Mousesavers "BASH" DVC!!

[tjkraz]

This is the mentality that is going to burn many DVC members. Relying on the ability to sell their contract and make some money when they need the extra cash is not a smart idea. Once ROFR goes, DVC contracts will be selling for next to nothing like the majority of resale timeshares.

Contracts may suffer a price adjustment, but they certainly won't be going for "next to nothing". As long as there is interest in Walt Disney World as a vacation destination and the dues don't skyrocket beyond the point where Rack Rates make more financial sense than DVC, there will be demand for DVC resale contracts.

 

[DizWacko]

Wouldnt you think that ROFR would indeed go away at some point? If most contracts expire in 2045 (give or take), the closer we get to that date, the less remaining vacation interest you have to sell to the buyer (?)

And relating to renting points at $10 per pt, I dont see this changing anytime soon. The market determines the price. If people could rent for more, why arent they already?


I think DVC is a great idea for people who love Disney .. but too many people here take it wayyyyyyy to personally when someone "dis'es" the program as not good for them.

 

[PepeLePirate]

well...I agree with the people who say that some people here take it too seriously with the "dissing" or not. I think is DVC's job to inform people about the benefits of their programs, and they are obviously doing a good job since they are experiencing such a nice growth.

Is the program for everyone? no. There are pros and cons, like everything in life, but 2 points most people here miss is that for some people (like myself) is easier to dish out a couple of hundred of dollars per month than a couple of thousand (or 3 or 4) all at once every year. Not only that, but it also acts like my personals "vacation savings" account, since I do have a deed to the property. Another one is the tax deduction on the interest (if you are financing like me); uncle sam made my decision a slam dunk.

Overall I'm very satisfied with my ownership, and if I would do it again, I would try and buy more points instead.

 

[Dean]

Wouldnt you think that ROFR would indeed go away at some point? If most contracts expire in 2045 (give or take), the closer we get to that date, the less remaining vacation interest you have to sell to the buyer (?)

And relating to renting points at $10 per pt, I dont see this changing anytime soon. The market determines the price. If people could rent for more, why arent they already?


I think DVC is a great idea for people who love Disney .. but too many people here take it wayyyyyyy to personally when someone "dis'es" the program as not good for them.

Prices will adjust downward at some point and there will be a point it's worth nothing, but as long as there is a reasonable life left in a contract, there will be definable value in owning DVC. IMO, the price will start down somewhere around 27-28 years or when ROFR ends for the older resorts, whichever is later. But it will be a long and slow process. What will happen is that some people may sell at far less prices because they are ignorant of the options.

 

[KJHawley]

The closer we get to the 2042 expiration date, the more the price should go down. However, I don't see Disney letting that price get too low. Imagine, for example, buying into the DVC in 2032 (with 10 years left) for $50 per point, or 2037 (5 years left) for $25 per point. Then, 5 years later, Disney offers brand-new 40 year contracts on all those resorts for $200 per point. All of a sudden, the cost of buying into the DVC will multiply by ten. It makes financial sense, but I just don't see that happening. I think that Disney will keep the ROFR high, just to keep the perceived "value" of the DVC high. So, as we get close to 2042, I think people just won't be able to sell their shares at all.

 

[Disney Doll]

That's OK. If the folks who read Mousesavers don't buy DVC because of what's printed there, that leaves more room for me!!!!

 

[Tagrel]

The closer we get to the 2042 expiration date, the more the price should go down. However, I don't see Disney letting that price get too low. Imagine, for example, buying into the DVC in 2032 (with 10 years left) for $50 per point, or 2037 (5 years left) for $25 per point. Then, 5 years later, Disney offers brand-new 40 year contracts on all those resorts for $200 per point. All of a sudden, the cost of buying into the DVC will multiply by ten. It makes financial sense, but I just don't see that happening. I think that Disney will keep the ROFR high, just to keep the perceived "value" of the DVC high. So, as we get close to 2042, I think people just won't be able to sell their shares at all.

Actually, I can't see this happening. Disney would go broke if they had to buy back all the points at high rates. (People will sell contracts, and either someone will buy them at a low cost, or Disney will ROFR the contract at a higher cost) Either way, the seller CAN sell their contract. I believe the only thing keeping Disney ROFR high is the fact the people are still willing to buy those points back from Disney directly. Once that stops, ROFR prices will have to drop.

