What happens when a DVC Property becomes “worthless”?

[Johtull12]

BC/BW have decent dues, and are completely different product than VB.

At 11 months they are, but at 7 months not so much. A 150 point contract at Vero would be about $7500 less than BWV right now and approx $54 a month more coming out of your checking each month for dues. I would imagine some people would rather save or not borrow an extra $7,500 and pay the equivalent to an actual tank of gas each month.

 

[Epcot Forever Forever]

These are great thoughts… They make sense to me, and I think VB is a very special resort in the DVC community, and in the wider community… Other VB hotels on the ocean go for considerably more, which also gives me hope…

What do you think the Post 2042 plan might look like for VB and HHI? I’m skeptical Disney will want to sell those points through again, but am unclear there would be demand for cash stays for all those rooms year round….

Vero they made clear what the plan was when they sold the adjacent land they owned. It’s going to be sold, almost certainly to a developer.

HHI will also likely be sold IMO because Disney is likely to continue to focus more on their core offerings over time. They can use the money they’ll get from it to build a new ride at Hollywood Studios or something.

 

[Nabas]

Hi all

I thought the dues were a direct reflection of the costs of running the resort - if dues exceed the cash price then the operation is insolvent ?

This only happens if Disney rents out rooms at a lose. But Disney is responsible for the hotel and the difference would have to come from Disney.

 

[sethschroeder]

Outside of the parks resorts will be propped up by those at the parks.

7% increases on Vero only makes sense if Hilton and Marriott also are seeing those increases which means cash rates will go up in the area.

Zero chance it drags down the rest of DVC though because its a tiny subsection of all points and that resort having $100 MFs doesn't impact any other resort.

Disney might get ticked off but I suspect they would go all in on IP retheme to drive up the value of a cash stay at that point.

Vero could be a perfect cruise deal (get 2 nights free before going on your way overpriced cruise) if it comes down to it.

Hilton head is harder but seemingly it also has more of a national draw as far as an area so again they could go crazy with the Disney tie in to sell their excess of cash rooms.

 

[Sweet T n Me]

The Polynesian & Contemporary were built in 1971. 52 years old, is not old for a hotel that is regularly maintained. The iconic resorts BWV & BCV will stay because of demand and location. Unless a natural disaster hits, they won’t tear them down. They could start with Star Wars, the latest.
I am sure a few of us remember when MGM was a 1/2 day park, EPCOT was boring except Figment, MK was okay, but, not like today. Changes.

 

[Epcot Forever Forever]

The Polynesian & Contemporary were built in 1971. 52 years old, is not old for a hotel that is regularly maintained. The iconic resorts BWV & BCV will stay because of demand and location. Unless a natural disaster hits, they won’t tear them down. They could start with Star Wars, the latest.

52 years old is ancient in hotels. Hotels built as Fancy Marriotts in the 1970s are now mostly dumpy Crown Plazas and Ramadas.

A building that old will eventually need to be stripped to the studs so the HVAC, electrical, and plumbing can be inspected and upgraded, and that’s extremely expensive. Disney has shown willingness to do this, but let’s not pretend that it is a slam dunk.

Boardwalk (the whole thing) and Beach Club Villas I think are especially likely to be bulldozed, but for different reasons.

Beach Club DVC is small and just not particularly well done for how popular it is. There’s no views, there’s very wacky rooms shapes, and there’s a lot of shared balconies. Also, They could easily have sold 3X the number of rooms they did create. I wouldn’t be shocked at all if in 2042 all of the hotel side of BC becomes DVC and the Villas are torn down and either rebuilt more intelligently or turned into some other space.

Meanwhile, the broader Board Walk project has never met expectations. Disney never got the foot traffic there they wanted to and a new premier convention facility was ultimately built at GDT. They’re left with a labyrinthine deluxe resort with shockingly poor indoor food access in probably the single best location on property for families with teens or adults staying without kids.

I’d anticipate a new resort (or resorts!) with a new theme(s), more 2 person accommodations, and more traditional access to dining.

 

[hhisc16]

Vero they made clear what the plan was when they sold the adjacent land they owned. It’s going to be sold, almost certainly to a developer.

HHI will also likely be sold IMO because Disney is likely to continue to focus more on their core offerings over time. They can use the money they’ll get from it to build a new ride at Hollywood Studios or something.

That makes me wonder how much VB and HHI would sell for?

 

[hhisc16]

Outside of the parks resorts will be propped up by those at the parks.

7% increases on Vero only makes sense if Hilton and Marriott also are seeing those increases which means cash rates will go up in the area.

Zero chance it drags down the rest of DVC though because its a tiny subsection of all points and that resort having $100 MFs doesn't impact any other resort.

