The Economy - its effects of DVC

[MJ6987]

Hi All,
With the economy (U.S. and worldwide) in its current poor state, does anyone have any predictions about how this might effect DVC purchase / sale prices and dues.

With property prices falling, you would expect DVC sale prices to fall accordingly (both from Disney and resale) - is there evidence of this in the resale prices yet? How far do you think they will fall over, say, the next 12 months?

I wonder if Disney are concerned about demand for the new DVC "tower"?

Also, dues have been increasing ahead of inflation in recent years (particularly since 2001) - do you think they will be due for some corrective reductions this year?

Just interested to hear people's views...

Matthew

 

[chalee94]

With property prices falling, you would expect DVC sale prices to fall accordingly (both from Disney and resale) - is there evidence of this in the resale prices yet? How far do you think they will fall over, say, the next 12 months?

there is evidence of softness in DVC sales, both in falling resale prices and in greater incentives for direct purchases.

you might as well ask the magic 8ball about the future. things might fall further or the economy might be fully recovered...

I wonder if Disney are concerned about demand for the new DVC "tower"?

i'm sure they are.

Also, dues have been increasing ahead of inflation in recent years (particularly since 2001) - do you think they will be due for some corrective reductions this year?

i doubt that. i expect slightly larger increases than usual in annual dues when they are announced at the end of this year. just my opinion, though.

 

[WolfpackFan]

I think we're seeing an effect in that DVC doesn't seem to be moving ahead as quickly as we would have thought with the Hawaii resort. I bet that resort is being put on the slow track until they see what is going to happen with the economy and specifically with the cost of air travel.

 

[DaveH]

It could lower the amount of dues increases. Dues cover things like taxes. If the property values may decrease taxes. If I remember right the largest increase we have seen was after the hurricanes went through and the insurance rates went way up. Incentives to buy from Disney seem the best we have seen. We bought in 2001. Last year's member cruise had a price break, a vacation or developer points. When we bought the incentive was to sell first years points back to Disney to help with the down payment.

 

[disneynutz]

Hi All,
With the economy (U.S. and worldwide) in its current poor state, does anyone have any predictions about how this might effect DVC purchase / sale prices and dues.

With property prices falling, you would expect DVC sale prices to fall accordingly (both from Disney and resale) - is there evidence of this in the resale prices yet? How far do you think they will fall over, say, the next 12 months?

I wonder if Disney are concerned about demand for the new DVC "tower"?

Also, dues have been increasing ahead of inflation in recent years (particularly since 2001) - do you think they will be due for some corrective reductions this year?

Just interested to hear people's views...

Matthew

Sales and prices are already down. DVD had great sales during the last couple of years and as a result made some poor decisions in my opinion. Too many new resorts too soon has weakened the demand. They should have waited on AKV and BLT until later. When you have more product than demand, prices fall.

 

[Anthony1971]

DVC like all other builders grew at a fast pace durning the boom. That being said yes there were a lot of people who purchased that truly could not afford to and those who were boarderline etc. This will soften the new and resale.
However I feel Timeshares in general will fair well in this economy. DVC has something unique to offer and that is the family vacation and Disney knows how to cater to this venue as others do OK at best.
Please keep in mind I am weeding out those who can not afford a vacation much less DVC. While those numbers are growing there is still a huge untouched number of people who can which is evident by the Deluxe hotels being booked. DVC in general focused on the people who stayed in the value and moderate as we pay a comparable amount in the end for much nicer accomadations. Of course there are many who can afford Deluxe and bought as well but still in the end they were looking for a bargain as well. That is where BLT comes in, DVC in front of the guests of the deluxe resorts faces. Lets face it when we say deluxe at Dinsey GF, Poly, and CR come to mind.
In the end those people may be hurt by this economy as well and looking for the bargain which DVC can offer. Lets face it a one week room rate at one of the above for a week will pay for about 25% (with some room for discount) of the total cost of DVC. The 160 point buy in can offer a studio for longer most times of the year.
In the end I doubt this economy will have a big effect on DVC but will certianly have some as seen already but I do not think we will see much more if not a turn around in the coming year or so.

 

[tjkraz]

There are two different issues which should probably be discussed independently.

The first is direct sales from Disney.

Sales and prices are already down. DVD had great sales during the last couple of years and as a result made some poor decisions in my opinion. Too many new resorts too soon has weakened the demand. They should have waited on AKV and BLT until later. When you have more product than demand, prices fall.

Is there any hard evidence indicating that sales are down?

I certainly don't see anything which would suggest that Disney has overbuilt. SSR is gone. AKV began selling Kidani points A YEAR before they will even be available. Disney can't turn-around these quarter billion dollar construction projects in a year's time--it takes 2 1/2 to 3 years to open a new resort. So they NEED to be thinking ahead.

