The Economy and DVC

[Mickey'sApprentice]

Crisi: I was a little bent as I read this quote. But after investigation, I reluctantly agree... In a list of "Green" states at Forbes.com, Florida ranks 20, Georgia was 29 and Alabama 49. Louisiana, Mississippi, Kentucky and Arkansas are all trolling the bottom of the list. New York and New Jersey made the top 10...go figure.

In regards to the original topic, I'm in the mortgage business so I can relate to others and completely "feel your pain!" But this is exactly the reason we purchased DVC. We pre-paid for our vacations so that during a slow economy, we would be able to go to Disney with the kids. Instead of feeling bad about splurging on a vacation, we can go guilt free and have a fabulous time.

Best,
Trace

I live in Alabama and I'm not at all surprised about the "business friendly" label. However, for any of you folks that are looking for a place to retire...I'll just say that Alabama has beautiful mountains and beaches, is still very rural in some places and still does not have the same heavy industry that you will find in other states, and if your car doesn't meet normal emission standards, who cares - drive it anyway. Frankly, we haven't woke up to find lots of problems with polluted land and water, so haven't joined the eco craze.

As for the "Business Friendly" label, the environment is not the biggest problem for Alabama citizens as Alabama is a "free hire, free fire state" meaning...you can be fired at any time for any reason, or for no reason at all. (Its not that simple with litigation and a few federal rules, but still if the boss don't like you...watch out.) When it comes down to it, any Alabamian will tell you that Alabama has an IMAGE problem. Some of it is deserved, some of it is not. A lot of it was caused by politicians that had opinions that were not shared by many of the constituents then, and are shared by very few people now.

Finally, Southerners have dollars to spend. From a marketing standpoint, I've always felt that Disney has done a poor job marketing its themeparks to ITS CLOSEST CUSTOMERS. So this comes down to a business strategy question. Should Disney attempt to sale to this untapped market - with the possibility of irritating its core competency, or should they find ways to further saturate its core competency? These are questions that must be determined by Disney management.

Ultimately, Disney has chosen to segment us "rednecks" into POR and POFQ, but there are a few of us who are beginning to show up in DVC too. (BTW, we love POR and POFQ!)

OK, I've gone on too long, and hope I haven't offended.

 

[starbox]

Its actually a PLUS for Disney.

They got your 10% (or more) up front. They've been collecting interest from you for a few years (and a little principal) at a higher than market rate. Plus the dues, so it isn't like they are out maintenence. You stop paying, they repo, they don't refund any of your money. They then resell your interest for full price - or if the market is down - sit on it until they can while renting it out when they can.

I doubt DVC would remain solvent if 90% of owners bought a contract and held onto it and vacationed for the length of the contract. I've always suspected that Disney factors in a (very) healthy percentage of people that only keep it for a few years - and it takes consistent use/ownership to start seeing "value" rather than just a vacation upgrade.

But, of course, Disney does not care at all about making a profit and DVC is just a way to give people a piece of the magic and let them vacation for the cost of annual fees - right??????

 

[crisi]

But, of course, Disney does not care at all about making a profit and DVC is just a way to give people a piece of the magic and let them vacation for the cost of annual fees - right??????

Absolutely. No profit at all involved in the equation. It CERTAINLY isn't a way to make sure they get regular revenue during down cycles - from DVCers using points and spending money when the economy is down and they "should" stay home this year, or even just from getting dues when they do stay home.

 

[javamom]

Well, I am getting a crach course in Econ 101 on this thread tonight. Thanks for all the good info.

Here is my take on the subject as a whole.

A) I bought into the DVC as a long-haul proposition. No way to do that without knowing that "life" happens.

B) When 9/11 hit, thousands of workers in our city became jobless in a hurry, or their hours were cut way back. We have a lot of aircraft related jobs here. My hubby was in the way cut-back category, and blessed to still have a job - mostly due to fact that he is tied closer to private aviation than commercial. It had a huge impact on our lives. I had to go back to work instead of being a SAHM. We adapted.

Interestingly enough, with the current home mortgage crisis going on in other parts of the country, the housing market here is strong. Good thing, because I work in a related field.

