What if...

[bighoo93]

Well I would then put all my points up for sale and laugh as Disney paid me double what I paid for them.

So this would never happen.

Well, if your points are worth double what you paid for them, you could do that right now!

 

[CarolMN]

They'd face a shareholder lawsuit for not looking after the fiduciary interests of their shareholders. ......(snip).....

I agree. At the least, Disney's stock price would suffer. I'd sell any company's stock that put their cash into projects that returned so much LESS than their other opportunities.

 

[bighoo93]

I agree. At the least, Disney's stock price would suffer. I'd sell any company's stock that put their cash into projects that returned so much LESS than their other opportunities.

Why do you assume that it would return so much less than other opportunities?

If we assume, as many seem to believe, Disney is losing tons of money because people are buying resale rather than direct, this would address that. Even IF Disney had to buy out a lot of contracts, there would be that significant amount of extra revenue. That is an assumption that I am not sure about, but relatively few seem to question it, particularly those regarded as the most knowledgeable about timeshares.

And if buyers and agents were aware that they would not actually get any contracts they bid on, why would they waste their time bidding in the first place? If there is no resale market (because buyers would not choose to pay the same price for restricted resale as they can get for direct points), then Disney will not have to pay out tons of cash. Disney only exercises ROFR on offers to buy. Other than scamming, which they would have to address, who would be offering to buy when they know they wouldn't get the contract?

 

[CRobin]

The assumption that Disney is losing lots of money on resales is, IMHO, not shared by all. This, and numerous other threads, was born out of a post referencing a guide who said that future resales would be restricted to home resort use only. No official word from DVC, just a comment from a guide who may or may not know what he is talking about.

Disney restricted resale access to some aspects of ownership for one reason or another. IMHO, it was because they were unsuccessful in getting rid of the points being traded out for DCL and other exchanges. I saw too may flyers in the rooms for bargain basement cash prices for SSR and OKW.

To conclude based upon hearsay that Disney is out to torpedo resales is certainly one's prerogative, but at this point and lacking any real facts, it's sure not mine.

Sent from my iPad using DISBoards

 

[wdrl]

With all due respect to the OP, this is one of the most fanciful ideas I've read on the disboards in quite awhile.

One, it makes no sense for DVD to advertise that it will reacquire all deeds that are being offered for less than the direct price. Currently, DVD can step in and take over all OKW deed on the resale market for prices in the $50s-$70s. Why would it suddenly announce it will now pay $100 for those same deeds? This would cost DVD tons of money, perhaps even more than it now loses when prospective buyers go with a resale purchase rather than a direct purchase.

Two, why should DVD pay top dollar for a deed when it reacquires a significant number of points through foreclosure proceedings at a hugely discounted price? There are two types of foreclosures: Court ordered foreclosures and cases where DVD steps in and reacquires a deed in lieu of foreclosure. When DVD exercises a warranty deed in lieu of foreclosure, it is buying back the deed at a substantial discount from the original purchase price. Since sales began for AKV and BLT, DVD has exercised warranty deeds in lieu of foreclosure on 164,649 AKV points and 50,113 BLT points. Under the OP's plan, DVD would be paying much, much more for these points than it current does.

Three, it raises the cost of doing business for DVD and reduces its profit margins. If it reacquires some AKV points at $135, then there is no profit margin if it tries to sell those points at the current price of $140. DVD will end up with overpriced inventory that it cannot sell, which is even worse than the current situation of competing with the resale markets.

Four, the entire plan hinges on the idea that no one would bid on a resale deed that they know they can't buy. This premise is absurd on two levels. First, there is overwhelming evidence that not all DVC buyers are highly educated about the resale market. No matter how much advertising DVD does to let people know it will exercise ROFR, it won't reach the entire base of potential DVC buyers. Second, its human nature to try to get something at a lower price. If I want to buy BCV, I can either spend $115/point buying direct, or I can take a chance that I can get BCV on the resale market for $105. Even if I'm unsuccessful at the lower price, it hasn't cost me anything. Meanwhile, DVD is now stuck with inventory that it can't sell at $115 for a profit.

