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

[bristodr]

We purchased all of our pts direct from Disney, and while I did use them to go to Hawaii a few years ago - when the awesome Kapalua Bay Hotel was still alive - I dont see the change as having any big impact. I now know much more about the value of the Disney resorts v/s the high pts 'cost' of the non-Disney resorts.

 

[mjc2003]

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

There have been multiple reports of contracts at BWV going through ROFR in the $50's, one as low as $50, a few higher. I recently averaged the last 7 to get through ROFR, and I think the average price was $59. Though the list prices are mostly higher, in the $70-$80 range, there are a TON of listings (I think the Fidelity site alone has about 125), and sellers seem to be accepting low offers.

 

[TLSnell1981]

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.

There have been multiple reports of contracts at BWV going through ROFR in the $50's, one as low as $50, a few higher. I recently averaged the last 7 to get through ROFR, and I think the average price was $59. Though the list prices are mostly higher, in the $70-$80 range, there are a TON of listings (I think the Fidelity site alone has about 125), and sellers seem to be accepting low offers.

Thanks for the information!

 

[Dean]

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.

Many add on buyers are familiar with the options but many aren't. Most retail buyers are not. Even then we often see those here on DIS that investigate and still go retail even when the number don't support it. I doubt that will change and I'm expecting DVD to find a way to steer them to retail. If this isn't enough, there will be more changes that many will see as neg.

 

[Greysword]

...Obviously DVC has been on the light end of this but that is changing, it really has to for them to stay in business...

Is this a bad thing? I mean, if Disney sold their existing inventory and failed to build any more resorts, I'm not sure how much it would affect the Disney Vacation Club as it stands now (since our dues keep the operations running). Disney Vacation Development would likely scale back significantly, making money by exercising ROFR to get inventory for resale, as well as foreclosed contracts. However, the Walt Disney World Resort would likely see this decline as acceptable, since the main goal of establishing a pool of frequent guests was achieved.

In addition, if DVD bought all of the existing resale contracts for resale, the price per point would escalate closer to the original purchase price fairly quickly. However, DVD needs to stop building new resorts (or have only one new one available at a time) to make this model work, and I'm not sure their greed can be contained in this instance.

 

[Dean]

Is this a bad thing? I mean, if Disney sold their existing inventory and failed to build any more resorts, I'm not sure how much it would affect the Disney Vacation Club as it stands now (since our dues keep the operations running). Disney Vacation Development would likely scale back significantly, making money by exercising ROFR to get inventory for resale, as well as foreclosed contracts. However, the Walt Disney World Resort would likely see this decline as acceptable, since the main goal of establishing a pool of frequent guests was achieved.

In addition, if DVD bought all of the existing resale contracts for resale, the price per point would escalate closer to the original purchase price fairly quickly. However, DVD needs to stop building new resorts (or have only one new one available at a time) to make this model work, and I'm not sure their greed can be contained in this instance.

I think it is a negative if the system stagnates. If DVD ceases to exist ALL of the non timeshare options likely fade away including most discounts and possibly ALL exchange options. There is no real money to be made in the ROFR and resale, in spite of what some would like to think, so that doesn't help. Plus, systems that are not in active sales and/or expanding tend to stagnate, dues tend to go up, etc. Worse is the in between where they're failing but trying to hang on. That's where current members would likely be squeezed the most. Based on what I've seen of other systems, yes I think it's a bad thing if there are no new resorts.

 

[arthur06]

I think it is a negative if the system stagnates. If DVD ceases to exist ALL of the non timeshare options likely fade away including most discounts and possibly ALL exchange options. There is no real money to be made in the ROFR and resale, in spite of what some would like to think, so that doesn't help. Plus, systems that are not in active sales and/or expanding tend to stagnate, dues tend to go up, etc. Worse is the in between where they're failing but trying to hang on. That's where current members would likely be squeezed the most. Based on what I've seen of other systems, yes I think it's a bad thing if there are no new resorts.

Dean,

Could you please elaborate on this? If DVC was able to buy back BWV at $50-$60 per point, isn't there money to be made?

Also, wouldn't at some point it be in DVC's best interest to ROFR some random contracts to keep an arbitrary price higher then what it needs to be? Thus, making the "informed" consumer rethink the low ball prices? If the price for resale, is 50 cents on the dollar going resale, why would anyone go direct. But, if Disney ROFR a few contracts here and there to keep the resale market at 70 cents on the dollar and higher, then the "informed" consumer might just find the hassle to be not worth it?

 

[Dean]

Dean,

Could you please elaborate on this? If DVC was able to buy back BWV at $50-$60 per point, isn't there money to be made?

