Resale prices and savings

[jerseyduke]

Somewhere circa 2013, DVC Marketing material got replaced. I was at the world, when one day, the material said "Save up to 70% on future Disney vacations*". The next say, everything had been replaced with 50% (and of course the asterisk). Now I am sure Disney has a (very liberal) formula to determine that number. The drop from 70-50 was right around the time of VGF. So direct points were high. Now they are at 168 for the poly.

If you can save up to 50% at the Poly by buying into it, how can there be savings on other purchases?

I would think the variables in determining that number include years, or am I incorrect? I get the whole time value of money, discount rate to bring money into present value etc. 2055 points do not contribute to your overall savings as much as current points, but they still contribute some, right?

But if you can save up to 50% at the Poly (for a 50 year contract) at 168 per point, how can you save paying(direct) 155 for Beach Club/ Boardwalk / Wilderness Lodge, which are only good until 2042?

I think even resale prices (particularly beach club, since it is the highest) are pushing the savings down to the point they are minimal.

So, what am I missing, or not seeing in the proper light?

 

[SuperRob]

Depends on how they're calculating it, but if they're comparing the cost of your points for a stay to the cost of buying a similar room at the same resort, then yes, the "savings" can be significant. For example, with my stays, I calculate the "cost basis" of my points (price paid per point divided by the years left in the contract, plus the dues per point), multiply that by the number of points we'll use to get the "Cost", then divide that by the nights stayed to get the cost per night. Then I compare that to what it would cost to stay in the least expensive room in that resort per night.



2012 was Aulani. 2013 was Grand Cal. 2014 was Grand Floridian. 2016 is Aulani again.

The other columns are the cost differences, the "savings", total "savings", and "savings" less what we've paid in so far. (So using this math, we have "broken even" on our fourth total trip. We paid cash and did not finance.)

In our case, for that Aulani stay, we did "save" about 75%. Whether this is a "fair" calculation or not is entirely dependent on whether rack rate for different class of room is a fair comparison. Other people will have other opinions on this; I use it because it's as close an apples-to-apples comparison as I could come up with. Anyway, this is what we use, and I suspect Disney does something similar.

What I usually tell people who ask is that DVC will only save you money if you usually stay at Deluxe resorts. If you're happy with Moderate resorts, you won't save money, but you'll get better locations and accommodations. If you're happy with value resorts, saving money is out of the question, but your stays will be a massive upgrade.

Note that I also left out how much we've "saved" with our DVC discounts for various things. Some people may find that to be significant. Others will say that you might not have ever made those purchases if not for the discount, so you didn't really save.

 

[_auroraborealis_]

I think they made up both numbers, and it's wildly variable on a per-person basis. Not even sure if they figure it based on what they charge cash for a DVC room via CRO vs. DVC purchase, or DVC purchase vs. Standard Resort Room, which we all know are not the same.

Marketing is often a lie.

 

[disneynutz]

IMO the savings quoted is like posting that a sale is for one day only or only the next 20 callers get the discount, exaggerated marking.

Bill

 

[SuperRob]

So I didn't touch on the resale prices at all, but you would figure the "cost basis" of the points the same way ... price per point paid divided by number of points, then add the dues per point for that UY. Resale will probably catch you up faster, but it's not like the direct buy can't pay off, too. Honestly the single biggest factor that affects your ability to save money is if you financed the points. Interest eats into those savings quite a bit. A lot of people will say to never finance because it changes your break even from 3-5 years out to 12-15 years, and if you sell before you get there, you actually lost money. The one nice thing about financing is that your up front cost is a lot lower. But you're trading that for much larger monthly costs, and it catches up fast.

I think they made up both numbers, and it's wildly variable on a per-person basis. Not even sure if they figure it based on what they charge cash for a DVC room via CRO vs. DVC purchase, or DVC purchase vs. Standard Resort Room, which we all know are not the same.

Marketing is often a lie.

No offense, but you don't know anything about marketing. I do. I have a degree in it, and it's also a big part of my job.

Marketing is rarely a lie. You can't get away with that, particularly if you're a massive company like Disney. But you DO need to be able to back up your perspective of the facts, and that's where the "art" in marketing comes from ... highlighting the positives, minimizing the negatives, and getting the customer to see things from your perspective.

