What if...

[bighoo93]

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.

No, I would not expect Disney to buy up existing inventories. Why do you assume that? They could announce an effective date, and buyers as well as agents would know that they wouldn't get any sales through after that date. There would be few if any subsequent resales to buy because buyers would not be going after resale contracts that cost the same as direct.

One obvious exception would be people trying to game the system with phony buyers. I think that would be relatively few, but also that ways could be devised to smoke them out or deter them from doing it.

 

[bighoo93]

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..

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.

 

[bighoo93]

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.

Wow. I would be pretty upset that the guide was lying to me. That definitely does sound like the tactics one would expect from slimy companies that give timeshares a bad rap.

 

[Missyrose]

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.

Dean, Webmaster Doc and others have explained that typically, the cost of a direct contract will start at double the developer's cost and go up from there.

Wow. I would be pretty upset that the guide was lying to me. That definitely does sound like the tactics one would expect from slimy companies that give timeshares a bad rap.

Haven't you ever heard the old adage:

How can you tell if a timeshare salesman is lying?

His lips are moving.

DVC cast members are timeshare salesmen, and no one should ever forget that. They make their money when they sell you a contract, so they'll use any tactic they can to convince you to buy.

 

[Chuck S]

No, I would not expect Disney to buy up existing inventories. Why do you assume that? They could announce an effective date, and buyers as well as agents would know that they wouldn't get any sales through after that date. There would be few if any subsequent resales to buy because buyers would not be going after resale contracts that cost the same as direct.

One obvious exception would be people trying to game the system with phony buyers. I think that would be relatively few, but also that ways could be devised to smoke them out or deter them from doing it.

An announcement isn't worth the paper it's written on, if there is no follow up action actually taken. People have a legal right to ry to sell their their ownership interest, if they so desire. They would engage a resale broker to do that, and Disney would need to either follow actually through and exercise ROFR on a high resale priced offer, or the market would soon revert to the current state if Disney does not routinely actually exercise ROFR.

And there are lot of ways to scam such a system. For instance, if a retail is offered under the current price for "new", and DVC did not exercise ROFR, then that send the message that they really are not doing what their "announcement" stated. It could be tested easily by having a friend submit a lower bid. If it was not taken by ROFR, the "buyer" would still, under FL timeshare law, have the right to change their mind before the contract closes.

And anyone that has had experience with Disney knows that "announcements" can and do change. Villas at Eagle Pines, anyone? Newport Beach?

Until ROFRs would actually start and continue, such an announcement would mean nothing.

 

[bighoo93]

An announcement isn't worth the paper it's written on, if there is no follow up action actually taken. People have a legal right to ry to sell their their ownership interest, if they so desire. They would engage a resale broker to do that, and Disney would need to either follow actually through and exercise ROFR on a high resale priced offer, or the market would soon revert to the current state if Disney does not routinely actually exercise ROFR.

And there are lot of ways to scam such a system. For instance, if a retail is offered under the current price for "new", and DVC did not exercise ROFR, then that send the message that they really are not doing what their "announcement" stated. It could be tested easily by having a friend submit a lower bid. If it was not taken by ROFR, the "buyer" would still, under FL timeshare law, have the right to change their mind before the contract closes.

And anyone that has had experience with Disney knows that "announcements" can and do change. Villas at Eagle Pines, anyone? Newport Beach?

Until ROFRs would actually start and continue, such an announcement would mean nothing.

Why would a prospective buyer bid on a contract they knew they would not get? I agree that Disney would have to demonstrate this some amount of times, but I think it would not take long. Again, I am assuming what many have asserted, which is that DVC would love to eliminate the resale market because they are losing lots of money to it. If you accept that as true, they would be claiming that additional revenue in direct sales after resales disappear.

I do assume that Disney could devise ways to deter scamming. All day long it is posted here that Disney can do just about anything they want as long as it is not expressly forbidden in the POS. Their options would be open to hampering phony offers.