If Disney DID do as you suggest, then people selling with 5 or 10 years left could make back a big portion of their original cost (if not more), Disney could NEVER resell those points for the same or higher amount, and they would be stuck with them. The beauty of the Disney DVC model (for Disney) is that they get all the properties back WITHOUT having to pay for them again.

After contract end, if DVC continues, I'm sure Disney would do a refurb on the Resorts (if needed) and then resell with another 50 or so years. People will understand that a 50 year contract is MUCH more valuable than a 5 year one.

 

[tjkraz]

So, as we get close to 2042, I think people just won't be able to sell their shares at all.

Assuming DVC still maintains roughly the same value it has today respective to cash room rates, once you get within a few years of the end of the contract it will probably make more sense to rent points each year rather than trying to sell the contract outright.

 

[bcvillastwo]

The concensus seems to be that over time the value of DVC from a resale stand point will go down somewhat in proportion to the amount of time left on the contract. If this is a correct reading of the concensus I totally agree. The unknown is, when will the decline in value start and again the concensus seems to be it's going to be a while maybe as late as 2027. (That is if the economy and other factors remain relatively stable like they are today.)

So, in my view I think we can all expect to see things remain relatively stable for a good while and then as expected--the value of our DVC investment will slowly decline until our contracts run out. Still, by that time I will have broken even many years earlier and be going to WDW for much less than it costs others because I prepaid for my vacation accomodations. (At least that's the theory, the plan, and the hope.)

 

[Dean]

The closer we get to the 2042 expiration date, the more the price should go down. However, I don't see Disney letting that price get too low. Imagine, for example, buying into the DVC in 2032 (with 10 years left) for $50 per point, or 2037 (5 years left) for $25 per point. Then, 5 years later, Disney offers brand-new 40 year contracts on all those resorts for $200 per point. All of a sudden, the cost of buying into the DVC will multiply by ten. It makes financial sense, but I just don't see that happening. I think that Disney will keep the ROFR high, just to keep the perceived "value" of the DVC high. So, as we get close to 2042, I think people just won't be able to sell their shares at all.

I think this scenario is very unlikely. DVC has no reason to do ROFR once they are nearing the end of developer sales. And if they do offer an extension, it will likely only be to the end of 2054 plus they'd have to do it far in advance. In order to make it reasonable for them to do so, they need at least 70-80% of the total owners at those resorts on board. To do that, they'll have to make the cost next to nothing with the fees as they are likely to increase. At the current spread, they don't really make enough money to make it worthwhile so ROFR has not and never will be about profit directly.

I don't see them offering an extension to be honest and can guarantee you they won't sell them again as a 30 year or more contract. I know some think the value will still be high due to the higher costs of the rooms but I think they're just kidding themselves to a large degree. Plus, in many ways, it will actually end in 2041 instead of 2042.

 

[walter]

We were fortunate in 1997 that DVC had a 0% loan for one year. We had some money that was willed to us and we did not have to use it right away. Every time we visit a DVC resort we always take a minute to that the individual who left this money to us. She was always a traveller and what better way to extend her love for vacationing.

 

[jana]

JimFitz said

Once ROFR goes, DVC contracts will be selling for next to nothing like the majority of resale timeshares.

The difference, IMHO is that the majority of timeshares rent out there room for low costs at times to get in perspective buyers. While Disney has historically offered some discount Florida residence,AP and AA rates it is VERY rare (IMHO NEVER SEEN) to see the discounted room rates of 199 $ for 4 nights in a 2 bedroom timeshare unit in the manner of Orange Lake, Fairfiend, Hilton and Marriotte. A secondary fact is that after a few years visiting the same resort/destination the owners start getting bored with non-Disney destinations and in many cases become disillusioned with the companies running their timeshare. I believe Disney (DVC) just was ranked as #1 timeshare in regards to owner satisfaction. The levels of service and customer care that DVC offers is way and above the industry standard. . Disney is one of the few resort destinations in the world that have people queueing up to return to year after year. The resale value of DVC is much easier to calculate and their is a flourishing "points rental" market that will support the price of ownership. IMHO Disney'd ROFR does help to a degree, but it isn't the only factor, IMHO price transparancy of rental income and the ease with which it can be achieved is a much more important factor.