So specifically, they may have certain calculations and hypotheticals (just like mine above) that say you can save that much. And usually you come up with some sort of a worst case scenario to present a "conservative" number. That's why they likely went from 70% to 50%. (That, and price increases probably skewed the numbers the wrong direction.) A customer may look at that, and say, "Hey, even a 25% savings would be great!" That's the reaction Disney wants. It doesn't matter if the comparison they use is skewed in their favor. The goal is to get the customer to have this reaction.

Now then, SALES is normally where you'll find the people who will either shade the truth or outright lie. It's easier to do that in person when there's no record of a conversation. But when they do, they're usually violating their own policies. Marketing very rarely will outright lie, and that tends to only happen in less trustworthy companies.

In my case, the DVC Guide never lied. In fact, it was the softest sell I've ever encountered. He just presented the info, handed us the gift card, and that was that. After looking over the information and doing our own math, we went back and bought. Did we overpay going direct and not investigating the resale market? Yes, but we're still satisfied with the purchase, and by my own math, we've extracted a lot of value.

 

[CraigInPA]

The most recent issue of Consumer Reports stated that the break even point was between 7 and 13 years, depending upon how you calculate the "savings". In the 7 year calculation, you're using the cost of a hotel room versus the annual fee and a pro-rata portion of the initial investment. In the 13 year calculation, they included other issues like interest and such. In the end, the pundits stated that if you are intending on going to the Poly every year for x straight years, you'll really see significant savings after that x+1 year. They ignored re-sale, and typical discounts offered by Disney for hotel rooms, both of which would greatly extend the break even point.

When all is said and done, you have to ask yourself if you are going to enjoy an annual Disney vacation every year for the next x years, and do you have cash to buy the points? I. personally, cannot say that DVC is a good option for anyone who must finance the purchase. When you finance the purchase and pay interest, you're going to extend the break even period to a ridiculously long time, likely for more years than a typical young family would go consecutively.

 

[ziravan]

DVC doesn't save me money. Never did. Never will.

I spend much more on Disney with my DVC account than I ever would without it.

DVC changes the way I do Disney.

Before DVC, Disney was a sporadic trip, at best: 2003, 2004 (solo), 2005, 2007 (solo) 2013; 5 trips in ten years with two of those trips being an extra night at Disney while at a conference.

Since DVC in 2014:

Sept 2014, Nov 2014, Feb 2015, Jun 2015, Aug 2015, Dec 2015, and 4 trips currently all planned in 2016.

Jun 2015 was a big family trip where we invited a total party of 19 of my DW's family to three rooms at BCV over 5 nights. DVC made that possible.

We spent 29 Park days at WDW in 2015, and including hopping, our per gate entrance was $16. Mind you, I'm not a Florida resident. I live in Texas.

Plus, instead of staying off Disney at a budget hotel, or on at All Star Sports or POR, now I stay at Beach Club and Poly.

DVC makes WDW a routine event in our family.

My coworkers, "So, when are you going to Disney again?"

Me: "Soon."

We like going to Disney often. We have the funds and flexibility in work schedules (and we homeschool) to make it possible.

DVC makes it possible.

We might get tired of it someday. I just doubt that'll be soon.

I get the focus on evaluating the costs savings of DVC. It's just not how DVC works for me, and it never will.

 

[_auroraborealis_]

No offense, but you don't know anything about marketing. I do. I have a degree in it, and it's also a big part of my job.

I have an MBA in marketing, and it's a big part of my job, too.

I'll stand behind the statement. Fundamentally, a lot of marketing involves some pretty hard assumptions along the way. Take a Kohl's 30% off coupon as an example. Sure, it's a SALE!! but their day-to-day pricing is horrible when comparing similar items at other stores. Rack rate is really a rough equivalent of that in hotels, and all you have to do is look at all the people who book and hope for a discount later to see how that works for Disney.

DVC is a lie in that they're making assumptions along the way, many of which are likely not applicable to their target markets, and the math is pretty hard to work out for most people. DVC is often an emotional decision.

Example assumptions:
1. People would be paying rack rate for a DVC room via CRO.
2. People would be paying rack rate for a standard Deluxe room, and that Deluxe room is the equivalent of a DVC unit.
3. People would be traveling as frequently at rack rate pricing, staying deluxe, as they would be as a DVC owner.

etc.

