The new resale rule: The Empire Strikes Back

[Cmbar]

Problem is you aren't thinking big picture. If Disney Vacation Development isn't selling new points, they have no incentive to support the current program. The first thing to happen is member perks would disappear. Why bother giving $100 Annual Pass discounts to people who are already committed to visiting the parks? Dining discounts, spa discounts, free Internet...it would all go away.

I see what you are saying but I think that is somewhat my point. DVD may not have an incentive to support the program but certainly Disney will. The DVC on property keep people filling the parks. If they let DVC go bust then all those rooms have to be filled by others. And as others have said member perks aren't guaranteed so they can't be considered in any equation in particular the big picture of DVD

And if the program doesn't have any future growth potential, I'm sure Disney would look at getting out of the timeshare management business. The next logical step would be to sell DVC to the highest bidder. DVC the management company, that is. There wouldn't be any property changing hands but owners could suddenly find themselves part of Wyndham or Bluegreen--competing with hundreds-of-thousands of other owners for the limited Disney availability at 7 months.

DVC points would become Wyndham points or some other. (Former) DVC owners would find themselves subject to VIP programs, housekeeping credits, reservation credits, trading fees and all of the other supposedly distasteful aspects of other timeshares. Other developers would have zero interest in ROFR. Resale values would fall completely off the map. Why bother buying Bay Lake Tower Wyndham points when you can get access to the WDW resorts by paying $100 for Wyndham Branson, MO on eBay.

Again I believe it would be a detriment to Disney itself if it let the DVC management go bad even if they decide to stop developing and selling through DVD

Whether we realize it or not, we all WANT DVD to do well. New destinations, larger guest rooms, extra bathrooms, expanded occupancy levels, more attractive locations, new resort pools, new resort restaurants...all of those moves are primarily designed to sell more points. But fortunately even the class of '91 can benefit from those additions.

If the program suffers, ultimately we all suffer. And it's not too hard to envision scenarios like the above where resale values are much, much lower.

As for DVC expansion, destinations like Aulani, BLT and the Grand Californian may not appeal to YOU but they certainly help the system as a whole. Resale prices are all about supply and demand. The demand side of that equation can can only increase when they add new destinations. Building in locations like Hawaii, Washington DC or Lake Tahoe generates new interest in the program. People who once dismissed DVC due to the lack of at monorail resort or non-Disney destinations will suddenly see DVC as a better match. Ultimately that can only HELP resale prices. I tend to disagree because I don't see the value for the resorts offsite. HH is a nice place, so is Vero but not many people want to go there to the Disney resort because it is Disney. I believe DVC members go there because they can get beach accomodations using DVC points occassionally, but I can do that with Marriott or certainly I could get lots of beach accomodations at lots of places. Just because HH has a Mickey on the resort doesn't make me want to buy DVC. People want to buy DVC for Disney World, Disneyland and maybe Disney Cruise line. I think the expansion to these markets decrease the value of DVC because it makes them like everyone else. If Disney is relying on the Disney name to fill a Wash DC resort I just can't see it. Who wants to see Mickey and Congress at the same time?? I want to escape reality when I got to see Mickey

And BLT does appeal to me since I own there

I'm not thrilled with the decision but I have yet to come across an alternative which doesn't carry its own set of consequences.


Agreed. But again I say that those that say "DVD" had this right and it is in their best interest and then lay it at the feet of the owners that they either bought for the wrong reasons, or did not do their research, have their own thoughts of what is valueable. For instance you just mentioned that other locations make DVC more attractive for the members, but again I say if we did the research we would find that we aren't guaranteed that we have access to those places in the future and with each new change that gets implemented, big or small (and I will admit this is small because it really only affects future buyers directly) leads to the next logical conclusion..... Your product is not what was advertised. Surely even you and Dean and bicker have some breaking point at which DVD will take away the value of your product. Maybe this isn't one of them because it doesn't impact you, but it does impact the "value" of DVC in some way, be it small. I think for those that are filling these 40 pages it is more a big picture of a deterioration of the product as we bought it.

