Whats the Mouse doing with all the ROFR'ed points?

[Noah_t]

I am curioius if anyone knows or even wants to make entertaining guesses as to what Disney is doing with all there points they seem to be aquiring. Do they resell them all or are they renting them out. Its my understanding when cash customers rent DVC rooms it comes from their inventory of DVC points.

 

[DVCDisneyRunner]

My thoughts is they only ROFR a contract if they have a buyer or at least potential buyers. The idea that they want to keep a floor doesn't work for me. We have proof that this is not the case in a couple instances. The virtually never ROFR a properry that is currently selling. This would indicate that because they have points they don't need to ROFR and are not concerned about resale value, Aulani anyone. The second was durning the economic down turn when prices kept dropping they where not buying up all the points to keep a floor.

 

[mustinjourney]

my guess is they're filling their large backlog from the waitlists. up until this year -- they couldn't change the UY on the contracts, so the waitlists could take awhile before they found one that worked. Now, Disney can take the best deals that are out there and repackage them as direct sales to people on the waitlists.

 

[jerseyduke]

They have jacked up so many of the sold out resorts that it has become more worthwhile to resell them.
Beach Club and BLT at 225
Poly at 235
Grand Floridian at 245 - that went on sale for 150 6 years ago - thats almost a 67% price increase, and ppl still buy direct.

 

[Hjs33]

What's the Mouse doing with all the ROFR'ed points? He's making it rain of course!

No but seriously, I think Disney uses ROFR strategically to help maintain a floor on prices. Otherwise why even have a waitlist. If all they wanted was profit, they would just ROFR all the contracts as soon as requests for direct purchases came in. By keeping a waitlist they have a ready supply of buyers to buy up all the contracts below what they think is a fair price. Plus keeping a decent resale price is a good selling point for them. But it makes me scratch my head why they would make the changes they did to Riviera, which will obviously hurt the Riviera's resale value in the future.

 

[Disney Dad ADL]

One thing to consider is that the DVC strategy appears to have drastically change over the past 2-3 years. The number of ROFR'd contracts seems to have gone up a lot.

Compare

ROFR thread April-June 2019
https://www.disboards.com/threads/r...ost-for-instructions-formatting-tool.3743908/
Roughly 69 contracts taken in ROFR 4/19-6/19

ROFR thread April-June 2016
https://www.disboards.com/threads/r...ost-for-instructions-formatting-tool.3497913/
Only 6 contracts take in ROFR 4/16-6/16

There is some higher volume in 2019, but I don't think it's 10x volume.

I personally think that it's just that they decided to sell more "sold out" points direct. If they cared about price floor, they would be buying more Aulani, which is one of the lower priced resorts. However, they are not buying Aulani because they can't sell it (they still have 1/2 the resort to sell), which makes me believe they ROFR to sell it, not to hold a price point. No one knows for sure of course, just a guess.

 

[chalee94]

No but seriously, I think Disney uses ROFR strategically to help maintain a floor on prices. Otherwise why even have a waitlist. If all they wanted was profit, they would just ROFR all the contracts as soon as requests for direct purchases came in. By keeping a waitlist they have a ready supply of buyers to buy up all the contracts below what they think is a fair price. Plus keeping a decent resale price is a good selling point for them. But it makes me scratch my head why they would make the changes they did to Riviera, which will obviously hurt the Riviera's resale value in the future.

You're first sentence is not well supported by the rest of your comment. Why not keep a waitlist to gauge demand for immediate resale even if you have no interest in propping up resale prices?

You say DVC's resale value is a good selling point. But have you actually ever heard of a guide mentioning resale value unprompted? Everything I have seen says that they really don't want to discuss resale at all.

A previous poster mentioned that DVC bailed out of ROFR almost completely during the Great Recession and you didn't mention that at all. An OKW contract supposedly sold for $25 - where was the floor then?