In general, I would say any of those 3 items is highly unlikely to be true for most DVC buyers.

 

[ziravan]

Example assumptions:
1. People would be paying rack rate for a DVC room via CRO.
2. People would be paying rack rate for a standard Deluxe room, and that Deluxe room is the equivalent of a DVC unit.
3. People would be traveling as frequently at rack rate pricing, staying deluxe, as they would be as a DVC owner.

etc.

In general, I would say any of those 3 items is highly unlikely to be true for most DVC buyers.

Taking my post just above yours as an example, none of my actuals nearly match any of the these three assumptions you'd have to make to buy DVC based on an advertised huge discount.

I was only researching DVC to rent points. I realized the value in owning would be to change how I do Disney. What I wanted out of DVC was to say, "No big deal Soarin' (or Pirates, etc) is closed, I'll be back."

This DVC board, with dozens of routine posters committed enough to DVC to make it part of their daily conversation, that was a huge selling point for me.

This week, a co-worker's family member is at Disney staying at a moderate. I gifted them a night at Poly Lake View. Because I could. I got a text saying the DGD4 of my coworker said watching fireworks from 3rd floor balcony "was so magical." That's why I own DVC.

The marketing? We are already conditioned, as a society, to at least mentally mark 50% off on any sales gimmick we hear.

Kohl's was used as an example. I already consider that rack rate is at least 50% overpriced. I already mentally view "30% off" as "only 20% overpriced" anyway.

I never for a second considered that DVC could save me money. I knew for a fact that it wouldn't. It's not why I bought.

 

[jerseyduke]

I am not questioning the saving you money aspect.

Since it is the newest one, I am using Poly in my example:

My point is, let's accept it saves you 50%. I always assumed that meant 'in total over the life of a 50 year contract', factors in Time Value of Money at some rate, etc, etc.

If that is the case, then yo would save less over a shorter contract. If the contract was one year, you would lose your shirt, 2 years, just your t shirt, so the number of years has to matter.

I do not see how 2042 resorts can save you anywhere near 50% at 155 a point, and probably using Disney's formula, may not save you a penny. If buying direct, the Poly has to be an almost infinitely better value based on 168 per point, 50 years, vs 155 per point, for 26 years. Or am I just not thinking in the correct way?

 

[ziravan]

In fact, I doubt very many people at all could save any money on DVC, over any length of time.

DVC will change your relationship to Disney.

That will change your spending behavior.

And THAT, in my opinion, renders any discussion of potential savings as academic.

The real question about DVC ownership is what do you expect to get out of it, and is that worth the price. For us, absolutely.

 

[SuperRob]

I have an MBA in marketing, and it's a big part of my job, too.

I'll stand behind the statement. Fundamentally, a lot of marketing involves some pretty hard assumptions along the way. Take a Kohl's 30% off coupon as an example. Sure, it's a SALE!! but their day-to-day pricing is horrible when comparing similar items at other stores. Rack rate is really a rough equivalent of that in hotels, and all you have to do is look at all the people who book and hope for a discount later to see how that works for Disney.

DVC is a lie in that they're making assumptions along the way, many of which are likely not applicable to their target markets, and the math is pretty hard to work out for most people. DVC is often an emotional decision.

Example assumptions:
1. People would be paying rack rate for a DVC room via CRO.
2. People would be paying rack rate for a standard Deluxe room, and that Deluxe room is the equivalent of a DVC unit.
3. People would be traveling as frequently at rack rate pricing, staying deluxe, as they would be as a DVC owner.

etc.

In general, I would say any of those 3 items is highly unlikely to be true for most DVC buyers.

None of what you're saying makes the DVC marketing a "lie." It would have to be completely untrue, not to mention the intent matters. Marketing, by definition (and I can't believe I'm explaining this to someone with an MBA), has to make some assumptions about the audience, because you can't know in advance. The point is to be reasonable in the assumptions. Now you could argue that maybe the assumptions made by DVC aren't reasonable, but as long as they're clear about those assumptions, it's not lying. It's perspective. Yes, they will use the perspective that is most advantageous to them. Again, doesn't make it a lie. And if the buyer doesn't educate themselves, or come up with their own set of assumptions, that's not because DVC lied to them.

