SSR subsidized fees?

[skibum]

There have been some posts in the past regarding the maintenance fees at SSR being subsidized. Really was thinking about resale (elsewhere), but with this new deal at SSR, I am reconsidering. My only concern is how and why are these fees being subsidized, and for how long?
Anybody with info on this?

 

[spiceycat]

this is the developer units that they are currently building.

they can't go to members yet because they are still working on them.

I am pretty sure as long as SSR is building - they will have subsidized fees.

it will probably decrease as more of SSR is finished and goes to sales.

 

[Anewman]

The way it was explained to me.

The resort is not sold out.
On the unsold points Disney is paying the the maintenance fees.
As points get sold Disney's total subsidy gets lower and lower.

I really dont know if it is acurate or not but it makes sense to me. It is meant to price our maintenance fees as if the resort was sold out, and it avoids us paying twice as much in fees right now that the resort is only Half sold.

 

[cobbler]

Can someone explain this subsidized fee thing to me? I am totally in the dark on this.

 

[tjkraz]

Here's an overly-simplistic example.

Let's say the resort has been 50% sold to members and 50% owned by DVC. The "front desk" budget for the year is $4 million. DVC would subsidize the front desk budget to the tune of $2 million since they still own half of the point inventory.

In theory, once the resort is sold-out, the budget is still $4 mil annually, and your dues see no related change. The new members would simply be paying that additional $2 million.

Many costs would be fall under the subsizided umbrella--upkeep of the grounds, transportation, dining, DVC fees, etc. I don't think DVC issues a line-by-line detail of the subsidization--they just show one dollar figure in the annual budget.

Again, in theory, there will be no change in the annual dues as the subsidy is removed. Those costs will simply be assumed by new members.

 

[dcibrando]

so we think SSR will be one of the cheaper resorts for maintenance fees?

 

[cobbler]

One reason we were told it would be cheaper in MF is because of the exterior corridor. No need to AC it and clean carpets and such.

 

[tjkraz]

The fact that it is (or will be) the single largest resort will also lend itself to lower fees. There are certain fixed costs (which I won't even try to list) that do not increase regardless of the size of the membership. With more owners, each indiviudal pays a smaller portion of those costs.

Barring ridiculous variations in amenities at the resort, larger resorts should always cost less to members than smaller resorts.

 

[Doctor P]

Part of the answer is correct, but the fees right now are actually being subsidized and reduced below where they would be expected to be once the resort is fully built out. Existing property taxes, which are less because the resort is not yet fully built, are being divided over the total number of points for the fully built resort. Some other maintenance fees will go up as the resort grows (e.g., transportation, maintenance and repairs, etc.) and the reduced current total costs are being divided by the number of points for the fully built resort. I fully expect that when built out the SSR fees will be substantially higher than those at OKW (for a variety of reasons) and probably on par with BWV (just a guess).

 

[JimC]

Maintenance fees at SSR have two special elements that the other fully subscribed resorts do not have.

1. Just as tjkraz explained, Disney picks up the maintenance fees for the portion of the resort they own.

2.. A partially built out resort will have lower operating costs for things like staffing, electricity, and the like. So the overall budget will increase as more of the resort is completed and sold.

If we look at the only real DVC comparable -- OKW -- we see that OKW dues increased annually greater than the rate of inflation in 1995, 1996, 1997 and then again in 2002, 2003, 2004 and 2005. With the largest single year increase in 2003 (8.6%). In three years the dues actually declined year to year. Here is the data by year with the annual % change in inflation first, then the increase in OKW dues.

1992 3.0 2.1
1993 3.0 2.6
1994 2.8 2.6
1995 2.6 5.2
1996 2.5 5.2
1997 3.4 5.2
1998 1.7 0.9
1999 1.6 -0.3
2000 2.7 -0.1
2001 3.4 -1.1
2002 1.5 2.8
2003 2.5 8.6
2004 1.8 5.2
2005 3.2 5.0


Some of our other long time owners need to jump in at this point to help interpret this. The resort sold out in 1998. I don't remember when the housekeeping change took place but that date is a critical one to understand the annual differences. Also now that OKW has a slide we will need to see how that factors into this going forward.

 

[Dean]

There are some misperceptions in this thread. First, DVC does not pay dues on any declared inventory they still own. This is inventory up for sale but not yet sold. This is different than inventory they haven't yet offered for sale or they are yet building. The goal of a timeshare developer is to offer units for sale in relatively small chunks, that way they have total control over the units not "declared into inventory" and the members have no access to those units. They can then rent the undeclared inventory if they want. At VB they originally offered the inventory in very large chunks and I understand had to go through some major wrangling to get some back to avoid this problem. I don't know how the "units" are figured at SSR but I'd guess it's by a portion of a floor at a time. At OKW and I believe HH it was by building. At BWV it was by a chunk of rooms on a floor. Remember that in DVC terms a "unit" is a group of rooms.

Subsidized dues are where DVC pays part of the dues that members would be due to pay. This was big at VB and some of the oldest contracts there still have subsidized dues. For most, the subsidy has gone away at VB. Timeshares usually do this to make the dues seem artificially low in the sales period.

 

[skibum]

So Dean, as the resident expert, where do you see fees going in the future? Will they stay low, like OKW, or go mid-range or high?