DVC all but ceased ROFR activity in the last 1-2 years. That move had a MUCH more damaging impact on resale prices than this ever will. I find it increasingly ironic that we have 40+ pages of discussion on this policy change yet nobody batted the proverbial eye over the end to ROFR.

The point about ROFR is an excellent point. Maybe I don't understand the new rule. Did they get rid of ROFR all together?

 

[crisi]

The point about ROFR is an excellent point. Maybe I don't understand the new rule. Did they get rid of ROFR all together?

They've just quietly stopped exercising in in most cases. They still have the right, but honestly, with as many foreclosures and fire sales as happened when the economy went South, and DVD sales slowing at their new resorts, they couldn't afford to have a lot of points on the books that they own, don't get maintenance revenue on - and in fact have to PAY maintenance revenue on. Disney was already granting deep discounts to fill rooms, they didn't need more room inventory.

They've continued to exercise at BCV - apparently there is still a fairly robust direct market for those points. And I suspect that if an eBay deal tries to get through for VWL at $10 a point, Disney would find the money to buy it.

In the future, if the resale market supply decreases and/or Disney wants to repackage old resorts into new offerings (as was proposed - i.e. a BWV contract with 25 years might not be worth much, but repackage it as a 50 year contract and its practically a "new" resort), we might see them exercising ROFR again.

 

[Cmbar]

They've just quietly stopped exercising in in most cases. They still have the right, but honestly, with as many foreclosures and fire sales as happened when the economy went South, and DVD sales slowing at their new resorts, they couldn't afford to have a lot of points on the books that they own, don't get maintenance revenue on - and in fact have to PAY maintenance revenue on. Disney was already granting deep discounts to fill rooms, they didn't need more room inventory.

They've continued to exercise at BCV - apparently there is still a fairly robust direct market for those points. And I suspect that if an eBay deal tries to get through for VWL at $10 a point, Disney would find the money to buy it.

In the future, if the resale market supply decreases and/or Disney wants to repackage old resorts into new offerings (as was proposed - i.e. a BWV contract with 25 years might not be worth much, but repackage it as a 50 year contract and its practically a "new" resort), we might see them exercising ROFR again.

Thank you. It wasn't an official thing, just a quiet decision to do this. That makes sense. I guess a lot of resales were going through for good prices for the buyers then.

 

[chalee94]

DVC all but ceased ROFR activity in the last 1-2 years. That move had a MUCH more damaging impact on resale prices than this ever will. I find it increasingly ironic that we have 40+ pages of discussion on this policy change yet nobody batted the proverbial eye over the end to ROFR.

i know this goes round and round but did the "great recession" hammer demand such that DVC had to drop ROFR? as the market pushed prices down, DVC decided not to risk getting caught holding the bag. that makes more sense to me.

still don't understand the argument that with home prices tanking, banks failing and unemployment soaring all around, that DVC dropping ROFR was the real culprit for timeshare values going down... cause and effect seem a little mixed up here.

 

[Dean]

Market forces will determine the new resale prices as well, that hasn't changed.

 

[nunzia]

Well, to be honest, that is the reason I spent $5000 more to buy BLT over SSR. I knew that I wanted to stay there and that DVC could, at any time, remove my home resort from the group and I would be allowed to only stay there.

Sure, I might be sad that the option was gone but I would in no way feel mad or upset about it. I would still love my DVC and in no way would that move even change its value for me. Again, I bought to stay at BLT and as long as I can stay at BLT I will be thrilled.

Same here..I pretty much only go to DLR for now and I went to great lengths to make sure I could get VGC the way I wanted (bought OKW resale to get in the system before VGC opened, then bought several small contracts direct from Disney to make up my current 225 without having to buy that 160 master.) I knew that VGC would get pretty hard to book at the current 7 month mark allowing all owners to book there. It is tiny..and I knew 11 months would be vital. I also knew that VGC was really the only resort I would be guaranteed to book at and all other options could come and go at Disney's whim. So, like this poster said, I'd be a bit bummed to lose the other options, but I bought DVC to stay at VGC so I'll always be happy I can stay there. It's been said over and over..buy where you want to stay...

