on SSR because the $75 buy in in 2054 at RIV is not that much lower than what we've seen some of the resale contracts go for today. And that would be with only 15 years remaining on the contract. Plus, as others have mentioned, the shorter the contract, the less the risk.

3) If your comparing RIV as a home resort contract and SSR as a SAP contract, then it's really an apples to oranges comparison.

Edit: Just to be clear, I'm only analyzing numbers here. Of course qualitative factors come into individual decision making.

 

[zavandor]

I mean there is a slight difference between the group you are marketing to doesn't see a value in the product sold at that prices vs. their being no value in the product at that price. I would say at one point in time those that were offered the extension on OKW did put a value on points that were coming between 35-50 years, since they initially bought a 50 year contract. However, when offered the extension they were much older and weren't the right group to market too anymore. I would guess a huge limitation is that those members were just simply older and expect to be passed away or too old to go to Disney during that window (thus they found no value but not that there wasn't a value per se).

If DVC really wants to fix the OKW problem quickly it could offer the new owners of resale contracts (as they turn over) to extend the contract for the $30 a point they initially offered. This new group of resale owner is likely younger on average then the original owners of DVC thus more inclined to find value in those extra 15 years. Plus if this was an option more frugal younger DVC members would be inclined to buy OKW for this new "value." I would say $30 a point is pushing it a bit on what the fair cost should be of the points (based on an assumed inflation rate of 2%); however, it is still close to reasonable. Every person that buys a contract is implicitly assigning a value to future year points. The fair way to do this is take 1/(1+X)^Y for each year as the Discount Factor for that year, where X is your assumed discount rate and Y is the year you are calculating for. You then sum those up over every year of the contract thus Sum_(Y=0....n)[1/(1+X)^Y], this is weighted average of the years, SumYears (can be thought of as the discounted number of years).

So essentially the present value being implied on the points in a future year is PurchasePrice * [1/(1+X)^Y] / SumYears. Where SumYears is defined above and X is the assumed discount rate (you can even set that to your assumed investment rate) and Y is the year you want the present value of the point. This entire exercise is treating DVC essentially like an annuity where you are getting the same value out for a defined number of years, which it sort of is except instead of cash you get points.

I haven't followed the market lately, but during the recession OKW extended contracts were selling for just $7-8 more than not extended. So the market valuation for those points was around half a dollar per year

 

[Bryan Burmeister]

Alright, alright, alright. Who's ready for some math!!!

Example 1)

Assumptions

1) In this example, we are considering sleep around points. Point charts don't matter.
2) US Inflation rate = 2%
3) Maintenance Fees Inflation Rate = 3.5%
4) Purchasing 250 Points

SSR Direct Purchase Price = $165
RIV Direct Purchase Price = $170 (after incentives)

SSR 2020 MF: 6.765 PP
RIV 2020 MF: 8.308 PP

Results

If we discount all the future cash flows for each resort back into 2020 dollars, these are the results until 2054

SSR: $117,945.37 total cost
RIV: $136,688.49 total cost.
Difference: $18,743.12 in today's dollars

RIV will of course have an additional 15 years on the contract. So in 2054, the person with the SSR contract can pay $18,743.12 for a RIV contract to use over the additional 15 years. That works out to $74.97 PP in today's dollars.

Of course, with the restrictions, the issue becomes that in that final 15 years, the SSR owner is stuck at RIV, while the RIV owner has full flexibility. That is the qualitative aspect of this calculation. The other work around would be to buy CCV for $74.97 in 2054, but get two less years.

Example 2)

Assumptions

1) In this example, we are considering home resort points. Point charts matter. For simplicity, I chose 2021 "season 3" as the barometer for a 1 week stay in a standard 1 BR
2) US Inflation rate = 2%
3) Maintenance Fees Inflation Rate = 3.5%
4) Purchasing 260 points at RIV
5) Purchasing 199 points at SSR

SSR Direct Purchase Price = $165
RIV Direct Purchase Price = $170 (after incentives)

SSR 2020 MF: 6.765 PP
RIV 2020 MF: 8.308 PP

Results

If we discount all the future cash flows for each resort back into 2020 dollars, these are the results until 2054

SSR: $93,884.52 total cost
RIV: $142,156.03 total cost.
Difference: $48,271.51 in today's dollars

Same spiel as before. It works out to $185.66 PP in today's dollars to buy the RIV contract in 2054 to break even.

