Value of aging DVC contracts?

[Dean]

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.

They don't have to take them all down at once, just on a rotating basis like they do refurbishments now. At OKW they could split the resort in half and do half then do the other half if they wanted.

 

[crisi]

They don't have to take them all down at once, just on a rotating basis like they do refurbishments now. At OKW they could split the resort in half and do half then do the other half if they wanted.

And for the other resorts, a floor by floor complete refurb would do it.

My guess is that they've bought a little wiggle room with the OKW extensions, if nothing else - the extended units can stay as is, while the other part of the resort gets gutted to be resold as "new" (or even torn down in favor of a different layout). Then they start selling that, close down BWV for cash rental, refurb that, move to VWL....BCV......

 

[JHank44]

The value of the contracts should equal the Net Present Value of the discount vs. direct Disney hotel. An easier way to think about it is dues vs. rental value. Simplistically, if you can rent it for $14/point and costs $7/point in MFs per year then the value at 10 years would be around $70 and decline $7 a year. This obviously ignores discounting (i.e. time value of money) and changes in rental income-MFs but that is the principle. It can be thought of like being a lender in a mortgage, you are receiving payments early on that are mostly interest but as time passes the "principal" payments increase and the value of the investment amortizes (i.e. tends towards 0).

 

[ELMC]

The value of the contracts should equal the Net Present Value of the discount vs. direct Disney hotel. An easier way to think about it is dues vs. rental value. Simplistically, if you can rent it for $14/point and costs $7/point in MFs per year then the value at 10 years would be around $70 and decline $7 a year. This obviously ignores discounting (i.e. time value of money) and changes in rental income-MFs but that is the principle. It can be thought of like being a lender in a mortgage, you are receiving payments early on that are mostly interest but as time passes the "principal" payments increase and the value of the investment amortizes (i.e. tends towards 0).

Theoretically what you say makes sense. Mathematically what you say makes sense. But as we have seen with the DVC marketplace, it is not wholly efficient. That's why contracts with three years worth of points go for $5-10 more than stripped contracts. Mathematically that doesn't make sense, but there's so much more at work here than just math. Fortunately, it works on the positive side. So your analysis, which is great, serves as a pretty decent floor for projected values. Factor in emotion and the price will typically go up.

 

[amcnj]

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.

This is something I have wondered about. When the "end" approaches, how is the maintenance issue handled? What is going to be considered short term maintenance versus life extending? What happens to the reserves for maintenance and repairs? Will they just happen to have zero balances at the end of the contracts? If some repairs, such as a roof replacement, are due in the last few years, will they be delayed, or performed, but be at least partially paid for by another entity?

 

[Dean]

This is something I have wondered about. When the "end" approaches, how is the maintenance issue handled? What is going to be considered short term maintenance versus life extending? What happens to the reserves for maintenance and repairs? Will they just happen to have zero balances at the end of the contracts? If some repairs, such as a roof replacement, are due in the last few years, will they be delayed, or performed, but be at least partially paid for by another entity?

There are really 2 issues, points usage/availability and dues. I don't think they can do a wholesale refurbishment late on the expiring owners but where that line is appropriately drawn may not be clear. To me the big question is how will points be handled late since there simply are not enough spots to handle all of the points the last 2-3 years, esp the last year. Will they suspend borrowing, clearly they'll have to suspend banking at some point. Will they have a lottery? Will it be a free for all? Will one have to pay dues on points one could not use?

 

[mustinjourney]

There are really 2 issues, points usage/availability and dues. I don't think they can do a wholesale refurbishment late on the expiring owners but where that line is appropriately drawn may not be clear. To me the big question is how will points be handled late since there simply are not enough spots to handle all of the points the last 2-3 years, esp the last year. Will they suspend borrowing, clearly they'll have to suspend banking at some point. Will they have a lottery? Will it be a free for all? Will one have to pay dues on points one could not use?

you'll have to start walking a reservation a year in advance. hahaha

I was wondering about this situation as well -- I assumed I would avoid it as much as possible by borrowing from my last UY and trying to go before the general public figures out what is happening.

 

[icc2515]

I don't think that there is going to be a whole lot of refurbing going on at BWV, BCV, and VWL. On the last day that people can use points those rooms should be in the same condition that they are right now...rent-able condition. They are not going to allow broken appliances, doors hanging off cabinets, peeling wallpaper, etc. They will probably fix those things more readily in the last years than they do now (and bill them to us). Those rooms will be turned over to Disney in sell-able condition. Slap a different color paint on the wall, move in some new furniture and let the money start rolling in. 25 years ago I think OKW was selling for $50pp the price for Copper Creek is $176 so that ought to make the new BWV's in 2042 go for $616pp. If you were a previous owner they will let you have it for $600pp, if you buy in 2040 and take the same number of points you have now.

