Value of aging DVC contracts?

[dalerb]

We are considering purchasing points at VBR at wilderness lodge. The termination year is 2042. Has anyone considered what the value of the contract will be in 10 years? There will be 15 years remaining. How will the "short life" affect the price per point if we would want to sell after 10 years?

 

[Gizmo74]

We are considering purchasing points at VBR at wilderness lodge. The termination year is 2042. Has anyone considered what the value of the contract will be in 10 years? There will be 15 years remaining. How will the "short life" affect the price per point if we would want to sell after 10 years?

I was just thinking about this. We just bought Poly one reason because the life of contract. It will be interesting to see if the 2042 resorts get option to extend contract.

 

[_auroraborealis_]

No one really knows. To date, BWV and BCV have held value, but decline is inevitable. BRV has lower pricing already and will have on-site competition with longer RTU.

 

[disneynutz]

Do your numbers with zero return when you sell, anything higher then nothing is gold. IMO buying where you love to stay is more important than saving money.

Bill

 

[KAT4DISNEY]

8 or 10 years ago people here were stating that the 2042 resorts would continue to drop in price which has not happened. Essentially, everyone can have a theory but it won't necessarily be what happens. The biggest comparison is the cost of DVC vs Disney hotel prices. If they continue rising then DVC may not fall for some time. Eventually there will be the tipping point but when that will be depends just as much on Disney hotels.

 

[kniquy]

In 10 years the prices may dip a little on the 2042 contracts, but on the other end it could possibly be more difficult to sell with a higher price tag and shorter contract life, that maybe the case for OKW and BRV, where as BW and BC have a huge draw for food and wine and access to 2 parks.

no one truly knows. If they were to offer an extension -- when would they do it? and how long would they extended it for? When was the OKW extension offered and how many years did they add on? We only became owners just recently so not sure of all the details of the OKW extension, other than it sounds like it was a flop for DVD, I don't really know the details

 

[LAX]

In 10 years the prices may dip a little on the 2042 contracts, but on the other end it could possibly be more difficult to sell with a higher price tag and shorter contract life, that maybe the case for OKW and BRV, where as BW and BC have a huge draw for food and wine and access to 2 parks.

no one truly knows. If they were to offer an extension -- when would they do it? and how long would they extended it for? When was the OKW extension offered and how many years did they add on? We only became owners just recently so not sure of all the details of the OKW extension, other than it sounds like it was a flop for DVD, I don't really know the details

Pure speculation on my part, but I can't see how DVD would elect to do extensions at BCV and BWV as those two resorts are literally goldmines if offered as "new" resorts. The most important consideration in deciding to "resell" them as new is the ability/option to reset point requirement for them. The current point requirements are real bargains considering how convenient their locations are. Can you imagine how much BCV and BWV can fetch if are reimagineered as new resorts and sold as "new"? We are probably talking $200+ per point with nightly requirement of at least 25 points/night for a studio to start! However, even at those prices, they probably would still have an easier time selling them than PVB and CCV.

LAX

 

[ELMC]

There is value to every year the contract has left which can be calculated by subtracting maintenance fees from the current market rental value for points. Obviously that's just a starting point, but even with five years left these contracts will still have significant value, if not in resale then in actual use. While not the most efficient market out there, the DVC resale market is different from that of just about every other timeshare out there.

All this is just a fancy way of saying that there's no real way to be sure, but there are many factors in play that will affect resale value of resorts as they approach their expiration date.

 

[CarolMN]

There is value to every year the contract has left which can be calculated by subtracting maintenance fees from the current market rental value for points. Obviously that's just a starting point, but even with five years left these contracts will still have significant value, if not in resale then in actual use. While not the most efficient market out there, the DVC resale market is different from that of just about every other timeshare out there.

All this is just a fancy way of saying that there's no real way to be sure, but there are many factors in play that will affect resale value of resorts as they approach their expiration date.

I agree. As long as there is demand for on site lodging and Disney's prices per night are significantly higher than DVC maintenance fees, there will be value left in our DVC contracts. IMO, the only argument is over how much!.