My point is simply that "this too shall pass." I'm not going to worry about my membership, or my discretionary spending. If conditions cause it to be too expensive to travel to Disney, I'll bank and borrow the points and use my points wisely. If this means we are going less often, that just means that we will appreciate it all the more when we get there.

From a historical perspective, people still spent money for entertainment during The Great Depression. Movies were a way to escape for a few moments. Granted, the cost of a movie has ginormously increased since then. And, no I am not saying that vacationing and a movie are the same thing. The principle is still the same. Disney will adapt, and so will we. Besides, you can't keep a good Mouse down!

 

[mello]

Very interesting thread. I've been thinking about this issue some too. I'm also a SAHM who handles the bills & shopping, and though our mortgage was extremely comfortable 7 years ago when we bought our home, and though we paid cash for our initial DVC purchase 3 years ago, I've been wondering how often we'll be able to afford to go to Disney in future years. In the last two years our property taxes have doubled, while the value of our home as actually gone down! (Yes we're appealing this). The value of the home on paper wouldn't concern me if it weren't for the rising taxes and insurance always looming, progressively raising our payment. The cost of food and heat have nearly doubled, gasoline has nearly tripled, etc. On a month to month basis we're definitely feeling the crunch. We're still saving the same amount toward our vacations and other things, but with Disney's cost increases lately, that same savings is not going to go as far either. I'm sure airfare is not going to remain immune to rising fuel costs. All of this combined, if it continues for long, will certainly mean fewer and more frugal vacations for us. I suppose someday it may reach a point where our entire yearly vacation savings is going to pay dues, and if that ever happens, I suppose we'd be looking at selling too.

 

[rinkwide]

If it takes a recession to get all these people out of the parks then so be it.

 

[DMKEDM]

It's hard to believe that the current economic situation won't impact people's ability to travel to WDW...even w/DVC, it's an expensive vacation--and if your job or your savings or even "just" your comfort level are affected by economic conditions, vacations--even the inexpensive kind--are among the first things to be cut from a budget...

So, it would seem you could win a five-cent bet that fewer people will go to Disney, at least most of the time...

On the other hand, it's equally likely I'd win that five cents if I bet on Disney "adjusting" so that I couldn't tell the difference!

I was among the few who traveled right after 9/11 (It made me so mad to think the terrorists could shut down Disney, that I decided we were going--whether we "could" or not...so we did). We got there--this was pre-DVC (by a lot) for us, to reservations made at the Boardwalk Inn. It was and remains my only "bad" Disney experience.

Disney had shut down half the Inn (staff was talking about cost containment); they had cut back on staff; the lines were just as long in the parks; waits just as long at the restaurants. Staff was cranky and "cold" (attitude-wise). I commented on it to my DS...it disappointed me intensely as I'd come to the belief that while Disney was a "gold-plated" trip for us on my then budget, it was worth every penny because people were so incredibly NICE to us while we were there. There wasn't a nice person in sight for the first two days of that trip...and the cut-backs made enjoying the World just as challenging as it is when it's crowded to the max...

Two days after our arrival there was a front-page story in the Orlando Sentinel about the Disney cut-backs, and about the complaints from Disney visitors about the "rough handling" they were getting at DisneyWorld...it was "magic"--overnight attitudes changed and Disney went back to being Disney...there was still closed capacity, but CMs were so much nicer...it was VERY noticeable.

It took me a while to get over that experience (and I still choose BWV last over any other facility; I have a lingering dislike for it because of that bad experience)...we didn't go back to Disney for two years after that...I couldn't justify the money it would cost w/out that wonderful feeling of being treated like I was the most important person in the world (I'm not, of course--but Disney's prices seem irrelevant when I'm getting that feeling...on the other hand, their prices made me decide against going when I wasn't getting that feeling)...

Obviously, I did get over it (even for the Boardwalk--we've stayed there, and enjoyed it, twice in recent years--but it still comes after SSR, BCV, and OKW on my list of "like's")--and I've never had a similar experience. Certainly there's been the occasional grump or glitch or issue...but by and large, I still feel like Disney is worth every penny I spend, and then some more...