Also, wouldn't at some point it be in DVC's best interest to ROFR some random contracts to keep an arbitrary price higher then what it needs to be? Thus, making the "informed" consumer rethink the low ball prices? If the price for resale, is 50 cents on the dollar going resale, why would anyone go direct. But, if Disney ROFR a few contracts here and there to keep the resale market at 70 cents on the dollar and higher, then the "informed" consumer might just find the hassle to be not worth it?

Retail sales of timeshares normally return about 40-50% of the sales price to be used for items above the cost of construction (profit, commission, infrastructure). Using investment capital for the prospect of making $20-25 a point over time with risk and paying dues simply isn't cost effective, esp by the time you look at the infrastructure they have to pay for. In addition, every resale point is in competition with a retail points they are trying to sell. ROFR has never been about buying low and selling high but rather about shaping buyers purchase habits as you also suggest. Now IF they stop building new resorts, they can still make money on management but mostly by squeezing owners. IF that were to happen they likely would take what they could get but would have to streamline the department dramatically. In that situation they'd also likely take consignment sales which are actually a better profit AND much lower risk as they generally charge around 25-40% of the sales prices commission with no risk, no dues on the points owned, etc.

 

[mjc2003]

Many add on buyers are familiar with the options but many aren't. Most retail buyers are not. Even then we often see those here on DIS that investigate and still go retail even when the number don't support it. I doubt that will change and I'm expecting DVD to find a way to steer them to retail. If this isn't enough, there will be more changes that many will see as neg.

Thanks for the thoughts. I am new to this, so I think it's hitting a little to close to home; I am projecting my habits throughout the buying process on all buyers. Though it surprises me that both retail and especially add-on buyers are not familiar with the resale market, I guess that's the way of the world. I would never make such an investment without knowing all the possibilities. But, not everybody is the same.
Your theory is that this will drive more business direct; the savvy buyer is not their ideal customer anyway, so they're not worried about that. They're focused on the majority, namely those who spend without doing their homework, and the onus is now squarely on the reps to do their job. Makes sense. I would never fall for it, so I don't see it, but I need to be more "worldly", I guess.
Just like I would never finance a timeshare; if I didn't have the money, I wouldn't buy in. But, I think that's also a minority perspective.

Thanks for your feedback.

 

[Dean]

Thanks for the thoughts. I am new to this, so I think it's hitting a little to close to home; I am projecting my habits throughout the buying process on all buyers. Though it surprises me that both retail and especially add-on buyers are not familiar with the resale market, I guess that's the way of the world. I would never make such an investment without knowing all the possibilities. But, not everybody is the same.
Your theory is that this will drive more business direct; the savvy buyer is not their ideal customer anyway, so they're not worried about that. They're focused on the majority, namely those who spend without doing their homework, and the onus is now squarely on the reps to do their job. Makes sense. I would never fall for it, so I don't see it, but I need to be more "worldly", I guess.
Just like I would never finance a timeshare; if I didn't have the money, I wouldn't buy in. But, I think that's also a minority perspective.

Thanks for your feedback.

I think many on DIS project their knowledge and that of the BBS in general as representative of DVC as a whole; it is not. In addition, timeshare purchases seem to bring out the worst choices in many people. I've had friends who are very bright and who I specifically told not to buy without talking to me, that couldn't help themselves. Some of them bought where I could have steered them to choices that were pennies on the dollar and were within their cancelation window and they still were buying the salesperson's spiel and wouldn't listen. I must admit that as knowledgable as I am, it's often hard to counter the lines of the sales staff at times, esp since they always seem to come up with new wrinkles. There are a couple of members of this BBS I can think of that bought other systems retail and still believe the half truths they learned from the sales staff over the realities from some of us seasoned veterans.

As to my theory on where this is going, I don't think this change will be enough by itself. I do think there will be other changes. Likely they will move toward the more aggressive tactics of other timeshares sales but likely in a reasonable way, maybe similar to Marriott. There are MANY things they could change to accomplish this direction, we'll see. I'll bet there are options they could come up with that area real world scenarios that WOULD get you to fall for it. Let me give you a few examples that many here would seriously consider parting with money for. Say they started DVC II and the only way you'd get access was to add on or pay an additional fee. Or they offered to extend your current contracts for an additional purchase. Or maybe they started a VIP program with benefits enough that you wanted to be an insider. We ALL have our price.

 

[Greysword]

Thanks for the insight, Dean. I do wish DVD would slow the construction process a bit. Having three resorts available for sale seems to be a lot of unsold inventory. I could see two (one at WDW and one elsewhere), since there is now a critical mass of DVC resorts at WDW. Having only one seems to add an air of exclusivity to the new resort, like the early days of SSR construction.

 

[MickeyMinnieMom]

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.

WHAT?!?!!? In timeshare?!?!?! NO!!!!!!