Maybe I'm missing something.... why doesn't Disney ROFR everything?

[TheYellowDart]

So, I know no one will know what Disney is thinking, but maybe just so thoughts? Let's do some quick math:

OKW direct from Disney - 160 (pts) x $100 = 16000
OKW from TTS today - 160 (pts) x $52 = 8320
Profit - 7680

Am I missing something? Even if the contract were stripped and they had to wait two years that would only cost them about 10 dollars a point or another 1600, leaving still 5k profit. Anyone would want a 100% profit on an investment they can always buy and turn right around and sell.

This people just don't buy direct? I thought I saw somewhere where Disney is selling 100s of thousands of points per month. If you were wondering the math works out to be about the same for all the other hotels.

 

[chalee94]

it takes cash to ROFR everything.

not even the Mouse has that much cash.

also, there simply aren't that many buyers for the older properties...DVC doesn't want to get stuck with the carrying costs for that inventory.

plus, margins are higher on selling the new properties.

 

[AllieV]

I've thought about this a lot myself and the only thing I come up with is the lost income in monthly dues. If they own the property, they cover dues. I've often read that someone wants XX month and XX points and went to Disney directly then the next contract that matched that got ROFRd. They'll do it if there's an immediate buyer.

 

[Missyrose]

And you're forgetting about the contracts Disney gets back for free when they are foreclosed upon. Why pay for something you get plenty of for free?

 

[Brian Noble]

OKW direct from Disney - 160 (pts) x $100 = 16000
OKW from TTS today - 160 (pts) x $52 = 8320
Profit - 7680

This ignores the costs of marketing and sales---someone has to pay all of those cast members at all of those park kiosks, resort tour desks, van drivers, guides, etc. etc. etc., not to mention the Samantha Brown specials. A general rule of thumb in the timeshare industry is that marketing/sales costs represents anywhere between 1/4 and 1/2 of the total cost of developing a property. And, those costs are MUCH higher for "old" resorts than they are for shiny "new" resorts, because most people want what's "new"---never mind that no timeshare unit is ever "new" except for the very first person to stay there.

So, where does DVD invest its limited capital? So far, they've come down heavily on the side of new construction. That may change down the road---for example, if they run out of attractive places to put new WDW-area resorts---but there's no sign of it so far.

 

[permavac]

Having lots of "old" inventory also may adversely impact newer model sales. DVD just doesn't want that kind of competition. When there is a new property out there (like when AKV and SSR came on-line) there were lots of reports of new buyers being told they "couldn't" buy an older property. The goal of putting a new property out there is to sell it out as quickly as possible. Taking back old inventory defeats that purpose. Their end game is to not have ANY inventory available. I think if they stop building new DVCs then maybe ROFR will pick up just so they have something to sell. My two cents anyway...

Terri

 

[TheYellowDart]

Having lots of "old" inventory also may adversely impact newer model sales. DVD just doesn't want that kind of competition. When there is a new property out there (like when AKV and SSR came on-line) there were lots of reports of new buyers being told they "couldn't" buy an older property. The goal of putting a new property out there is to sell it out as quickly as possible. Taking back old inventory defeats that purpose. Their end game is to not have ANY inventory available. I think if they stop building new DVCs then maybe ROFR will pick up just so they have something to sell. My two cents anyway...

Terri

I agree with this, but on the other side of that coin by not doing ROFR on these properties they are making resale look more attractive. If they started heavily using ROFR the resale market would start to rise (people will sell higher if they know Disney will take it for a higher price) and less people will buy resale as it would be frustrating to make and accept offers only to have them taken from you.... I guess it could go either way.

 

[Brian Noble]

on the other side of that coin by not doing ROFR on these properties they are making resale look more attractive.

This is a downside, but it's a limited one. The vast majority of timeshares are bought in the heat of the moment, with little to no advance research, and DVC is no different. Most people who buy from Disney have no idea what the resale market looks like. Some may do a little post-purchase research during their cooling off period, but a surprising number of people will (a) not do so or (b) will ignore the facts, because they don't want to be "wrong" about this purchase that they are very happy about.

 

[disneynutz]

Disney knows it's numbers and if it made financial sense, they would ROFR everything. The profit on new sales is so high that they will always sell them first.

I see a lag in new inventory coming so this could be interesting.

Bill

 

[JKMJ441724]

Having lots of "old" inventory also may adversely impact newer model sales. DVC just doesn't want that kind of competition. When there is a new property out there (like when AKV and SSR came on-line) there were lots of reports of new buyers being told they "couldn't" buy an older property.

Terri

That's what I had always been led to believe.

 

[Missyrose]

That's what I had always been led to believe.

The DVC salespeople will always push harder to sell you the new properties. But they are in the business of selling. So if you tell them you want SSR or BWV or nothing at all, they'll "magically" find a way to make that happen for you.

 

[permavac]

...I see a lag in new inventory coming so this could be interesting.

Bill

And I think that the best explanation for the uptick in ROFR on OKW properties is that lag. It wasn't first suggest by me - someone on another board said since Aulani is the newest and is a non-WDW resort, DVD wanted to have an alternative to AKV for those who wanted a WDW home resort. In any case, it certainly makes sense that ROFR happens more often when there is a lag between the imminent sell out of the latest (well, not the "latest" but the latest one that hasn't sold out yet) property (AKV) and building of something new (Grand Floridian)...

Terri

 

[pmaurer74]

Having lots of "old" inventory also may adversely impact newer model sales. DVD just doesn't want that kind of competition. When there is a new property out there (like when AKV and SSR came on-line) there were lots of reports of new buyers being told they "couldn't" buy an older property. The goal of putting a new property out there is to sell it out as quickly as possible. Taking back old inventory defeats that purpose. Their end game is to not have ANY inventory available. I think if they stop building new DVCs then maybe ROFR will pick up just so they have something to sell. My two cents anyway...