IMO, altering their 2012 plans for the Hawaii project would be a poor decision. We need to go back 80 years to find a period of recession that lasted for 4 years, and I sure hope that Disney isn't managing the company under the assumption that we're headed for a repeat of the Great Depression. That project needs to keep moving forward so that Disney is positioned to cash-in when times are good.

Now, we could argue that the promotions being offered now are a sign of slow sales. But in reality, discounted pricing in the fall months has become the norm for at least 4 years now.

The $8 off at AKV is pretty standard, and lower than the $10 off at SSR that was offered throughout '06 and '07. The developer's points are a necessity since they are in pre-sales mode--you can't ask people to spend $20k on a product they cannot use for 10-12 months.

That leaves the $500 gift card...which is really only available to those who have a referral. Joe Disney Fan who walks up to a sales booth during his trip will just be offered the $8 off and developer's points.

Other mitigating factors would include the 800 pound gorilla going up next to the Contemporary. How many potential customers are still waiting with baited breath for that announcement? California residents are doing the same for VGC. And we should also consider that the theme of AKV (the only resort available for direct sales) isn't exactly everyone's cup o' tea.

Are sales at the same levels they were this time in 2006 or 2007? Probably not. But I don't think the bottom has exactly fallen out of the market, and the economy isn't entirely to blame for any degree of slow sales.

The other market for DVC is resale and that one is easier to evaluate. It seems clear that contracts are hitting the resale market at higher numbers than ever. Can't really fault Disney for that one--the buyers are the ones making poor decisions. Prices are already falling, which is good for the buyer.

As an owner, it doesn't bother me in the least. I bought my contract to use it...not as an investment. I only wish I was in the market for an add-on right now.

 

[crisi]

I'd say that there is hard evidence. Disney never used to give away anything much for taking the tour - of late they've been giving out gift certificates - the best teaser for touring I've heard of. Promotions are better than I think they've ever been as well. Both imply a softer level of sales than Disney anticipates, since they aren't giving away their profit if sales are what they expect.

And I bet they are freaking over the tower. And that is why we've spend six months with no announcement that's been anticipated almost every moment for something we all seem to know what it is. My own guess is that they will continue to delay annoucing that - and also delay any spend on finishing interiors - until the economy picks up.

I have no evidence, but I wouldn't be surprised to discover that Disney is sitting on a bunch of "sold out" SSR points - they said VWL was "sold out" when they wanted to start selling BCV, but then - about a year later when BCV sales had met expectations, they suddenly had about 10% of VWL available to sell. "Sold Out" seems to be DVCs favorite marketing term.

However, the investments have been made and Disney has enough money to be able to sit on the capital rather than realize it - if they think the economy will pick up in a year or so. So I don't think this wil translate into significantly lower prices from DVC - there may be an even better promo.

And I think dues will go up - a significant portion of dues are transportation costs and energy costs.

 

[tjkraz]

I'd say that there is hard evidence. Disney never used to give away anything much for taking the tour - of late they've been giving out gift certificates - the best teaser for touring I've heard of. Promotions are better than I think they've ever been as well. Both imply a softer level of sales than Disney anticipates, since they aren't giving away their profit if sales are what they expect.

This is the first I've heard of Disney giving out gift certificates recently, but they have done it in the past. Even still, are the supposed slow sales a result of:

The economy (the question posed here)?
Lack of appeal of AKV?
People waiting on the Contemporary or Grand Californian?
More people buying resale?



Probably some combination of all four. Speaking to the questions of the economy, I don't see the situation being severe enough to prompt abnormally high discounts. The offers we see today are attractive, but hardly unprecedented. And given the lead time on resort construction, I don't believe Disney has been too aggressive in development as has been suggested. If anything, they waited too long to start on Kidani as SSR sales were winding down.

Not sure I buy the "SSR isn't sold" conspiracy theory either. VWL sales were 7-8 years ago under different DVC management. After touting how well things seemed to be running with two distinct resorts to sell, I can't see any advantage to DVC sitting on a pile of SSR points. And we've even had reports of there being a waiting list for certain Use Years as SSR sales were winding down.

 

[Mickey'sApprentice]

Rising energy costs means that the economy is going through a period of cost-push inflation similar to what we went through with the oil shocks in the 1970s. The inflation rate is not as high as it was during the 1970s partly due to the fact that labor has much less leverage than they did because of increased globalization. Demands for higher salary to fight inflation actually increased the level of inflation significantly.

However, as a pp stated, transportation and energy costs have risen significantly. This will definitely be reflected in annual dues.

