New resale rules - Good for DVD for new sales, but won't it hurt add-on sales?

[tidefan]

I have been thinking about something, most notably, adding on. I understand how DVC can anticipate how for new sales, the resale restrictions will help. Strangely, I think that DVC's resale decisions are having the exact opposite effect for those considering add-ons. Take my situation for example.

We have 310 points per year. Let's say I was interested in picking up an extra 50-100 points. Fast forward to the March 20 announcement. For me, I have two choices:

1) Purchase from Disney at DVC prices for unrestricted contracts, or

2) Purchase resale at what could be considerably lower prices than resales have traditionally been for a restricted contract.

So what am I really losing? In my current contract, I have more than enough direct points to accomplish anything I may want to do in the Disney Collection. Additional points would just be used for DVC locations, so why should I care about the restrictions? In this sense, DVC has pushed me away from a direct sale into a resale.

It will be interesting to see how this plays out, as I think that add-ons to current owners are a non-trivial percentage of new contracts. I can't see for the life of me, if as theorized, the resale price drops somewhat significantly after 3/20, any advantage for the current owner to add-on direct. In this sense, I can completely see where folks like Dean are coming from about adding tiered benefits. It would be the only way they could incentivize existing members to add-on direct...

 

[hellerjw]

I agree with you. I believe they have decided that they are willing to lose a few add-ons here and there to gain some leverage on new buyers.

I don't know if there are any statistics publicly available that show the number of members that have actually used their points at one time or another for the Concierge, Disney or Adventurer Collections, but I would guess its a small percentage (maybe 10% or less).

Even among those members who have done it I suspect they don't do it frequently due to the high point costs involved in making these "trades".

I think this move IS the preliminary step toward creating a tiered benefit system as they are laying the mental groundwork for members to start expecting different levels of service. However, if the resale market pricing does start dropping even more after 3/20 then it would be very difficult for them to justify 50% or higher premiums over resale pricing to a well-informed buyer. I think they are betting on the fact that most new buyers have no idea a resale market exists and/or enough experience with timeshares to really understand how little they are gaining by paying the direct pricing.

 

[mjc2003]

There was a thread here recently asking how people use their points. About 90% of the responses were "DVC properties". A few mentioned cruises, but even those almost all said they wouldn't do it again.

So, in reality the 3/20 date is stripping away virtually useless benefits.

I am not so sure that Disney is working off the assumption that most people don't make educated buying decisions. These days, people don't go spending $15-$25,000 without doing their homework.

I am starting to believe that this is not as sinister and protracted a plan as some have speculated. I am beginning to think, after seeing the response over the last few months, that this move was made to reduce the burgeoning inventory on the resale market. Since the announcement, resellers will tell you they're doing 4x the business. Disney wants to sell direct, yes; and this will bring them a few more buyers perhaps. But I don't think they want tiers, or a more complex system. They are juggling several hundred thousand members; that's enough of an effort.

I think, with the economy being what it's been the last few years, that Disney has watched the list of resales grow exponentially. I believe they said, "how can we enact a reduction to this list without any wholesale changes?" After all, they look at the numbers; do we think for a second that they are not aware that they are stripping away benefits that are probably used 5% of the time? I think they wanted people to speculate that "more is coming". Many, myself included, have rushed to buy on this notion, that is really unfounded (they've never indicated more is coming).
They created a sense of urgency. Could that be all this is about?

 

[Dawn16]

If a sense of urgency is what they were going for it definitely worked! I really wanted to add on at BWV and the 'drop dead' 3/20 date prompted us to do it now. Like most, we don't use points often for things outside the DVC properties but we have done so on occasion. If we get a last minute cheap airfare we might take a trip to Disneyland. And at the late date we can't get into VGC so we use our points at the Disneyland Hotel (not particularly outrageous). So, just that little nagging idea that we could not do so with the BWV pts if we added them later made us pull the trigger now. Do I have enough previously purchased points so that it wouldn't have mattered? Probably!

 

[jstarcze]

I can say that the theory of the OP that current members will move to resales vs adding on direct is true for me. It is the debate I just had with myself whether to add-on direct or resale. My original points are direct purchase, so I'm covered for anything I might want to do outside disney. But I wanted enough points to get 1br accommodations for 2 stays at WDW each year. I just couldn't justify buying direct. But since I've purchased resale and the contract is already in for ROFR, I've got the best of both worlds; my wish for a 1br for my trips and grandfathered resale points.

 

[JimMIA]

I think the retionale for these change is more simple. I think it boils down to three things -- BLT, AKV, and Aulani. DVD has three large resorts to sell, and they're having trouble moving the inventory because of economic conditions. The fact that they were selling new owners contracts as small as 50 points has to tell us something about how their sales have been.