Terri

I think this is true. 2 years ago we took the tour and wanted VWL and were told only BLT and AKV were available.. neither appealed to us so we walked away. I remember wishing VWL or SSR was available. Had they told us it was we may have bought right then and there. Then I found about resales....

 

[disneynutz]

I think this is true. 2 years ago we took the tour and wanted VWL and were told only BLT and AKV were available.. neither appealed to us so we walked away. I remember wishing VWL or SSR was available. Had they told us it was were may have bought right then and there. Then I found about resales....

My guess is that within the world of Disney, when millions of dollars are used to build a new resort, they are under pressure to sell that building ASAP. Seems that all of their focus, bonuses, commissions, and marketing are for selling that project. The new project also seems to sell better due to being new and the Guides are telling buyers that when it's sold out, it's sold out.

Bill

 

[wdrl]

And you're forgetting about the contracts Disney gets back for free when they are foreclosed upon. Why pay for something you get plenty of for free?

You are right. Primarily through foreclosures, DVD reacquires points from every DVC resort each month. I only track reacquired points for AKV and BLT, but so far in 2012 DVD has reacquired about 34,401 AKV points and 17,473 BLT points.

Disney knows it's numbers and if it made financial sense, they would ROFR everything. The profit on new sales is so high that they will always sell them first.

I see a lag in new inventory coming so this could be interesting.

Bill

I agree with disneynutz. If it made sense to ROFR more deeds, then DVD would.

I'm not sure how much of a lag there really is in new inventory for DVD to sell to the general public. DVD has about 220,000 unsold points left at BLT before it reaches its 98% sales limit, but with points already set aside for cash reservations and other commitments, I'm not sure how many BLT points it actually has available to sell.

AKV, however, has over 2.1 million points left to sell before DVD reaches the 98% sales limit at that resort. Even though sales jumped in April 2012 to over 177,000 points, DVD could maintain that level of sales for about a year before running out of AKV points. By that time, sales for Villas at Grand Floridian should be in full swing, giving DVD another 3.5 to 4.5 million points to sell.

Let me add a comment about DVD's renewed interest in exercising ROFR on OKW deeds. Frankly, I don't think the numbers support the assumption that DVD is ROFRing OKW merely to support sales. Since August 2011, DVD has ROFRed 11,965 OKW points. However, during that same time it sold 28,449 OKW points. For the period July 2010 to July 2011, DVD ROFRed only one OKW deed for 150 points. Yet, it also sold 59,592 OKW points during that 13 month period.

If there is a discernible explanation to DVD's ROFR activity, it escapes me.

 

[drusba]

I've thought about this a lot myself and the only thing I come up with is the lost income in monthly dues. If they own the property, they cover dues. I've often read that someone wants XX month and XX points and went to Disney directly then the next contract that matched that got ROFRd. They'll do it if there's an immediate buyer.

Unless the specific contract that is being ROFR'd requires the buyer to pay dues for the applicable year, Disney will not be paying them for the points it recaptures through ROFR or foreclosures, at least not directly. As the timeshare developer, it has the option for any of the units/points it owns to either pay dues directly like other members or to agree when it provides the estimate of annual dues that the dues charged to members will not be subject to any special assessment or increase during the year except as needed in the case of a destructive event to the property (hurricane, fire etc.) or a raise in property taxes. Disney has for every year of DVC's existence taken that no payment option. The risk it assumes in doing so is that it has to cover any costs during the year that are in excess of those covered by dues and not subject to the exceptions.

As far as why Disney does not ROFR more, many reasons have already been given. Also included are that Disney is not in the resale business, does not want to create any expectation of owners that they can always sell back to Disney (which could potentially raise resale prices), does not want to be in the position that it is the one setting resale prices for resales which would occur if it bought most porperties, and does not want to be accused of wiping out the resale market entirely which would happen if it ROFR'd all or most contracts.

 

[ELMC]

If there is a discernible explanation to DVD's ROFR activity, it escapes me.

I'm sure there is one, but Disney is certainly not making it public. So the best we can do is infer and speculate and identify our assertions as such.

 

[Brian Noble]

So the best we can do is infer and speculate and identify our assertions as such.

My inference is still the same: a drunk monkey with a dart board.

 

[BarryS]

... and does not want to be accused of wiping out the resale market entirely which would happen if it ROFR'd all or most contracts.

Exactly my thoughts. If they ROFR everything, and everyone knows that, then buyers won't waste their time making offers on resale contracts. With no buyers, there's no resale market, and nothing to ROFR.

 

[cloudnut220]

Let me add a comment about DVD's renewed interest in exercising ROFR on OKW deeds. Frankly, I don't think the numbers support the assumption that DVD is ROFRing OKW merely to support sales. Since August 2011, DVD has ROFRed 11,965 OKW points. However, during that same time it sold 28,449 OKW points. For the period July 2010 to July 2011, DVD ROFRed only one OKW deed for 150 points. Yet, it also sold 59,592 OKW points during that 13 month period.

If there is a discernible explanation to DVD's ROFR activity, it escapes me.

I will say, that although there may not be a direct relationship, it does seem like OKW is a new hot property for DVD. I talked to my guide just over a week ago and he seemed to really push OKW--they are the new "cheap" direct option now that SSR is sold out. The guide said when they get points available in a certain UY they don't stick around very long.

As an aside, it's interesting to me that the OKW points DVD is selling now are all extended points. I wonder what the mix of extended vs. non extended points is, and what is DVD going to do in 2042 when all of those points come back but they have a bunch of "new" or extended owners who have 15 more years of membership? Seems that "total overall" of OKW they promised my parents after 50 years won't be in the cards...