Negative article on Wall Street Journal re:Time Share

[luckytso]

Hi,

There is an article on WSJ re:time share which is kind of negative (in the personal journal section @4/16/02). I am still in the process of trying to figure out how many BVC points to buy. After reading this article, I am a little uncomfortable. What is your thinking on this?

 

[CarolMN]

My DH & I always said that we would never even consider purchasing a timeshare and even though we visited WDW at least annually, it took a long time before we even looked into DVC. We do not regret our DVC purchase at all.

I don't have access to the WSJ right now, so I can't read the article. However, unless it specifically referenced Disney and/or the DVC, I would personally pay it no mind. DVC is not a traditional timeshare.

DVC is one of the few timeshares that has kept its value and even increased in value. Its point system is very different from "traditional" timeshare operations. Disney is a reputable company and even in the slow economy, DVC WDW resorts are selling very well.

Perhaps you could post a few of the things in the article that are making you incomfortable. DVC is not for everyone and anything that makes you think and evaluate before you decide is a good thing!

 

[JeffreyH]

Just read the article. I am less than 2 weeks away from visiting WDW and hope to buy in while we're there. I've been considering it for a whole year. I'm a "numbers guy" and have considered the economics of this from many angles, including possible resale value (search my posts if this interests you).

Anyway, I believe the topics this article addresses either don't apply to "upscale" timeshares to any large degree or don't apply to DVC.

Here's the negatives in the article (for those who don't have a copy of it...basically just about Hilton converting some NYC hotel rooms to timeshares and the travel industries renewed interest in them, including upscale places):

"Timeshares conjure up notions of tattered FL condos and pushy salespeople." Based on the pictures I've seen online, reviews you'll find here, and the interaction I have had with my "salesperson", I don't believe this applies to DVC.

"Despite their reputation as a money pit..." (maintenance fees, no resale market, sky-high interest rates because mortgage lenders are loathe to lend for them...Hilton charges 13%-17% per the article).
You will have main. fees, and hopefully they will be enough to keep the resorts looking nice and "fresh" while not increasing 10% per year. To date (10 years), maintenance and its related fee have not been a problem with DVC as far as I can tell.

Resale market....well, the advice not too buy into a timeshare as a financial investment is wise. There are too many uncertainties to be CERTAIN that people will be willing to pay good $ to visit Disney in 20 years. But again, we do have history as a guide. The Timeshare Store (and others) has dozens of resales listed. The going rate seems to be about $60-something per point. But there are fees of going this route. People might end up netting less than $60/point. But for some that could be above what they paid, for others 80-90%. DVC's resale market has been very good. The reason is the ability to "lock in" room rates at rather attractive levels. Again, while futre prices of Disney hotel rooms are uncertain, its a safe guess that they will be higher than they are today.

While Disney's interest rates are high (10.95%, 11.95%), the interest is tax deductible in most cases. So the after-tax rate ends up being 7-something percent. True, higher than a regular home equity loan or mortgage. If you can find a better rate, go for it.

Another thing the article mentions is swapping a timeshare week only to find a "rundown condo". Well, that won't be what you find at DVC, and you'll have to just be careful what you might swap DVC for. There are many internet resources out there which rate properties.

"Heavy selling pressure". That is not what you hear about DVC's "guides".

The article concludes with "big-name brands like Hilton and Disney....are lending luster to the industry."

Worry about the negative stuff mentioned: Run-down resorts, pushy salespeople, too-high interest rates. By looking at DVC, you have already avoided most of these problems.

 

[drusba]

I read the article but unfortunately many may not have it as the WSJ pages on line are available only to subscribers. It contains the fair warning that you should never buy a timeshare expecting to get a high resale price later and notes many timeshares have low resale prices and few buyers, surprise maintenance fees to repair roofs, are rundown, and there are highly pressured sales pitches. However, it does not include Disney, Marriot, or Hilton in that list though they are mentioned in the article

You should not buy into DVC based on the belief that you will get a high resale later, you may or may not. Right now, and in the past, DVC unlike most timeshares, has had high resale values in comparison to other timeshares--DVC resales are generally within 80 to 90% of what someone may have originally paid (many timeshares are lucky to be in the 30% range). That reflects its popularity, particularly the WDW resorts where buyers can continuously see value because you are always comparing what you buy with the rental prices of the other WDW resorts which continuously go up. It also reflects that Disney actively supports high resale prices by exercising its right of first refusal on a resale if it perceives the price is too low. Nevertheless, high resale values cannot last indefinitely. As DVC has a 2042 end date, the closer you get to it the more likely it is going to be that resale prices will start to come down.