 

[csharpwv]

OK, I have to comment on this one.

The idea isn't entirely ridiculous...with a few modifications.

I think Disney SHOULD have a far more robust ROFR/Buy Back program.

The key to this success would be offering an 'in house' auction system that caters to current member wishing to add on points (almost 75% of owners add points to their membership).

Ed and Susie Smith are DVC members, however - they would really like to buy points at Boardwalk Villas, their budget it $70-$75 a point - their use year is June, and they are flexible with the number of points they purchase - between 125 and 200.

Jim and Nancy Johnson are empty nesters that have decided that DVC membership no longer meets their needs. It just so happens that they have Boardwalk Villa points - 175 points, June use year.

In this scenario, Ed and Susie would sign up with DVC to be part of a DVC ROFR Auction.

Jim and Nancy have their contract listed with a resale agent for $78.00/pp - they get an offer for $70.00 per point.

When the contract goes to ROFR, DVC notifies anyone that is part of the auction that this contract has started the ROFR process, and they have 7 days to make an offer direct to Disney for FULL VALUE points for a set dollar amount higher than the offer price. ($8 more per point, $12 more per point - something reasonable)

This situation allows the SELLER to sell their contract, and allows MEMBERS/OWNERS to get a good deal, AND Disney makes $$$ on each and every resale that is scooped up as part of this process - AND it allows points not to lose even more value once they become a resale contract.

I can just about bet that Disney would generate a lot of loyalty by selling sold out resorts to current members at a good value, AND it would permit sellers to sell their contract a little faster, direct to Disney if they choose to do so.

Jim and Nancy could have contacted Disney direct with their asking price FIRST to see if anyone offers to buy their contract at their asking price, at full value.

The key to this would be the requirement that only current members, owning direct purchase contracts could participate.

Hey, a guy can dream - right?! HAHA

 

[Chuck S]

Why would a prospective buyer bid on a contract they knew they would not get? I agree that Disney would have to demonstrate this some amount of times, but I think it would not take long. Again, I am assuming what many have asserted, which is that DVC would love to eliminate the resale market because they are losing lots of money to it. If you accept that as true, they would be claiming that additional revenue in direct sales after resales disappear.

I do assume that Disney could devise ways to deter scamming. All day long it is posted here that Disney can do just about anything they want as long as it is not expressly forbidden in the POS. Their options would be open to hampering phony offers.

None of that would do away with the resale market.

And what becomes of those owners that either need to sell their interest for one reason or another? And there are a number of reasons why someone would need to sell. Bankruptcy, death of an owner, divorce are but a few.

You'd expect Disney to buy them ALL back a full price if there is no resale market? And pay the taxes and dues on those points until someone comes along to buy them? And as the resorts age, and near their end dates, if Disney had a lot of inventory they buy back at full price, are they going to absorb that loss? Do you really expect stockholders and fund managers to be OK with that?

The potential long-term losses and risks of such a scheme far outweigh any potential short term benefits for the company. Especially when you consider the ownership WILL eventually be worthless when the current leaseholds expire. Why buy them back, when they can refurbish/retheme and sell "new" points and bill it as a "new" resort after the expiration date much cheaper?

 

[wdrl]

Why would a prospective buyer bid on a contract they knew they would not get?

You are assuming that prospective buyers are completely knowledgeable about buying DVC. And that is a very poor assumption to make. Just as there is a large number of direct buyers who don't know about the resale market, there would be a large number of prospective buyers who won't know that, in your scenario, DVD is ROFRing every deed.

 

[bighoo93]

None of that would do away with the resale market.

And what becomes of those owners that either need to sell their interest for one reason or another? And there are a number of reasons why someone would need to sell. Bankruptcy, death of an owner, divorce are but a few.

You'd expect Disney to buy them ALL back a full price if there is no resale market? And pay the taxes and dues on those points until someone comes along to buy them? And as the resorts age, and near their end dates, if Disney had a lot of inventory they buy back at full price, are they going to absorb that loss? Do you really expect stockholders and fund managers to be OK with that?