Dean Said

I know some think the value will still be high due to the higher costs of the rooms but I think they're just kidding themselves to a large degree. Plus, in many ways, it will actually end in 2041 instead of 2042.

and this is also a continuation of an answer to Jim's other points.
Room rack ( and discounted ) rates will be a driving force in setting the resale prices for DVC points, this is particularly the case at the latter stages of DVC's shelf life. At the moment we are all having to make our "best guest" at what room rates will be in 2042 (and longer) it is going to be much easier, for example, in 2037 to say "room rates for a room similar to a DVC studio unit have a best available rate ( whatever discount you care to use) of $907 per night" ( I've used a room rate of $200 per night, which I think is pretty low and an annual inflation rate of 5% which I think is pretty low historically). If someone knows they are going to make 3 trips to WDW in the next 5 years (length of DVC life left) and they can work out that by banking/borrowing they can buy enough points to book rooms instead of paying cash using an average points per night of 12 points (IMHO high ). We'll use the $17 per point dues cost so dues costs are $204 per room leaving $703 as the cash vs dues difference for the room divided by 12 so a points purchase price of $58.58 per point works out to be the same as paying $907 a night cash. What sort of discount would be needed to make it worthwhile to buy the points? It's a very short term risk , buy the points at 66% of that price ($39) and you are effectively getting three vacations for the price of two. Historically 8% has been the rise of hotel rates at WDW (from 1971). If one were to use that rate of inflation the price of a "$200 room" in 2037 would be more than $2,100 a night.

Whatever inflation figure one is to use you have to remember that dues are starting at $5 and room rates are starting in the $200s.

With 3% inflation dues costs for a 12 point room in 2037 would be 12x12.5 or $150 a night the cash rate ($200 with same inflation is $500 a night). The dues cost rises by $90 , the cash rate by $300

With 5% the same factors give a dues cost of a room at 12x22.69 or $272 a night ( rise of $212 a night) compared to cash rate of $907 ( a rise of $707)

with 8% inflation it gives a dues cost of 12x 54.34 or $ 651.96 per night ( a rise of $591.96) compared to a cash rate of $2173 a rise of $1973

Unless we have a sustained period of zero or negative inflation there will be a sizable, tangable and easily calcuable value to any residual DVC time. That doesn't mean there won't be the occassional "fire sale" when someone just HAS to off load their DVC points, but unless WDW manages to alienate it's adoring public ( not impossible) I think the sheer volume of eager customers wanting to visit WDW and many of whom who are looking for a discounted way to stay on WDW property mean that any comparisom with " normal timeshare resale % values" are meaningless and disengenuous. Mariotte, Hilton, Orange Lake, Fairfield et all just don't have the same cache as a WDW property and they do not engender the same feeling of desire to experience in the general public that Disney can manage.
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As to the original subject, I think the article is biased and unbalanced, it approaches the DVC subject from one (per judged) view point and doesn't give a fair reflection of the real situation. It (correctly) asks people to consider the ramifications of the choice, but only gives half the story (not curiously it's the half that perpetuates the arguemnets of the writer). The author chooses not to realise that the point rental price will be tied to the rate at which rooms can readily be booked. If Disney is able to further reduce the discounts and deals it has had to offer for the last few years (since 9/11) to achieve it's desired occupancy levels ( as seems to be becoming the case) then the MANY bargain hunters out there are going to very quickly realise that DVC point rentals at $12,13,15 per point offer fantastic savings. It seems 10 or even 11 $ per point is quickly becoming a thing of the past.

Much is made of Disney possibly removing the floor out of the ROFR market, yet those same people choose to ignore that it is also very (IMHO more so)possible that Disney can (and is) removing the cap/ceiling on the rental market that was held in place by Disney's aggressive discounting of room rack rates.

Give the people the full facts and let them make an informed choice, I don't think the mousesavers article gives the full facts and IMHO does a disservice to those people who read that website. IMHO it hinders them from making an informed choice because it is biased, unbalanced and to a degree deliberately misleading

 

[Dean]

jana, it is my opinion that the timeshare factors will have a far greater influence on resales late than room prices will. Assuming that the dues, resale costs and room rates go up at roughly the same percentage; I don't think there will be any great interest in buying a timeshare with only a few years left regardless of any spread of numbers one can generate. And I suspect the dues will actually go up at a slightly higher percentage than the room rates, at least the effective rates after discounts. Heck, how many people now are prime candidates and still don't buy. How many on this board looked at some point and didn't buy until years later when DVC was obviously right for them?