BLT resale is selling in the 90's (occasionally slightly lower) vs a starting price of $130 direct, and there are PLENTY of BLT resale contracts around.

AKV is selling in the 70's vs. $120 (I believe), and there are PLENTY of AKV contracts around.

For all the brave talk of impending sellouts, I suspect DVD has WAY more BLT inventory than they admit and way more AKV as well. And probably a lot more Aulani than they want.

As far as add-ons by existing owners, I don't see how the change could possibly hurt add-on sales.

I'm not sure how big the add-on market is, but the change can't do anything but strenthen DVD's sales position with existing customers. They have a marginally better product now -- how can that hurt?

 

[arthur06]

Suppose that after 3/20 resale prices drop even more. For argument's sake, let's say an additional 10% drop in the immediate future.

So SSR is selling in the mid $60's ... is now selling in the mid to upper $50's. But I can't use them for anything non-dvc related.

Wouldn't buying a 100 point SSR resale make sense? I am buying them even cheaper now, and if I wanted to rent them out, the rental market wouldn't be affected.

Most people will concede that using points for non dvc properties is not a great use of points. So they rent them out. It seems like a was to get even better pricing and deals for what I was already owning!

 

[TLSnell1981]

My concern isn't the restiction of non DVC usage, but what's coming next. I'm afraid, this is the tip of the iceberg.

 

[dbs1228]

I agree with OP and we too have plenty of direct points BLT and resale (bought last year) of SSR so to buy resale after 3/20 will not at all in pack us since we plan to use all points for DVC properties. Things can change in travel habits so I know I am covered.

With that being said I did take advantage of this change and put our VGC for sale since we realized it was a high price to pay for a resort we will visit once every 4 - 5 years for maybe 4 - 5 nights vs. 10 nights every year at WDW (we live on East coast). The contract sold for 1.00 less then what we paid for it and we used the 2009 - 2010 points for a 7 night 2 bedroom stay at OKW so I am okay with the commission we have to pay.

I kept my eye on resale and keep seeing great deals and took the plunge yesterday and bought a 130 point SSR for 59.00 that is coming with 260 points, another 130 in Oct so I could not resist!!! I was going to wait but guess I needed an excuse to go back to WDW soon!

 

[mjc2003]

As far as add-ons by existing owners, I don't see how the change could possibly hurt add-on sales.

I'm not sure how big the add-on market is, but the change can't do anything but strenthen DVD's sales position with existing customers. They have a marginally better product now -- how can that hurt?

It hurts if this move drives the price of resales down even further. Most existing owners know their usage; and most, as indicated by informal polls, use their points for DVC properties. probably 95%. Add-on buyers are the MOST savvy; they know what they need. They know how they vacation. Most add on to supplement their DVC vacations, not for a cruise or the like.

So by driving the resale pricing down, which this move will surely do, they have made adding on more affordable on the resale side, and less desirable going direct.

I think there is an outside chance that they are hoping new buyers are not going to do their homework, and see that buying direct gives them 5 options, while resale gives them 2. This is a dangerous assumption, however, b/c people are more cost conscious than anytime in recent memory.

I still contend that this is not as sinister as "more to come", and not as detailed as implementing a tiered system, or some complex membership hierarchy. I think this was done to light a fire under the resale market b/c the inventory was creating a glut.

Resellers are doing 4-5x the business versus ever before. Mission accomplished.

 

[Goofy DVC]

mjc2003, very insightful view. After reading it, I agree and think it is spot on.

 

[JimMIA]

It hurts if this move drives the price of resales down even further. Most existing owners know their usage; and most, as indicated by informal polls, use their points for DVC properties. probably 95%. Add-on buyers are the MOST savvy; they know what they need.

I agree add-on buyers are probably the most knowledgeable buyers out there, but I don't think it follows that this particular change will drive them away from DVD direct.

What is the super-savvy add-on prospect going to say?

"Okay, see...I was okay with buying direct at $30 more per point. But $34 more per point? Are they out of their minds??? I'm buying resale!!!"

I don't think so.

I think there is an outside chance that they are hoping new buyers are not going to do their homework...

OUTSIDE Chance???

ALL timeshare developers RELY on the normal pattern that prospective buyers will make an emotional purchase decision rather than taking the time to research appropriately. They make their living on that lack of understanding of the product.

 

[JimMIA]

Absent some strong promotion I think the typical direct add-on purchaser falls into one of three categories:

• those seeking small contracts which are difficult to find in the resale marketplace, and where the cost differences are relatively minor
• those who don't think the cost savings are worth the delay of the resale process
• those who need to finance.

