Predicting the Future is Hard

[KAngela]

Okay, standard disclaimers apply: do your own research, I'm not a financial advisor, and Madame Leota did not return my calls to tell me whether I'm on the right track here or not.

After reading lots of posts and arguments and debate about DVC and hotel price futures, I got intrigued enough to dig into some historical data. I found a couple of pieces of data on pricing that cross-confirmed each other, so I feel kind-of comfortable that these are pretty good historical data points, and this is what DVC direct, retail, and resort hotel pricing have looked like:

• DVC Direct pricing has increased at a rate of 5.75% per year; this is taken by the BLT pricing change from 2008 (112 $/pt) to 2022 (245 $/pt) (from some historical DVC pricing info I found)
• DIS Resort pricing has increased at a rate of about 6% per year; this is taken by a Contemporary price of 65 $/night going to about 1000 $/night for similar rooms (I found this pricing in two different threads by two different posters)
• DVC Resale pricing has increased at a rate of about 4% per year; this is taken by the BLT resale price change from 2015 (112 $/pt) to 2022 (149 $/pt) (again from some historical DVC pricing info I found)

Obviously I only looked at one resort (the one I'm an owner at). And there are all sorts of seasonality and incentive offers that can change this. So we shouldn't read too much into them or treat them as gospel. At the same time, the resort pricing covers a long period of time with very different economic conditions, and is close to the direct pricing percentage raise, so let's roll with it for a moment.

What would that mean, then? Well, you can consider that resale is driven by both the direct pricing (which is the initial cost of the underlying asset) and the resort pricing (which is the cost of the competing option). Those are both controlled by the same company, and show a similar rate of percentage increase over time. Let's figure that the rate of growth is going to be 5.75% annually for both, and look at where we'll be in 2030:

• DVC Direct pricing will go from 245 to about 380 $/pt for BLT
• DIS Resort pricing will go from about 1000 to 1560 $/night for Contemporary

That leaves us wondering where resale pricing would go. Growing at its previous level of 4%, it'd be at about 200 $/pt by 2030. That's a pretty remarkable discount over direct, though, and you'd think at that gap it would get ROFR'd pretty aggressively to turn a quick profit. In 2022, resale pricing is about 60% of the direct price at BLT; if it was similarly positioned in 2030, and that projection was correct, it would be more like 230 $/pt, or a good 10% higher than its traditional growth.

I will leave aside how robust the DVC market would be if direct resort pricing was over 1500 $/night, but it's worth recognizing that's where history says we're headed, our period of high inflation right now not even considered.

So if you bought BLT with incentives right now, there's a chance the resale price would pass the direct pricing you paid after 2030. Obviously, this alone doesn't make it a good idea or an investment or anything else: after all, you tied up the money, you still had to spend to go to Disney, etcetera. But I do wonder what it means for the resale market if the direct and resort pricing trends continue. They'd have to pull resale upwards in their wake, wouldn't they?

Whatever happens, I guess in 2030 I can recalculate and see how close these numbers are. And if they are close, by some miracle, you can pretty much count on me pretending to be the absolute authority on where DVC pricing will go in the future!

 

[SleeplessInTO]

Love it! Fun post. Right now I'll take anything that tells me buying BLT direct for $202 is a good deal Confirmation bias is real, and it makes me so happy!

 

[CarolynFH]

We didn't regularly compare cash prices for our stays to our DVC cost, but I do remember that a year or two after we bought (1997), Orange County raised the hotel tax rate from 4% (? - not sure) to 6.5%. That alone made DH feel good, since we didn't have to pay hotel tax any more! Something else to keep in mind, though!

 

[KAngela]

We didn't regularly compare cash prices for our stays to our DVC cost, but I do remember that a year or two after we bought (1997), Orange County raised the hotel tax rate from 4% (? - not sure) to 6.5%. That alone made DH feel good, since we didn't have to pay hotel tax any more! Something else to keep in mind, though!

That's a really good point, and I didn't think of that. Of course, you also pay dues on points whether you use them or not, and those come out to a significant chunk of change, but the two constants in life are Death and Taxes, and the latter never go down!

 

[Great3]

I don't know if I hope DVC pricing goes up or down!!! I hope it goes up so what I own becomes more valuable. But I hope it goes down so I can buy more points cheaper. So, I hope you are right, and I hope you are wrong. I am just such a confused / conflicted person, what can I say?

Great3

 

[Lorana]

Definitely the idea that, given time, resale prices will match or exceed direct costs is a factor, though I’m curious to know if it’ll continue to hold true over time considering just how expensive Disney (in general) has become. It can’t always go up this way!

When we bought the bulk of our direct contracts in Summer 2020, we took advantage of those crazy incentives plus the fact that you could bundle RIV and CCV together, and managed to buy CCV direct at $175/point* and RIV at $150/point* and I figured it would take years to see resale close to my direct price (I bought CCV resale for $130/point in summer 2020 as well), and I look at the resale market now and am like… damn. (My VGC went from $195/point I paid in summer 2020 to $300+ now for a small contract!).

That said, perhaps I’m a pessimist, but I feel like the resale prices right now (and even direct. BCV at $265??) - which yes I’ve paid on some new resale contracts - are inflated, and I’m expecting the bubble to burst. But maybe that’s because I can’t believe my contracts are holding so much value!