So...that's my long-winded way of saying "beware Disney's internal cut-backs" if the economy dramatically depresses attendance/bookings...but hopefully, we will all ride out this "life happens" cycle (including Disney), and it won't be the trauma that post 9/11 was...

 

[DisneyFreaks]

We're still saving the same amount toward our vacations and other things, but with Disney's cost increases lately, that same savings is not going to go as far either. I'm sure airfare is not going to remain immune to rising fuel costs. All of this combined, if it continues for long, will certainly mean fewer and more frugal vacations for us. I suppose someday it may reach a point where our entire yearly vacation savings is going to pay dues, and if that ever happens, I suppose we'd be looking at selling too.

I totally agree!!

 

[crisi]

....cost of food and heat have nearly doubled, gasoline has nearly tripled, etc. On a month to month basis we're definitely feeling the crunch. We're vacations for us. I suppose someday it may reach a point where our entire yearly vacation savings is going to pay dues, and if that ever happens, I suppose we'd be looking at selling too.

One of my coworkers and I were talking about this. Inflation has caused use to have less money in our pockets and salary increases have not, for most of us, kept up. That means something has got to give. For those people that expect and plan for a cyclic economy - and save a ton, they may save a little less than they did, cut down on some discretionary purchases, and move along with a standard of living very similar to what they had. For people who lived closer to the edge, there are only two choices in a down economy, lower your standard of living, or debt. And since EVERYTHING gets more expensive, saving the same amount for vacation isn't going to be good enough for taking the same vacation.

But it is cyclic. The recession of the 70s eventually became the plenty of the 90s (with some highs and lows in between). Whether the storm will be short enough to be weathered by most, or long enough that almost everyone feels it, remains to be seen.

And there will be some benefits - for luxury goods companies their margins will shrink and those that can still afford the luxury of dining out, taking vacation, or buying a new car may find good deals. This sort of deal is not as good for timeshare owners - since we locked ourselves into a situation to even just this sort of thing out - for better or for worse.

The biggest fear for me right now is that a lot of people are going to make the debt choice. We got here because of the debt choice, and it may take a lot more pain to get out if we don't face up to how we got here. We may end up fixing it with a severe 1970s style tightening of the money supply - remember 18% home mortgages?

 

[Maribel]

...Inflation has caused use to have less money in our pockets and salary increases have not, for most of us, kept up. That means something has got to give. For those people that expect and plan for a cyclic economy - and save a ton, they may save a little less than they did, cut down on some discretionary purchases, and move along with a standard of living very similar to what they had.

Great post everyone!!! I'd been reading all your insights on the US economy and am learning a lot.
I would consider our family to be amongst this group the previous poster talks about. We own our home in south florida, but are currently leaving on Spain on assigment.
This has been specially good for us in a tight economy, as we are receiving a monthly assigment amount that gets matched to inflation every 6 months in Euros, which doesn't happened with our US salary. Still, we found that we are saving a lot less than we did before.
Now, DVC: for current owners, I think DVC will continue to bring value. We will still have great accomodations at a fair price, no matter what is happening with the travel industry in general. If you use your Disney Reward Visa points wisely, you can even save a lot on tickets/meals/entertainment while in the world.
I was able to save a lot of euros using my points and visa rewards to stay on disneyland paris. The total accomodation/ticket package using points and cash in dollars was a little over half what it would cost to purchase the same thing from Spain in euros. That to me is value. Yes, it might no be the best use for my points from the point of view of some, but I might not be able to use them in WDW for the next couple of years anyway, so why not?
I pay my dues on a monthly basis, which makes financial sense since I'm not paying any interests and I don't have to lay a large amount of cash at the begginning of the year, and I can schedule it on my monthly budget.
Now, thinking of new buyers, I'm pretty sure the situation in the housing industry will affect DVC to some degree, as many with cash in their hands will probably wait a little bit to see what develops and those with no cash and in need of financing will see higher loan rates, making them change their purchase decisions.
My personal wish is for DVC sales not to be affected much by the current economic situation, as I want that CRV to be announced, and I presume that won't happen until they have sold SSR, have started selling AK Kidani Villas, and are ready to start selling on CRV (building 70% completed or whatever the rules are).