And for the record, rack rate for a Deluxe room is a reasonable assumption, though not completely applicable to all circumstances. It did, in fact, apply to me. I'd only ever stayed at a Deluxe resort, and I paid rack rates both times (because I was on a free dining promotion).

Using emotion in marketing is fine, too. And yes, most people (including myself) buy with emotion playing a huge role in that. Again, doesn't make it a lie. Just because they put dreams in my head of all the wonderful trips I'll take my daughter on, doesn't mean they're lying in some way. In my case, I had no kid and no plans for kids at the time, so they couldn't use that tactic effectively on me. But when we did, in fact, end up with a daughter, you bet all that imagery popped up into my head, and was a factor in us deciding to buy more points (this time, via resale).

Lastly, and again, you should know this ... you can't flat out lie in marketing. There are laws against it, and companies who do it get sued. There has to be some element of truth to the marketing. Disney won't take the risk. And the timeshare industry is probably one of the most regulated specifically because of all the shady companies out there.

tl;dr - Just because the assumptions don't apply to you doesn't make it a lie.

 

[ziravan]

I am not questioning the saving you money aspect.

Since it is the newest one, I am using Poly in my example:

My point is, let's accept it saves you 50%. I always assumed that meant 'in total over the life of a 50 year contract', factors in Time Value of Money at some rate, etc, etc.

If that is the case, then yo would save less over a shorter contract. If the contract was one year, you would lose your shirt, 2 years, just your t shirt, so the number of years has to matter.

I do not see how 2042 resorts can save you anywhere near 50% at 155 a point, and probably using Disney's formula, may not save you a penny. If buying direct, the Poly has to be an almost infinitely better value based on 168 per point, 50 years, vs 155 per point, for 26 years. Or am I just not thinking in the correct way?

But owning at BCV gives me 28 years (from the time I bought) of enjoying vacations where I want to stay.

We love BCV. We love Storm Along Bay. SAB has one of the few deep water pool areas at Disney.

Why on earth would I give up more than two and a half decades staying where we want to stay for some academic exercise about some hypothetical savings? That's the crazy talk, if you ask me.

BCV being a 2042 resort was about 3% of my decision making process.

My DGS2 will be 28 when my BCV contract ends. In the meantime, BCV will be an essential part of his entire childhood memory set.

How much is that worth?

The $84/point we paid was a bargain.

 

[_auroraborealis_]

I do not see how 2042 resorts can save you anywhere near 50% at 155 a point, and probably using Disney's formula, may not save you a penny. If buying direct, the Poly has to be an almost infinitely better value based on 168 per point, 50 years, vs 155 per point, for 26 years. Or am I just not thinking in the correct way?

Anyone paying $155/point for the 2042 resorts is out of their mind or has cash to burn.

Disney does not present any information on the value of resale. They don't get a cut there.

 

[SuperRob]

.

It just occurred to me reading back over my posts that I was unnecessarily harsh and assuming towards you. I apologize, and I hope you'll accept my apology. Some people consider any shading of the truth to be a "lie", so I can understand your perspective on the matter. (Quoted you just so I could alert you.)

 

[jerseyduke]

But owning at BCV gives me 28 years (from the time I bought) of enjoying vacations where I want to stay.

We love BCV. We love Storm Along Bay. SAB has one of the few deep water pool areas at Disney.

Why on earth would I give up more than two and a half decades staying where we want to stay for some academic exercise about some hypothetical savings? That's the crazy talk, if you ask me.

BCV being a 2042 resort was about 3% of my decision making process.

My DGS2 will be 28 when my BCV contract ends. In the meantime, BCV will be an essential part of his entire childhood memory set.

How much is that worth?

The $84/point we paid was a bargain.

I think you mistook my question. I just put in an offer on a VWL contract at 87 pp, so 84 per point at a resort with the same expiration makes sense from my eyes for certain. I love Beach Club, at at 84$ per point you got a steal. Its worth more today than you payed for it! However, not buying said contract does not mean you give up two and a half decades of staying where you want; you can still go, you just have to pay cash. Noone would pay 20K per point, as you would lose money. You would pay cash every year instead.

