Resales and how they affect DVC

[L.C.Clench]

I am pretty familiar with DVC and have followed them for a few years now but the issue of resale has never quite made sense to me.

My first question stems from Disney’s “Right of 1st Refusal”. They way I understand this is if I want to get rid of my contract, I have to offer it back to DVC 1st. If they refuse (for whatever reason) then I can sell on the resale market. I realize it depends on the resort, time left on the contract and price per point (and likely several other factors), but what value will Disney offer on the contract? Are there resorts DVC tends to buy back more than others? Are there resorts they seem to never buy back?

I relate this issue to the selling/trading of used video games, which has become a huge topic in the game industry. They lose millions (maybe billions) each year from gamers that don’t need the game when it is first released and purchased used copies instead (not to mention piracy, but that is another topic for another time). Retailers like GameStop make a fortune off this secondary market and the companies that made the games see none of the profit.

With that analogy in place, would it not make more sense for DVC to buy back most if not all the contracts that were offered? Granted it would be an additional expense, but would this not be offset from increased sales?

This brings me to their recent changes to purchasing resale. I assume the changes were made to “devalue” the resale market, thus making direct purchases the only way to fully take advantage of Membership. Has the secondary market seen any sort of decrease in price as a result? I would think any decrease in the price would only make these resales even more popular since many Members don’t use their points for ABD or foreign parks. Cruises I believe are quite popular though.

Does anyone know how Marriott or Hilton handle their resales? I believe their contracts are indefinite as opposed to 60 years.

Apologies if that seems like a rant, just trying to wrap my head around how DVC views the resale market.

Thank you in advance for your sharing on the subject.

 

[RobDoc]

ROFR occurs only after you have accepted an offer on your contract. The accepted contract is then presented to DVC and they have the option to purchase the contract from you at the same terms. The only loser in that scenario is the buyer - but they will get any deposit back and just have to start all over.

There is no risk for the seller since they will get the same amount from either the buyer or from DVC.

You won't be able to offer your contract directly to DVC for sale although a few have reported being able to do that for BWV and BCV a few years ago- but at a very low price.

 

[CMOORE185]

I am pretty familiar with DVC and have followed them for a few years now but the issue of resale has never quite made sense to me.

My first question stems from Disney’s “Right of 1st Refusal”. They way I understand this is if I want to get rid of my contract, I have to offer it back to DVC 1st. If they refuse (for whatever reason) then I can sell on the resale market. I realize it depends on the resort, time left on the contract and price per point (and likely several other factors), but what value will Disney offer on the contract? Are there resorts DVC tends to buy back more than others? Are there resorts they seem to never buy back?

I relate this issue to the selling/trading of used video games, which has become a huge topic in the game industry. They lose millions (maybe billions) each year from gamers that don’t need the game when it is first released and purchased used copies instead (not to mention piracy, but that is another topic for another time). Retailers like GameStop make a fortune off this secondary market and the companies that made the games see none of the profit.

With that analogy in place, would it not make more sense for DVC to buy back most if not all the contracts that were offered? Granted it would be an additional expense, but would this not be offset from increased sales?

This brings me to their recent changes to purchasing resale. I assume the changes were made to “devalue” the resale market, thus making direct purchases the only way to fully take advantage of Membership. Has the secondary market seen any sort of decrease in price as a result? I would think any decrease in the price would only make these resales even more popular since many Members don’t use their points for ABD or foreign parks. Cruises I believe are quite popular though.

Does anyone know how Marriott or Hilton handle their resales? I believe their contracts are indefinite as opposed to 60 years.

Apologies if that seems like a rant, just trying to wrap my head around how DVC views the resale market.

Thank you in advance for your sharing on the subject.

To use your video game analogy, most gamers want the new games right when they come out, they do not want to wait until used ones come out. Same with DVC, when a new hotel is built, people that are interested in it want to buy right away not later when it shows up on the resale market, not to mention it takes awhile before a new hotels resale comes down in price. I do not understand why you think it makes sense for Disney to buy back peoples contracts? Disney makes their money selling the new properties, there is very little profit for them to buy back contracts and resell them.

 

[disneynutz]

DVD only exercises their ROFR on proprieties that they have a wait list for if the price is right, buy low, sell high. They don't want to fill their inventory with points that aren't selling because there is a cost. They pay dues on the points just like members and there only income is if Disney gets cash reservations for the points.

Changing the resale rules gave them another bullet point of why people should buy direct. Anything Disney does affects resale prices and the number of people selling their contracts seems to have increased and is consistent. Members renting reservations has also increased so IMO Disney's new business model of increasing prices while reducing the product is affecting members desire to vacation at Disney. The economy plays a part but in the past, even if you were depressed due to change in your finances, you would still reward yourself with a Disney vacation.

Bill

 

[TisBit]

DVD only exercises their ROFR on proprieties that they have a wait list for if the price is right, buy low, sell high. They don't want to fill their inventory with points that aren't selling because there is a cost. They pay dues on the points just like members and there only income is if Disney gets cash reservations for the points.

Changing the resale rules gave them another bullet point of why people should buy direct. Anything Disney does affects resale prices and the number of people selling their contracts seems to have increased and is consistent. Members renting reservations has also increased so IMO Disney's new business model of increasing prices while reducing the product is affecting members desire to vacation at Disney. The economy plays a part but in the past, even if you were depressed due to change in your finances, you would still reward yourself with a Disney vacation.