*I tend to say my RIV contract is effectively ~$143 per point, because we had been on the fence about getting RIV - yet we knew we wanted a small contract at an Epcot resort for festivals and we just were unwilling to pay BCV prices for a 2042 expiration - and when my guide told me we could combine to get the higher incentives, we were sold. So I was prepared to pay $180/point for our CCV contracts. Adding RIV dropped them to $175, and when you just did the difference in cost between what I was going to pay for CCV and what I paid to add RIV, it made my RIV $140/point or effectively $143/point with remaining 2020 dues factored in.

Now if that BWV incentive had been offered last summer? We may very well have gone BWV instead of RIV. Or at least been tempted, lol! Certainly we may have strongly considered rhe $133 Aulani offer for SAP.

My only real regret is not having gotten more points at the time, considering I just picked up some CCV resale for an average of $170/point across the three small point contracts. That’s only $5/point less than my CCV direct points in 2020! I really like having unrestricted points - partly as I’m still holding out (faint) hope for Reflections. ;-)

 

[peabody58]

For those that drive, the parking costs are very small part of DVC dues where as WDW Resorts is $25/day. More indirect cost savings for DVC.

 

[RamblinWreck]

For those that drive, the parking costs are very small part of DVC dues where as WDW Resorts is $25/day. More indirect cost savings for DVC.

Great point! This is definitely an important factor for us.

 

[RamblinWreck]

• DVC Direct pricing has increased at a rate of 5.75% per year; this is taken by the BLT pricing change from 2008 (112 $/pt) to 2022 (245 $/pt) (from some historical DVC pricing info I found)

I'm not so sure that this is the best way to calculate the change in DVC direct prices.

It may be more apt to compare what BLT sold for when it went on sale in 2008 to what RIV is selling for now.

Or, if you want to use BLT as an example, compare what it was being sold for when it first sold out to now. There's a lot more than just inflation involved in the difference between a resort that's being actively sold and one that's been sold out for some time.

 

[Ruttangel]

I have some more old resale stats here, only valid up to q1 2021 though https://www.disboards.com/threads/purchasing-dvc-analysis.3828292/

 

[KAngela]

It may be more apt to compare what BLT sold for when it went on sale in 2008 to what RIV is selling for now.

Well, we can only sort-of do that. As near as I can tell, BLT was for sale at 112 $/pt in 2008, and RIV is for sale at 195 $/pt right now. But of course 2008 dollars are more valuable than 2022 dollars, so we can't just declare that BLT is cheaper than RIV at the same point in the sales cycle. And this is where the rub comes in when you calculate something like this, because you have to decide what the annual percentage increase of that 112 is for 14 years to see how it compares to RIV. There's two methods I can think of:

• I looked up average inflation in a CPI calculator for 2008 to 2022 and it says the average is 1.95%, which means $1 in 2008 is worth $1.29 in 2022, so that equivalent BLT pricing becomes 145 $/pt. Looked at like this, RIV is more expensive at this point in its life cycle than BLT. I have my doubts about that CPI factor, as it feels too low, but three different sites used it (all probably from the same source). Even if we bump it up to 3% (a nice historical average for inflation) that 112 only goes to 169 $/pt, still under RIV.
• Dis-flation, though, is much higher: something like 6%, as shown in direct pricing. Using that factor we see that BLT goes to 245 $/pt, which makes RIV cheaper than BLT at the same time in its life (which is what we already knew). Given that they want to sell RIV, and BLT not so much, it makes sense that they're trying to incentivize you to buy there.

Schrodinger's Pricing, I guess, both lower and higher than RIV.

 

[Lorana]

Well, we can only sort-of do that. As near as I can tell, BLT was for sale at 112 $/pt in 2008, and RIV is for sale at 195 $/pt right now. But of course 2008 dollars are more valuable than 2022 dollars, so we can't just declare that BLT is cheaper than RIV at the same point in the sales cycle. And this is where the rub comes in when you calculate something like this, because you have to decide what the annual percentage increase of that 112 is for 14 years to see how it compares to RIV. There's two methods I can think of:

• I looked up average inflation in a CPI calculator for 2008 to 2022 and it says the average is 1.95%, which means $1 in 2008 is worth $1.29 in 2022, so that equivalent BLT pricing becomes 145 $/pt. Looked at like this, RIV is more expensive at this point in its life cycle than BLT. I have my doubts about that CPI factor, as it feels too low, but three different sites used it (all probably from the same source). Even if we bump it up to 3% (a nice historical average for inflation) that 112 only goes to 169 $/pt, still under RIV.
• Dis-flation, though, is much higher: something like 6%, as shown in direct pricing. Using that factor we see that BLT goes to 245 $/pt, which makes RIV cheaper than BLT at the same time in its life (which is what we already knew). Given that they want to sell RIV, and BLT not so much, it makes sense that they're trying to incentivize you to buy there.

Schrodinger's Pricing, I guess, both lower and higher than RIV.

If you’re going to compare BLT at opening, you should compare RIV at opening - which was $188 in 2019. BLT still ends up being “cheaper” but it’s a slightly more accurate comparison.

 

[upritbass]

Love it! Fun post. Right now I'll take anything that tells me buying BLT direct for $202 is a good deal Confirmation bias is real, and it makes me so happy!

Buying VGC at $300+ per point.