My question was more mathematical; using a 2042 resort, at what price per point do you actually not save any money. (Simple, straight up comparison, using DVC for your room, versus paying cash for a hotel room) There is a Price per point, at which you would be better off forgoing DVC, and just paying cash every year, and was wondering what it was. I think 84$ per point is well below that level. I think 155$ (which is what Disney is charging for direct purchase) is probably above that point. It is really a question as to how to put a proper value on future points, and how they affect savings.

I was using the current marking of "save up to 50%" as a basis for my inquiry. What would be the percentage using the exact same method to calculate the savings based on 155 per point with 26 years of life left vs 168 per point with 50 years left.

Obviously there is a lot of variables, rate of return on your purchase price over 26 years, inflation, etc. S&P compounded annual growth rate from 1970-2015 is about 6%, So going with that

I am not questioning anyone's decisions on buying, where they bought, or reasons why, just curious about the math of money, I am a tech guy, not a finance guy.

 

[ziravan]

I think you mistook my question. I just put in an offer on a VWL contract at 87 pp, so 84 per point at a resort with the same expiration makes sense from my eyes for certain. I love Beach Club, at at 84$ per point you got a steal. Its worth more today than you payed for it! However, not buying said contract does not mean you give up two and a half decades of staying where you want; you can still go, you just have to pay cash. Noone would pay 20K per point, as you would lose money. You would pay cash every year instead.

My question was more mathematical; using a 2042 resort, at what price per point do you actually not save any money. (Simple, straight up comparison, using DVC for your room, versus paying cash for a hotel room) There is a Price per point, at which you would be better off forgoing DVC, and just paying cash every year, and was wondering what it was. I think 84$ per point is well below that level. I think 155$ (which is what Disney is charging for direct purchase) is probably above that point. It is really a question as to how to put a proper value on future points, and how they affect savings.

I was using the current marking of "save up to 50%" as a basis for my inquiry. What would be the percentage using the exact same method to calculate the savings based on 155 per point with 26 years of life left vs 168 per point with 50 years left.

Obviously there is a lot of variables, rate of return on your purchase price over 26 years, inflation, etc. S&P compounded annual growth rate from 1970-2015 is about 6%, So going with that

I am not questioning anyone's decisions on buying, where they bought, or reasons why, just curious about the math of money, I am a tech guy, not a finance guy.

Yes and no. Obviously at 20k/point, my 250 BCV points ($5 million dollar contract) wouldn't be worth it.

By the same token, comparing DVC to rack rates doesn't make sense to me, either.

Without DVC, my previous experience with WDW is by package vacation. I paid for a room and prob tickets together, then transportation, then a food and souvenir budget. Easily $5K to come visit Disney.

THAT total package is what I compare to DVC.

Without DVC, I wouldn't have an annual pass. I didn't. No need when you visit 4 or so days every other year.

Without DVC, every trip is a flight. Every trip is being a prisoner to the World, just as WDW intends, with all its costs.

With DVC, I use my annual pass. With those two pieces in play, sometimes we drive and stay in a 1 BR and eat in. Sometimes not.

DVC changes the way I do Disney. I don't save money; I go more often. Much more often.

A rack rate package doesn't compare.

It's like trying to find the value of my Porsche by comparing it side by side with a Ford, Lexus, or BMW. I don't care if a Porsche only makes sense if I'd normally drive a Beemer and doesn't make good financial sense when compared to a Ford.

It's a Porsche.

It's DVC.

I find the DVC ad campaign that I can save 50% off deluxe stays with a break even in X number of years to be very academic.

At what price point does DVC not save money? If they gave it away, DVC wouldn't save me money (because now I'm going to WDW 4x/yr instead of every other year). And, I don't care. I didn't buy in to save money. I bought in because we like Disney enough to use three weeks worth of points and APs a year.

A rack rate package isn't in the same category of comparison.

 

[jerseyduke]

Yes.....it is academic. I want to learn about those academics, that is exactly the point to my post!

Maybe I do not explain myself well enough.

Disney, by use of some formula, claims you can save up to 50%.
two parts to this have to include, price per point, and length of contract; obviously there are more.

I wonder what that percentage would be for a 2042 resort, at 155 per point.

Yes, it is academic, but that is what I am asking, because it is exactly those academics I am interested in, and there are people who post here that can answer such a question.

