ROFR Profit

[brelyt]

If Disney ROFRs a property for say $70 and then resales it for $130, what fund does the profit go to?

 

[JimMIA]

Disney's pocket.

 

[OKW Lover]

As the PP noted, this is all Disney's money. Once they buy the points (ROFR) they can sell them for whatever they can get for them.

Its just like an owner selling their points, they get to keep the proceeds.

 

[NH Disneyfan]

DIS stock price

 

[Dean]

If Disney ROFRs a property for say $70 and then resales it for $130, what fund does the profit go to?

Remember they're also competing against their retail sales so in reality they don't make much even with that spread.

 

[DVC Doctor]

Remember they're also competing against their retail sales so in reality they don't make much even with that spread.

I think the money can be huge when multiplied over tens of thousands of points. They probably cherry pick the most profitable and in demand points to quickly resell. I am sure there is some algorithm that they use to make the decision to buy or not.

Disney for sure tilts the odds I their favor.

 

[brelyt]

Seems like it should go back to the resort fund, but I get that it is profit for Disney.

 

[tjkraz]

I think the money can be huge when multiplied over tens of thousands of points. They probably cherry pick the most profitable and in demand points to quickly resell. I am sure there is some algorithm that they use to make the decision to buy or not.

Disney for sure tilts the odds I their favor.

Construction costs on a new resort tend to run $30-40 per point. Building for $40pp and selling for $155 is much more profitable than ROFR at $70 to resell at $130.

While Disney will target contracts which are priced exceptionally low, years of reports on websites like this have shown that there's seemingly a random element involved, too.

 

[JimMIA]

Seems like it should go back to the resort fund, but I get that it is profit for Disney.

Not sure what "resort fund" you are talking about, but it's counter-intuitive to think that Disney would shell out their money to purchase a contract via ROFR and then donate the proceeds to some earmarked fund...if, in fact, such funds even exist. The Mouse buys, the Mouse sells, the Mouse keeps the money.

Yes, there is a significant amount of revenue generated by resales of ROFR'd contracts. The margins are lower than direct sales of newly developed properties, but the turnaround is much quicker and less costly. It's a good piece of business for Disney.

Also, although ROFR resales do theoretically compete with new sales, I suspect that very few purchasers of ROFR contracts would buy new direct. They buy ROFR because they want to own that particular resort, not because the price is lower. Hopefully, they don't think they are getting a low price!

 

[chalee94]

Not sure what "resort fund" you are talking about, but it's counter-intuitive to think that Disney would shell out their money to purchase a contract via ROFR and then donate the proceeds to some earmarked fund...if, in fact, such funds even exist. The Mouse buys, the Mouse sells, the Mouse keeps the money.

yeah, i think there may be a case where if DVC owners don't book a villa, it can go to disney's CRO as a short notice rental (breakage). so if disney rents that villa, the income can offset owner maintenance fees.

but that is the only relatively similar case i can think of (and it mostly isn't dealing with pts that disney owns directly.)

 

[JimMIA]

yeah, i think there may be a case where if DVC owners don't book a villa, it can go to disney's CRO as a short notice rental (breakage). so if disney rents that villa, the income can offset owner maintenance fees.

but that is the only relatively similar case i can think of (and it mostly isn't dealing with pts that disney owns directly.)

Right, unreserved points inventory goes to CRO at 60 days out and is rented to regular cash customers. That is called "breakage" and it is owner property (points inventory) being rented by Disney on behalf of the owners, with the net proceeds being returned to the owners. It is reflected in a revenue line item in each DVC resort association's annual budget and it does offset dues.

But that is very different from what OP was asking.