Value DVC Timeshares Coming?

[tjkraz]

But that's a temporary situation. A value tier would create long-term revenue as does the current DVC.

But it has the long-term likelihood of diminishing the current DVC revenue stream.

As for mid-tier guests reserving value accommodations, there would be incentives in place to discourage that.

IMO, too many rules, too many except/buts. Disney has spent 20 years building the Disney Vacation Club brand and positioning it as a high-quality operation to diminish its worth for something like Value-class accommodations.

If money is an object for buyers, DVC can offer them smaller point contracts and even lower prices like $75 per point at Vero. While older resorts have not historically been their focus, I have heard of situations where astute Guides will make that suggestion if they feel it's the only way to salvage the sale. And DVC could institutionally place a greater emphasis on that approach to its staff.

Creating different levels and tiers of "Disney Vacation Club" only multiplies the buyer confusion for what is already a tough concept to grasp.

It also creates issues with the trading companies. RCI and the like are built on a foundation of offering like-for-like accommodations. They are not going to accept the deposit of a 520 sq ft Art of Animation Suite in return for a 1200 sq ft Two Bedroom villa elsewhere.

I agree with other posters in that Disney can accomplish the same goal by adding the Animation Suites to the Disney Collection. If they eliminate the $95 fee, so much the better.

 

[Chuck S]

Mod note: Please do not allow this thread to go off-topic, or become a discussion of the quality of "Value" resort guests vs "Deluxe" Resort Guests discussion.
Further discussions along this line will be removed.

Thanks.

 

[Brian Noble]

A value tier would create long-term revenue as does the current DVC.

In what way? The Value resorts are already full. That's the entire premise behind my position. The profit from long-term rental rates outpaces the management fee that gets added to the dues figure, by a wide margin. For ancillary revenues (foods, merch, etc.) full resorts are full resorts.

It only makes sense to convert cash rooms to DVC inventory when you can't move those cash rooms at the rates you need to get. Back in the day, AKL and the Contemporary Garden wings were some of the last Deluxe rooms available under any big promotion. That's why they converted two floors of AKL and one CR Garden Wing to DVC. It's widely speculated that some of the GF's rooms are getting the same treatment, for the same reason.

The current Value resorts do not have this problem, and demand for the ASMu suites well outstrips their supply. Unless Disney suddenly believes they've overbuilt AoA, it just doesn't make (dollars and...) sense to convert these rooms from cash to timeshare. Even (and, especially) during economic downturns, the Value resorts are in high demand for cash reservations---to the point that people are being moved *from* Value resorts to OKW and SSR to make more room for people who are willing to pay Value rates.

Why make that problem worse?

 

[Brian Noble]

I would have done this in the post above, but it's really a separate point:

As for mid-tier guests reserving value accommodations, there would be incentives in place to discourage that.

You misunderstood my "dropping down" point. It's not that *current* owners would reserve low-tier resorts. It's that some fraction of *future prospective buyers* who would ordinarily be "mid-tier" customers would see the value proposition of the low-tier resorts, and buy there instead. That's a disaster for DVD, because selling a particular guest is the expensive part; you need them to spend as much in that single transaction as possible. "Volume Per Tour Guest" is the metric for the timeshare business, and you can't ever do anything to lower that.

Edited to add: ultimately, I'm willing to buy that someone at DVD had a conversation with someone at Resort Operations about whether or not some of these rooms made sense as DVC inventory. There are some reasons why a lower price point would make sense. But, ultimately, it seems to be bad business for *both* DVD and RO---DVD cannibalizes its own sales arm, and RO loses inventory in its most in-demand rental segment. Granted, I'm just an armchair economist, but if you read the tea leaves that's the way it seems to me. Every other timeshare developer is *raising* the bar, not lowering it. Disney's only new cash resort in the last decade is a value resort, but they are actively removing deluxe inventory into DVC. Going the other way just doesn't seem to make sense. I think the Disney Collection story seems a lot more likely.

 

[BWV Dreamin]

I don't know, all of the timeshare names out there have lesser valued properties in their portfolio. Why is it that Disney is only Deluxe? Again, I see plenty of Marriots, Wyndhams, Hilton's that have some moderate to lower rated resorts. As far as RCI goes, if Disney includes Value resorts, there would be plenty of mediocre resorts to trade with.

I would have done this in the post above, but it's really a separate point:


You misunderstood my "dropping down" point. It's not that *current* owners would reserve low-tier resorts. It's that some fraction of *future prospective buyers* who would ordinarily be "mid-tier" customers would see the value proposition of the low-tier resorts, and buy there instead. That's a disaster for DVD, because selling a particular guest is the expensive part; you need them to spend as much in that single transaction as possible. "Volume Per Tour Guest" is the metric for the timeshare business, and you can't ever do anything to lower that.

