Point Increase / Potential New DVC - Rich's Comment

[Cap]

On 3/26/01 Rich said:

"I think we may even see another increase before VWL sells out. I also think we will hear of another DVC resort VERY soon. I really think it will be at a monorail hotel. Wether its GF or Poly or someplce else along the monorail, I think that would be the only way for them to keep the 2042 ending date."


Rich,

Why do you think that GF, Poly, or somewhere else along the monorail is the only way for them to keep the 2042 ending date? While being on established transportation is a plus, I don't see how that relates to keeping the 2042 date, particiularly as we see WVL rapid pace of sales with 2042 date. With the relatively instant gratification that many Americans seem to want, do you think a big percentage of buyers are really looking at the difference between 40 or 50 years of remaining use of the contact?

Cap

 

[Tigger1]

Computing the cost per point divided by the next 40 years, DVCers are paying less than $2.00 per point per year at this time. Dues are over $3.00 per point per year.

I dont think that the 2042 is a big factor in not selling at this point. A monorail DVC sure would be nice though. If the monorail had non DVC resort guess on it, the guest could get a Monorail Tour of the DVC resort everytime the rode the Monorail. That sure would help sells.

Tigger

 

[Dean]

I've probably been the loudest advocate that DVC is ending it's current tenure in timeshare sales. I believe that as the Right TO USE approaches 30-35 years, sales will be difficult at current prices. Any new resort would need to be finished and sold out well before the 30 years window. Assuming something is already planned and nearly finalized, you're talking at least 2 years from announcement to completion for a small resort like the WLV and BCV, (add 1-2 years for an OKW type arrangemnt), then 2-3 years to sell out (again longer for a larger development). That would give you between 34-38 years remaining at sell out for something announed today.

I think there will be one more AT MOST, I suspect AKL (if there is one more) because it will be easier to sell and they have the space there. I think that will be it and DVC will begin the long process of ending the timeshare reign. I've explained other "clues" previously that lead ME to think they are posturing to get out in 2042. Only time will tell.

Dean

 

[mikesmom]

But I don't totally understand your reasoning.

1)What makes you think it would take 2-3 years to sell out a new resort? They started selling VWL in January and right now they project a sellout by November. Not even one year. The word on DVC is out and has reached a critical mass where it is very desirable. You see folks on these boards stressing out because they can't buy in NY and even wishing they could buy sight unseen at BCV.

2)The end of ownership in 2042 may look like a big deal to those of you who purchased back near the beginning when you had 50 years to enjoy. For those purchasing now, 40 years looks just fine. We bought last year. That means we'll be about 92 when membership ends. Do you really think I care that I won't have it til I'm 102? Or even that I would stress out if I would only get it through age 82? Please! For those just discovering DVC, the deal still looks just fine.

 

[Richyams]

The AKLV could possibly be an exception. I think that the 2042 date is set in stone, agreeing with Dean. The next resort will need something special. It will need something to set it apart. It needs that for TWO reasons.

First, to still be attractive even with the 2042 date. This is pretty obvious. I do think that a monorail hotel would do exactly that. AKLV could also do that....especiallly if the units are OKW sized or larger.

Second, they are going to have to be over $100 per point by then. The point schedule will probably be 25% higher than BWV prefered today. SOmething has to justify those numbers. A monorail rail could, as could palatial AKLV units.

"From each according to his ability, to each according to his needs", Karl Marx,This has failed every time it has been tried, why do we still have liberals?

 

[Lisa P.]

I agree with Dean. In the Right-To-Use timeshare industry, the RTU resorts usually seem to begin by offering enough years left on their contracts that they will still have 20+ years when the last of the buyers join. And that's a very short RTU! Many have 35-99 years for the original buyers.

The problem for Disney is that they would have to reduce their asking price on points if the time frame gets too short. Otherwise, renting would be a better buy and there's no incentive to plunk down a huge chunk of change.

It's really hard to imagine Disney dropping their price on points. Can you see them charging, say, $89 per point, and new members who are still paying their mortgage payment and maintenance fees then seeing a price drop 3 years later to $81 per point??? It would look like a scam, even if it was just recognizing the reduced RTU. Just speculating but I agree with Dean.

 

[fkj2]

At some point, the entire timeshare/hotel enterprise at Disney would have to seem saturated. There are just so many people to fill the vacancies. At times like America is presently incountering, the rooms, not only at Disney but in the surrounding areas, will be under price pressures and suffer from discounting.