Five, it will cost DVD perhaps millions of dollars to implement. Not only would it have to buy up every deed that is currently on the market at increasingly higher prices, but many more owners would suddenly start trying to sell their deeds at the inflated prices. The resale marketed would be flooded with owners that have been sitting on the fence about selling their points but now realize that they can sell their points for more than they originally bought them for.

And six, its debatable whether the resale market really hurts DVD that much. DVD has been able to sell over 5.5 million BLT points in four years at very high prices despite the presence of the resale market. Additionally, over 5.9 million AKV points have been sold since February 2007. Since March 2010, its been able to sell 82,269 BCV points, 59,075 BWV points, 181,699 OKW points, and 42,614 VWL points. and, since July 2010, 35,969 HHI points and 41,290 VB points.

 

[Missyrose]

With all due respect to the OP, this is one of the most fanciful ideas I've read on the disboards in quite awhile.

One, it makes no sense for DVD to advertise that it will reacquire all deeds that are being offered for less than the direct price. Currently, DVD can step in and take over all OKW deed on the resale market for prices in the $50s-$70s. Why would it suddenly announce it will now pay $100 for those same deeds? This would cost DVD tons of money, perhaps even more than it now loses when prospective buyers go with a resale purchase rather than a direct purchase.

Two, why should DVD pay top dollar for a deed when it reacquires a significant number of points through foreclosure proceedings at a hugely discounted price? There are two types of foreclosures: Court ordered foreclosures and cases where DVD steps in and reacquires a deed in lieu of foreclosure. When DVD exercises a warranty deed in lieu of foreclosure, it is buying back the deed at a substantial discount from the original purchase price. Since sales began for AKV and BLT, DVD has exercised warranty deeds in lieu of foreclosure on 164,649 AKV points and 50,113 BLT points. Under the OP's plan, DVD would be paying much, much more for these points than it current does.

Three, it raises the cost of doing business for DVD and reduces its profit margins. If it reacquires some AKV points at $135, then there is no profit margin if it tries to sell those points at the current price of $140. DVD will end up with overpriced inventory that it cannot sell, which is even worse than the current situation of competing with the resale markets.

Four, the entire plan hinges on the idea that no one would bid on a resale deed that they know they can't buy. This premise is absurd on two levels. First, there is overwhelming evidence that not all DVC buyers are highly educated about the resale market. No matter how much advertising DVD does to let people know it will exercise ROFR, it won't reach the entire base of potential DVC buyers. Second, its human nature to try to get something at a lower price. If I want to buy BCV, I can either spend $115/point buying direct, or I can take a chance that I can get BCV on the resale market for $105. Even if I'm unsuccessful at the lower price, it hasn't cost me anything. Meanwhile, DVD is now stuck with inventory that it can't sell at $115 for a profit.

Five, it will cost DVD perhaps millions of dollars to implement. Not only would it have to buy up every deed that is currently on the market at increasingly higher prices, but many more owners would suddenly start trying to sell their deeds at the inflated prices. The resale marketed would be flooded with owners that have been sitting on the fence about selling their points but now realize that they can sell their points for more than they originally bought them for.

And six, its debatable whether the resale market really hurts DVD that much. DVD has been able to sell over 5.5 million BLT points in four years at very high prices despite the presence of the resale market. Additionally, over 5.9 million AKV points have been sold since February 2007. Since March 2010, its been able to sell 82,269 BCV points, 59,075 BWV points, 181,699 OKW points, and 42,614 VWL points. and, since July 2010, 35,969 HHI points and 41,290 VB points.

Where is the "like" button when you need one?

 

[bighoo93]

The assumption that Disney is losing lots of money on resales is, IMHO, not shared by all. This, and numerous other threads, was born out of a post referencing a guide who said that future resales would be restricted to home resort use only. No official word from DVC, just a comment from a guide who may or may not know what he is talking about.

I'm glad to hear this. The assumption is certainly NOT shared by me, but is by many, or perhaps just some of the most vocal. For the purposes of this discussion, I assumed it, but I do not actually assume it to be the case.

