Point renting hurting trade values?

[tjkraz]

I cooked up this theory the other day while responding to another post and thought it would make an interesting discussion topic. It involves the use of DVC points for non-DVC options. To illustrate, I'll just use one of the WDW resorts--say the Grand Floridian.

When a member elects to use DVC points toward a non-DVC stay, it seems that the process would work something like this:

1. DVC takes the published number of points from the member.
2. DVC coordinates booking of the room with the resort.
3. DVC compensates the other resort (presumedly cash equivalent) for the member's room.
4. DVC then is able to use the member's points to make DVC accommodations available for a cash stay.

As I understand it, DVC is assuming some risk in that if they are unable to turn the member's points into a room that is actually rented on a cash basis, the points are essentially lost.

If the above is correct, I'm theorizing that point rental activities could be devaluing our points in terms of their trade value within the DVC program. With DVC members facilitating the cash ressies for folks who want to stay at OKW, SSR, BCV, etc., it seems that there would be less demand for the rooms on a cash basis (through CRO), thus DVC would have an increasing number of points that go unused.

Certainly one could argue that non-members renting wouldn't stay at DVC if they have to pay cash--and I agree with that to an extent. But certainly there is some element of WDW guest who decides they want to stay in a 1B / 2B / GV and are willing to pay cash, only to later discover the $$$ that can be saved via rental.

Any comments? Could we (DVC members renting points) be at least partially responsible for the deteriorating trade values of non-DVC resorts and cruises?

 

[spiceycat]

no - there are more guests who want to rent points than can through CRO.

if you are talking about why the WDW resorts are so much more per point - WDW must make a profit - it is a business - WDW resorts will always cost more in points than DVC resorts - that is not going to change.

if you have the time and are willing to do the work - then renting your DVC points yourself and paying cash for your other reservations is always better for you.

 

[BigDisneyKids]

Since being new to the timeshare thing as well as DVC, I have but one question for you vets.

When Disney created DVC, did it anticipate its members renting their points out or was this an unexpected consequence?

 

[nuthut]

Originally posted by BigDisneyKids
Since being new to the timeshare thing as well as DVC, I have but one question for you vets.

When Disney created DVC, did it anticipate its members renting their points out or was this an unexpected consequence?

I would say thet DVC expected us to rent our points as the contracts mention it and allow it....

 

[LisaSt]

I agree with NUTHUT it is in the contract so we are free to rent our points out if we wish to. I also agree that there are far more people wanting to rent points than CRO could ever accomodate.

 

[DrTomorrow]

tjkraz,

Your theory seems sound; the big unknown - at least to me - is the demand for DVC rooms through CRO. If there are more people who want to pay cash for a DVC room than there are DVC rooms available - which means that CRO is filling all the rooms DVC "gives" to them - then renting points has no impact.

However, if there are more rooms available than there are people who want to pay cash for them, then those who rent their points are in direct competition with CRO selling DVC rooms for cash, and lower per.point rental costs may be "stealing" customers from CRO/DVC.

Does anyone have any reliable information as to the supply/demand of DVC rooms sold by CRO?

Whoa - acronym overload!

 

[tjkraz]

Originally posted by LisaSt
I agree with NUTHUT it is in the contract so we are free to rent our points out if we wish to. I also agree that there are far more people wanting to rent points than CRO could ever accomodate.

I'm not questioning the appropriateness of people renting points. It happens. Everyone knows that. Debating rentals as a whole is a topic for another thread.

Non-DVC members don't choose point rental over CRO because CRO has no rooms to offer--they do it to save money. This isn't a case of "oh, drat, CRO has no rooms--guess I'll have to rent and pay 1/2 the CRO prices."

When DVC constructs a resort, they sell enough points such that every room could be reserved every night of the week, 365 days / year. Meanwhile, many members advocate staying off-site on weekends or paying cash. People DO get rooms on very short notice (particularly at the larger resorts). And the reality is that the DVC resorts are just NOT at full occupancy 365.

That tells me that someone (DVC members or DVC itself) is forfeiting points along the way.

In short, my theory goes something like this:

Non-DVC guests voluntarily choose rental over CRO due to cost savings. Therefore there is less demand for rooms (at Disney prices) via CRO. Less demand means a greater chance that DVC will be unable to "use" its own allocation of points. More risk on DVC's part justifies the ever-increasing trade-in costs at non-DVC resorts.

 

[Laurabearz]

Originally posted by tjkraz
In short, my theory goes something like this:

Non-DVC guests voluntarily choose rental over CRO due to cost savings. Therefore there is less demand for rooms (at Disney prices) via CRO. Less demand means a greater chance that DVC will be unable to "use" its own allocation of points. More risk on DVC's part justifies the ever-increasing trade-in costs at non-DVC resorts.

My brain hurts!

 

[Happy Birthday Cat]

This is an interesting way of looking at things. To prove it, you would have to know how many people book DVC rooms through CRO, how many rent points from members and how many of those people would book through CRO if they couldn't rent. My guess would be very few. I think most people rent to get a great deal. Not to get a specific type of room. So therefore while I think it's an interesting topic of conversation, I don't think it's a completely valid argument.

