Restrictions on points bought via resale

[calypso726]

I read on this board not too long ago that a guide told someone that DVC would be putting restrictions on points purchased via resale. If I remember correctly it was concluded that the statement was a sales tactic. Well, I just got off the member cruise today and some of our traveling companions purchased more points on board. The agent they dealt with also told them that DVC would be placing restrictions on points purchased via resale. Having heard this type of statement twice I am wondering if there is any truth to it? If so, what exactly could/would they change?

 

[SSR]

I read on this board not too long ago that a guide told someone that DVC would be putting restrictions on points purchased via resale. If I remember correctly it was concluded that the statement was a sales tactic. Well, I just got off the member cruise today and some of our traveling companions purchased more points on board. The agent they dealt with also told them that DVC would be placing restrictions on points purchased via resale. Having heard this type of statement twice I am wondering if there is any truth to it? If so, what exactly could/would they change?

We were told the same thing in our sales meeting a year ago, too. My sense is that it's a perpetual sales tactic and probably the only "reason" to get people to pay 25%-30% more for a product.

 

[Dean]

I read on this board not too long ago that a guide told someone that DVC would be putting restrictions on points purchased via resale. If I remember correctly it was concluded that the statement was a sales tactic. Well, I just got off the member cruise today and some of our traveling companions purchased more points on board. The agent they dealt with also told them that DVC would be placing restrictions on points purchased via resale. Having heard this type of statement twice I am wondering if there is any truth to it? If so, what exactly could/would they change?

They could change a lot but I doubt they'll restrict current members. They could restrict access to all non DVC options which is the most likely change. IF they made other changes such as VIP levels, they could lock resale points out of those options as well.

 

[ELKHUNTER]

Why would Disney want to ever do that someone has to pay all those dues.

 

[ssawka]

I seriously doubt it. All that would do is devalue the product. Even for new purchases. I think people would be less likely to buy in if they didn't think they could liquidate quickly if they needed to.

 

[Chuck S]

I have a feeling that they are definitely mulling over the possibilities of restricting resales, and how best to implement new usage rules. They may be seriously discussing restrictions, just as they seriously discuss and revise other aspects of the program.

Now, whether they actually do change anything we'll just have to wait and see.

They could easily make several colors of membership cards to reflect whether you purchased direct, resale, or make different colors for different levels of points owned, each with their own perks and privileges. Disney/DVC would need to weigh the costs of such a plan, and whether they think it would increase direct sales vs resales.

Multi-tier levels of perks and privileges is certainly not uncommon in the timeshare industry.

 

[SSR]

I have a feeling that they are definitely mulling over the possibilities of restricting resales, and how best to implement new usage rules. They may be seriously discussing restrictions, just as they seriously discuss and revise other aspects of the program.

Now, whether they actually do change anything we'll just have to wait and see.

They could easily make several colors of membership cards to reflect whether you purchased direct, resale, or make different colors for different levels of points owned, each with their own perks and privileges. Disney/DVC would need to weigh the costs of such a plan, and whether they think it would increase direct sales vs resales.

Multi-tier levels of perks and privileges is certainly not uncommon in the timeshare industry.

Retroactive or going forward, in your opinion?

I tend to agree with you that changes may be a'comin. However, my guess would be an enhancement of perks to direct buyers rather than a detraction from resale buyers.

 

[mouseaider]

The only way I could see Disney controlling the resale market without hurting the vacation club market is to ROFR every resale under $90 per point and set up their own resale center. And I don't think they would do it.

 

[bom_noite]

I seriously doubt it. All that would do is devalue the product. Even for new purchases. I think people would be less likely to buy in if they didn't think they could liquidate quickly if they needed to.

You are absolutely correct! But, the majority of first timers buy in through DVC and never contemplate selling - I would suppose.

They may consider creating a program to repurchase points as well. But, if they instituted a hard and fast buy-back policy (lets say $55 a point) and then we had another recession 5 years from now - this would create a huge financial risk.

I personally think the thought of increased perks makes more sense. Slap a lifetime Fast Pass or Guaranteed Dining Ressies on a purchased contract and people have to really examine the cost / benefit options. Of course they could offer the non-DVC buyers the same perks with a $30 per point surcharge - and - thus cutting the gap 'tween DVC and secondary market.