The potential long-term losses and risks of such a scheme far outweigh any potential short term benefits for the company. Especially when you consider the ownership WILL eventually be worthless when the current leaseholds expire. Why buy them back, when they can refurbish/retheme and sell "new" points and bill it as a "new" resort after the expiration date much cheaper?

Details, details...

No, I'm with you on most of this. But it really would do away with resale--people would be virtually unable to sell their contracts, no matter what the circumstance, at least as I've described it. So Disney really wouldn't have to buy many contracts, and from what I have read on these boards, they acquire many more points through default and repossession than through ROFR anyway. And I don't think that would be great for them or great publicity for Disney. But what if some are right and DVC doesn't give a hoot about Disney's reputation or the ability of anyone to sell their points, or anything whatsoever other than extracting every extra penny they can from selling timeshare points for as much as they can, as many times over as possible?

I have possible answers for every question you raise (and they are all good, thoughtful questions), but it is just piling hypothetical on top of hypothetical. Without any significant data, we can only really talk about this in broad strokes and big visions. It is all built upon the assumption that the resale market evaporates if nobody can buy resale contracts for less than they can buy from Disney. If it doesn't (and I can't imagine why it wouldn't), then Disney would abandon it immediately. But though it would collapse the resale market (just like other timeshares that sell for a penny on eBay), there would be other details to arrange. The point of raising this discussion wasn't to lay out a detailed, bullet-proof plan with every contingency (I don't do those for free... ). It was to discuss but one simple mechanism by which Disney could eradicate the resale market, if they really are getting killed by it and really don't care about anything except pumping DVC sales revenue.

 

[bighoo93]

You are assuming that prospective buyers are completely knowledgeable about buying DVC. And that is a very poor assumption to make. Just as there is a large number of direct buyers who don't know about the resale market, there would be a large number of prospective buyers who won't know that, in your scenario, DVD is ROFRing every deed.

It is part of the assumption in my scenario that Disney publicizes this fact extensively. Certainly every timeshare resale agency would be well aware. Some people would get burned on eBay I guess, at first.

 

[bighoo93]

Dean, Webmaster Doc and others have explained that typically, the cost of a direct contract will start at double the developer's cost and go up from there.

OK, I think you are kind of saying that the gross margin on an original direct sale would be 50%, based on what some of the timeshare experts on the boards have said. I hope I have that right. Good enough. That would also be the gross margin for a ROFR direct sale that Disney reclaimed at about half their sales price. And for at least some of the resorts, that seems to be the approximate range they are picking up when they choose to exercise. I don't see why their margin would be significantly lower for those they resell after ROFR.

DVC cast members are timeshare salesmen, and no one should ever forget that. They make their money when they sell you a contract, so they'll use any tactic they can to convince you to buy.

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.

 

[bighoo93]

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.

And all you'd have to do is find a buyer willing to pay you Disney's direct price of $135 for your (modestly) restricted resale contract. Good luck.

But in all seriousness, this is part of the beauty of it (from a Diabolical DVC perspective). A significant number of prospective buyers would think this was a DVC selling point, rather than the knifing in the back it would really be...

 

[Sandisw]

Why would a prospective buyer bid on a contract they knew they would not get? I agree that Disney would have to demonstrate this some amount of times, but I think it would not take long. Again, I am assuming what many have asserted, which is that DVC would love to eliminate the resale market because they are losing lots of money to it. If you accept that as true, they would be claiming that additional revenue in direct sales after resales disappear.

I do assume that Disney could devise ways to deter scamming. All day long it is posted here that Disney can do just about anything they want as long as it is not expressly forbidden in the POS. Their options would be open to hampering phony offers.