The thing I like about this thread is that it is a good topic of discussion. It has nothing to do with whether it's in the contract or not. It's a thought provoking point of discussion.

HBC

 

[SoCalKDG]

Knowing what a person would do if they couldn't rent points is a big factor in all this. If they planned on staying at a value or moderate, then rented points, Disney would see an increase in the dollar payed for that vacation.

You pay $120 for a deluxe studio, but don't get room service, nor any guarentees that your room will actually be there when you get there. A savings over the other deluxes, but not dramatic, and it comes with some risk.

How many point rentals are there in a year? 1000? 2500? 5000?

 

[d-r]

One thing is, speculative and not precise, if people didn't rent points at dvc resorts, there would be more people staying at the non-dvc resorts through CRO (some would stay off property, but there would be some more), so there would be more of a demand for the non-dvc resorts, so the price of the non-dvc resorts would go up, so disney would charge dvc more points for the non-dvc resorts because they are worth more.

 

[Tagrel]

I see the opposite result.

There are so many rentals, BECAUSE Disney keeps the trade values so low. Even at just $10 a point its a HUGE savings to rent points and not trade directly. If there was a decent trade balance I'm SURE most members would trade instead of rent.

And while it may seem that EVERYONE knows about Disney Web sites, this site and DVC rentals, its been my experience that the vast number of WDW travellers don't have a CLUE about discounts, rentals and do little research before going there. (I personally know five families (friends/co-workers) that went this past year without any pre-trip planning - and they could not be CONVINCED to do any planning). --- "My TA got me a package, so I don't need a discount" - Another friend that did listen ended up saving over $500 bucks on tickets and their room from their original 'package deal'. (And no, I didn't rent them points! )

There is a huge percentage of WDW guests that pay the big bucks and don't know any better... And Disney loves each and every one of them!

 

[Dean]

DVC itself doesn't have a risk, the members do. This is a budget item ultimately. I'd seriously doubt there's enough activity to make any difference and even if it did, what would it change?

When Disney created DVC, did it anticipate its members renting their points out or was this an unexpected consequence?

You'd have to ask them but my guess is it was anticipated and planned for to a certain extent, hence the stated allowance in the POS.

I agree with Tagrel, if the values for the CC, DCL, etc were reasonable, there would be far less renting. Remember that CRO is likely to take a cut on the units they rent, I wonder how much, but likely 35-40%. As to how many are rented. Matt Gibbs told be a few years ago it was 75% of the units given up and the points rates have kept going up and up since then. At least in the past DVC has made an effort to keep the units given up to lower demand times. If they rented higher demand times like Xmas, the points exchange costs might be less but so would availability.

Plus, how many points have been sold to people who rented? Quite a lot would be my guess.

 

[tjkraz]

Originally posted by Tagrel
I see the opposite result.

There are so many rentals, BECAUSE Disney keeps the trade values so low.

Certainly the low trade values would prompt people to rent...on that point there is little room for debate. But, have the declining values lead to an unending downward spiral?

Several weeks ago someone (don't remember who, but I hope he or she will take credit) made the point that there really isn't a monetary justification for the increasing point costs of trades. (OK, let's leave greed out of the argument for a moment. )

Let's go back 5 years and (fictionally) assume that a Grand Floridian room would rent for 20 DVC points. Now let's assume that DVC could take those 20 points and convert them into two OKW Studios to be rented to non-members for cash.

This scenario would have its own inflationary increases already built-in. Fast forward 5 years. The room rate at the Grand Floridian has increased, say, 4% per year. However, the cash rate for the OKW Studio(s) has also risen by the same amount!!! You really can't justify the increased point needs for the Grand Floridian just by saying that the Rack Rates have gone up. The reality is that DVC has just as much extra income potential with those same 20 points.

Back to the fictional realm, let's assume that DVC increased the trade-in rate by 2 points per year. The question is: what is DVC's justification for a GF room = 2 OKW studios in 2000 vs. GF room = 2 OKW studios PLUS 10 additional DVC points in 2004.

My hypothesis was that the reduced demand for cash rooms (via the availability of point rentals) is devaluing points in DVC's eyes. Certainly you could argue that DVC fired the first shot, but it leaves one wondering how ridiculous the point rates will look in 10-20-30 years.

The other (perhaps more obvious) answer is that ugly word: Greed. They raise the point values simply because they CAN.

There is a huge percentage of WDW guests that pay the big bucks and don't know any better... And Disney loves each and every one of them!

Oh, I don't think there's any question of that. Last September a co-worker started telling me about a Disney trip their family had planned for Thanksgiving. Her Mother was paying for this "once in a lifetime" trip for about 8 family members to go to WDW together. Turned out the Mother was paying cash for a 2B at VWL for about 5 nights. I think the bill for the room alone was somewhere in the $3500 range!