 

[keishashadow]

made me think when i received the listing info:

Vero Beach
150 (? as i recall-could've been less)
$50/point
some points missing, most intact for current UY

It was a relist, evidently; desperate to dump & banking on ROFR?

just wondering, is this a windfall for DVC...as in profiting from resales or will it be a drain?

 

[Starr W.]

I've noticed the prices on the resale listings are down even for BCV, some under $92/pt. Has DVC lowered ROFR levels or are people desparate and hope by using a low asking price they will get a buyer and get their cash quickly(either by the buyer or DVC).

 

[snowbunny]

there are several sectors that are relatively safe from the current housing crisis such as pharmaceuticals, healthcare, law, education, technology, and oil.

Disagree. The Fed doesn't lower interest rates by 3/4 point overnight unless there are broadly terrible economic conditions. The foolishness of the bankers in making loans to anyone and everyone with a pulse is affecting the entire world economy -- including those of us who didn't take the temptation -- and, if you read what Bernake says, it's going to get a lot worse before it even begins to get better.

 

[snowbunny]

Sorry double post.

But to add - I'm really glad I'm not trying to unload an SSR contract right now, if you go over to the TSS listings. Sheesh.

 

[Disney_Daddy]

Disagree. The Fed doesn't lower interest rates by 3/4 point overnight unless there are broadly terrible economic conditions. The foolishness of the bankers in making loans to anyone and everyone with a pulse is affecting the entire world economy -- including those of us who didn't take the temptation -- and, if you read what Bernake says, it's going to get a lot worse before it even begins to get better.

We are speaking about separate issues. The Fed's action on Tuesday came after the worst two day stock decline in Japan and Hong Kong in more than a decade. While surprising to some, Mr. Bernanke is doing what he feels necessary to ease tension in the global markets.

My point was only that oil, pharma, education, etc. are all performing relatively well right now. The employees in these companies are still receiving bonuses, promotions, etc. The corporate ladder is hard at work. So these people may be able to afford luxury purchases during this current economic situation.

 

[gmboy95]

I think the real impact from the economic downturn will be felt by average americans being able to travel to disney over the next couple of years....this will be offset of course by the huge number of euro and canadian tourists who will most likely flood the parks due to the very week dollar and exchange rate....Sometines we lose site of the fact that DVC is great but it still costs significant amounts of money for members to travel and stay....gas prices are very high,l which in turn makes airline flight more expensive, and all things that rely on transportation to get to a store cost more as well....I got news for everyone, despite what those in the top 25% tell you, we have been in an economic downturn for quite some time.

 

[BWV Dreamin]

Luring people to WDW in down times is not new to Disney. They have the resources to get people there....free Dining, reduced park tickets, breaks on hotel stays. Unfortunately, DVC members will not see any of these perks.
All of the billions of dollars Bernanke thru into the economy, the 3/4 cut, and Bush's emergency economic pkg. are not going to turn the economy around NOW. It is projected 18-24 months before we see any benefit. In the mean time, houses are going to continue to deflate in prices......and the financial markets will continue to take hits from defaulting mortgages. The only saving grace is someone is bailing out the mortgage insurance co's, so there will be some immediate cash.

 

[rinkwide]

You people watch too much CNN.

 

[BWV Dreamin]

You people watch too much CNN.

And CNBC!

 

[mwehttam]

My point was only that oil, pharma, education, etc. are all performing relatively well right now. The employees in these companies are still receiving bonuses, promotions, etc. The corporate ladder is hard at work. So these people may be able to afford luxury purchases during this current economic situation.

You are correct. I work for a tech firm and we are doing very well. We are growing, adding employees and moving into new, bigger office space. My yearly increase was well above inflation.

I do not believe there will be a long recession and I am doubtful there will be one at all. Someone mentioned earlier that it will be a depression. That is highly doubtful. The government has too many "safe-guards" in place to make anything approaching the 30's close to impossible.

I remember the first day of my Econ 101 class: Every 8-12 years or so there is a recession. It it like clock work going back to the 1830's.

-Matt