And, even with that what do you do about the folks who bought in through DVC and then have 3 add-ons via the secondary market? What if I transfer points from my non-dvc purchased contract to my purchased contract? Do they restrict those points? That would be a pretty sophisticated calculation.

Rampant speculation on my part. Regardless, when WDW is pitching OKW Points at $100+ and I can buy them for $59 then their is a huge gap. And, WDW is smart enough to close that gap in some manner! Based on other threads they are almost forced too as they are taking in so many contracts via the foreclosure route.

 

[Chuck S]

Retroactive or going forward, in your opinion?

I tend to agree with you that changes may be a'comin. However, my guess would be an enhancement of perks to direct buyers rather than a detraction from resale buyers.

Just my opinion, but I think one of the better options to increase direct sales would be to resurrect the old Limited Park Admission program, and apply it only to new, direct purchasers when they opt to stay at SSR. Just as the original incentive only applied to stays at OKW. It would help fill up a larger, under-appreciated resort, while at the same time possibly freeing up DVC rooms for cash at some of the more popular resorts. Free park passes for 10 years, even for only half the occupancy limit of the room, would be an almost irresistible draw.

Or, marketing could do a similar program with a dining offer for new direct purchasers. Giving them free dining for half the room occupancy (or a half price DDP) for x number of years after purchase.

 

[JimMIA]

A couple of comments:

These remarks by one or two DVC timeshare salesmen trying to make sales at an inflated price 25-30% above resale are typical of the tactics that sleezy timeshare salespeople use.

They have been thoroughly debunked by other, more reputable, DVC salesmen and managers.

So the question then becomes a hypothetical, theoretical brainstorming exercise that means very little: COULD DVC do something like this if they wanted to. And the answer is, of course they could.

However, as others have posted, putting restrictions on resale points - even if it were done only from a certain point going forward - would do nothing but devalue the product. They would create a product that people would buy for $1 plus closing costs on eBay. I know many initial buyers currently plan on holding their DVC until it expires, but the ability to resell it if you have to is a BIG advantage and a selling point that guides pound on in their sales presentations.

Many other timeshare systems use various types of VIP programs to differientiate their very high-priced product from inexpensive resales. But when most knowledgeable consumers look at those programs, they conclude that they are not worth the difference between retail and resale.

I don't think DVC will create a difference between retail and resale, and if they do, I'd be amazed if it was really worth considering. There might be some temporary benefit, but when compared to the price difference that now exists, I think they'll have a hard time making it really worthwhile.

 

[wildernessDad]

Retroactive or going forward, in your opinion?

I tend to agree with you that changes may be a'comin. However, my guess would be an enhancement of perks to direct buyers rather than a detraction from resale buyers.

Imo, it would be going forward and not retroactive - IF they actually do something like this, which I doubt. If they did, I have a feeling that there would be a sudden and dramatic increase in contracts up for resale.

 

[Brian Noble]

Occam's Razor suggests this is a sales tactic, and nothing more.

However, as others have posted, putting restrictions on resale points - even if it were done only from a certain point going forward - would do nothing but devalue the product.

If you believe in the "wisdom of the marketplace", then evidently there is more to be gained (for the developer) by devaluing resales than there is to be lost (for the developer). A solid majority of multi-site developers have done so (Wyndham, WorldMark, BlueGreen, Diamond, Marriott, Starwood) vs. those who haven't (Hilton, Disney). One distinguishing characteristic: those who do devalue tend to be larger than those who don't. If I am reading the tea leaves correctly, as Disney grows, it becomes more and more likely that they will resort to some similar tactic.

Imo, it would be going forward and not retroactive

Do you have a reason for this, or just wishful thinking?

From where I sit, it depends on what they come up with. If the differentiators end up being paid for by Sales (e.g. point discounts on last-minute bookings), then it certainly could be retroactive to keep a lid on costs, and other systems have gone that route. If the consequences of the differentiators are borne by the Members (e.g. an earlier booking window, etc.) then there's no real reason to apply retroactively.

 

[ssawka]

Rampant speculation on my part. Regardless, when WDW is pitching OKW Points at $100+ and I can buy them for $59 then their is a huge gap. And, WDW is smart enough to close that gap in some manner! Based on other threads they are almost forced too as they are taking in so many contracts via the foreclosure route.