As to becoming run down, that is not likely as Disney cannot allow it to happen since it also rents out rooms at the resort to paying guests. The DVC resorts actually have high annual maintenance fees now and have from the start in comparison to other timeshares (for example I have seen many timeshares where the annual dues on a 1BR for a week are only $400 or less; comparable purchase at DVC in points leaves you paying annual dues of $800 or more). The reason is that you are paying for a lot more services than a normal timeshare and they are building large and adequate reserves--so you never get that big surprise assessment when the roofs need repair. The DVC resorts undergo major reburbishing every 5 to 6 years or so (as do the WDW resorts in general), and when it occurs there is no sudden increase in dues.

As to the high pressure sales pitches. DVC does not do that. It was also interesting to note that Hilton has very high interest rates for its timeshares--13% to 18%. Disney actually provides financing at below market rates for timeshares.

 

[Firefighter Mickey]

IMO, the onyl reason that DVC has a high resale value is that they are artificially controlling the market via the first right of refusal.

Unless DVC creates some sort of "extension" program, I predict that there will come a point at which DVC elects to no longer exercise their first right of refusal, at which point resale values will most likely plummet (both because of the lack of artificial inflation, and because at the point when DVC does this, there likely won't be many years left). I expect this to happen around the 2022 time frame.

Getting back to the article, the thing to remember is that not all timeshares are the same. To simply lump all timeshares that are not high-end such as DVC or Marriott into the same catagory of potential fly-by-night candidates, does a real dis-service to the industry and suggests to me that the WSJ doesn't really have a clue about what they're writing about.

That's not to say that there aren't some bad apples out there; so it's necessary to investigate quite a bit more when making a purchase. Also, you really need to understand exactly what it is that you are purchasing and why.

 

[JeffreyH]

The WSJ article didn't lump all timeshares into one bucket. It discussed the negative image many have of the timeshare industry based on past (and some current) practices, and how some big names are now getting involved, adding "luster" to the industry. But there are still concerns...ones which pop up regularly on these boards: Fears of main. fee increases, resale values (we know it will likely be zero in 40 years), double-digit interest rates on loans on something Disney can resell pretty easily.

As for Disney artifically providing price support to the resale market, I guess that could be true to a limited degree. But people still buy it for over the rumored "price supports" of Disney. There is a demand there, and DVC points seem to routinely sell for over $60 per point. The buyers aren't basing their purchase price on what Disney's price support is.

As for the resale price plummeting, I don't see it happening. In 2022 you can get X number of nights at DVC for the price of the main. fees. For instance, assuming 3% inflation, main. fees on 150 points will be about $1,000 in 20 years. You can get about 10 nights in a studio for those points. A cost of only $100/night. If Disney is charging $500/night for a comparable room ($450+tax...assumes an increase of only about 2%/year), that is a heck of a deal. People will be willing to pay a good deal of money up front to get 80% off of the regular room price for 20 years. Lets say in 2022 you value 10 nights at $3,000 (means you're paying about TODAY'S price for a room 20 years from now). Then for $1,000 in main. fees you're getting a $3,000 value. How much would you be willing to pay upfront for that $2,000 in savings every year for 20 years? My guess it would be over $10,000. Why is the value going to "plummet" just because there is "only" 20 years left?

The price of the resale will be dependent on the value people are getting. People pay $15 to buy a meal voucher to WDW which expires in less than a year. They make a purchase decision based on what they're getting and the hassles involved.

 

[JohnG]

DVC is to a Timeshare as Filet Mignon is to a Big Mac

Disney has been able to increase the cost of DVC 40% in 10 years (started at $50 per point, now going to $80 in June), as the term of investment has come down 20% (40 years left out of the original 50). To say nothing of the first OKW buyers who got free park passes that in some cases were worth as much or more than their intial DVC costs!

That should tell us all something. Virtually every DVC buyer could sell their investment today for 90-120% of what they invested in the first place. And I personally don't think it has anything to do with the DVC first right of refusal on the resale pricing. I think it has much more to do with VERY limited WDW inventory. The "botique" sizes of VWL and BCV and even now the DIV have led to them selling out ahead of original schedules. Eagle Pines will be the real test of whether they can keep upping the price without moving back the date beyond 2042.