 

[SuperRob]

Yes.....it is academic. I want to learn about those academics, that is exactly the point to my post!

Maybe I do not explain myself well enough.

Disney, by use of some formula, claims you can save up to 50%.
two parts to this have to include, price per point, and length of contract; obviously there are more.

I wonder what that percentage would be for a 2042 resort, at 155 per point.

Yes, it is academic, but that is what I am asking, because it is exactly those academics I am interested in, and there are people who post here that can answer such a question.

Do the math. I showed you how. Take a theoretical BCV contract ... maybe 100 points at $155 a point. Total cost is $15,500, plus dues of $613 for the year. Figure out the cost basis. 100 points / 26 years of life left is roughly $3.85. Then add the dues per point, which at BCV is $6.13, so that's $9.98 per point. Figure how many points it would take to stay in a studio for a week. I only stay in the slow seasons (I'm frugal with my points), and I stay in studios because my family is small. An Adventure Season week is 107 points. OK, so if I don't want to borrow, I need to buy 7 OTU points at $15 each, for $105. 100 points times the cost basis is $998, plus $105 is $1103. Divided by 7 gives you a DVC cost of $157.57 per night for that room.

Now one quick note ... notice that Beach Club only factors in because of the dues and the price per point. I could stay anywhere, and that cost per night doesn't change. I could stay at OKW, or I could stay at the Grand Floridian. Cost to me was the same because it's Beach Club I bought.

Now, you just need to use whatever you think is fair in determining how much it would cost you to stay at WDW for that same week. I try to get as close to an apples-to-apples comparison as I can, so I just go to the WDW site and see how much the cheapest room at Beach Club is for the third week of September. There are no standard rooms available, so I'm using the Deluxe Studio cash price, which is $414 a night. 1 - ($157.57 / $414) is 62%. That's how much I "saved" versus paying cash for the same room. If I chose to stay at a different resort, that number is going to be different, but my cost per night ... $157.57 never changes for that year*, it only changes year to year as dues go up. (This is why picking a property with low dues is almost as important as picking the one you would prefer to stay at ... if saving money is a factor for you.)

*Edit: Actually, it would change, I forgot about the one time use points I used in this example. But it would still be very close to that, within a few dollars.

So, I saved $256.68 a night, or $1796.76 for that stay. Obviously, this is a LOT less than the $15,500 I paid. Now someone smarter than me can do the math for how many similar stays it would take, factoring in dues increases as well as how much the price of that room might go up. If I paid cash out the door, I might "break even" in about six stays, maybe less if I go to higher end properties.

But as has been pointed out, would you REALLY pay cash rack rates to stay at the Grand Floridian if you hadn't bought DVC? Maybe not. This is why I tell people that if your budget is more for the moderate hotels, you won't save money, but you will get a better experience ... rates at those hotels is right around that $150 a night mark, give or take. But if you are paying to stay deluxe, this can save you money, how much is a factor of how much of a discount you get when you stay.

So where did Disney get the 50% figure? Probably doing the same math, but using the cheapest comparable (read: Deluxe) room as an example. That gives them a reasonably conservative figure, so that when someone like me does the math and sees BETTER than 50%, it looks like an even better deal. Your mileage, of course, may vary.

EDIT: As has been pointed out, I misread my spreadsheet and used the wrong numbers. The correct math is below, but I'm leaving this post to shame me.

$155 per point / 26 years of life $5.96. Add the dues per point ($6.13) for a cost basis per point of $12.09.

If you use 107 points for a stay, it's $1209 + $105 (for the OTU points), or $1314. Divided over seven nights is $187.72. 1-($187.72/$414) is a cost savings over the cash price of 55%.

 

[ScubaCat]

When we say "rack rates", are we talking about the villas or the regular hotel rooms? Because, to me, a one or two-bedroom villa is FAR more comfortable and accomodating than a standard disney hotel room. I don't know anyone that would pay rack rate for a direct booking on a DVC villa. Granted, we're not even considering DVC rental, but the value of a villa to me as well as not having to budget so much for constantly more expensive accommodations is well worth it. And yes, there are discounts off of rack rate, but they're always different and have limited validity times and availability. You can't depend on those to be able to go when you want, either.