What makes DVC worth investing in?

[CanadaDisney05]

Were going to go around and around.....

For a 2 bedroom? No chance. My example was for a 2 bedroom.

I was referring to the 1 BR 166 point sample. But it doesn't matter. I'm not arguing that DVC points are a bad investment.

And yes, renting is an entirely different story. I was specifically talking about rack rates.

If your going to buy into DVC, should you not consider point rentals as well? It's a viable option and probably the closest option to replicating DVC without purchasing.

Re: Your Ferrari example, if you're buying a Ferrari I highly doubt you are getting out a spreadsheet to determine how you are paying for it.

Why do you say that? Unless you have stupid money, why would you not care about the cost?

If you have stupid money where cost is not an issue, why even bother with DVC? I highly doubt too many celebrities and fortune 500 CEO's own DVC's or any other timeshare. Why not just pay rack rates and have all the flexibility in the world if the money were talking about is immaterial?

But the main point is if you have for many years over and over been going to WDW website, purchasing rack rate a cash room, DVC would save you money in that scenario every single time vs. holding onto the cash. But again, at end of day, no one needs any of this.

This is where I disagree. Whether DVC would save you money vs holding onto cash is a function of the rate of return you earn on that cash. If you hold it in a chequing or a basic savings account with little to no interest, then sure. If you hold it in a well diversified index/mutual fund, the break even point becomes quite a bit later (you can probably average around 7-9% over the life of the contract depending on risk tolerance). If you took that money and invested into a single stock which explodes, then DVC will never break even. In all of these scenarios, you would pay to rent points, or pay cash rates using the proceeds from the investments.

Just because your risk tolerance doesn't adhere to investing in anything outside of a basic low-interest chequing account doesn't mean you can attribute these qualities to all prospective DVC owners.

Just to be clear, everyone's personal finances are there own decision. I can't tell someone that they must do a thorough analysis before purchasing DVC. Frankly, I don't really care if they do or not. It has no personal effect on me. I'm just trying to point out that you can have identical experiences without purchasing DVC. Purchasing DVC itself is not what creates the experiences. Purchasing DVC is just a way to theoretically save you money over the long-term vs the other options. Since it's purpose is to save money, it's probably a wise idea to understand realistically how much it really is saving. If your calculating this wrong just because you don't want to take the time to do it properly may lead you to false expectations.

 

[Bing Showei]

The next decision is how do you want to pay for the Ferrari. You can lease or purchase. This decision is economical. Buying the vehicle vs leasing doesn't provide any non-measurable value to you. In both cases, you have the same car to drive.

I think this is the crux of how some of us are failing to find common ground with your position about the importance of the analyses. You go to renting points regularly as a point of comparison and therein lies the luxury we see as a Disney timeshare "ownership."

Because you have not used the product as a member in terms of being able to log on, look at your points, book a vacation, go back, make changes, switch out later for a bigger room because family is now joining you, cancel, bank, go the following year instead in an even bigger room, last minute, jump online, piggy back off of a work trip, book a studio, find out there's a potential Moonlight Magic event, book a studio at SSR, search for flights, realize you're being Disney dumb, cancel the studio, close the flight windows, realize you should get back to work.

With a rental, you're at the mercy of another owner. You can't see/modify/cancel your stay with ease. Everything is done through that owner, adding MDE details, buying a meal plan, etc. That's a hassle, so buying in, you're paying for the luxury of that convenience.

A bunch of that stuff above around booking sounds like a hassle to an outsider, for some owners, that's part of the "fun." Not a fan of hunting for rooms personally, but I've done it and owning a Disney tiemshare affords me the luxury of basically deciding to go down whenever I want (most times).

You don't get that as a renter, and that's where the Ferrrari analogy falls apart. It's the difference between deciding you're going to go for a drive, versus checking in with your neighbor who you've agreed contractually to use the car for a predetermined time during the year.

It's not an identical experience.