 

[pwoodham]

And while it may seem that EVERYONE knows about Disney Web sites, this site and DVC rentals, its been my experience that the vast number of WDW travellers don't have a CLUE about discounts, rentals and do little research before going there. (I personally know five families (friends/co-workers) that went this past year without any pre-trip planning - and they could not be CONVINCED to do any planning).

I agree completely. The lastest stats I heard are that Disney still gets 80% of its bookings through travel agents, and I'd be very surprised if the TAs are combing through point rental options to save their clients money.
The people who rent points from members are a minority who have really searched out the options and want the very best deal. Most people simply do not have the time or inclination to do so. I bet members' point rentals have an absolutely insignificant impact on anything DVC does.

There are so many rentals, BECAUSE Disney keeps the trade values so low. Even at just $10 a point its a HUGE savings to rent points and not trade directly. If there was a decent trade balance I'm SURE most members would trade instead of rent.

I also agree with this. Trades are an extravagant use of points, but easy! We saved $3000 on our November cruise by renting out points instead of using them directly. OTOH, we're using 42 points for a 1 night stay at AK Concierge because it's last minute, simple, and we saved a bunch of points by renting to pay for our cruise!
Disney folks are smart, and they know what's happening. If renting was having any negative impact on them, things would change.

 

[tjkraz]

Side Note: I hope nobody reading this thread sees it as a veiled condemnation of point rentals. I really don't care what people do with their points. In fact, I rented points myself before we purchased our own contract. That rental is a large part of the reason that we have since become members ourselves, so I certainly have no axe to grind with those who choose to rent.

Just thought the discussion would be a welcome change of pace.

 

[Laurabearz]

Originally posted by tjkraz

This scenario would have its own inflationary increases already built-in. Fast forward 5 years. The room rate at the Grand Floridian has increased, say, 4% per year. However, the cash rate for the OKW Studio(s) has also risen by the same amount!!! You really can't justify the increased point needs for the Grand Floridian just by saying that the Rack Rates have gone up. The reality is that DVC has just as much extra income potential with those same 20 points.

Back to the fictional realm, let's assume that DVC increased the trade-in rate by 2 points per year. The question is: what is DVC's justification for a GF room = 2 OKW studios in 2000 vs. GF room = 2 OKW studios PLUS 10 additional DVC points in 2004.

Wow.... very good point.

 

[Granny]

Originally posted by tjkraz
Side Note: I hope nobody reading this thread sees it as a veiled condemnation of point rentals. I really don't care what people do with their points. In fact, I rented points myself before we purchased our own contract. That rental is a large part of the reason that we have since become members ourselves, so I certainly have no axe to grind with those who choose to rent.

Just thought the discussion would be a welcome change of pace.

tjkraz...I think you've bent over backwards to point out that this was not a topic to encourage a morality debate on renting points. Your original post was quite clear in that. I think a poster or two might have seen the word "rental" and knee-jerked a response out of habit!

It is certainly an interesting theory. It hurts to try to wrap my brain around it, but I see the underlying concept of the theory. I think I'm in the camp that point rentals are not a big enough influence on things vs cash resservations through CRO. That's based on absolutely no data, just a feeling.

Good topic.

 

[spiceycat]

no you are leaving out CRO - the regular WDW resort don't pay extra for CRO - but anytime a DVC resort goes to CRO from a DVC member trading - they take their share.....

back in 2001 the Polyn you could get for 22 points (off season) - now the same room is 42 points - lagoon view.

this was not because DVC got greed - it was more WDW trying to make it be what the members say DVC points are worth - $10 a point. (okay WDW is greed...)

but even in 2001 members were saying it was a bad deal - I think the room rented then for $250 - now it is $385 with taxes $430 - I think the 42 points is pretty close to $10 a point.

if you buy DVC then if you want a fair price for your points most of where you will be staying in at DVC resort. this has always been true from the first.

when DVC has to go outside of DVC - the cost will increase - that is a supply and demand rule.

if you want to give up 14 points to stay in a moderate when you can have a 1-bedroom at OKW for 16 points - almost the same time - hey that is your right!!!

we enjoy the flexibility of DVC - flexilbility comes with a price....

II cost per point has gone down - because lots of II exchangers want the DVC resort.

back when BWV was still the new kid on the block - lots of people with lots of money - would not buy at DVC - why - they would rather rent - well guess what - in a few years they couldn't get their grande villa when they wanted it - why - because a DVC member had it - that is when some of these people joined DVC - not for the better value - but to get what they wanted when they wanted it....

as long as there are people like that - DVC will be in demand - they probably won't even consider renting from a member....I am sure you know the type!!!

One of my solo trips to BWV - I think meet one of these - they had 3 Grande Villa - they were new members and they say they never heard of a studio......oh to have that much money!!!!

 

[LisaSt]

Good point pwoodham we to rented out our points to pay cash for our cruise especially after working out the cash price vs the trade of points price. We were able to rent out our points and pay for the cruise and pay our dues and have spending money for what it was going to cost us in the points trade we were far better off doing it this way.

Darren