Why wouldn't I still try to purchase resale? If Disney is selling BLT for $165 and there is someone out there that wants to sell me their contract for $90, I'm going to try for the $90. The only way I'm not getting it is if Disney actually takes it. In this case, I try again and again until something goes through. As long as a buyer isn't in a huge rush, people are still going to try and it's only going to work if Disney buys back lots of contracts for an extended period of time--which would cost a lot of money up front.

And, if one gets through for less than direct, there are plenty of people willing to gamble..as long as that is a possibility, there will always be people willing to try.

Remember, there are sellers who need to sell and don't care if its Disney or someone else who buys it so in those cases , they will put the contract up because as soon as it goes to Disney, they will get there money.

 

[crisi]

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

I'd go into the business of buying a DVC contract for my vacation and reselling it to Disney after their annual price increase - vacations for the cost of dues and profit while Disney takes a loss.

(Which actually happened once in a while maybe eight years ago. People would buy and get a "free years" worth of points - they'd take two vacations or have a big family reunion and then because DVC was holding its value so well, sell on the resale market for very little loss - in some cases even turning a profit once you figured the value of the trip).

 

[crisi]

One of Disney's financial woes during 2008-2010 - like many large companies - had more to do with cash flow than with profit, btw. Paying people for DVC contracts involves handing over cash - and then there is a delay - often significant - before you see that cash come back. A lot of companies were looking a bleak cash flow statements in 2009 - its too recent for Disney to make stupid cash flow mistakes.

 

[bighoo93]

Why wouldn't I still try to purchase resale? If Disney is selling BLT for $165 and there is someone out there that wants to sell me their contract for $90, I'm going to try for the $90. The only way I'm not getting it is if Disney actually takes it. In this case, I try again and again until something goes through. As long as a buyer isn't in a huge rush, people are still going to try and it's only going to work if Disney buys back lots of contracts for an extended period of time--which would cost a lot of money up front.

And, if one gets through for less than direct, there are plenty of people willing to gamble..as long as that is a possibility, there will always be people willing to try.

Remember, there are sellers who need to sell and don't care if its Disney or someone else who buys it so in those cases , they will put the contract up because as soon as it goes to Disney, they will get there money.

I don't presume to tell you, personally, what you would or would not do. But the overwhelming majority in a rational market would not bother bidding on a contract they could not get, and knew in advance they could not get. Also, we can assume that Disney eventually sells any contract they buy to a new buyer, because we assume that resale contracts are taking money that would otherwise go to Disney. That may not be true, but many believe it to be so and I am assuming it here.

If Disney had a policy of allowing a small percentage of contracts to go through, that would create some market. But only for people who were willing to wait potentially years before getting to purchase. Maybe disney would do it this way or maybe not. But I doubt most purchasers are looking at a multi-year timeframe once they make their decision.

 

[Missyrose]

I don't presume to tell you, personally, what you would or would not do. But the overwhelming majority in a rational market would not bother bidding on a contract they could not get, and knew in advance they could not get. Also, we can assume that Disney eventually sells any contract they buy to a new buyer, because we assume that resale contracts are taking money that would otherwise go to Disney. That may not be true, but many believe it to be so and I am assuming it here.

If Disney had a policy of allowing a small percentage of contracts to go through, that would create some market. But only for people who were willing to wait potentially years before getting to purchase. Maybe disney would do it this way or maybe not. But I doubt most purchasers are looking at a multi-year timeframe once they make their decision.

Then how do you explain the people who continue to bid on OKW after getting four or five contracts ROFRed by Disney? Many OKW contracts have been ROFRed in the past few months, but the market for them hasn't cooled at all.

 

[bighoo93]

Then how do you explain the people who continue to bid on OKW after getting four or five contracts ROFRed by Disney? Many OKW contracts have been ROFRed in the past few months, but the market for them hasn't cooled at all.

You're in luck. I just submitted a research paper for publication on this very topic. Rather than explain it all in a lengthy post, I will simply direct you to it here: An Improvement of Multi-Processors with UreaFay

 

[DougEMG]

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...

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.