Edited to add: ultimately, I'm willing to buy that someone at DVD had a conversation with someone at Resort Operations about whether or not some of these rooms made sense as DVC inventory. There are some reasons why a lower price point would make sense. But, ultimately, it seems to be bad business for *both* DVD and RO---DVD cannibalizes its own sales arm, and RO loses inventory in its most in-demand rental segment. Granted, I'm just an armchair economist, but if you read the tea leaves that's the way it seems to me. Every other timeshare developer is *raising* the bar, not lowering it. Disney's only new cash resort in the last decade is a value resort, but they are actively removing deluxe inventory into DVC. Going the other way just doesn't seem to make sense. I think the Disney Collection story seems a lot more likely.

 

[disneynutz]

I still don't see it happening. Disney considers the DVC a "deluxe" product and their marketing plan and their actions affirm this.

Direct sale prices keep going up even when we think that they are nuts for increasing them and they are still selling hundreds of contracts per month.

Bill

 

[Brian Noble]

I don't know, all of the timeshare names out there have lesser valued properties in their portfolio

Right, but those are the *earliest ones*. They only build "better" over time.

There are very few instances when a developer has gone backwards. I can think of a handful of counter-examples of "newer" resorts not measuring up, but usually (a) they aren't co-located with other "better" properties that were built earlier and (b) they usually are properties developed by someone else quite some time ago that were acquired or marketed by the "new" developer and folded into the system.

As an example I'd point to Wyndham's Smuggs inventory---those units have been around, unsold, for a long time. Wyndham acquired them under their WAAM model. But, they don't have other resorts in that area to compete with on sales, and Smuggs is a nice "get" for their overall resort portfolio, so it's okay that the units aren't quite up to standards.

Like I said, I'm the armchair developer. I don't have any inside information, and I could be wrong. But it just doesn't seem to add up.

Usually, if you follow the money and/or trends in the industry, that tells you where things will go. For example, it was clear to me that resale restrictions were inevitable, because nearly everyone else had added them and found them beneficial to the bottom line. I expect some sort of tiered recognition program to come about for the same reasons---it works for other developers, and successfully spurs add-ons/conversions. Offering a "discount brand"? I can't think of anyone else who has done that successfully, and there just doesn't seem to be a need for one in WDW based on both current sales volume in the existing resort portfolio and strong demand for low rental price points on the cash resort side.

All bets are off if Aulani fails from a sales standpoint though. If that happens, DVD is in deep water and will have to scramble for revenue however it can get it---and that's going to have to be by selling resorts near a theme park, because if they can't make an "outside the berm" location work in Hawaii, they can't make it work anywhere. The dues disaster is not helping.

A little off topic for the DVC boards, but I also think that differentiated access to FASTPASS based on how "profitable" you are will also come eventually---and with rumors about XPass flying, I'm betting on sooner rather than later. Every other theme park operator has dropped free virtual queueing and/or expanded their paid versions in one way or another. Disney will eventually follow suit, because Mickey hates to leave money on the table.

 

[Brian Noble]

I take it back. I *can* think of one developer that went "backwards".

DVC.

The OKW units are better in every possible regard than the 2nd generation resorts (BWV, BCV, VWL, and SSR). The units are larger. They are better equipped. The layout is more spacious and "private". Some of the 2nd generation resorts make up for the clearly inferior units with superior locations. But, not all of them---at the very least, SSR is a notable exception. Yet, they *all* cost more *points* than OKW, not less. The sole exception: BWV standard view, which is near as I can tell is as much marketing screw-up as intentional choice.

My read: Disney under-estimated the demand they had for their timeshare resorts, and realized quickly that they could offer less and charge more. So they promptly did. That's not what is being proposed here though---it is offering less for less.

 

[hakepb]

I still don't see it happening. Disney considers the DVC a "deluxe" product and their marketing plan and their actions affirm this.

Direct sale prices keep going up even when we think that they are nuts for increasing them and they are still selling hundreds of contracts per month.

Bill

I agree about new contracts seeming too much.
But I was looking at one online inflation-based calculator, and a minimum OKW contract at opening (230 points * 51/point in 91) = $11,730 is actually about $21,000 in today's dollars. Which is not hugely different than a minimum BLT contract today, $24,000. (OK US govt inflation index would say it it $19,500 today)

And while it is fewer points in a more points heavy resort, the initial "getting into the system" is not some crazy 3x of the "good old days" that you initially think...

