OKW Extension ?

[sjdisneywedding]

Well then welcome home neighbor

but dont think that means I have to start agreeing with ya

 

[simzac]

but dont think that means I have to start agreeing with ya

No, it's more fun having a friendly argument with you

 

[Mtnman44]

Well I don't know if that's a fair comparison, as I doubt Southwest turned over money 35 years before they were entitled to the gas but...

I don't disagree with the concept, just the initial price. Although the time frame is very loooong. 35 years creates a lot of risk. I can't think of anything else where you pre pay for something 35 years early, except maybe certain kinds of whole life insurance and that is incrementally paid over time. Anyway, I don't feel that, given the risk and the 35 years, that the price justifies it. It's just an opinion. If someone else feels it's "worth it" to them, fine. If the cost was $5 a point, I'd be singing a different tune.

You know, years ago, when oil was "cheap" and hung around $15 and $20/barrel and never moved higher, other airlines never understood or considered what Southwest Airlines was doing buying futures contracts on oil to hedge their costs years into the future. When oil went significantly higher and Southwest was still turning in profits because (initially) over 50% of their fuel needs were hedged and other airlines were posting massive losses as a direct result of higher fuel costs, they had a big change of heart as analysts were praising the genius of what Southwest had done.

 

[rsinj]

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[Dean]

On the contrary. The only "risk" is the $2250 we paid...or rather the $1500 difference between what we paid and what you consider the proper price. $1500 is not a sum of money that would make any difference in my lifestyle today, nor would the $10,000 it "could" grow to in 35 years in your "alternative investment" scenario. I would actually hope it were no different for other DVC members. Certainly not something to go crazy over.

And that $1500 today - about the same as the current value of the $10/point DVC paid us for half our first year's points. So, from that perspective, yeah - we only paid about $5/point for the extension.

Small price for the extra 15 years. We have no risk.

Actually you have the largest risk, the yearly mainat fees.

 

[rsinj]

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[Mtnman44]

For the benefit of anyone else reading that might be interested. Here is one of the risks. it's important to realize that this purchase/investment of your $2250 only returns a benefit starting 35 years from now.

Let's say 32 years from now, due to health, personal, travel, weather, or whatever possible reasons, that you no longer desire to travel to WDW or maybe OKW is so run down and un-popular that you can rent if for cash for much cheaper than it costs as a DVC member.... At that point you have not gained anything from your investment but you have lost the opportunity to earn (depending on the % of retun you assign to this level of risk) $43,000 over that time period of 32 years. (based on a $2250 extention cost, 10% discount rate used). These numbers don't "tell you" if it's a good deal or not, that is up to the individual but it does help put it into perspective.

The whole concept of DVC ownership is basically that for those who travel regularly and spend X amount on WDW hotels, they can essentially pre-pay and gain real savings each year. For most people, after 7-10 years, the amount they have saved covers the intial purchase price, even including annual dues. After that the savings continue as it is assumed that dues will not equal the cash cost of the hotel.

Paying something now, but not starting to get the savings from that payment for another 35 years throws this whole thing way off about IF and How much total savings those last 15 years will actually add up to. The opportunity cost (the lost investment amount) is not typically included with the 7 year pay off estimate as it has a much smaller impact at the 7 year mark, but it is a valid argument there as well. However, you MUST include this when you are talking about pre paying 35 years early for any reasonable analysis of a purchase.

 

[sajetto]

I'm interested in reading the perspectives of other owners on this issue. I'm in agreement with the side that says the extension isn't a good deal. If it was I'd be running to buy a resale and then take advantage of the offer. OKW is our favorite resort, even over AKV. If we could go back in time our first contract would have been OKW instead of SSR, but we were newbies and just didn't understand the benefits of buying where you want to stay. I'm just waiting for the right time to buy an OKW contract direct from Disney with the later expiration. The cash just isn't in the bank right now. Until then I'll be dreaming of finally owning at paradise

 

[Saratoga Souris]

"or maybe OKW is so run down"

Where does this come from?? Have you ever known Disney to allow this to happen?