Expect increases of at least 5% for 2009.

 

[BWV Dreamin]

I just don't buy the notion that Disney is"hurting" in this present economy. They are still on the "best buy" list for stocks according to CNBC. Their stock has outperformed...we'll see what the next quarter brings. Once any new resort opens for sale, we'll see Disney's numbers take a bounce "up". I think this is just little phase where no new resorts are for sale, Kidani is just opening up for sales, SSR winding down, people waiting for BLT announcement, GCV not for sale yet. These gift certificates are just a tool to get at the ones that are presently looking. Disney is in great shape.

 

[Brian Noble]

Disney executives were on record stating that bookings for Oct-Dec are ahead of last year's pace, and this was prior to any discounting. The most recent attendance figures had domestic parks flat to slightly higher vs. a year ago, with guest spending up.

So far, the economy has not impacted Parks & Resorts.

 

[pickles]

I think if you go to the timeshare store website and see the number of sale pending signs, that will tell you exactly how things are going

when I first started looking a year or 2 ago, I watched those boards and the sales and I got an idea on the "value" of each resort. You could not get me to buy SSR..think those folks can hardly give their resort away, until someone pointed out the cheaper yearly fees, then you start seeing there is more wisdom and thoughts to consider.

Disney is building, not shrinking and the resales have many sale pending signs....I am not worried, people like going where they can forget their worries even if just for a week

 

[tomandrobin]

Even though Home sales are down for the year, Timeshares are seeing one of their best years ever in 2008.

DVC prices will not come down. The housing market really never effected them, its a different product. People will vacation regardless of the economy. If anything, people are buying the sales pitch of cheap vacations for life.

 

[hakepb]

I think we're seeing an effect in that DVC doesn't seem to be moving ahead as quickly as we would have thought with the Hawaii resort. I bet that resort is being put on the slow track until they see what is going to happen with the economy and specifically with the cost of air travel.

Does any construction happen fast in Hawaii? Every construction material has to be imported from the mainland.

 

[moredisneyplease]

I agree with hard evidence because indeed you didnt get much for going on the tour.....besides ice cream! Now there are gift certificates, Fast passes, and all kinds of great incentives when there really wasnt those kinds of things a few years ago.

 

[DisFlan]

I think DVC and most owners (there are a lot of us now) will ride it out in okay shape. Things will happen, resales will go up and down, dues will fluctuate, new sales may take a dip for awhile. There may be changes. BLT may soar, Hawaii may be a bust. Or not. I don't think anything will happen that can't ultimately be dealt with.

Unless the gates clang shut, we'll still be at BWV using our points.


DisFlan

 

[mjtm610]

We were at the DVC store in Schaumburg's Woodfield Mall the evening they celebrated their 1st anniversary. If the economy is hurting----it's not hurting them!
When the presentation was over---people RAN to buy points. They had a very large room set up with table and chairs. All the table and chairs were full. People were standing in line to give away their $$$$$. One of the CM told me later that they had more than TRIPPLED their expected sales for that week-end. Yes, they had great promotions. Great deals. We thought they would make alot of sales and yet were flabbergasted when we saw people fighting to give Disney their $$$$
No----I don't think the DVC is hurting

 

[BWV Dreamin]

Unless the gates clang shut, we'll still be at BWV using our points.


DisFlan

Yep, love my BWV!!!

 

[DisneydaveCT]

I'd say that there is hard evidence. Disney never used to give away anything much for taking the tour - of late they've been giving out gift certificates - the best teaser for touring I've heard of. Promotions are better than I think they've ever been as well. Both imply a softer level of sales than Disney anticipates, since they aren't giving away their profit if sales are what they expect.

The fact that Disney is giving incentives to take the tour may be a reflection of the economic downturn, or it may be due in part to the fact that as DVC has grown so has the number of activities to capture our attention during our trips "home." With all of these additional activties to capture a guest's attention, it is probably more difficult today to get people to interrupt their vacations to tour a timeshare.

As far as sales incentives, I am sure many people will agree that the free park passes given to those of us who bought in the 90's were proably a better value than some of today's incentives. I was able to get the free park passes for every trip I made to WDW during my first 4 years of my DVC membership.

I have no evidence, but I wouldn't be surprised to discover that Disney is sitting on a bunch of "sold out" SSR points - they said VWL was "sold out" when they wanted to start selling BCV, but then - about a year later when BCV sales had met expectations, they suddenly had about 10% of VWL available to sell. "Sold Out" seems to be DVCs favorite marketing term.

Given that DVC holds a ROFR on all the contracts, the post "sold out" points at VWL were probably points that DVC bought back through the ROFR, rather than DVC holding on to points for a future marketing campaign.