Vero and Hilton will get sold off, in my opinion. OKW, if they can, I would think that they would move all the extended points up to the area around the main house and start bulldozing the stuff further out. Maybe they could turn it into Disney Springs 2. Disney always has plenty of money to put up new shopping and eating experiences. Maybe a shopping center with a DVC on top of it. Wait they did that with the BWV's.

To me the big question is how will points be handled late since there simply are not enough spots to handle all of the points the last 2-3 years, esp the last year. Will they suspend borrowing, clearly they'll have to suspend banking at some point.

I have no idea how they will handle it, but more fun than that will be how they handle the Poly and Copper Creek. All those points tied up in the bungalows and cabins and a whole lot of owners that cannot afford a night in either fighting for a standard view studio in adventure season. Because that's all they bought points for.

 

[Dean]

you'll have to start walking a reservation a year in advance. hahaha

I was wondering about this situation as well -- I assumed I would avoid it as much as possible by borrowing from my last UY and trying to go before the general public figures out what is happening.

I suspect they'll suspend banking the last 3 years or so but I wouldn't be surprised if they suspended borrowing the last year as well. Being borrowed ahead the last 3-4 years might be a good thing. In part it depends on how they handle it but I'm betting some combination of voluntary foregoing the last year and a lottery system with dues for the points one uses. But there are lots of options, non of them will make most members happy.

I have no idea how they will handle it, but more fun than that will be how they handle the Poly and Copper Creek. All those points tied up in the bungalows and cabins and a whole lot of owners that cannot afford a night in either fighting for a standard view studio in adventure season. Because that's all they bought points for.

If the other resorts are gone, i'll be very simple overall, the choices are the choices. But they'll still have the issue that there simply is not enough points to go around the last year or 2.

 

[pmaurer74]

There are really 2 issues, points usage/availability and dues. I don't think they can do a wholesale refurbishment late on the expiring owners but where that line is appropriately drawn may not be clear. To me the big question is how will points be handled late since there simply are not enough spots to handle all of the points the last 2-3 years, esp the last year. Will they suspend borrowing, clearly they'll have to suspend banking at some point. Will they have a lottery? Will it be a free for all? Will one have to pay dues on points one could not use?

I have wondered this as well since I have a December u/y. If I cannot borrow my points or use those for the last year that would stink.

 

[zavandor]

I still don't know what will happen during the last year to my points. I have a December UY, my contract expires in January 2054. In December 2053 will I get the full amount of points in December or will I get 1/6 since the last UY the resort will "exist" only for 2 months?
I guess if they pro-rate the points in the last year depending on time remaining, there shouldn't be too more points than rooms, it should average (expecially if they suspend banking).

 

[CraigInPA]

I suspect that DVC will give you the points for that last use year, and then "allow" you to try to use them until the end of your UY at other DVC resorts. So, if you get your December 2054 UY points on a resort ending in January 2055, you can book your home resort until January 2055, but they will likely give you until December 2055 to use them at another DVC resort.

Of course, DVC could also play hard ball and tell you that you have the points, but you only get 2 months to use them. That would, however, put them in a very bad position with DVC members who were considering buying new, as well as what the press would say about it...

 

[Gizmo74]

I suspect that DVC will give you the points for that last use year, and then "allow" you to try to use them until the end of your UY at other DVC resorts. So, if you get your December 2054 UY points on a resort ending in January 2055, you can book your home resort until January 2055, but they will likely give you until December 2055 to use them at another DVC resort.

Of course, DVC could also play hard ball and tell you that you have the points, but you only get 2 months to use them. That would, however, put them in a very bad position with DVC members who were considering buying new, as well as what the press would say about it...

It's going to be a mess whatever happens. If they let the folks who bought a 2042 resort but only let them use their last years point at a newer resort, it will be impossible for those folks to book. It seems to many points are going to expire at the same time.

 

[mustinjourney]

I suspect that DVC will give you the points for that last use year, and then "allow" you to try to use them until the end of your UY at other DVC resorts. So, if you get your December 2054 UY points on a resort ending in January 2055, you can book your home resort until January 2055, but they will likely give you until December 2055 to use them at another DVC resort.

Of course, DVC could also play hard ball and tell you that you have the points, but you only get 2 months to use them. That would, however, put them in a very bad position with DVC members who were considering buying new, as well as what the press would say about it...

Since you can borrow the points, that means that you could make a reservation for 12+2 months.

 

[Dean]

I suspect that DVC will give you the points for that last use year, and then "allow" you to try to use them until the end of your UY at other DVC resorts. So, if you get your December 2054 UY points on a resort ending in January 2055, you can book your home resort until January 2055, but they will likely give you until December 2055 to use them at another DVC resort.

Of course, DVC could also play hard ball and tell you that you have the points, but you only get 2 months to use them. That would, however, put them in a very bad position with DVC members who were considering buying new, as well as what the press would say about it...

I don't see any way they could let you use them after the resort expires. Legally you would no longer be a member. If we're talking SSR, I think it ends 31 Jan, 2054 so 2053 would be the last points no matter what.