Riviera's restrictions should tell you that you are confusing correlation with causation. DVC's high prices correlate with active ROFR but ROFR isn't the cause of the high prices. Strong demand is at the root. When demand wanes, Disney's models spot it before most of us and they drop ROFR.

(And yes, there is a small affect - if I'm interested in Riviera at $100, I might offer $105 if I think I can avoid the hassle of ROFR. But if ROFR is set around $150, I'll drop out or look at Legacy 14 resorts instead.)

 

[Hjs33]

You're first sentence is not well supported by the rest of your comment. Why not keep a waitlist to gauge demand for immediate resale even if you have no interest in propping up resale prices?

You say DVC's resale value is a good selling point. But have you actually ever heard of a guide mentioning resale value unprompted? Everything I have seen says that they really don't want to discuss resale at all.

A previous poster mentioned that DVC bailed out of ROFR almost completely during the Great Recession and you didn't mention that at all. An OKW contract supposedly sold for $25 - where was the floor then?

Riviera's restrictions should tell you that you are confusing correlation with causation. DVC's high prices correlate with active ROFR but ROFR isn't the cause of the high prices. Strong demand is at the root. When demand wanes, Disney's models spot it before most of us and they drop ROFR.

(And yes, there is a small affect - if I'm interested in Riviera at $100, I might offer $105 if I think I can avoid the hassle of ROFR. But if ROFR is set around $150, I'll drop out or look at Legacy 14 resorts instead.)

Anyone that has bought resale knows there's a floor on any resort that isn't actively being sold direct. To act like there isn't a floor is to be unaware of the ROFR process.

Yes, the guides do not want to discuss resale so as to not drive unknowing buyers somewhere where they can buy DVC at a discount to the direct prices they are selling. If someone does bring up the possibility of selling, they will be more than willing to bring up the high resale value.

During a recession buyers disappear and there is no "waitlist" for the resorts. In that case Disney does not step in to support the prices and this is why there was a dramatic drop off in resale prices. This supports my theory that Disney uses the waitlist as a tool to support resale prices through ROFR.

 

[DVCDisneyRunner]

During a recession buyers disappear and there is no "waitlist" for the resorts. In that case Disney does not step in to support the prices and this is why there was a dramatic drop off in resale prices. This supports my theory that Disney uses the waitlist as a tool to support resale prices through ROFR.

You comment here says that demand drives the price, not Disney, and actually from my point of view goes against your theory. If there is no demand then there is no ROFR. Disney isn't intentionally propping up resale via ROFR. They are only using it to get the lowest cost points to resale direct. Because of the nature of supply and demand the fact that direct sales from Disney are contracts purchased on the resale market, direct demand and resale demand on the "sold out" resorts are one and the same. With that being the case it drives up prices on resale contracts because the market dictates it not because Disney wants DVC to have high resale value. Look at the restrictions they have put on Riviera, seems to me they are trying to depress resale prices (perhaps so they can increase their margin when they do exercise ROFR)

Disney has a minimum they want to make on a direct sale. It is not cheap to pay a sales force, marketing, member perks.... they need a high margin to sell direct. If there are no contracts "cheap" enough to hit the margin they do not exercise ROFR, but create a wait list so if a "cheap" contract comes through they can grab it and sell it. So again it is demand driving the price not Disney, if there were no direct buyer there would be no ROFR. They only buy back what they need at a price that meets their parameters.

If Disney cared at all about keeping resale high it would be forcing Aulani up to make the direct sale look more attractive, but they do not bother with ROFR because it is cheaper to sell developer points (way less expensive than ROFR resale at $80-$100) and they don't care if the resale price is low.