Now have at it

Personally

I haven't followed the market lately, but during the recession OKW extended contracts were selling for just $7-8 more than not extended. So the market valuation for those points was around half a dollar per year

Wow that is a good deal in my mind.

 

[Soap_1984]

Yes a good deal for the resellers and not the one who originally extended direct.

Just reinforces the point that disney has missed out on a key factor, which I believe is starting to, or could, hurt Riviera sales. The price up front and MF are massive and the points chart is strong requiring a large number of points. The fact is people are not willing to pay nearly as much for something that they won't get the benefit until 35 years have gone by.

Probably an impossible experiment to do, but if they cut 5 years off the contract at Riv I'm pretty sure sales would not change one bit. If they drop the price to $160 per point and got rid of the restrictions, they would sell a significant amount more.

 

[Sandisw]

Yes a good deal for the resellers and not the one who originally extended direct.

Just reinforces the point that disney has missed out on a key factor, which I believe is starting to, or could, hurt Riviera sales. The price up front and MF are massive and the points chart is strong requiring a large number of points. The fact is people are not willing to pay nearly as much for something that they won't get the benefit until 35 years have gone by.

Probably an impossible experiment to do, but if they cut 5 years off the contract at Riv I'm pretty sure sales would not change one bit. If they drop the price to $160 per point and got rid of the restrictions, they would sell a significant amount more.

Personally, I think it is too early to say that it’s been a disaster. They are selling and when the resort opens, I would venture sales will increase,

The market they may be losing, IMO, is current owners who are hesitant to add on there, due to restections.

Of course, if they lower the price they will sell more points, and if by summer, the level of point sales does not increase to an acceptable level, they will do just that With incentives for sure! Right now, they at least have a plausible reason for the current sales number in that it hasn’t opened yet.

I do not think restrictions are going anywhere, It’s be great to see me be wrong on that one!

 

[KAT4DISNEY]

Yes a good deal for the resellers and not the one who originally extended direct.

Just reinforces the point that disney has missed out on a key factor, which I believe is starting to, or could, hurt Riviera sales. The price up front and MF are massive and the points chart is strong requiring a large number of points. The fact is people are not willing to pay nearly as much for something that they won't get the benefit until 35 years have gone by.

Probably an impossible experiment to do, but if they cut 5 years off the contract at Riv I'm pretty sure sales would not change one bit. If they drop the price to $160 per point and got rid of the restrictions, they would sell a significant amount more.

Some history supports that since the first 6 resorts all had 2042 end dates. BCV was the last added with that date and only ever had 40 years on it's contract. At the time it had the fastest sell out of any DVC resort albeit is smaller than OKW or BWV but it was larger than VWL which came before it and so had more years on the contract too.

 

[Christiney]

My husband wants to buy direct and I am doing some HEAVY persuading trying to get him to change his mind (we own at SSR through resale). He is convinced that we will regret not being able to stay at the new DVC resorts....I would rather save the THOUSANDS of dollars buying through resale!! If I become desperate enough to stay at one of the new resorts.....I will just rent out our points and pay cash for it!!! WAYYYYY too much money for my taste.....

 

[amypetecar]

If you are in love with Riviera as a home resort, buying direct could make sense.

 

[MJB62676]

If you are in love with Riviera as a home resort, buying direct could make sense.

I saw earlier in the thread someone said to never buy Aulani direct under any circumstances...and I disagree as I just did it...only because it made perfect sense for us. We paid a small premium to get what we wanted, when we wanted. I'd say the same for Riviera. It has me quite intrigued and it may be our next home resort....even though i'd considered OKW to likely be next. The restrictions are somewhat significant to me, as we intend to hand down our contracts to each of our kids.

So, I'd say buying direct at Riviera makes sense if it makes sense to an individual.

 

[SecondEventuality]

I will say, buying OKW direct near the end of the year, basically came out the same as resale. So it made better financial sense for us to buy our first contracts direct. We had some help from the boards, which we will always be thankful for, in this regard. Plus the AP discounts and the "welcome home" booking ability to use our points so soon after buying were icings to a cake that we value very highly at this point in time. I'm sure those highs will wane in time, however, we would not have either with resale.