Disney might get ticked off but I suspect they would go all in on IP retheme to drive up the value of a cash stay at that point.

Vero could be a perfect cruise deal (get 2 nights free before going on your way overpriced cruise) if it comes down to it.

Hilton head is harder but seemingly it also has more of a national draw as far as an area so again they could go crazy with the Disney tie in to sell their excess of cash rooms.

In 2042, Disney may keep VB for a cash only cruise deal/FL Beach combo for WDW.
In 2042, Disney may keep HHI for a cash only deal since HHI has a national/international draw. Plus it pays for itself basically with good margins.

 

[kanerf]

The dues will be at least $50 pp by 2042

I doubt that. They might go up about 5% per year, so perhaps 90% more by 2042, so about $15.20 per point if yours are $8 per point now.

 

[mz-s]

These are great thoughts… They make sense to me, and I think VB is a very special resort in the DVC community, and in the wider community… Other VB hotels on the ocean go for considerably more, which also gives me hope…

What do you think the Post 2042 plan might look like for VB and HHI? I’m skeptical Disney will want to sell those points through again, but am unclear there would be demand for cash stays for all those rooms year round….

I think there is value for members to have these beach resorts in the system. If Disney is going to get rid of them, it would make sense to sell them to a system like Marriott and have a strong exchange agreement with them.

 

[sethschroeder]

In 2042, Disney may keep VB for a cash only cruise deal/FL Beach combo for WDW.
In 2042, Disney may keep HHI for a cash only deal since HHI has a national/international draw. Plus it pays for itself basically with good margins.

It not becoming worthless isn't a business proposition of why capital should be invested there.

My point is while Disney is stuck with it they can have a plan to make it somewhat beneficial.

They can likely make more money by taking that money and investing elsewhere when it hits 2042. If it sticks around it would stay DVC unless Disney changes their business plans which today really only involves park attached hotels.

Right now Disney has yet to invest in spinning up actual cash hotels besides attached to their parks and doubt that changes.

 

[Nabas]

52 years old is ancient in hotels. Hotels built as Fancy Marriotts in the 1970s are now mostly dumpy Crown Plazas and Ramadas.

A building that old will eventually need to be stripped to the studs so the HVAC, electrical, and plumbing can be inspected and upgraded, and that’s extremely expensive. Disney has shown willingness to do this, but let’s not pretend that it is a slam dunk.

Boardwalk (the whole thing) and Beach Club Villas I think are especially likely to be bulldozed, but for different reasons.

Beach Club DVC is small and just not particularly well done for how popular it is. There’s no views, there’s very wacky rooms shapes, and there’s a lot of shared balconies. Also, They could easily have sold 3X the number of rooms they did create. I wouldn’t be shocked at all if in 2042 all of the hotel side of BC becomes DVC and the Villas are torn down and either rebuilt more intelligently or turned into some other space.

Meanwhile, the broader Board Walk project has never met expectations. Disney never got the foot traffic there they wanted to and a new premier convention facility was ultimately built at GDT. They’re left with a labyrinthine deluxe resort with shockingly poor indoor food access in probably the single best location on property for families with teens or adults staying without kids.

I’d anticipate a new resort (or resorts!) with a new theme(s), more 2 person accommodations, and more traditional access to dining.

There are no rumors that the Polynesian or Contemporary are going to be torn down soon because they are almost 52 years old.

I’m not sure why you think the Beach Cub or Boardwalk Villas would be any different.

DVC members, not Disney, pay for maintenance and repairs of those buildings. In 2042, Disney is going to retake control of buildings that will be well maintained exactly because that maintenance was paid for by someone else.

 

[Brian Noble]

What do you think the Post 2042 plan might look like for VB and HHI?

I have no idea. But both resorts have been a tough sell for a long time.

DVC is not a particularly great timeshare developer when viewing the resorts as stand-alone entities. The units tend to be small and under-provisioned compared to a "typical" timeshare. The value proposition is in theme park access (physical and "by policy") and, to a lesser extent, the placemaking that Disney is known for.

DVC got to develop on relatively cheap land in Orlando. Even if they had to "buy" it, it would have been much less expensive there than e.g. in Anaheim. The problem is that they carried that idea over. Vero is pretty out-of-the-way as far as beach destinations go. It's a litlte isolated, too far north for the snowbirds compared to FLL/MIA, and it doesn't have the charm of the Gulf side. HHI was built on the "wrong" (inner) side of the island's ring road. And in both of those, the placemaking doesn't really make up for it, because they are already in the place they are trying to create.