About building on the monorail system, if rumors are accurate and Disney expands the system, that might be a feasible thing to do, especially as the population ages, and the need for convenient/handicapped access increases. The draw is the experience of staying "on property." We need look no further than the Budget Board here to see that you can get great room/suite rates at facilities just minutes from Disney's door

 

[KNWVIKING]

VWL is selling out fast, but it's also a very small resort. The appeal of AKL is looking at animals right out your window.Where could they do this with a new DVC resort that doesn't intefer with that view or would make the common areas of the lodge easily accessible. As long as they sell out, Disney will keep building. It's BC now, maybe next yr it's Poly, then Contemp,etc.etc....
So far Disney has shown no saturation level. I read their financial statement last year-their existing resorts were reporting averages of 95-98 percent occupancy year round.They are planning a new All Star opening every other or so.At some point they will need to create a new time share co. so they can go beyond 2042,I personally feel 35 yrs is the max they can go with the existing system.I'm curious- any idea of the median age of first time buyers? I was 38.

 

[PamOKW]

I'm not sure about the median age. The first purchasers of DVC, from what I could see, tended to be older. Parents of older children and/or grandparents. With the opening of BWV and the lowering of the buy in to 150 points I think younger families became aware of DVC and bought in. Of course, the stock market boom didn't hurt either in bringing in the younger owners. I don't think I could guess what the median age today is.

 

[Grotto]

For our travel preferences (5 to 8 nights/year at a deluxe resort) I calculate a "break even" point for DVC of approximately 7 years. With this being the case, it seems that they may be able to keep people joining for quite some time. Maybe until there are 25 years left. If that were the case, they could start DVC 2 in 2017, expiring in 2067, and sell it until 2042 (is for 25 years). Then they can begin reselling the original DVC resorts. This could go on forever.

I guess what would really determine the end of sales for DVC 1 is when people stop buying. I think they'll keep pushing forward with the current program as long as sales are brisk.

 

[Richyams]

I think the 2042 date is hard. I agree with Dean, I don't think we will see any DVC resorts with a date beyond that.

"From each according to his ability, to each according to his needs", Karl Marx,This has failed every time it has been tried, why do we still have liberals?

 

[JeffreyH]

The conventional wisdom I have seen is that as the year 2042 approaches, Disney will have to start dropping its price per point. While this may be true (obviously it all depends on supply and demand and how fast they INCREASE prices now), there is no reason why Disney can't continue to sell points at $100+ in 15 years or even 25 years. Dean said, "As the right TO USE approaches 30-35 years, sales will be difficult at current prices." I disagree. But keep in mind that in 25 years, $100 will be equal to about $50 today.

I know that no one is buying into this as purely an investment, at least not a "financial" one. However, if the price per point is so low relative to hotel prices, they may. Right now the cost is $72/point, and about $4/point as a maintenance fee. With Disney's "deluxe" rooms going for about $300, rental prices per point are $10. Means one can "rent" a DVC studio for about $150/night (assuming 15 points on average, 105 per week). Or, get a room at about half price.

One could buy 150 points for $10,800 today. Rent them to someone for $1,500/year. After paying the maintenance fee, have $900 left over. That is your "income". A few years from now, when Disney's room rates are say $360 (20% increase), I am sure that one could rent their points for $12. Assuming maintenance fees and rental prices both increase at 3% per year, in 2016 main. fees will be $935 ($6.23/point) and rental fees will be a little over $15.50/point. That means you could rent your points for $1,400 more than you pay in main. fees that year.

So, you pay $10,800, get back rental fees less main. fees each year for 41 years, until you have nothing left. Well, assuming all of that, your return would be 12.0% on your "investment".

Lets fast-forward to 2026. How much would one pay to get 150 points per year for 16 years? Well, by then main. fees would be double what they are today - $1,200 per year (assuming 3% annual increases). However, assuming Disney has raised their hotel prices by 3%/year (and they have done well above that in the past), a regular hotel room at Disney will be going for $600. So renting points at $20 each would still offer the opportunity to get a room at half price. So you could rent your points out and "make" $1,800 that first year. If one paid $15,000 for the right to get 150 points from 2026-2041 and rented them, using the 3% increase assumptions, they would have a return of 14% on that "investment". Even better than buying at $72/point today.

The person who pays $100 per point in 2026 and $1,200 in main. fees (more in the following years) will pay a little over $39,000 for 16 years worth of points. Add in some interest on their original purchase, and maybe they pay about $44,000 over 16 years. For less than $3,000 per year they can get 10 nights in a studio room, a room that at the time will be going for $600+. They paid, on average, $18.33 per point ($44,000 / 2,400 points in 16 years). But I'm pretty sure that getting a room at Disney in 2026 for $275 (15 points x $18.33) will be a very good deal.

I'm not saying that there won't be a "DVC II". But given the fact that Disney room rates will continue to increase, and thus rental prices will continue to increase, the value of a price per point at DVC will increase into the future, even when there is only 25 years or 20 years or 15 years left. And this means great things for those current owners who wish to sell in 20 years. I'd be willing to bet that you will get more than what you paid for it.