 

[bighoo93]

With all due respect to the OP, this is one of the most fanciful ideas I've read on the disboards in quite awhile.

Thanks for the kind words and thoughtful response. I'll try to be concise in addressing your points below.

One, it makes no sense for DVD to advertise that it will reacquire all deeds that are being offered for less than the direct price.

I agree. Has anyone suggested such a thing? I sure haven't.

Two, why should DVD pay top dollar for a deed when it reacquires a significant number of points through foreclosure proceedings at a hugely discounted price?

They probably wouldn't, because few sales would be agreed upon once agents and buyers realized that the buyer would never get the contract in the end. But in the relatively few cases that they had to exercise ROFR, they would do so in order to demonstrate that they are following through with this policy.

Three, it raises the cost of doing business for DVD and reduces its profit margins.

Not necessarily true at all. If, as assumed for discussion, resale point sales represent lost sales for DVD, they would be capturing significantly more sales once the resale market effectively vanished. Including, BTW, selling back the very contracts they just ROFR'd to the party who bid on it.

Four, the entire plan hinges on the idea that no one would bid on a resale deed that they know they can't buy. This premise is absurd on two levels. First, there is overwhelming evidence that not all DVC buyers are highly educated about the resale market. No matter how much advertising DVD does to let people know it will exercise ROFR, it won't reach the entire base of potential DVC buyers. Second, its human nature to try to get something at a lower price. If I want to buy BCV, I can either spend $115/point buying direct, or I can take a chance that I can get BCV on the resale market for $105. Even if I'm unsuccessful at the lower price, it hasn't cost me anything. Meanwhile, DVD is now stuck with inventory that it can't sell at $115 for a profit.

I think it is a relatively safe assumption, actually. I think word will get out about the policy, and certainly through the agencies that do most of the resale deals. I assume that while those purchasing direct from Disney might be uneducated and buying on a whim, that those buying resale have likely done more research. Maybe that isn't true, but I don't know that it is not. At first, there may be some that Disney has to buy back, but I think before long it would be a rare event. I really don't see why someone would "take a chance" on getting a resale contract when they know their chance is 0. If they don't know it, then they may try, but I suspect the word gets out, and frankly, that agencies stop listing DVC contracts.

Five, it will cost DVD perhaps millions of dollars to implement. Not only would it have to buy up every deed that is currently on the market at increasingly higher prices, but many more owners would suddenly start trying to sell their deeds at the inflated prices. The resale marketed would be flooded with owners that have been sitting on the fence about selling their points but now realize that they can sell their points for more than they originally bought them for.

I think this point is completely based on your misunderstanding of the proposal.

And six, its debatable whether the resale market really hurts DVD that much. DVD has been able to sell over 5.5 million BLT points in four years at very high prices despite the presence of the resale market. Additionally, over 5.9 million AKV points have been sold since February 2007. Since March 2010, its been able to sell 82,269 BCV points, 59,075 BWV points, 181,699 OKW points, and 42,614 VWL points. and, since July 2010, 35,969 HHI points and 41,290 VB points.

I couldn't agree more with this.

 

[bighoo93]

Where is the "like" button when you need one?

How about this one: Yay! Yay! What she said! Yay!

 

[Dean]

Since you mentioned it, what is the approximate profit on "original" vs. ROFR direct sales by DVC?

As I've said repeatedly, I don't expect Disney would have to ROFR much because there wouldn't be many sales. There can always be ways to combat gaming the system.

Roughly 50% is hard costs and 50% marketing related and profit for timeshares in general, I'm not sure any way to be sure exactly where DVC falls in this generalization. The problem would be they'd be over paying by almost double what they need to make any profit. They don't use ROFR as a direct profit tool but rather an indirect one to drive people to retail. That's not to say they don't make anything, just it's not a big ticket item plus every ROFR is potentially in direct competition with new sales. As stated in the OP, resale prices would immediately rise to right at retail value but nothing would sell. What they could do would be to start a direct buy back program and put all the players out of business then close the program or reduce their offering prices. Some companies do resales in one way or another though many have gotten away from it that used to. Marriott has essentially done away with a very active internal resale department. Bluegreen does internal resales but controls the price. They'll sell at what ever price the seller wants but only counts those points as qualified if you meed a target price of $1.25 a point where you can buy those same points for essentially free otherwise. Retail is somewhere around $2-3 a point depending on specifics and number of points.