 

[ELMC]

I agree. As long as there is demand for on site lodging and Disney's prices per night are significantly higher than DVC maintenance fees, there will be value left in our DVC contracts. IMO, the only argument is over how much!.

Well said. I agree that these are the two biggest variables that will affect future values, and there are probably a lot of little variables as well.

 

[Dean]

We are considering purchasing points at VBR at wilderness lodge. The termination year is 2042. Has anyone considered what the value of the contract will be in 10 years? There will be 15 years remaining. How will the "short life" affect the price per point if we would want to sell after 10 years?

The years on the back end have a significantly lower value and corresponding higher risk than the years on the front end. The long term cost of a retail CC is dramatically likely to be more than a BR purchase even if you adjust for RTU. Values will have to decline but it shouldn't matter for one who buys with good choices because it should be bought planning to keep until expiration. But planning for exit options in case life happens is a good thing to do.

 

[kapicka]

Just as in our investments the costs/benefits WAY out in the future have the least effect on today's value. So for DVC, as long as the dates are far away it doesn't matter much if the expiration date is 2042 or 2052 or even 2057. Once you are within 15 year it will have an effect IMO. Even more so at 10 years which seems to be the "break even" point right now for more affordable resorts (in that once you pay fees if you were to rent points out it would take about 10 years to get your money back on a resale purchase). These are total guesses but based on my gut feeling about the value of an expiring resort membership I would say this:

If we call 20 years before expiration date value 100% of resale...
At 15 years before expiration date value will still be 80%-85% of resale.
At 10 years before expiration date value will be 50%-60% of resale.
At 5 years before expiration date value will be 30%-35% of resale.
From there each year will probably lose another 5% of resale value.

There COULD be a small jump in value within those last few years if Disney decides to offer to extend to all members and if the extension is a good value compared to resale. I agree with the above post that there is probably more money in it for Disney if they "redo" the whole resort and sell points as a new resort (probably with a new name).

 

[jerseyduke]

I can not see Disney offering extensions for a few reasons:
1. The Old Key West "mess"
2. Disney is going to run out of spots to put new DVC locations, so they are probably going to want to redo as new.

I think they will target 1 or 2 2042 resorts right away as redo resorts, and the others will just go into the Disney room inventory. Without a lot more rooms added by then, Disney can not take all the rooms at OKW, BWV, BCV, VBR out of inventory all at one shot.

I think if you look in the area of 500$ per year remaining you are in the right ball park, but, you have to consider things like inflation. The value of the contract is going to be dictated by perceived savings over the life of the contract.

An interesting aspect to me is how hard will it be to book rooms at certain resorts? The room supply at Poly and WL was basically cut in half. If demand does not drop in a similar fashion, then the rack rate will go up, and the "DVC savings" will increase.

You could argue that the people who would have wanted those Poly rooms still get them, just with DVC, and to a large degree that is true, but also, there will probably be 15-20 million more people in the US by 2030. How many more world wide? It only takes a fraction of a percentage of that population increase to look at rooms at one of those resorts(poly, WL) to really throw the supply vs. demand situation out of whack.

 

[Dean]

I can not see Disney offering extensions for a few reasons:
1. The Old Key West "mess"
2. Disney is going to run out of spots to put new DVC locations, so they are probably going to want to redo as new.

I think they will target 1 or 2 2042 resorts right away as redo resorts, and the others will just go into the Disney room inventory. Without a lot more rooms added by then, Disney can not take all the rooms at OKW, BWV, BCV, VBR out of inventory all at one shot.

I think if you look in the area of 500$ per year remaining you are in the right ball park, but, you have to consider things like inflation. The value of the contract is going to be dictated by perceived savings over the life of the contract.

An interesting aspect to me is how hard will it be to book rooms at certain resorts? The room supply at Poly and WL was basically cut in half. If demand does not drop in a similar fashion, then the rack rate will go up, and the "DVC savings" will increase.

