What if...

[bighoo93]

What if Disney announced and publicized that they were going to exercise ROFR on every contract that sold for less than their current direct price?

The funny thing is, DVC could probably market this as a benefit to many unsuspecting potential customers...

 

[DannysMom]

They would run out of money, very, very quickly.

Sent from my iPad using DISBoards App, please excuse any typos or autocorrects!

 

[bighoo93]

They would run out of money, very, very quickly.

Why would they run out of money? If the resale market is significantly cutting into their sales, this would solve that problem pretty quickly. Maybe they would run out of places to store all their money, or run out of ideas of how to spend all their money...

 

[kamik86]

Why would they run out of money? If the resale market is significantly cutting into their sales, this would solve that problem pretty quickly. Maybe they would run out of places to store all their money, or run out of ideas of how to spend all their money...

Because anyone who is on the fence about selling now knows that they can easily sell back to disney for direct price... That is actually what it would become you would just sell back to disney.

Say I want to sell. All I have to do now is get a "dummy buyer" to say they want to buy for some price less then direct but only a little less. This could just be any friend. We send the paper work to ROFR and Disney now buys it up. The buyer would never have had to be interesting in getting the points in the first place as we would know Disney would buy them.

Now Disney has a ton of inventory from all the people that wanted to sell. No one is paying maintenance fees on that inventory either. So yeah Disney is going to run out of money very quickly if they did this.

 

[Chuck S]

They would be paying the same price to obtain points as they are getting by selling them.

Where is the profit for them on the reacquired points?

For instance, Disney sells at $100pp. Then that new owner sells, Disney reacquires them through ROFR for $100pp...erasing any profit made on that sale, and actually costing them money for closing and filing fees. It would be a quick way for DVD to go broke.

 

[bighoo93]

Because anyone who is on the fence about selling now knows that they can easily sell back to disney for direct price... That is actually what it would become you would just sell back to disney.

Say I want to sell. All I have to do now is get a "dummy buyer" to say they want to buy for some price less then direct but only a little less. This could just be any friend. We send the paper work to ROFR and Disney now buys it up. The buyer would never have had to be interesting in getting the points in the first place as we would know Disney would buy them.

Now Disney has a ton of inventory from all the people that wanted to sell. No one is paying maintenance fees on that inventory either. So yeah Disney is going to run out of money very quickly if they did this.

I considered that some people could game the system as you suggested, and I don't think it would happen enough to make a difference at all. Disney could simply allow a small percentage of sales to go through now and then to keep people from assuming they can do this risk-free, which would cut down on the gaming significantly. But I don't think that scenario is something that most people would turn to anyway. Besides, if resales are really cutting so heavily into Disney's sales as many believe, they would be raking in money from all those new direct sales that used to go to resale instead. The resale market would be effectively shut down. The additional revenue from the new direct sales would easily offset the relative handful of times that a sophisticated seller gamed the system.

 

[bighoo93]

They would be paying the same price to obtain points as they are getting by selling them.

Where is the profit for them on the reacquired points?

For instance, Disney sells at $100pp. Then that new owner sells, Disney reacquires them through ROFR for $100pp...erasing any profit made on that sale, and actually costing them money for closing and filing fees. It would be a quick way for DVD to go broke.

The resale market would disappear virtually overnight. Nobody would buy resale at the same price they could buy direct from Disney. Except for rare instances of people trying to game the system, Disney wouldn't have to exercise ROFR at all because there wouldn't be any resale market.

Price-matching is an anti-competitive practice, and ROFR is a form of price-matching (with a twist that the buyer is left out in the cold). It is definitely counter-intuitive. It is only natural to see a company advertise that they will match their competitor's price on a product and assume that is consumer-friendly. But it isn't. It is just a way to prevent competitors from competing on price.

 

[kamik86]

I considered that some people could game the system as you suggested, and I don't think it would happen enough to make a difference at all. Disney could simply allow a small percentage of sales to go through now and then to keep people from assuming they can do this risk-free, which would cut down on the gaming significantly. But I don't think that scenario is something that most people would turn to anyway. Besides, if resales are really cutting so heavily into Disney's sales as many believe, they would be raking in money from all those new direct sales that used to go to resale instead. The resale market would be effectively shut down. The additional revenue from the new direct sales would easily offset the relative handful of times that a sophisticated seller gamed the system.