Maybe so, but I won't deal with a salesman who I know is lying to me. It may work for them with people who don't care, but it costs them my sale.

You often won't know until it's too late then you have no recourse because you won't be able to prove they lied to you. It seems rare with DVC but does happen. There are other companies that are able to be appropriate and honest as well and they all are able to do so while putting more sales pressure than does DVD.

 

[marynvince]

if Disney exercises ROFR? If so argument shot as the Real Estate companies would continue to offer as they will get paid.

As an owner, If i wanted to sell, or if had to sell, I don't care who buys. I want out.

The argument that buying all resales effectively shuts down the market for resales is counterintuitive and has no basis in logic, marketing or economic principles.

 

[bighoo93]

if Disney exercises ROFR? If so argument shot as the Real Estate companies would continue to offer as they will get paid.

As an owner, If i wanted to sell, or if had to sell, I don't care who buys. I want out.

The argument that buying all resales effectively shuts down the market for resales is counterintuitive and has no basis in logic, marketing or economic principles.

But one side doesn't make a market. Why would a buyer make an offer when they know they won't get the contract? Not think they won't, know for certain they won't. Is there a basis for that in logic or economic principles?

 

[Chuck S]

If DVC were to make it impossible to sell a contract via the resale market, and not receive an offer on the contract, without guaranteeing to buy back any and all contracts from owners that wish to sell, they'd be open to a huge class action suit by owners.

 

[Dean]

But one side doesn't make a market. Why would a buyer make an offer when they know they won't get the contract? Not think they won't, know for certain they won't. Is there a basis for that in logic or economic principles?

They won't, which is exactly the way ROFR is designed to work. It's aimed at having the buyer go resale, not the company get the contract at a "cheap" price because it's not really a cheap price as I commented on previously.

If DVC were to make it impossible to sell a contract via the resale market, and not receive an offer on the contract, without guaranteeing to buy back any and all contracts from owners that wish to sell, they'd be open to a huge class action suit by owners.

Not as being described because they wouldn't remove the possibility, only the practicality. If they bought everything at 90% retail or less but no one would pay that, the possibility of a sale still exists. Then they have to enforce the legal parameters that you have to have a valid sale agreement/contract and not just your cousin acting as a shell. Anti competitive and monopoly legal arguments would not apply in this case as I understand it.

 

[Dean]

if Disney exercises ROFR? If so argument shot as the Real Estate companies would continue to offer as they will get paid.

As an owner, If i wanted to sell, or if had to sell, I don't care who buys. I want out.

The argument that buying all resales effectively shuts down the market for resales is counterintuitive and has no basis in logic, marketing or economic principles.

True, assuming you can get a valid offer. From a resale company standpoint it can actually be better with multiple commissions related to a single buyer. It's only at the point people say never mind and don't buy or turn to retail that it hurts them. Disney could easily put them all out of business but it'd take a ton of cash and the return likely wouldn't be reasonable. What Westgate did was to demand the sales commission for themselves on ROFR and it effectively eliminated resale companies that were willing to deal with them or list their product for sale. Others have gone the qualified points/VIP route with varying degrees of success but what it has done is essentially eliminated any value when one wants to resell.

 

[tjkraz]

There are thousands of contracts which change hands on the resale market each year. These are contracts held by people who have suffered the death of a spouse, divorce, loss of job, bankruptcy, etc.

If DVC created barriers which kept these buyers from selling their contracts, do you really think they would respond with "oh well, I guess I'm stuck with it"?

Every person selling a contract now found out about the resale market, got in touch with a broker and learned everything necessary to begin the transfer process. And those same people would easily learn exactly how much their contract would fetch via ROFR if Disney was buying them all up.

If I were forced to sell, I'd enlist my next door neighbor to offer a couple bucks under retail to maximize my return and get the contract sold ASAP. I'd do it in a heartbeat. So would most other people who are forced to shed unwanted or unneeded points.