Even Aulani is tricky. The location is better, but still not great--Oahu is my fourth favorite of the four "main" Hawaiian islands, and Ko Olina is man-made/engineered which knocks it down another peg for me. Here, the placemaking does a better job--Aulani is sort of "concentrated Hawaii" but still Disneyfied, in that it's sort of the ersatz ideal of Hawaii, not actual Hawaii. Of course, some people want that, because actual Hawaii is messy. For example, not all of the residents are super excited to have the haole running all over the place, and you don't have to experience that at Aulani.

If I'm going to fly all the way to Hawaii, I want to go to Hawaii, not Disney's version of it. Why would I pay to snorkel in Disney's artifical reef when there are actual reefs within spitting distance? It's like taking the France pavilion and putting it in the Paris suburbs.

I have no idea what this means for the resorts post '42, but I don't think it is obvious that they stay in the system, and I don't think most owners will be super disappointed to see them go if that's what happens.

If Disney is going to get rid of them, it would make sense to sell them to a system like Marriott and have a strong exchange agreement with them.

That's unlikely for (at least) two reasons. First, Marriott has many resorts in better locations in both coastal Florida and Hilton head. So there is little value for Marriott in picking up these two. Second, Marriott owns Interval International, so they already own their own exchange system in which Disney participates. Hilton might be interested--they have more of a presence Gulfside than Atlantic beach, and I don't think they have anything on Hilton Head. But they also bought Diamond and are still integrating them, and depending which resorts get re-flagged, they might fill those holes.

 

[Epcot Forever Forever]

There are no rumors that the Polynesian or Contemporary are going to be torn down soon because they are almost 52 years old.

I’m not sure why you think the Beach Cub or Boardwalk Villas would be any different.

I thought I pretty clearly articulated that. Let me know if you have any questions about my logic.

 

[TinkAgainU]

There are no rumors that the Polynesian or Contemporary are going to be torn down soon because they are almost 52 years old.

I’m not sure why you think the Beach Cub or Boardwalk Villas would be any different.

DVC members, not Disney, pay for maintenance and repairs of those buildings. In 2042, Disney is going to retake control of buildings that will be well maintained exactly because that maintenance was paid for by someone else.

If you check the "theoretical" refurbishment timelines for the resorts here: https://dvcnews.com/96-static-content/content/5196-dvc-resort-refurbishment-tracker - it appears a lot of each property is gutted down almost to the studs to update and replace plumbing / electrical, for example, on around a 15 year schedule (with an interim soft goods update). While at some point, you could say that's insufficient, most would agree if the property has not been structurally damaged, that big overhaul resets the property age fairly substantially.

 

[Genie+]

I doubt that. They might go up about 5% per year, so perhaps 90% more by 2042, so about $15.20 per point if yours are $8 per point now.

But it’s compounded yearly.

BW is $8.53 this year. In 18 years at an average 5% yearly increase, dues for 2041 will be around $20.50pp.

I’m thinking they might just tack on the month of Jan 2042 to 2041 dues bill. Maybe $22 that last full year?

Vero today at $12.85 with estimated average increases of 6% would be $36.68 for 2041.
(Eta- if tacking Jan 2042 into the last full year in 2041, about $40pp dues bill Jan 2041)

https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

This is a handy tool to play with DVC numbers.

 

[ocdb8r1]

It's like taking the France pavilion and putting it in the Paris suburbs.

Which Disney has also (basically) done. Anyone been to Remy's in Disney Studios Paris? Very surreal...

 

[Brian Noble]

I haven't been since Remy went in, and I gave them a pass on DLRP. I remember seeing a Tony Baxter interview when he essentially said: "We couldn't do what we did in the US castle parks, because France has actual castles. Instead we needed something a little more over-the-top whimsical." I think they did a great job of that. I also think the Jules Verne "future-that-never-was" vibe of Discoveryland is a better idea than it's-only-futuristic-for-a-decade Tomorrowland.

Finally, the Paris walk-throughs (e.g. Alice's Labyrinth) are extraordinarily cool, and something they'd never really be able to pull off in the US, because our market would think they are "too boring."

 

[mort1331]

There are two situations in which timeshares are "worthless". The first (and the most important) is if it is "under water"--defined as annual fees that exceed comparable rental rates.

This can happen in a weeks-based timeshare in a highly seasonal destination. In these resorts, each owned week pays ~1/50th of the ongoing costs (assuming two weeks held back for maintenance, etc.). But, the rental "values" of in-season weeks are signficantly higher than the rental values of off-season weeks. If the resort is very highly seasonal it is possible for the offseason owners to be under water, even though the high-season owners still get very good value.

When this happens, a seasonal weeks-based resort can enter a "death spiral" in which off-season owners stop paying and allow their units to be foreclosed. Those weeks can't easily be sold, and while the resort will try to rent them, the rental proceeds are not high enough to offset the lost fees. The lost income is then spread over the remaining owners. This pushes more weeks underwater, and those that were already underwater go farther under. More owners default, rinse, repeat. Eventually the resort ceases operations and is sold off, with the proceeds going to remaining owners.