You could argue that the people who would have wanted those Poly rooms still get them, just with DVC, and to a large degree that is true, but also, there will probably be 15-20 million more people in the US by 2030. How many more world wide? It only takes a fraction of a percentage of that population increase to look at rooms at one of those resorts(poly, WL) to really throw the supply vs. demand situation out of whack.

There are points for both choices but it will clearly be done differently than OKW if they do offer extensions. I think it's pretty likely VB & HH will be out at the end of the RTU.

 

[CraigInPA]

Looking into my crystal ball, which is hardly ever right, I predict:
OKW will continue, but will be open as a room resort in 2042 until the last OKW extension contracts expire. Then it will close for a complete refurb, and re-open as a newly themed DVC resort.
BCV will revert to a Disney room resort with extra amenities for a whole new class of rooms with kitchens.
BWV will be re-sold as DVC.
VBR will be re-sold as DVC.
VB will close and be sold to another company.
HHI will close and be sold to another company.

 

[com_op_2000]

IMHO, The 2042 contracts will start to decline in value @2032. With just 10 years left, there will not be "time" enough left on the contract to support today's resale prices.

 

[CraigInPA]

IMHO, The 2042 contracts will start to decline in value @2032. With just 10 years left, there will not be "time" enough left on the contract to support today's resale prices.

We don't know what the hotel room prices will be in 2032. Since the value of resale contracts is based upon hotel room prices and the cost of a direct buy from Disney, I'm not sure that we can say whether it will still be a 10 year payback period or not. Absent that 10 year payback period, we can't know what year the value of 2042 contracts will plateau.

What can be said is that the cost of hotel rooms and the point rental price will be the principal drivers of the value of resale 2042 contracts as 2042 approaches.

If there is a margin between the prevailing rental price minus the maintenance fees, you can be assured that even in 2041, 2042 contracts will still have some value.

 

[ELMC]

Just as in our investments the costs/benefits WAY out in the future have the least effect on today's value. So for DVC, as long as the dates are far away it doesn't matter much if the expiration date is 2042 or 2052 or even 2057. Once you are within 15 year it will have an effect IMO.

This is a good point. Just as people frowned upon the OKW extension offer because you are paying now for something that doesn't happen until 2042, the same can be said for the expiration date of the contract affecting the resale value. Right now BCV and BWV are two very high demand destinations, and their resale prices reflect this fact. This will likely change as 2042 approaches, but whether it is 2, 5, 10, 15, or 20 years out remains to be seen.

 

[kniquy]

Disney can not take all the rooms at OKW, BWV, BCV, VBR out of inventory all at one shot.

this is a very good point that i never realized -- all those resorts and rooms couldn't possibly be closed for total referb at the same time to then be sold as a new resort. Do they offer extensions on a couple of those resorts and close others for complete referb? That is a lot of lost revenue for DVC if changed back to hotel rooms. I thought i recall reading that there is a huge benefit of having DVC due to the members paying for the refurbishments/maintenance of the resorts.

It will be very interesting to see it all play out.

 

[KAT4DISNEY]

this is a very good point that i never realized -- all those resorts and rooms couldn't possibly be closed for total referb at the same time to then be sold as a new resort. Do they offer extensions on a couple of those resorts and close others for complete referb? That is a lot of lost revenue for DVC if changed back to hotel rooms. I thought i recall reading that there is a huge benefit of having DVC due to the members paying for the refurbishments/maintenance of the resorts.

It will be very interesting to see it all play out.

It's not as if they would have to just shut all those resorts down. They already rent rooms for cash guests and could just start renting them all for cash. The lease will be up so technically everything would revert over to Disney resorts and they could continue operating them should they wish. If anyone wished to do anything with them they could just do it one resort at a time or part of a resort at a time to refurbish and or turn over to DVC refurbish and resell just one at a time. What might get a little interesting is what refurbishments are done just prior to the end of the lease and if DVC members might be paying for something that would benefit Disney resorts going forward.