DVC IS expensive versus some other Time Share options, but only because (imho) we can count on their properties looking every bit as nice as Main Street in the MK does at 30 years old!

DVC has proven to be the best single investment I've ever made from the perspective of limiting my expenses while providing increased value over time.

I hope you decide to join our DVC family.

 

[littlestar]

My husband and I talked about some of this before we bought DVC.

We bought at Wilderness Lodge Villas and Beach Club Villas. We felt that Disney would not want a rundown resort sitting next to its parks (just look how great the Contemporary hotel looks! How old is it? Built in 1971 wasn't it? So it's at least 30 years old.)

I don't think the DVC resorts will be allowed to run down. I figure when it gets close to 2042, they can resell these places again. I think of the same thing I thought of when we bought our personal home - location, location, location.

 

[MarceRN]

I payed 55.00 per point so I can sell for at least 75 per point now.
I like dvc because it is not a Saturday through saturday use.
This is the top reason I bought into it because hubby and I have days off in the middle of the week and they rotate.
No burning up vavation days waiting for Saturday entry.
Also no fixed week.
friends of mine have a time share in orlando for the second week in Oct saturday in saturday out. THATS IT!!!!
But you must remember THIIS IS NOT A REAL INVESTMENT it's only for convience and pleasure.
And not much is tax deductable!!!!

 

[ripleysmom]

I just had a conversation this morning with a friend who owns at Clarion in Orlando. His maint. fees wind up being about the same as mine but he is stuck with a certain week and only a week.

He said it was pricey but I don't think think that our initial purchase was all that much more expensive than purchasing direct from a timeshare place. When we looked at Silver Lake it was going to be a couple thousand more than DVC with a much higher interest rate.

I am so fortunate that we purchased DVC. I didn't buy it for an investment. I bought it as a "Home Away from Home with Disney Magic"

 

[Granny]

luckytso....predictably, you won't find many people here who are disenchanted with their DVC purchase.

As drusba and others have pointed out, it is not a good idea to purchase a timeshare with the idea that it is an investment to make money on. I don't care that it expires in 40 years because I'm not sure I'd want part ownership of a 40-50 year old building anyway!

DVC is best viewed, IMHO, as a way to facilitate high quality vacations to one of the great vacation destinations on earth. It's not really a pre-paid vacation because of the decades of dues payments. But the annual dues are a far cry from paying cash rates for comparable accommodations.

We have watched Disney handle the DVC aspect of quality and value very well for the past 10 years. There is no reason to think they will not continue for the next 40.

If it makes sense for you, and the financials are okay for you, I'd put your worries aside and join up.

Good luck!

 

[DisneyKidds]

DVC is not your run of the mill timeshare. I haven't read the article, but it appears the WSJ recognizes that when they say that Hilton and Disney add lusture. Don't let the article discourage you.

I agree with most of the posts. We did extensive financial analysis before we bought. We go every year, stay in nicer on site hotels, and the DVC numbers make sense in these circumstances. Don't buy any timeshare as an investment. DVC may end up being one - but don't count on it and buy for that reason. WDW will never let the DVC resorts get run down, especially at places like BWV and BCV where these resorts are an integral part of the WDW landscape. This is true at VWL as well as it is part of a larger WDW resort that is a regular cash ressie resort. OKW may be a bit more isolated, is primarily reserved by DVC points and not cash, and is not as integrated into the WDW landscape, but they have proven over 10 years that they won't let the quality slide.

I do disagree with artificial DVC price support in the form of ROFR. First off, how much do they really exercise that right? Probably not much. Fact of the matter is, resales sell briskly at between $60 and $65 a point. Secondly, DVC is not buying up resales thru ROFR and holding an inventory they can't sell. That would indeed be artificial price support. On the contrary, those contracts that they buy back are quickly sold at the going rate of $75 a point (a little less if incentives apply). DVC is not really in the business of selling resales. ROFR just seems to be there to protect DVC and it's members - but not artificially. If DVC wanted they could probably buy up every resale that is going for less than the current DVC price and sell them for full price. They wouldn't do that as the cost to do so may prohibit it, but demand is strong enough that they could.