Additionally DVC will lose sales to buyers who are concerned about how they would ever rid themselves of the points down the road.

Beyond that, the assumption here seems to be that buyers would respond by paying DVC's higher prices. That simply is not true. There are people paying $50-60 per point resale not just because they want to save money but because that's all they are willing to spend or it's all they can afford. With a hard price floor of $100 per point for SSR or $165 for BLT, the market is much, MUCH smaller than at $50 and $90 respectively.

Ultimately DVC ends up holding more points yet has fewer buyers.

 

[Dean]

There are thousands of contracts which change hands on the resale market each year. These are contracts held by people who have suffered the death of a spouse, divorce, loss of job, bankruptcy, etc.

If DVC created barriers which kept these buyers from selling their contracts, do you really think they would respond with "oh well, I guess I'm stuck with it"?

Every person selling a contract now found out about the resale market, got in touch with a broker and learned everything necessary to begin the transfer process. And those same people would easily learn exactly how much their contract would fetch via ROFR if Disney was buying them all up.

If I were forced to sell, I'd enlist my next door neighbor to offer a couple bucks under retail to maximize my return and get the contract sold ASAP. I'd do it in a heartbeat. So would most other people who are forced to shed unwanted or unneeded points.

Additionally DVC will lose sales to buyers who are concerned about how they would ever rid themselves of the points down the road.

Beyond that, the assumption here seems to be that buyers would respond by paying DVC's higher prices. That simply is not true. There are people paying $50-60 per point resale not just because they want to save money but because that's all they are willing to spend or it's all they can afford. With a hard price floor of $100 per point for SSR or $165 for BLT, the market is much, MUCH smaller than at $50 and $90 respectively.

Ultimately DVC ends up holding more points yet has fewer buyers.

I'm sure if the resale market became nonviable some would stop paying fees and DVC (not DVD) would take those points back under current options to do so which they do now at times. As for getting a shill contract, that's fraud and illegal in all the states I'm aware of though I'm sure some would try it. All you'd have to do would be to prosecute some of them or let it go through and follow up on the sale from a legal standpoint. I wonder if they could increase the transfer fee as some of the MX resorts have done to astronomical levels, as I read the FL statutes I don't think so but am not certain. They could also simply start their own resale department. Marriott use to allow uptrades but they required an addition cash amount above, usually $15K and they took their 25% commission out of the traded in amount in addition.

As for what people would do. Some would simply keep it an pay the fees, some would stop paying, either way DVD and DVC would be OK assuming the volume of fees wasn't great enough to affect the maint fees because current members would have to pay any portion of the fees no paid by other members.

As for affecting future sales, I doubt it'd have much effect just like I don't think the lower resale prices have much effect on current sales.

 

[bighoo93]

If I were forced to sell, I'd enlist my next door neighbor to offer a couple bucks under retail to maximize my return and get the contract sold ASAP. I'd do it in a heartbeat. So would most other people who are forced to shed unwanted or unneeded points.

I'll stipulate that in order to make this work, DVC would have to find a way to deal with (i.e., deter, prevent, inhibit) these kinds of "dummy sales."

Additionally DVC will lose sales to buyers who are concerned about how they would ever rid themselves of the points down the road.

I think this is quite possible, too. Though I'll note that many here argue that most people don't even think about the idea that they might ever have to sell when they purchase. But this is a risk, for sure.

Beyond that, the assumption here seems to be that buyers would respond by paying DVC's higher prices. That simply is not true. There are people paying $50-60 per point resale not just because they want to save money but because that's all they are willing to spend or it's all they can afford. With a hard price floor of $100 per point for SSR or $165 for BLT, the market is much, MUCH smaller than at $50 and $90 respectively.

I agree with this. But many do not. This was just kind of a thought experiment, assuming that in fact resale DVC contracts are costing DVC a considerable fortune. If that were the case, DVC would have many options to address this, and many of them quite simple. So much so that one might almost assume the fact that they haven't implemented them suggests that there is not this great loss of sales in reality.