 

[crisi]

i know this goes round and round but did the "great recession" hammer demand such that DVC had to drop ROFR? as the market pushed prices down, DVC decided not to risk getting caught holding the bag. that makes more sense to me.

still don't understand the argument that with home prices tanking, banks failing and unemployment soaring all around, that DVC dropping ROFR was the real culprit for timeshare values going down... cause and effect seem a little mixed up here.

I suspect it had to do with cash flow and inventory management.

To buy up a contract under ROFR Disney has to have cash. Then they have to pay maintenance on those points while they own them.

Coming up with cash to exercise ROFR in an ordinary resale market wasn't difficult - $10,000 here and there for a big company in a healthy economy. And they could resell the points they had as add ons fairly quickly.

But when the recession hit, DVC/DVD got a triple whammy in terms of cash flow:

1) Owners were not paying dues. Less dues maintenance revenue.
2) Owners were not paying their loans - DVC was foreclosing on and reclaiming those contracts. More inventory, less external dues revenue.
3) Sales slowed. Both add ons and initial orders at both new and old resorts.
4) The resale market exploded with people who couldn't afford their points - creating lots of ROFR opportunities.

The first three Disney was sort of obligated to just deal with the fallout. The last one, Disney has an OPTION to exercise ROFR, not an obligation. They had ample inventory for their reduced sale/add-on demand from foreclosures alone. Wall Street hates to see a company sitting on excess inventory. The only reason to add to that inventory was to prop up prices for direct sales - they've found a different way to do that.

 

[DVCconvert]

I suspect it had to do with cash flow and inventory management.

To buy up a contract under ROFR Disney has to have cash

That's right -- and in late '08/early '09 DVC lost it's credit line...thus the "crunch"

 

[jarestel]

The dramatic shift of focus from vacation savings to resale values seems a bit illogical.

Consider:
After 5 - 10 years of stays at a Disney moderate to deluxe resort, one has only 5 - 10 years of memories in the bank. Nobody gets any money back after Disney becomes tiresome or should some sort of OMG event occur.

After 5 - 10 years of DVC stays, for approximately the same or less money expended and for stays in at least theoretically larger and more comfortable accommodations, one has 5 - 10 years of memories in the bank, as well as a chance to recoup something should Disney become tiresome or some sort of OMG event occur.

So, it would seem to make sense that if you're going to Disney anyway, the DVC option would still seem to be the better choice, even factoring in the potential of dwindling resale values.

 

[chalee94]

But when the recession hit, DVC/DVD got a triple whammy in terms of cash flow...

i agree with all that you said - plus there was the issue of DVC getting cut off from securitizing their DVC loans (selling the future loan payment streams for immediate cash), which is i think what DVCconvert is talking about... DVC definitely got hammered in cash flow terms.

but the point is that DVC was picking up a bunch of foreclosure inventory...more than they expected to be able to resell in the short term...would they really have used the cash if they had it to try to "prop up" resale prices? if extra supply was flooding the market and demand was drying up due to increasing unemployment and economic concerns, that's going to push prices down faster for timeshares than for normal real estate...which was tanking for similar reasons. so did dropping ROFR cause the prices to drop (was dropping ROFR the cause) or did market conditions push values down which forced DVC to drop ROFR (was dropping ROFR the effect)?

as i've said before, if the market isn't the primary driver for pricing, why is a BWV resale more expensive than a VB resale? why won't DVC "prop up" prices for VB owners just like they do for BCV owners? i'm thinking demand for the resorts is really that different...and DVC really can resell ROFRed BCV pts at a much quicker pace than they can VB pts. so DVC makes ROFR decisions based on market pricing rather than making ROFR decisions to establish market prices.