You're not an owner yet, so it's really hard to drive a lot of these points home, but at the heart of it, a lot of us who do own understand the following:

It's a timeshare. It's a luxury purchase you buy to enjoy. It's not a way to "save money." It's not an investment.

 

[mustinjourney]

If your going to buy into DVC, should you not consider point rentals as well? It's a viable option and probably the closest option to replicating DVC without purchasing.

My only comment on this is that owning the points and renting them are not the same. Renting comes with risks and additional headaches that owning does not.

When renting, you lose all control. You can’t make changes easily-you can’t walk hard to get reservations, you can’t add waitlists, and there’s a risk you could get screwed by the owner (outright stealing or they might fail to pay their MFs for some reason which could cancel your room). Not to mention the time involved in hunting down an owner and trying to vet their credentials.

Those are all really big considerations for me personally. So I do not value renting as being equal. To me, there is at least a 10-20% risk/hassle factor involved.

 

[stewart715]

I think this is the crux of how some of us are failing to find common ground with your position about the importance of the analyses. You go to renting points regularly as a point of comparison and therein lies the luxury we see as a Disney timeshare "ownership."

Because you have not used the product as a member in terms of being able to log on, look at your points, book a vacation, go back, make changes, switch out later for a bigger room because family is now joining you, cancel, bank, go the following year instead in an even bigger room, last minute, jump online, piggy back off of a work trip, book a studio, find out there's a potential Moonlight Magic event, book a studio at SSR, search for flights, realize you're being Disney dumb, cancel the studio, close the flight windows, realize you should get back to work.

With a rental, you're at the mercy of another owner. You can't see/modify/cancel your stay with ease. Everything is done through that owner, adding MDE details, buying a meal plan, etc. That's a hassle, so buying in, you're paying for the luxury of that convenience.

A bunch of that stuff above around booking sounds like a hassle to an outsider, for some owners, that's part of the "fun." Not a fan of hunting for rooms personally, but I've done it and owning a Disney tiemshare affords me the luxury of basically deciding to go down whenever I want (most times).

You don't get that as a renter, and that's where the Ferrrari analogy falls apart. It's the difference between deciding you're going to go for a drive, versus checking in with your neighbor who you've agreed contractually to use the car for a predetermined time during the year.

It's not an identical experience.

You're not an owner yet, so it's really hard to drive a lot of these points home, but at the heart of it, a lot of us who do own understand the following:

It's a timeshare. It's a luxury purchase you buy to enjoy. It's not a way to "save money." It's not an investment.

Also, the rental market isn’t exactly flush. Good luck getting a 2 bedroom at Beach Club whenever you want.

 

[mustinjourney]

I think this is the crux of how some of us are failing to find common ground with your position about the importance of the analyses. You go to renting points regularly as a point of comparison and therein lies the luxury we see as a Disney timeshare "ownership."

Because you have not used the product as a member in terms of being able to log on, look at your points, book a vacation, go back, make changes, switch out later for a bigger room because family is now joining you, cancel, bank, go the following year instead in an even bigger room, last minute, jump online, piggy back off of a work trip, book a studio, find out there's a potential Moonlight Magic event, book a studio at SSR, search for flights, realize you're being Disney dumb, cancel the studio, close the flight windows, realize you should get back to work.

With a rental, you're at the mercy of another owner. You can't see/modify/cancel your stay with ease. Everything is done through that owner, adding MDE details, buying a meal plan, etc. That's a hassle, so buying in, you're paying for the luxury of that convenience.

A bunch of that stuff above around booking sounds like a hassle to an outsider, for some owners, that's part of the "fun." Not a fan of hunting for rooms personally, but I've done it and owning a Disney tiemshare affords me the luxury of basically deciding to go down whenever I want (most times).

You don't get that as a renter, and that's where the Ferrrari analogy falls apart. It's the difference between deciding you're going to go for a drive, versus checking in with your neighbor who you've agreed contractually to use the car for a predetermined time during the year.

It's not an identical experience.