Really??

 

[Mtnman44]

It's just a hypothetical. One possible risk. More likely is that OKW will be fairly well maintained, but there is no getting around the fact that it will be a 60+ year old resort in those final years. No one really knows how that will play out.

It's likely that there will be many, many more newer, more popular resorts. Perhaps OKW will be very cheap to stay at for cash due to the low demand? Who knows, these are just possible scenarios to consider. The point is that a lot can happen in 35 to 50 years to us, to Florida, to WDW, and to OKW itself.

Yes, the same is true of a "Normal" DVC purchase. the difference is of course with a normal purchase you start using your points and gaing a retun (vacation savings) from year one. Since the initial costs are normally covered around year 7 or 8, this mitigates most of the longer term risk.

"or maybe OKW is so run down"

Where does this come from?? Have you ever known Disney to allow this to happen?

Really??

 

[MikeJ]

Right now we're leaning towards saying "no, thanks". One question DW asked me but I only saw mentioned in passing earlier in the thread is the issue of the potential resale value. Do people think the additional years would make a difference to the resale value of a contract if one was to opt in to the extension and then sell their contract a few years down the road? If extended contracts do sell for more on the resale market, would it be $15/point more? I realize this is all crystal ball stuff but I'm interested to hear people's opinions.

- Mike

 

[Dean]

Right now we're leaning towards saying "no, thanks". One question DW asked me but I only saw mentioned in passing earlier in the thread is the issue of the potential resale value. Do people think the additional years would make a difference to the resale value of a contract if one was to opt in to the extension and then sell their contract a few years down the road? If extended contracts do sell for more on the resale market, would it be $15/point more? I realize this is all crystal ball stuff but I'm interested to hear people's opinions.

- Mike

There's no way it'll make up the difference over the next 10-15 years, maybe in 20-30 it'll cross over.

 

[rsinj]

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[Saratoga Souris]

Great way to look at it

 

[Dean]

Now, replace each OKW with SSR and look in the mirror. Yep, those last few years of SSR ownership will be unbearable as it will be over 50 years old! And, who knows, it's possible that it won't be maintained as it approaches the half century mark. And, a night at SSR may cost no more than Pop Century. All hypothetical of course!

Absolutely. If we were looking at adding 10-15 years at the end of the contract, one could say exactly the same thing. The big difference is that when one compares to using now compared to just the last years of the term, there is a huge difference in the scenario and that's true for ANY and EVERY resort we could name, DVC or otherwise. Personally I prefer OKW but it's extremely likely the long term upkeep of OKW will be the highest of any on property resort in terms of the hard and soft goods and exteriors. The only saving grace may be that it doesn't have quite the level of amenities as some of the other DVC resorts and doesn't have the interior spaces to upkeep to the same level. That's what's scary about HH as well and VB ? to a lessor degree though the maints fees at VB have been consistently much higher for other reasons. The only way one can even think about justifying the cost from a dollar standpoint is simply that they expect to use those extra 15 years in one way or another (could be kids or grandkids) and that they are betting the fees and other costs will not outpace the comparable cash costs. Even then I think it's essentially a certainty that one could wait and buy in much later and come out ahead thus my stance it makes no sense for any group other than possibly for a smaller contract. One thing is for certain, that we have a number of years yet to have this discussion about once of twice a year.

 

[Mtnman44]

You forgot to read the next paragraph. Do you seriously not understand the difference? I'm using my SSR contract NOW. I will have saved enough to cover it's cost and dues after my 6th trip!!!!!!

Quote:

Yes, the same is true of a "Normal" DVC purchase. The difference is of course with a normal purchase you start using your points and gain a retun (vacation savings) from year one. Since the initial costs are normally covered around year 7 or 8, this mitigates most of the longer term risk.

Now, replace each OKW with SSR and look in the mirror. Yep, those last few years of SSR ownership will be unbearable as it will be over 50 years old! And, who knows, it's possible that it won't be maintained as it approaches the half century mark. And, a night at SSR may cost no more than Pop Century. All hypothetical of course!