 

[DebbieB]

I don't see where the Disney Collection makes much sense. If a current member books a room at AoA, then that leaves a DVC room that gets sent to CRO. DVC is having a hard time recouping those points and keeps raising the points requirements for Disney Collection, plus they added the fee. I don't see why DVC would want to get involved with more rooms they have to rent through CRO. That's why they cut back on cruise availability plus I think that was one of the reasons they decided to restrict resales. They just can't rent the rooms sent to CRO at a decent rate. They are giving United Kingdom people a 45% discount at SSR plus free dining! They are upgrading value reservations for free to fill them during parts of the year. I don't see them getting involved with it on a large scale. They are in the business of building resorts and selling points, not finding new ways for current members to spend their points outside DVC.

 

[zalansky]

So now we'd have new members, with both low purchase price AND low dues able to use their value points at existing DVC resorts, basically much cheaper than long time owners. Bad idea, in effect the Deluxe DVC owners would be subsidizing the ability of value owners to stay at deluxe DVCs at 7 months. Unless the Value DVC and Deluxe DVC are totally separate and the points are not able to be used between resort classes.

Exactly. For that reason alone, I will be pretty steamed if DVC ever moved forward with something like that.

 

[dvcbrad]

Not really a possibility. There would likely be a legal requirement that there be a true interuse agreement, not a one-sided use agreement. It probably would not be allowed by the state timeshare board, as it could be considered overselling the resort.

I see the point, but I would think that use of another resort or resorts, if specifically named, could still be restricted in the legal documentation for the sale (right to use) of the new value resort. That information would be disclosed, so the buyer would know going in, and there would be no effect on the deluxe owner. I do understand the potential overselling issue, though ... not sure that would fly or if there could be a legal work-around. It would be interesting to know both from a legal perspective.

Well, here's the kicker to that idea. Let us say that BLT sells for $114 per point, and has dues of $5 pp. So, 114/50 = $2.28 + $5, making the BLT owners point cost about 7.28 per year. Now let's assume that a value resort sells for $90 pp and has $3.50 dues. Meaning the per point per year cost would be about $5.30. So, If a BLT studio is 20 pts per night, that would mean that a BLT owner would pay $145.60 per night, and a value owner would pay $106 per night to stay at BLT. How do you think that would affect sales at BLT (or other deluxe resorts)? Is the 11 month priority at a deluxe really going to be worth an extra $40 per night for a studio?

Great line of thinking, and if that was the criteria, you would be spot on. It probably would be worth the premium for some buyers, though, knowing that they could get into their deluxe resort at the 11-month window, even though there's a point value cost premium over the value resort points. Plus the deluxe owner would have the satisfaction of owning at the deluxe resort vs. the value (the Lexus vs. Toyota scenario).

 

[Brian Noble]

I don't see where the Disney Collection makes much sense. If a current member books a room at AoA, then that leaves a DVC room that gets sent to CRO.

That's already a problem. DVC solves this in part by charging ridiculously high point values for Disney Collection rooms, so even if they have to fire-sale the DVC room, they can still cover the cost of the CRO room.

 

[Dean]

IMO, adding multiple tiers would complicate the system to the point that sales would suffer. Timeshares are already a difficult product for many to embrace. Disney has done a pretty good job of (if you'll pardon the expression) dumbing it down for the masses. But when you start adding different tiers of ownership, different booking windows for native resorts, creating different classes of ownership, customer acceptance would suffer.

A properly implemented tiered system could easily increase sales and/or profit per point. Most timeshare mini-systems have some sort of tiered option and all that do implemented them and/or changed them to generate sales or more profit per sale. As I've noted earlier, I could easily come up with a system that would get everyone to either buy additional points or want to if they couldn't afford them.

If there is a three tier system - value, deluxe and super deluxe (choose your own category names) - it opens up two new sets of customers. Existing members would be in the deluxe category. With the addition of AoA and GF, there would be two new groups of customers could be marketed to. Of course existing members wouldn't use their points to stay at a value, or purchase value points. They would most likely want to upgrade to a super deluxe. That would be the motivator for existing members.

When people talk about tiered systems, they're generally talking about giving one member priority over another based on certain criteria. Also assuming current DVC members would be in the top group in your example is an assumption that is likely not to be true for all members.

How would a value DVC actually have lower dues per point?

If a BLT room takes (20x5)=100 / night to maintain than how would a Value only take (10*3.5)=35?
Which dues line items would be dramatically lower?

There is both a lower cost to such a situation and a higher volume of guest density. A value option would simply have cheaper items as well as less onsite amenities and an economy of scale.