Bill

Yes and no. They have ROFR'd on properties without a waitlist as well, based on the factors you listed. There is usually some "tipping" point where DVC sees it advantageous to take those points back vs letting the resales hit a low price.

Disney does not want to have a bulk of excess points sitting around and not pulling in MF's, so they have to balance the system. Resales are actually a good thing and healthy thing, as long as it does not cannabalize the direct sales. Take BWV's, they expire in 2042...a new buyer that walks in the door looks at BWV with expriation of 2042 and AKV with an expiration of 2057...most purchasers are going to gravitate to the longer contract. The resale market helps keep those resorts competitive and even allows someone who maybe thinks that they can't afford the full price, to get a deal on these "used" points.

But when the system gets out of balance like it has due to the economy and foreclosures, etc...the resale prices dropped so much it was more difficult for DVC to sell the direct purchase points which were at least 3x's as much to purchase. Now, with restrictions on resale point use, DVC can help distinguish and regain some ground on the resales.

 

[mountdew1]

ROFR lets DVC keep the market price on points above a rock bottom. If people know that they can buy resale points at half of MSRP, who would want to buy them direct? And as a PP mentioned, it lets them buy points to fulfill internal needs, be it for a waiting list or some other unknown purpose.

 

[DVCconvert]

ROFR lets DVC keep the market price on points above a rock bottom. If people know that they can buy resale points at half of MSRP, who would want to buy them direct?

and at the same time...dvc is now offering say Vero beach at $75 per point to members....but....I've been buying vb at $ 39/$37/$35 on the resale market....so resale can still be, by far the cheapest way to go.

 

[L.C.Clench]

Thanks all! Lots of learnings!

 

[csharpwv]

I am with the OP - while some do not understand why Disney would buy back all contracts - I don't understand why they doesn't buy back almost all contracts.

Disney doesn't like to be out of control of anything with their name on it - that's why Walt wanted to buy so much land in Florida - he didn't like the commercial areas that popped up around Disneyland.

Why wouldn't DVC buy back all of the contracts, in turn making everyone buy direct - at a much higher price.

HOWEVER, there would still need to be a resale market as that's the only way Disney could pick up lower priced 'bargains' to make the practice more profitable.

DVC could simply use a calculation to determine the price of a 'used' contract - and offer the owner that price through a direct buy-back, and if the owner doesn't accept that price, then the owner is free to sell it for a price that they think is fair - and then Disney would still have the option to exercise ROFR on the resale.

People like to paint DVC as a dark manipulative force - however, they are sunshine and rainbows compared to what they could be!

 

[Mtnman44]

It is highly possible that Disney would buy back almost all contracts, if they had a fairly solid reason to believe that they could sell them all fairly quickly at a decent profit to justify all of the trouble and expense.

They can only ROFR what they can expect to sell within a reasonable time period. Disney wants owners paying the maintanence fees, not themselves.

One possibility is that DVC was losing some money in the ROFR game in order to keep direct prices really high but eventually ran out of enough direct buyers for that to make sense. At which point, they could either drop prices to increase volume or drop ROFR in order to increase margins. They chose to reduce ROFR costs, combined with a strategy to make resales appear less valuable (reduced trading options).

I am with the OP - while some do not understand why Disney would buy back all contracts - I don't understand why they doesn't buy back almost all contracts.

Disney doesn't like to be out of control of anything with their name on it - that's why Walt wanted to buy so much land in Florida - he didn't like the commercial areas that popped up around Disneyland.

Why wouldn't DVC buy back all of the contracts, in turn making everyone buy direct - at a much higher price.

HOWEVER, there would still need to be a resale market as that's the only way Disney could pick up lower priced 'bargains' to make the practice more profitable.

DVC could simply use a calculation to determine the price of a 'used' contract - and offer the owner that price through a direct buy-back, and if the owner doesn't accept that price, then the owner is free to sell it for a price that they think is fair - and then Disney would still have the option to exercise ROFR on the resale.

People like to paint DVC as a dark manipulative force - however, they are sunshine and rainbows compared to what they could be!

 

[L.C.Clench]

I think I asked this in my original post.

Does anyone know how Marriott or Hilton handle their resales? I believe their contracts are indefinite as opposed to 60 years. Do they have a right of first refusal? Do they buy back theirs? Have they taken similar steps to devalue the resales to justify the higher price of buying direct?

 

[SanDeeKath]

I think I asked this in my original post.

Does anyone know how Marriott or Hilton handle their resales? I believe their contracts are indefinite as opposed to 60 years. Do they have a right of first refusal? Do they buy back theirs? Have they taken similar steps to devalue the resales to justify the higher price of buying direct?

Marriott is indefinite for sure and I know they stopped ROFRing about 2 years ago, when the economy really went south. Nowadays if you go on the TUG website you will see that basically nothing is getting ROFR'd, although that may change with the economic conditions.

Disney also basically is not doing ROFR except at BCV (on occasion) and GCV (most often). So as above posters said, it's a matter of supply and demand!

Katherine

 

[L.C.Clench]

Thanks for the info. I think im beginning to get my head wrapped around this resale business.

 

[L.C.Clench]

I bet rocket scientists get confused when it comes to learning all the fine points of timeshare