You know, if Disney wanted to close the gap, they could just exercise ROFR more. Even if just for awhile, it would cause fewer resale purchasers to "bite at" a low price knowing it would most likely be ROFRed.

 

[Chuck S]

You know, if Disney wanted to close the gap, they could just exercise ROFR more. Even if just for awhile, it would cause fewer resale purchasers to "bite at" a low price knowing it would most likely be ROFRed.

Yes, but it would cost them far more $, and would give them a huge inventory of points on hand as opposed to restricting perks for resales or offering a dining/park pass perk for new perchasers.

 

[Brian Noble]

if Disney wanted to close the gap, they could just exercise ROFR more.

They'd have to exercise it a LOT more. And, even then, it might not work---if sellers need to sell, they need to sell to someone. Exercising ROFR doesn't create new buyers, it only removes some supply from the market, leaving the existing buyers to fight over the remainder. What you are suggesting is akin to having a company buy back its stock to raise the stock price. It takes a lot of such buying to move the market as a whole. The bigger the market, the harder it is to move---and as DVC grows, the resale market only gets bigger.

Even so, they could do it, but at what capital cost? The rule of thumb in the industry is that the cost of sales is anywhere between 1/4 and 1/2 the total cost to the developer to build, market, and sell the timeshare, the cost to build is the remaining 1/2 to 3/4. (Remember, that's cost, not revenue---even though they sell a BLT point at $120, presumably their cost to develop and market is significantly below that.) So, going on an ROFR spree can easily be just as expensive as actually building a new resort. But, they are left without a brand new shiny resort to market, which *further* increases sales costs. Worse, they will be left marketing the largest resorts (like SSR) most often---and they've already dropped the sales price of that one.

 

[McCrae]

Can't see this happening. If material changes are made this would breech the conditions layed down in the orginal sales prospectus and would open DVC up to legal action.

 

[Brian Noble]

Go back and read the multi-site offering again, and you'll find that the developer/management company has *significant* latitude in changing many of the program terms going forward.

(Edited to add: as I said in my first post in this thread, I don't expect the FUD offered by the sales staff to be any indication of an actual policy change. This is all hypothetical.)

 

[Dean]

I seriously doubt it. All that would do is devalue the product. Even for new purchases. I think people would be less likely to buy in if they didn't think they could liquidate quickly if they needed to.

Actually the resale value has little importance to DVD and to most people buying other than to the extent it supports retail sales. Sure, some would realize that the spread between resale and retail was problematic and consider not buying but most wouldn't and as noted, most wouldn't think they would sell later anyway.

What DVD could do would be to make it "an offer you couldn't refuse" situation by giving significant benefit to retail buyers and limiting/removing such benefits to resale buyers or even current owners. I know some will argue that DVC can't do VIP programs but given that several other timeshares who's main base and home office are centered in FL and who did so midstream, I wouldn't agree. It would be easier and cleaner to limit to future buyers and/or new resorts and grandfather current owners but it's not automatic they'd do so.

Lets assume an extreme situation. Lets assume the following distinction for the sake of argument. Ignore whether you think a given option is legal but I'll only includes ones I think could be done.

Retail Resale
Transfers unlimited none or fee
Banking None $25
Borrowing None $25
Cancelation fees None $35-50
Cash Exchange access (DCL, etc) yes no
Reservation Window home resort 10 mo 7 mo
RCI included yes no
Special phone number to call yes no
Wait list access yes no or reduced

Obviously the list could go on and on. Each of these examples is already in practice in some way in other systems that are comparable.

As I've stated previously, I'm not saying they will, only that they could. While I'm surprised they haven't gone this route long ago, the fact that they haven't does reduce the risk that they will but not to zero by any means.

Can't see this happening. If material changes are made this would breech the conditions layed down in the orginal sales prospectus and would open DVC up to legal action.

As I read them, none of my examples would be a legal or contractual breach. The only real protections are with the home resort use and reservations inside the applicable reservation priority window. Essentially everything in the CLUB component of the system and Multi site POS is changeable at their discretion. The exchange options have even less, actually no protection at all.

 

[wildernessDad]

Do you have a reason for this, or just wishful thinking?

Are those my only two choices? Because together, they do not span all space. And you left out my big IF. I don't think this will happen, but IF it did, I THINK that it will be going forward.