ROFR seems to be there to allow DVC to pick up fire-sale priced contracts where DVC has more information than the panicky seller - they know they have the machinery already in place to sell it directly for a profit, even if a relatively small one. as we've seen, in the event of market collapse, DVC will not be "taking one for the team"...they will not ROFR just to prop up resale prices, they will back off on ROFR until they can get a handle on where the new market equilibrium will settle.

i will concede that if i think a contract is worth around $84 per pt, i might offer $86 per pt to get past ROFR...so there might be a small scale effect. but if i think a contract is worth $75 per pt, i'll either offer $75 and take my chances with ROFR or else use the money elsewhere.

but the ROFR arguments on TUG have been epic and have covered the ground pretty thoroughly. just makes me nervous when posters imply that ROFR offers some sort of protection for resale values...

 

[tjkraz]

but the ROFR arguments on TUG have been epic and have covered the ground pretty thoroughly. just makes me nervous when posters imply that ROFR offers some sort of protection for resale values...

ROFR never offered any protection but it did artificially inflate values. DVC was clearly more aggressive in the ROFR realm 2+ years ago and those decisions weren't strictly based upon inventory needs--even resorts in active sales would be re-purchased at prices much higher than what one would call "fire sale" rates. IMO, it was pretty obvious that they were controlling prices in order to keep the span between direct and resale pricing at manageable levels.

There were even times when DVC would aggressively raise its ROFR levels in anticipation of price increases. Entire waves of contracts sitting in Disney's hands--most priced at levels which buyers were certain would clear--were suddenly scooped up.

I don't disagree with any of the reasons for Disney ending its ROFR practices. Banking crisis, falling housing prices....all were contributing factors. But despite the economy being in a tailspin, for the most part DVC kept increasing its prices. There were some deep discounts back in early 2009 but since then things have been on a sharp increase.

With that aggressive pricing, the direct sales market would be better if DVC had maintained and increased its ROFR levels to keep the cost spread more reasonable. I won't claim to know what it would have cost DVC to continue such aggressive ROFR in light of high unemployment and other economic factors. But my point simply is that it's another option that was available.

Two years ago SSR was going for $80 per point resale. Today it's $60. It was within DVC's legal power (if not financial power) to keep it at $80. Choosing to NOT be aggressive in ROFR was far more damaging to resale prices than this policy change will ever be.

 

[tjkraz]

I see what you are saying but I think that is somewhat my point. DVD may not have an incentive to support the program but certainly Disney will. The DVC on property keep people filling the parks. If they let DVC go bust then all those rooms have to be filled by others. And as others have said member perks aren't guaranteed so they can't be considered in any equation in particular the big picture of DVD

Again I believe it would be a detriment to Disney itself if it let the DVC management go bad even if they decide to stop developing and selling through DVD

There's absolutely no incentive to give DVC members on-property discounts if active sales were to end. Other discount programs--cash room promotions, Passholder discounts, FL resident discounts--are designed to get people on property. DVC members are already guaranteed to be on property.

Disney wouldn't let DVC "go bad" but it only makes sense for them to sell off the management division to another timeshare. There would be a bidding war among the big timeshare players to add Walt Disney World and Disneyland resorts to their portfolio.

Selling the management company also has the benefit of exposing new guests to the Disney parks. If the DVC resorts were to become part of Marriott or Bluegreen, suddenly there are hundreds of thousands of individuals who gain access to the Disney parks.

Without the carrot of BILLIONS in profits from "new" sales, there's little reason for Disney to keep the timeshare management in-house.

I tend to disagree because I don't see the value for the resorts offsite. HH is a nice place, so is Vero but not many people want to go there to the Disney resort because it is Disney. I believe DVC members go there because they can get beach accomodations using DVC points occassionally, but I can do that with Marriott or certainly I could get lots of beach accomodations at lots of places. Just because HH has a Mickey on the resort doesn't make me want to buy DVC. People want to buy DVC for Disney World, Disneyland and maybe Disney Cruise line. I think the expansion to these markets decrease the value of DVC because it makes them like everyone else. If Disney is relying on the Disney name to fill a Wash DC resort I just can't see it. Who wants to see Mickey and Congress at the same time?? I want to escape reality when I got to see Mickey

That's your own perspective and I do think it's a little narrow. Look around the forums and you'll see many posts from people saying things like "I want to buy DVC but my husband wants to travel to other places, too."