You're not an owner yet, so it's really hard to drive a lot of these points home, but at the heart of it, a lot of us who do own understand the following:

It's a timeshare. It's a luxury purchase you buy to enjoy. It's not a way to "save money." It's not an investment.

You beat me to it!

 

[Bing Showei]

You beat me to it!

Quicker to the draw. You brought nothing but shame to your Texan brethren; beaten by a Yankee.

 

[stewart715]

(you can probably average around 7-9% over the life of the contract depending on risk tolerance).

Because the cash rack rates are so exorbitantly high that even in your 9% example, you’re spending all of your returns and then some every single year. Even returning 9% on an account with the value of a hypothetical DVC purchase, you’re outspending your returns by a mile and you will exhaust all of it quickly.

 

[CanadaDisney05]

Because you have not used the product as a member in terms of being able to log on, look at your points, book a vacation, go back, make changes, switch out later for a bigger room because family is now joining you, cancel, bank, go the following year instead in an even bigger room, last minute, jump online, piggy back off of a work trip, book a studio, find out there's a potential Moonlight Magic event, book a studio at SSR, search for flights, realize you're being Disney dumb, cancel the studio, close the flight windows, realize you should get back to work.

With a rental, you're at the mercy of another owner. You can't see/modify/cancel your stay with ease. Everything is done through that owner, adding MDE details, buying a meal plan, etc. That's a hassle, so buying in, you're paying for the luxury of that convenience.

This is a fair point. I would add though that outside of "moonlight magic", cash rates allow all of the exact same freedoms you just mentioned, and more.

I just don't see the position one can be in where someone would buy DVC, but the cost is unimportant.

If you are

A) the person who wants the lowest price for deluxe accommodations, it goes without saying that cost is important
B) the person who can't put a price on flexibility and control of your own reservations, go with a cash reservation instead of DVC.
C) looking for a balance between cost, flexibility & control, again cost is one of your concerns
D) That rare exception where you can't put a price on flexibility, control, AND moonlight magic.... Well you win in this scenario. There is no point in this person doing any sort of basic analysis. They want what they want.

Edit:
E) The person who wants a very specific room type every year at the same type of year. Unless they have stupid money, this person should still probably have a reasonable idea of how much money they are saving/paying a premium for to have that room.

 

[Katie L]

Quicker to the draw. You brought nothing but shame to your Texan brethren; beaten by a Yankee.

Texans will never be shamed by Yankees. Full stop.

 

[CanadaDisney05]

Because the cash rack rates are so exorbitantly high that even in your 9% example, you’re spending all of your returns and then some every single year. Even returning 9% on an account with the value of a hypothetical DVC purchase, you’re outspending your returns by a mile and you will exhaust all of it quickly.

1) Outside of very very specific times of the year, you can usually get some sort of discount off of rack rates
2) You are making a giant assumption on the long-term increases to rack rates. If rack rates stay flat, this is not true.

Again I reiterate, I am not suggesting that DVC doesn't make sense financially. But all of your counter points are financial. To understand if they are true, you have to do the analysis.

 

[stewart715]

1) Outside of very very specific times of the year, you can usually get some sort of discount off of rack rates
2) You are making a giant assumption on the long-term increases to rack rates. If rack rates stay flat, this is not true.

Again I reiterate, I am not suggesting that DVC doesn't make sense financially. But all of your counter points are financial. To understand if they are true, you have to do the analysis.

1 - I am specifically talking about larger units which are almost never discounted. Especially during highly desirable times

2 - you’re joking, right? Disney and flat prices? Have you seen the AP news today?

 

[stewart715]

1 - I am specifically talking about larger units which are almost never discounted. Especially during highly desirable times

2 - you’re joking, right? Disney and flat prices? Have you seen the AP news today?

Furthermore, the only time I’ve ever seen low increases at Disney was during the largest recession in history (arguably) in which case your touted 9% returns were more like -30%

 

[CanadaDisney05]

2 - you’re joking, right? Disney and flat prices? Have you seen the AP news today?

