I've said this before, but there is a fundamental problem with timeshares and the resale market that, eventually, forces every resort/system into these sorts of valuations.
The problem is that very few people wake up in the morning and think to themselves
Today I'm going to legally obligate myself to pay for the operating and upkeep costs of some fraction of a luxury vacation condominium for the next many decades.
Sure, some people wake up with such a thought---there are some folks who calmly and deliberately seek out timeshares to purchase. I own three of them! But, the number of such people is not unlimited. In other words, there isn't a lot of "natural demand" for a timeshare.
So, if there isn't this huge pent-up demand for people clamoring to buy timeshare, how does it get sold? It gets sold in a very calculated way, meant to create demand amongst people who previously hadn't seriously considered it. A couple or young family is on vacation, literally having the time of their lives, when someone explains to them that they can bottle this magical vacation feeling forever! And, better yet, they can do so "at today's prices!" How cool is that?
Cool enough that it moves A LOT of product. But, it moves product at prices based on emotional factors, not rational dollars-and-cents factors. At the end of the day, the developer extracts a *premium* thanks to that vacation magic feeling.
Most of these people---the vast majority, in fact---love what they've purchased. Sure, it is a luxury purchase, and a bit of a stretch, but after all they can afford it, and gosh darn it they sort of deserve it too! They use the product, they enjoy it, and have many years of great vacations going forward with friends and family. They are happy even though it may not have been the best deal ever. But, a few---some small percentage---either don't love it, or their circumstances change such that they can no longer make use of it or afford it. So, they put it on the market. Some of them are in such dire straits, or so disillusioned, that they'd sell it even if they got next to nothing for it, because they just want to be done with the darn thing.
So, here is where the problem lies. The developers are constantly creating more and more owners through their calculated "bottle the magic" presentations. If the percentage of people who find themselves with something they didn't really want stays roughly the same, the resale market also is constantly growing in size. Unless that pool of "calm deliberate" purchasers who wake up in the morning wanting timeshare is also growing---and growing at about the same rate---resale prices have to fall and, eventually, collapse. And, history tells us that every timeshare, no matter how desirable, eventually succumbs to this
if it continues to grow via development.
And, I don't know about you, but I don't see any signs that DVC is going to stop development anytime soon.
There are some mechanisms that slow this process down some. If real-market rental rates are consistently higher than ongoing costs to owners, the property has some residual "dollars-and-cents" value. That's true for DVC right now, and will probably remain so unless and until the resale market gets so cluttered that too many owners decided that renting is better than selling, and they flood the rental market as well. Unfortunately, there is some evidence that some owners are making this decision, via the Timeshare Store's recent foray into rental management (and more importantly the reasons behind it.)
ROFR also potentially offers a mechanism to put the brakes on any market-size-induced collapse. But, ROFR depends on the developer's willingness to potentially acquire a large number of deeds---and pay the ongoing maintenance on them---until such time as they can be sold. The margins on this are surprisingly small; marketing expenses are anywhere between 1/4 and 1/2 the total cost of a timeshare project, and those marketing expenses have to be paid all over again to sell a deed a second (or third or fourth) time, plus eat the costs of carrying the deed in the meantime. As it stands, Disney seems to have decided that their capital is better spent developing new projects than reacquiring deeds to old ones. They could put the reacquired deeds into the CRO pool, but the whole point of DVC from Disney's point of view was to avoid having to pay ongoing marketing costs for these resorts renting them out year after year.
So, where does that leave us? As the system grows, eventually it will outstrip the "natural demand" in the resale market, unless that market demand grows just as quickly. Once you hit that point, things can get bad in a hurry. The mechanisms to avoid this---rental and ROFR---only delay the inevitable. The only way out is to stop (or slow down) development, but that's not in Disney's interests.
Whether we've reached that point today or not is not clear to me. Perhaps we're just in a transitory period brought on by the economy. If so, prices should stabilize and perhaps recover relatively quickly, because travel demand is picking back up. Disney reported both increased occupancy and increased per-room spending just this past quarter. But, we might also have reached that crossing point. Time will tell.
Bill 