There are a bunch of ways to deal with this. For example, several of the northern Michigan resorts originally sold their weeks as a bundle of two or more with a mix of seasons. So instead of some owners having a great deal and others a terrible one, every owner on average has a "good" deal.

However, the easiest way to do it is to sell as points rather than weeks. In a points-based resort, the weeks that are worth less in rental value also require less points to book. The weeks worth more in rental value require more points to book. If the points allocation is done with at least some care, then if the resort has any value at all, everyone has a more or less equal share in that value.

That's usually good, but it can be very bad. In this model, either the entire resort has value, or the entire resort is under water. If that happens, you get the same death spiral, but it happens much more quickly. The good news is that such underwater resorts are uncommon. This generally only happens to resorts that are in very "regional" destinations without much broader appeal, and that suffer significantly in comparison to any other options in the area. The latter happens because the owners want to keep fees low, so they don't invest much in refurbishments, etc. That's a strategy that can backfire if the resort falls too far behind the competition.

I suspect Vero will never get to that point. I took a quick look at other Hutchinson Island spots that appear to be of comparable quality (Expedia lists Vero as 3.5 stars, so I'm looking at "branded" 3 star or general 4 star properties), the all-in weekly rate is about $2-3K for a standard room w/not much of a view for early June. A standard-view "Inn room" that time of year is 104 points for a week, unsubsidized dues are $12.85, for a total cost of about $1,340. There's still a healthy gap between those, which is at least partly why Vero is still worth something on the secondary market.

Vero isn't the ideal location for FL Atlantic Coast---its a little too far north for snowbirds---but Hutchinson Island is still a decent draw. It's also unlikely that Vero will fall significantly behind the competition in terms of upkeep.

-----------------

There is another reason why a timeshare might be "worthless" (meaning: it has to be given away rather than sold on the secondary market)---there isn't enough organic demand in the secondary market to meet the supply of willing sellers. That can happen even if the timeshare itself "has value" from the rental-rate perspective, because timeshare is something that is sold, not bought. Very few people (outside of the DVC section of Disboards, TUG, etc.) wake up and decide they are going to go looking to buy a timeshare. If there isn't enough traffic in the market, it doesn't matter how much "value" the week holds--you aren't going to get a great price for it.

This is more likely to happen to resorts that are unbranded. Unbranded resorts are a problem because no one is going to go looking for one. Everyone knows Disney. The name automatically carries some sense of value and desirability. But "Generic Beach Resort" that isn't affiliated with one of the name-brand hoteliers? That's a much tougher sell---even if it is a perfectly fine resort, and the fees are less than area rental rates.

Even if this happens to a timeshare you own, it's not the worst thing in the world, because there will still be plenty of value in using it. Renting the same thing would cost more, and if you still want to go, great! If you no longer want to go, you can probably find someone among your social circle who would be wililng to take it off your hands--again, because it has value.

Even so, this is not likely to happen to Disney, because the fan base is large, passionate, and well connected. I can't think of another timeshare system with a dozen or so well-known brokers handling resales. That's not because they are worthless: Hilton, Marriott, Hyatt, etc. all have real value on the secondary market. But the Disney market is "just different," and I don't see that changing anytime soon.

https://www.bradfordtoday.ca/local-...r-timeshare-owners-finally-see-payout-5730864
Here is a great example in my neck of the woods. A TS we did a tour at back in the day and are glad we walked away from.

 

[AnnaKristoff2013]

I get that, but even if VB gets to $26/pp dues by 2042, and you own 200 points, $5200. That's still cheaper than most beach vacations I've priced out. 6 nights in summer in a 1 bedroom. Is it a great value? No. Maybe if you're in the rental game, it's more worthless. Just my opinion.

At the current rate VB isn't going to be $26 pp by 2042. It's going to be $51.68 per point. 200 points wll be $10,336. This is the dues chart if VB grows by the same amount as it did last year, every year. (And it's an aging beach resort, looking at other similar timeshares these things usually get worse, not stay the same, to say nothing of a potential hurricane):

2023​	$12.85​
2024​	$13.83​
2025​	$14.88​
2026​	$16.01​
2027​	$17.22​
2028​	$18.53​
2029​	$19.94​
2030​	$21.46​
2031​	$23.09​
2032​	$24.84​
2033​	$26.73​
2034​	$28.76​
2035​	$30.95​
2036​	$33.30​
2037​	$35.83​
2038​	$38.56​
2039​	$41.49​
2040​	$44.64​
2041​	$48.03​
2042​	$51.68​