I don't think this change will affect those folks at all. It is certainly possible that DVD could come up with some new promotion that would make direct add-on purchases truly attractive, but we haven't seen that yet.

 

[Sandisw]

I agree add-on buyers are probably the most knowledgeable buyers out there, but I don't think it follows that this particular change will drive them away from DVD direct.

What is the super-savvy add-on prospect going to say?

"Okay, see...I was okay with buying direct at $30 more per point. But $34 more per point? Are they out of their minds??? I'm buying resale!!!"

I don't think so.

OUTSIDE Chance???

ALL timeshare developers RELY on the normal pattern that prospective buyers will make an emotional purchase decision rather than taking the time to research appropriately. They make their living on that lack of understanding of the product.

I think what you might see now is that the add on buyer who is looking to add a decent amount of points will definitely head to resale first and possibly be flexible in what they want because of the price difference.

However, for those that want to add on with those smaller amounts 25 - 75 points, Disney is still going to come in to play as you can deal with a higher price point when you are talking small contracts.

It may not be the slam dunk it was before, but let's be honest, when you wait 6 months trying to find a resale contract that matches your needs and can't find one, that extra $1000 it costs to get from Disney becomes less of an issue or a concern.

 

[AirGoofy]

My $.02. We did an initial resale purchase because it was cheaper than DVD and we could afford it. Then, we did an add-on through DVD. We did DVC to exclusively stay at WDW. The only benefit that may have effected our decision was if we could not stay at different DVC resorts (which can always happen). In our two trips a year, we now would like to do a beach stay (Vero or HHI) and WDW for the other. IMO, if the re-sale market falls even lower, I think there would be more re-sale purchases.

And, if it drops the re-sale marker lower, a case of addonitis may strike!!!!!! DW and I are in our 30s with two children (9,6) and would be willing to take a 3rd vacation a year. I guess Vero may be an option this time ...

 

[Tigger1]

Resales drop in price, then Disney buys them all up.

 

[Dean]

My concern isn't the restiction of non DVC usage, but what's coming next. I'm afraid, this is the tip of the iceberg.

I suspect there will be other changes but doubt they'll affect the core of DVC unless they institute a VIP program.

I think there is an outside chance that they are hoping new buyers are not going to do their homework, and see that buying direct gives them 5 options, while resale gives them 2. This is a dangerous assumption, however, b/c people are more cost conscious than anytime in recent memory.

Most people who buy timeshares, including most that buy DVC, do so on an impulse without researching ahead. Most that do research after signing, don't cancel. However, for those that do research, DVC stands above the rest in comparison with a few others close. This is the entire sales model for timeshares. Get them in the door, baffle them with BS and half truths, attack them at their weakness and pressure them to sign. Obviously DVC has been on the light end of this but that is changing, it really has to for them to stay in business.

Many companies have gone the route of making sure the resale buyer only has a trial or limited version, much like a trial version of a computer program. It has proven to be a very successful method.


I agree that the current plan is likely a blessing in disguise but that assumes that other options aren't removed in the future including that one will have access to future resorts, a big assumption IMO.

 

[mjc2003]

I agree add-on buyers are probably the most knowledgeable buyers out there, but I don't think it follows that this particular change will drive them away from DVD direct.

What is the super-savvy add-on prospect going to say?

"Okay, see...I was okay with buying direct at $30 more per point. But $34 more per point? Are they out of their minds??? I'm buying resale!!!"

Yes, actually there is a tipping point. And I don't think the resale market is going to drop $4-$5. Look at some of the price drops now already, BWV has dropped $15-$20 on average over the last few months alone, and this is PRE-CHANGE. I think add-on buyers are going reach a point where they say, "I can't afford to add-on at $100+ when all I do is vacation at DVC properties and there are resale contracts at my home resort for $50 less".

I don't think it's going to necessarily "drive away" business from DVD direct, but the fact is that most add-on buyers are intimately familiar with the resale option, and as the disparity between resale and direct pricing grows, as it has and will, then many will consider resale simply b/c they will have to. It's fiscally prudent. If you only vacation at DVC properties, that is.

In any respect, it will be interesting to see what the end game is.

 

[TLSnell1981]

Yes, actually there is a tipping point. And I don't think the resale market is going to drop $4-$5. Look at some of the price drops now already, BWV has dropped $15-$20 on average over the last few months alone, and this is PRE-CHANGE.

I'd like to know, where contracts are selling in the $50s. I would love to buy at these prices.

 

[JimMIA]

I'd like to know, where contracts are selling in the $50s. I would love to buy at these prices.

There is a recent posting on the ROFR thread about a 150 point BWV contract (loaded contract, in fact) passing ROFR at $50 per point.