I'm not saying next year that prices will be flat. But DVC is a 30 to 50 year contract. Lots of room for long economic recessions in there that may force Disney to keep prices flat (or even drop). Assuming prices will increase exponentially forever and ever is recency bias.

 

[CanadaDisney05]

Furthermore, the only time I’ve ever seen low increases at Disney was during the largest recession in history (arguably) in which case your touted 9% returns were more like -30%

AVERAGE.....If you had money invested in the late 90's and kept it invested today, your average rate of return through two recessions wasn't -30%

 

[stewart715]

I'm not saying next year that prices will be flat. But DVC is a 30 to 50 year contract. Lots of room for long economic recessions in there that may force Disney to keep prices flat (or even drop). Assuming prices will increase exponentially forever and ever is recency bias.

As I said in my follow up post, if there is a recession enough to affect Disney rack rates that badly, your portfolio isn't doing so hot either

 

[stewart715]

AVERAGE.....If you had money invested in the late 90's and kept it invested today, your average rate of return through two recessions wasn't -30%

All relative, as your portfolio returns, so do the hotel rack rates. Nonetheless, attendance was down during those years but the prices were still high. They aren't going down any time soon. Volatility is built into every investment, including DVC. But they are stubborn as hell about their prices. So if you expect them to all of a sudden discount the grand villa on new years eve for $199 a night you're crazy. If you want those rooms and want protection from the crazy inevitable price increases, DVC is the answer.

 

[stewart715]

AVERAGE.....If you had money invested in the late 90's and kept it invested today, your average rate of return through two recessions wasn't -30%

How many people kept money in their portfolio through 2008-2009 and trusted it would come back? How many people lost money on investments because companies went completely belly up? So yes, late 90s could investments could still be down 30% or even more. What if I invested in Bear Sterns in 1992? How's that doing today?

 

[CanadaDisney05]

As I said in my follow up post, if there is a recession enough to affect Disney rack rates that badly, your portfolio isn't doing so hot either

This is a complete side topic, but I'll bite.... Disney is an individual company. There are no comparisons to make informed long term predictions to what they will do at this stage of their life, or how they/consumers will react during different economic situations. 2008 & 2001 were very short term market downturn, so it's hard to use those as a barometer for future predictions.

There is 150 years of history of stock market information, which takes into account 1000's of the largest countries across the globe. There is enough statistical data to make informed decisions, and understand how long-term rates of return will be affected. Can we predict with 100% certainty? No. But we can make a pretty safe assumption.

 

[CanadaDisney05]

How many people kept money in their portfolio through 2008-2009 and trusted it would come back? How many people lost money on investments because companies went completely belly up? So yes, late 90s could investments could still be down 30% or even more. What if I invested in Bear Sterns in 1992? How's that doing today?

What you are referring to is human behavior. Just because you pulled money out of your portfolio rather than letting it ride during a recession doesn't mean the portfolio didn't return exactly what it should have.

Were going on a complete side tangent here though, that's only mildly really related to purchasing DVC. If you want, we can continue the discussion in another form, and keep this thread on topic.

 

[stewart715]

This is a complete side topic, but I'll bite.... Disney is an individual company. There are no comparisons to make informed long term predictions to what they will do at this stage of their life, or how they/consumers will react during different economic situations. 2008 & 2001 were very short term market downturn, so it's hard to use those as a barometer for future predictions.

There is 150 years of history of stock market information, which takes into account 1000's of the largest countries across the globe. There is enough statistical data to make informed decisions, and understand how long-term rates of return will be affected. Can we predict with 100% certainty? No. But we can make a pretty safe assumption.

Just because I purchased DVC doesn't mean I don't have other investments. My portfolio is just $30k lower than it would be without DVC. And spending 10 grand a year on accommodations, I would exhaust that and returns very fast. Like any investment, it is a bet. Whether it be betting that you're going to return 9% annually over a 30 year period or betting that DVC will save you money. At end of day, both are bets.