To make the room prices alone a major driving force in resales, one would have to be able to end up with rooms at 50% or less the DISCOUNTED rate at the time and that's taking into account paying for dues, purchase price and closing. Even then, there'd have to be enough life left to make it usable, say 4-5 years minimum. Most people wanting to sell would likely see they could only get a small price and just keep it and rent it out the last few years. Plus it's likely that there will be so many listed that some will take a small price just to get rid of it and thus the competition would drive the prices down. So yes, I think those that believe the room rates will keep the resale value high near the end ARE kidding themselves.

 

[Divamomto3]

I didn't have time to read all of the replies. A few comments though...First, Mary's site is awesome, but tends to lead people toward "deep vacation discounts." I don't think DVC is truly a vacation discount. Secondly, I guess if I did some algebraic equation/number crunching with compounding interest vs. the prime rate vs. the rotation of the Earth, etc., I'd come up with the fact that I probably could have invested $20,000 somewhere else that would have made me more pennies down the road. We, however, bought DVC purely as a luxury. It's a chance for our family of 5 to have spacious accomodations and for us to make vacation memories a few times a year in between my husband travelling all over the country and me working the night shift. And it's a chance to make these memories before our children no longer can or want to vacation with us. Believe me, one minute my oldest was a tiny baby and now he's a teenager and it seriously happened in the blink of an eye. And as an ICU nurse with 17 years on the job, I can also tell you that unfortunately, not everyone makes it to retirement age.

As long as you have 401 K's in place, college funds going, a rainy day savings, and you pay all of your bills on time, I can't see any reason why someone can't own a piece of the magic if that's what they want. DVC has brought my family and I so much joy...there' no price to be put on that.

 

[Lisa F]

DVC is only a discount if you were going to go for deluxe or home away from home type accommodations consistently. At least, this is the reason that we bought into DVC. We financed when we bought in and even figuring in what we are paying for finance charges as part of our cost, our cost is still somewhere between $6.50-7/point this year with dues (of course that varies based on what dues go for). I'm not sure how good of a deal it is nowadays with the much higher per point prices... we paid $55/point in 1999 with magical beginnings to buy BWV.

STILL if you take our per point cost for a week (including weekends) in a preferred view studio during food and wine festival (when we prefer to go, and we generally do a standard studio anyway) it's 106 points for a week. Say our cost (including intial buy in plus finance charges divided by the number of years left in the program when we bought in) plus dues is $7/point. That is a week in a BWV studio for $742. If you divide by 7 and take off tax of 11% that's the equivalent of getting a rate at the BWV of $95/night. The AP discounted room for the same time period at BW/YC/BC for a standard room (fairly equivalent to a studio when you are talking two adults) is $224/night. It just doesn't even come close to comparing. BTW the off season AP rate when we first bought in was $169/night (we stayed at the BW Inn on that rate and fell in love with the place and bought into DVC). Any way you do the math in our case, we win.

Now if you are willing to stay at value/moderate resorts and willing to stay offsite, DVC is not the least expensive way to do WDW. BUT if you are spoiled like I am and insist on at LEAST a deluxe resort, it was a no brainer for us. I think mousesavers caters mostly (but not entirely) to people who are looking for the best deal period and who will stay at values and moderates and maybe even offsite and who might occasionally splurge on a deluxe if the price was right whereas DVC caters more to people who are very specific about the kind of accommodations they want. BTW I am not saying that one "type" is better than the other but for me, the hotel is a big part of my vacations and I fully admit that I am spoiled by the home away from home accommodations of DVC and willing to pay more than a value or moderate for that.

 

[drakethib]

In fact it is going to cost me a lot more since we wil now be taking more trips.

 

[jana]

Dean Said

To make the room prices alone a major driving force in resales, one would have to be able to end up with rooms at 50% or less the DISCOUNTED rate at the time and that's taking into account paying for dues, purchase price and closing

I pretty much agree with what you're saying Dean, although I think 60-70% of the cost of what the best discounted rooms are going for would be sufficient inducement to get people to "take the plunge". As I pointed out, at the moment the savings need to be a little higher, because we all have to make guesses as to what room rates are going to be. With just 4 or 5 years left of the program that guesswork is pretty much out of the equation. I'll ask a direct question, to you and anyone else.