Not when you add the scammers to the point above that there is no profit in reselling points that you bought for the same price that your selling them... Actually they lose money as the guide still wants to be paid as do all the people that have to do the paperwork to have the sale go through.

 

[Chuck S]

The resale market would disappear virtually overnight. Nobody would buy resale at the same price they could buy direct from Disney. Except for rare instances of people trying to game the system, Disney wouldn't have to exercise ROFR at all because there wouldn't be any resale market.

Price-matching is an anti-competitive practice, and ROFR is a form of price-matching (with a twist that the buyer is left out in the cold). It is definitely counter-intuitive. It is only natural to see a company advertise that they will match their competitor's price on a product and assume that is consumer-friendly. But it isn't. It is just a way to prevent competitors from competing on price.

And again, at what cost to Disney? The profit from the initial $100pp sale would be erased. The would still be paying for the guides time to make that initial sale, the filing fees and other costs. So now they've bought back points at $100pp that have already actually cost them more than that.

Let's say for discussion that DVD makes a 50% profit on points sold. A new owner buys $10,000 worth of points, giving DVD $5000 in profit. DVD then buys back those points for $10,000, eliminating the $5000 in profit from the sale. And also pays filing fees on the reacquisition and guides time on the first sale amounting to $500. The profit on reselling those points has just dropped to $4500. And if they cycle again, to $4000 and so on until they are in the negative.

If there were profit in that business plan, everyone from K-mart to Cadillac would be onboard.

 

[chalee94]

What if Disney announced and publicized that they were going to exercise ROFR on every contract that sold for less than their current direct price?

the execs probably still remember those couple of years during the great recession when they didn't ROFR much of anything (cash was tighter and disney is too smart to want to get stuck with potentially worthless inventory during a period of major uncertainty). i believe one OKW contract made it through ROFR at $20-25 per pt.

tying up a lot of cash in picking up inventory at relatively high prices (relative to the original development cost) and then being responsible for maintenance fees on those pts until they resell is something disney wouldn't have a lot of interest in. much easier to take perks away from resales...

 

[marynvince]

That would effectively shut down resales.


both have the same chance of happening and make the same amount of sense.

 

[bighoo93]

And again, at what cost to Disney? The profit from the initial $100pp sale would be erased. The would still be paying for the guides time to make that initial sale, the filing fees and other costs. So now they've bought back points at $100pp that have already actually cost them more than that.

Let's say for discussion that DVD makes a 50% profit on points sold. A new owner buys $10,000 worth of points, giving DVD $5000 in profit. DVD then buys back those points for $10,000, eliminating the $5000 in profit from the sale. And also pays filing fees on the reacquisition and guides time on the first sale amounting to $500. The profit on reselling those points has just dropped to $4500. And if they cycle again, to $4000 and so on until they are in the negative.

If there were profit in that business plan, everyone from K-mart to Cadillac would be onboard.

Almost no cost to Disney. If they announced this policy, there would be no more resale market. Nobody would choose resale instead of direct at the same price. So there would be almost no ROFR. Plus, I am assuming that Disney makes many additional direct sales, with the resale market dead. There could be some gaming the system as mentioned earlier, but I do not believe that would be extensive and could be mitigated.

 

[kristenrice]

I bought AKV in 2008 when Disney was selling it for $96/point. Under OP's plan, Disney would ROFR anything less than a $135/point price....that's a nice return on my investment! I could get 4 years of use out of my timeshare and then sell it and MAKE several thousand dollars.

 

[DebbieB]

I bought AKV in 2008 when Disney was selling it for $96/point. Under OP's plan, Disney would ROFR anything less than a $135/point price....that's a nice return on my investment! I could get 4 years of use out of my timeshare and then sell it and MAKE several thousand dollars.

Problem is you have to find a buyer who makes an offer that high. If the buyer offers $70, that is what Disney would pay you, not $135.

 

[marynvince]

Problem is you have to find a buyer who makes an offer that high. If the buyer offers $70, that is what Disney would pay you, not $135.

No, it's not the offer price Disney has to match in this ridiculous scenario, it is the accepted price by the seller.