But that's a temporary situation. A value tier would create long-term revenue as does the current DVC.

As for mid-tier guests reserving value accommodations, there would be incentives in place to discourage that.

MOST profit in timeshares is made on the retail sales side.

I don't know, all of the timeshare names out there have lesser valued properties in their portfolio. Why is it that Disney is only Deluxe? Again, I see plenty of Marriots, Wyndhams, Hilton's that have some moderate to lower rated resorts. As far as RCI goes, if Disney includes Value resorts, there would be plenty of mediocre resorts to trade with.

But generally not by design, no one goes out to create a mediocre product. Marriott's attempt at a lessor product was a clear failure.

 

[Brian Noble]

Marriott's attempt at a lessor product was a clear failure.

Ah, I had forgotten about Horizons. You are right---that was a loser.

 

[tjkraz]

A properly implemented tiered system could easily increase sales and/or profit per point. Most timeshare mini-systems have some sort of tiered option and all that do implemented them and/or changed them to generate sales or more profit per sale. As I've noted earlier, I could easily come up with a system that would get everyone to either buy additional points or want to if they couldn't afford them.

If you're referring to a tiered system of perks or ancillary benefits then I wholeheartedly agree.

I was commenting on the suggestion that Disney would benefit from creating different resort tiers within the DVC system (i.e. Value, Deluxe, Super Deluxe) with different cross-over booking privileges, reservation dates, etc.

Personally I'm not convinced that the DVC audience would embrace such a complicated system, particularly given DVC's limited growth pace. There isn't much appeal to buying into a Value (presumably Art of Animation) or "Super Deluxe" (Grand Floridian) property if each class includes exactly one location into the foreseeable future.

 

[Brian Noble]

I was commenting on the suggestion that Disney would benefit from creating different resort tiers within the DVC system

It can be done---and has, by Wyndham, with their Presidential Reserve line---but the key is building aspirational tiers to get people to move up, not lowering them.

Wyndham's system works this way: Presidential Reserve owners can book anything in-system---Presidential or "regular"---according to the usual home resort/any resort rules and timelines. Regular members cannot book Presidential Reserve inventory until fairly close-in, unless some Presidential member books a "regular" unit, in which case PR inventory of equal value is released into the "regular" pool. But, PR inventory costs significantly more points, and Wyndham chooses what to release. Effectively, it is a different timeshare system with a built in exchange on a one-point-to-one-point basis, with discretionary booking only in one direction.

There isn't much appeal to buying into a ... "Super Deluxe" (Grand Floridian) property if [it] includes exactly one location into the foreseeable future.

True. Wyndham has many locations with Presidential Reserve inventory, which helps, but this is also why PR owners can always "book down" whenever they want to. I have no idea how often they do though. That would be interesting to know.

 

[BWV Dreamin]

Couldn't they reclassify BLT to enter that "super resorts" group, even add Alunai as well, with the intention of eventually creating a Poly DVC? That would create that top tier.

It can be done---and has, by Wyndham, with their Presidential Reserve line---but the key is building aspirational tiers to get people to move up, not lowering them.

Wyndham's system works this way: Presidential Reserve owners can book anything in-system---Presidential or "regular"---according to the usual home resort/any resort rules and timelines. Regular members cannot book Presidential Reserve inventory until fairly close-in, unless some Presidential member books a "regular" unit, in which case PR inventory of equal value is released into the "regular" pool. But, PR inventory costs significantly more points, and Wyndham chooses what to release. Effectively, it is a different timeshare system with a built in exchange on a one-point-to-one-point basis, with discretionary booking only in one direction.


True. Wyndham has many locations with Presidential Reserve inventory, which helps, but this is also why PR owners can always "book down" whenever they want to. I have no idea how often they do though. That would be interesting to know.

 

[JimMIA]

Couldn't they reclassify BLT to enter that "super resorts" group, even add Alunai as well, with the intention of eventually creating a Poly DVC? That would create that top tier.

I don't know whether it would be possible to reclassify resorts after the fact. And even if it was, it would be met with a great deal of resistance from owners who were now denied the ability to book those resorts.

And with Aulani -- I think they have bigger things to worry about there. Have they gotten their legal problems fixed and resumed sales yet?

 

[BWV Dreamin]

I don't know whether it would be possible to reclassify resorts after the fact. And even if it was, it would be met with a great deal of resistance from owners who were now denied the ability to book those resorts.

And with Aulani -- I think they have bigger things to worry about there. Have they gotten their legal problems fixed and resumed sales yet?

Oh yes, sales have resumed. The MF's increased 33%....ugly....