Not worrying about 20-30 years time, talking here and now. In todays money but we have to "pretend" there are only 4 years of DVC left.

Scenario is you know that you and your family plan at least 2 Disney vacations in that time ( at a resort similar in class to the DVC resorts). If those two Disney vacations are going to cost you say ( pick a number in todays money) $10,000 dollars (you've got the best AP rate for vaca one and it's gonna cost $5k so IMHO it's fair to assume you're not going to get a better deal next year). How much would you be prepared to spend to buy a DVC contract that gives you at least three vacations in that time ( the two you plan plus the option for one more or to "upgrade" you accommodation). I accept no one's going to pay the full $10k or more, but IMHO at about $6-7k it starts becoming a no brainer. You're going to pay 5k for the first vaca anyway so worst case scenario you're out 2k. If you make 2 vacations you're up 3k , if you make all 3 your up 8k. IMHO you don't have to go below the price of vacation 1 (i.e. 50% discount) before a lot of people realise "hey this one vaca is costing me 5K, for the same price I can get another 2 on top of it" .

"Regular" timeshares are available to buy for cents on the dollar, because the room prices are regularly heavily discounted to attract potential buyers. It is the availabilty of low prices that drives down the resale value, not the low resale value that's driving down the room rentals. Because of the ease to compare DVC with Disney room rates, the similarity in services, location, room types it makes DVC perhaps unique in the timeshare industry. It needs no leaps in faith or understanding, it needs no change in vacation habits and it doesn't require a PHD in math or accounting. If you want a hotel room, DVC can provide it for you. Same rooms (pretty much) same level of service(pretty much), same transportation, same on site Disney privilages, same locations. No other timeshare can offer that. That is why Disney room rates will continue to be the driving force for DVC values. What happens to other timeshares is completely irrelevant UNLESS Disney screws up it's relationship with it's customer base.

 

[Dean]

Jana, I believe most people will look at the situation and decide not to bite no matter what the savings. Partly because it's a timeshare and partly because it wouldn't be worth it for just a few years left. Heck, most DVC members aren't nearly as savvy as even a newbie here on this board. And there's always the chance of a late special assessment. But we shall see and we have a lot of time to bounce it around until we find out for certain how this will all fall.

It's true some timeshares are available pennies on the dollar but not the best ones in high demand ares. Orlando being the exception because of the overabundance. Top resorts in top places do pretty well. Look at Marriott, Hyatt, Royals and the like. But even then one can always find someone who isn't award and willing to sell far below market value. ROFR takes this away and when ROFR stops, this issue tends to control resale prices in the last few years of a RTU resort life.

 

[Mojomanny]

The big point that everyone is missing is the calibre of the DVC properties.

Comparing VWL to a regular WL room is like comparing a Hyandai to a Lexus.

Let me tell you this, if I was paying $4200 (rack rate for my upcoming trip), do you think I would be staying at VWL? Heck No!

DVC allows me to stay in the shadow of the Magic Kingdom, on the shores of Seven Seas Lagoon and on the beach watching the Water Pageant. We spend part of every day enjoying the various boats, having paid for unlimited use since we have a marina at our Home.

As the commercial says ... owning DVC is priceless!

If you want to compare it to lesser properties, be it the Motel 6, Holiday Inn or what have you, that's fine, just make sure you know what you are missing out on.

I defy you to find a hotel that offers anything like this: http://community.webshots.com/album/131084080yhQvfw/0

Have a great day

 

[Daitcher]

Doesn't seem like such a bash, it says run the numbers and consider the time value of money. Not sure her suggested techinque is up to snuff from a correct financial prespective but the basic idea that you should look before you leap is sound.

The idea of inflation needs to be worked into the cash side of the comparison too.

Mousesavers is absolutely on the ball with this one. DVC does not make financial sense for anyone. Timeshares are not a good "Deal". That being said we love DVC and don't regret our purchase. We don't care one bit about the cost or break even point. We just enjoy our family time together. I've said it before, only buy DVC or any other timeshare if you can afford it comfortably. That means you have no pressing need for that money spent and you do not have to finance it. I am glad mousesavers posted this. This is the truth you seldom hear on these or other boards. All the glowing reviews and happy campers paints an unrealistic view. Thanks mousesavers.

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