 

[chalee94]

No, it's not the offer price Disney has to match in this ridiculous scenario, it is the accepted price by the seller.

not following this?

ROFR means disney doesn't have to bid on the contract. a seller would be forced to accept the highest bid they could find. if you can't find an offer from a willing buyer, your only alternative is to rent the pts to keep up with annual dues or else to give the contract back to disney for $0.

in this kind of scenario, it doesn't necessarily force buyers from resale to a direct purchase. it can also force some of us out of the market for DVC ownership (maybe i'll rent points or else stay at timeshares offsite).

 

[kamik86]

Problem is you have to find a buyer who makes an offer that high. If the buyer offers $70, that is what Disney would pay you, not $135.

I still am not sure why everyone is so naive to think that 90% of people that want to sell aren't going to think of what I did at the top of this thread. That you just need a fake buyer to offer $130 to make a profit.

Now in the odd world where no one thinks of the above:
This would just stop all resales (which would be the same thing as Disney just saying you can no longer sell points, not sure if that is legal though) because no one would bother trying to buy knowing that Disney would ROFR. However in that case you would have to be an idiot to buy in. Becasue that means you have spent thousands on something and the maintenance fees will cost 1000s more and you can NEVER get rid of it before the end of the contract. So people just default becasue there is no other way to get out of paying if they lose there job and don't have the money. This will ruin their credit yes but its better then throwing away the money.

Now Disney has to spend the money on the paper work to take back the points from the person that defaulted and try to sell them but wait as I said above very few are buying because its too risky.

No matter how you look at it this just wouldn't work.

 

[Chuck S]

Almost no cost to Disney. If they announced this policy, there would be no more resale market. Nobody would choose resale instead of direct at the same price. So there would be almost no ROFR. Plus, I am assuming that Disney makes many additional direct sales, with the resale market dead. There could be some gaming the system as mentioned earlier, but I do not believe that would be extensive and could be mitigated.

Well, first, you are correct that "announcing" such a policy would not be of much cost. But actually following through with such a policy would be very, very expensive. The resale market would not just disappear overnight following an announcement. Disney would have to actually buy up the current inventories of the resale companies when the "announcement date" arrived. Then continue to follow through buying up any and all future resales. Plus, how much value would you expect a resort to continue have as the lease hold nears its end dates? If Disney can't move all those reacquired points before those lease holds have only a few years left on them, they will be out millions, if not billions, of dollars.

A risk that no financial officer of a major corporation would be willing to take.

 

[Missyrose]

I still am not sure why everyone is so naive to think that 90% of people that want to sell aren't going to think of what I did at the top of this thread. That you just need a fake buyer to offer $130 to make a profit.

Now in the odd world where no one thinks of the above:
This would just stop all resales (which would be the same thing as Disney just saying you can no longer sell points, not sure if that is legal though) because no one would bother trying to buy knowing that Disney would ROFR. However in that case you would have to be an idiot to buy in. Becasue that means you have spent thousands on something and the maintenance fees will cost 1000s more and you can NEVER get rid of it before the end of the contract. So people just default becasue there is no other way to get out of paying if they lose there job and don't have the money. This will ruin their credit yes but its better then throwing away the money.

Now Disney has to spend the money on the paper work to take back the points from the person that defaulted and try to sell them but wait as I said above very few are buying because its too risky.

No matter how you look at it this just wouldn't work.

Won't ruin anyone's credit. Disney doesn't report the DVC loans to the credit companies and members are allowed to simply give back their contracts if they are underwater price-wise and can't afford their dues anymore.

But even a wealthy company such as Disney doesn't have the resources to make a scheme like the one OP is proposing work. Mainly because DVD typically looks to other ways of getting points back that cost far less than ROFR and they only use ROFR as a last resort because the profit margin is so much less.

But I totally agree that a public policy such as this one would bring nothing but attempts to game the system.

 

[LisaS]

What if Disney announced and publicized that they were going to exercise ROFR on every contract that sold for less than their current direct price?

My guide told me this exact thing to try to persuade me that buying direct was the only viable option. I was told "Disney exercises ROFR on every contract so don't waste your time with resale." I had been reading posts here on the DVC boards including posts on the ROFR thread for several months so I knew that wasn't true.