Simply put, the program isn't sustainable if the only market for DVC points are die-hards who want to visit the theme parks every single year for the next 40-50 years. They need outside destinations in order to attract the buyers who also have non-park interests.

Agreed. But again I say that those that say "DVD" had this right and it is in their best interest and then lay it at the feet of the owners that they either bought for the wrong reasons, or did not do their research, have their own thoughts of what is valueable.

More accurately, I would say that some owners operated under the mistaken impression that DVC/DVD would operate in such a way as to maximize the owner's resale value.

For instance you just mentioned that other locations make DVC more attractive for the members, but again I say if we did the research we would find that we aren't guaranteed that we have access to those places in the future and with each new change that gets implemented, big or small (and I will admit this is small because it really only affects future buyers directly) leads to the next logical conclusion..... Your product is not what was advertised.

Obviously there are many changes DVC can legally make to the program. Resorts can only be removed from the association under limited circumstances as defined in the POS--things like owners voting to remove DVCMC as a manager, eminent domain or the destruction of the resort due to natural disaster. It's also a move which would severely damage future sales prospects.

Suggesting that owners could be limited to Home resort bookings is FUD. It's about as useful to the discussion as debating resale values if Disney closed the theme parks or paved over Stormalong Bay to build a Super Target.

Surely even you and Dean and bicker have some breaking point at which DVD will take away the value of your product. Maybe this isn't one of them because it doesn't impact you, but it does impact the "value" of DVC in some way, be it small. I think for those that are filling these 40 pages it is more a big picture of a deterioration of the product as we bought it.

Certainly every person has their own breaking point and I fully expect all owners to continue to gauge whether ownership is a good match for their vacation needs. But again, we are talking about a policy which has absolutely zero bearing on how a current members can use his/her existing timeshare ownership. Expecting DVC to formulate policies which maximize resale value--at the expense of their own revenues--is just not realistic.

 

[FindingFigment]

Expecting DVC to formulate policies which maximize resale value--at the expense of their own revenues--is just not realistic.

Amen! We could actually end this thread on that statement, because that pretty much says it all.

 

[KAT4DISNEY]

It seems like that these changes may hit the resales of off-site resorts and especially VGC and maybe Aulani owners harder than the WDW resorts. I currently have some holding points and was looking at booking a studio - just for even one night - at VGC and there's not a single night available for the next 60 days. I'm a direct purchaser so I can use the points at DLH or PP but in the future a resale buyer will not be able to. VGC is sold out and has wait lists for points so at the moment the only option if you want to own at DL is to buy resale. When there's literally no other options that's going to mean lost points or require you to rent them out. At WDW you will most likely find something and won't miss the Disney Collection that is still kind of vital for DL.

 

[Dean]

Surely even you and Dean and bicker have some breaking point at which DVD will take away the value of your product.

One of my main points is that the affect on the membership as a whole or an individual is irrelevant as a measure of this issue. This issue, as have all of the other controversial ones (valet parking, reallocation, etc) have affected me personally to one degree or another. Actually I have a fairly large BWV contract I'd planned to sell at some point. The issue is whether DVC is living up to their legal and contractual obligations, IMO, they are. I have no problem with one saying the change hurts them, I have a large problem with the "how dare they" attitude of many. I think the one potentially valid negative criticism is that this change will likely increase the number of people that would have sold but now will keep and rent out.

 

[Dean]

It seems like that these changes may hit the resales of off-site resorts and especially VGC and maybe Aulani owners harder than the WDW resorts. I currently have some holding points and was looking at booking a studio - just for even one night - at VGC and there's not a single night available for the next 60 days. I'm a direct purchaser so I can use the points at DLH or PP but in the future a resale buyer will not be able to. VGC is sold out and has wait lists for points so at the moment the only option if you want to own at DL is to buy resale. When there's literally no other options that's going to mean lost points or require you to rent them out. At WDW you will most likely find something and won't miss the Disney Collection that is still kind of vital for DL.

My opinion is that it will hurt the higher price options more than the lower ones, like BLT.