 

[jaysue]

I do not think SSR fees will be as high as BWV/BCV nor as low as OKW - for ranking purposes I see it ending up as the 2nd "least expensive"

We do own points at VB - the original contract owners have subsidized fees there (a selling feature as Dean noted) and then people (like me) who bought later pay "regular fees". The "regular fees" have been higher than one would have originally projected due to the lower number of units built than originally projected and I think the higher than expected maintenance of having an Ocean Front property (for example rebuilding the beach access ramp several times)

We bought into SSR to get the 12 years and to get what I believe to be lower maintenance fees - if the mtce fees end up in BWV/BCV/VWL range, then people (like myself) who bought for the expectation of lower fees might go into the resale market to sell SSR and buy the more central location/more expensive fee locations

I think the biggest risk albeit small is that for some reason or reasons (economy, storm weather, demographics etc.) is that SSR does not get built out completely leaving higher dues than expected due to fixed costs being spread out amongst the points holders

thanks
jaysue

But at the end of the day it is all a bit of an educated guess

 

[tjkraz]

Part of the answer is correct, but the fees right now are actually being subsidized and reduced below where they would be expected to be once the resort is fully built out.

I don't believe that's true at all. The purpose is not to make the resort more attractive to new buyers through artificially low dues...it's to keep the first 1/4 of the resort's owners from paying the FULL annual cost of a pool complex, restaurant and other infrastructure designed to host 4 times as many members.

I fully expect that when built out the SSR fees will be substantially higher than those at OKW (for a variety of reasons) and probably on par with BWV (just a guess).

What is your basis for this assumption?

In the past, DVC seems to have done a good job of calculating the subsidy. Dues at BCV went up 5.4% in the first increase and 5.2% in the second increase. VWL dues increased .2%, then 4.9%.

In order for SSR to catch BWV by 2007, SSR dues would have to increase roughly 24% in a two year span. By comparison, BWV dues have only gone up a TOTAL of 19% over the 9-year period it has been open, and it took OKW 10 years to experience a cumulative 24% increase in dues from its opening level.

 

[Dean]

So Dean, as the resident expert, where do you see fees going in the future? Will they stay low, like OKW, or go mid-range or high?

Obviously it would simply be a guess and expert wouldn't apply to any of us in guessing what fees will do in the future. But it's fun to speculate. Overall, I'd expect fees to increase in the range of about 4% per year but it will depend on many unforeseeable factors. As for ranking, I'd expect VB to remain the highest with VWL then BCV followed by BWV, SSR and OKW. I expect the current 15-20% spread to continue or possibly widen slightly over time. I think it's likely VB will be substantially higher over time, that BWV, BCV & VWL will all be fairly close. I'd expect SSR to be far closer to the above and significantly above OKW in the long run. But it's obviously my own speculation and others will have theirs. I have my reasons for believing so and it's mostly based on amenities, transportation costs, MS costs and personnel costs.

I also expect significant cost cutting measures at MS by the time selling is mostly done including a minimum stay of 3 days to come into being at some point. And we shall all see what happens over time.

 

[Doctor P]

I don't believe that's true at all. The purpose is not to make the resort more attractive to new buyers through artificially low dues...it's to keep the first 1/4 of the resort's owners from paying the FULL annual cost of a pool complex, restaurant and other infrastructure designed to host 4 times as many members.

I don't disagree with the factual parts of these statements, but I also believe that holding the dues down IS part of the sales strategy, and I stand by my original statement that I am guessing that the dues will end up being much closer to those of BWV than those of OKW in the long run. Time will tell. Keep in mind that the large size of SSR means that dividing the costs over a fully built out resort greatly reduces SOME of per point costs that are currently being incurred as compared to the per point costs once the whole facility is built out.

 

[DrTomorrow]

I don't disagree with the factual parts of these statements, but I also believe that holding the dues down IS part of the sales strategy [...]

I don't feel comfortable enough to claim knowledge of Disney's intent regarding any marketing benefit of fee subsidization. I do have to wonder if the vast majority of DVC purchasers (who have no idea of resales, dues increase data or the DIS) really take the dues into consideration when making an initial DVC purchase into SSR. IMHO the key thing that most potential purchasers focus on is the price per point: what it's going to cost them up front. Yes, it's short term thinking, but I confess that it took some fine posts here on the DIS to really drive home the true "cost" of dues over the 50 years of our ownership. But I feel that knocking $5/point off the price ("A savings of $1000 on your 200 point purchase, sir!") will be significantly more effective than a minor reduction in dues cost ("That's $3.12 per point instead of $3.48, sir!")

IMHO - YMMV

 

[JimC]

I don't feel comfortable enough to claim knowledge of Disney's intent regarding any marketing benefit of fee subsidization. I do have to wonder if the vast majority of DVC purchasers (who have no idea of resales, dues increase data or the DIS) really take the dues into consideration when making an initial DVC purchase into SSR. IMHO the key thing that most potential purchasers focus on is the price per point: what it's going to cost them up front. Yes, it's short term thinking, but I confess that it took some fine posts here on the DIS to really drive home the true "cost" of dues over the 50 years of our ownership. But I feel that knocking $5/point off the price ("A savings of $1000 on your 200 point purchase, sir!") will be significantly more effective than a minor reduction in dues cost ("That's $3.12 per point instead of $3.48, sir!")

IMHO - YMMV

Agree.

 

[Doctor P]

I agree. But that point only holds for new purchaser, IMHO, and SSR has been marketed hard for add ons.

 

[cobbler]

IMHO - YMMV

What in the heck does YMMV stand for?? Driving me nuts.