 

[Hjs33]

You comment here says that demand drives the price, not Disney, and actually from my point of view goes against your theory. If there is no demand then there is no ROFR. Disney isn't intentionally propping up resale via ROFR. They are only using it to get the lowest cost points to resale direct. Because of the nature of supply and demand the fact that direct sales from Disney are contracts purchased on the resale market, direct demand and resale demand on the "sold out" resorts are one and the same. With that being the case it drives up prices on resale contracts because the market dictates it not because Disney wants DVC to have high resale value. Look at the restrictions they have put on Riviera, seems to me they are trying to depress resale prices (perhaps so they can increase their margin when they do exercise ROFR)

Disney has a minimum they want to make on a direct sale. It is not cheap to pay a sales force, marketing, member perks.... they need a high margin to sell direct. If there are no contracts "cheap" enough to hit the margin they do not exercise ROFR, but create a wait list so if a "cheap" contract comes through they can grab it and sell it. So again it is demand driving the price not Disney, if there were no direct buyer there would be no ROFR. They only buy back what they need at a price that meets their parameters.

If Disney cared at all about keeping resale high it would be forcing Aulani up to make the direct sale look more attractive, but they do not bother with ROFR because it is cheaper to sell developer points (way less expensive than ROFR resale at $80-$100) and they don't care if the resale price is low.

If Disney was always just buying the cheapest points in ROFR to sell direct then there would be substantial fluctuation in the ROFR price, which there isn’t. Also, if that was the case why is there a wait list at all? If they were just buying the cheapest points they could buy as many as they needed and clear all the direct purchasers on the waitlist as soon as they came in.

As I said before, they do not do this with resorts they are actively selling because I agree with you. Unsold points are more profitable than points bought through resale ROFR.

 

[DVCDisneyRunner]

If Disney was always just buying the cheapest points in ROFR

I did not say cheapest, I said "cheap". There are other factors other than price that goes into the decision making for Disney, but I seriously doubt the price of resale is one of them.

why is there a wait list at all?

They need margin.

 

[Disney Dad ADL]

If Disney was always just buying the cheapest points in ROFR to sell direct then there would be substantial fluctuation in the ROFR price, which there isn’t. Also, if that was the case why is there a wait list at all? If they were just buying the cheapest points they could buy as many as they needed and clear all the direct purchasers on the waitlist as soon as they came in.

As I said before, they do not do this with resorts they are actively selling because I agree with you. Unsold points are more profitable than points bought through resale ROFR.

I think that maybe you and @DVCDisneyRunner are arguing slightly different things. Usually, if you say Disney is trying to "maintain a floor on prices", in means that they believe having low resale values of DVC is inherently a bad thing, and that Disney will buy DVC contracts below a certain level, independent on whether they are able to resell the contracts or make any profit off of them. In other words, DVC believes that a contract should not go less than $50 per point because it is damaging to their brand, so they will by a contract at that level no matter what, even if that particular contract is not making them any money, they believe that strategy will help them in the long run.

What DVCDisneyRunner is saying is that their ROFR purchases are mainly driven by the ability to make a profit off of those ROFR'd contracts. The fact that this happens to prop up the resale market is simply a side-effect of that process (because it increases demand).

I personally tend to side with DVCDisneyRunner's point of view. I don't actually think that Disney specifically cares if the resale market goes in the toilet. I think they buy contracts because they think they can make a profit selling them, which does by itself support the resale market somewhat. But this is all speculation, you could certainly be right

The problem is they have balance several factors:
1. They still need to sell their new resorts, so they don't want to sell on ton of "sold out" resorts because they want to try to direct some of them to buy the new resorts
2. They would prefer to buy contracts as cheap as possible. They don't just buy every single contract at a certain price, otherwise they would not be able to see if the market would allow the prices to drift lower.
3. There is some speculation that the actual contract itself matters (not just the price), in terms of which unit is deeded to the contract. Some people speculate that DVC needs to at times buy several deeds from the same unit in order to combine them or repackage them efficiently.
4. It is unknown how they value stripped vs. loaded contracts, also things like seller pays MFs, etc.

 

[Richard H.]

What if Disney looks at your past travel history in their system to determine ROFR (once a year traveler or every other year). If the contract is loaded they know you are planning a trip soon and will make money on tickets and food sales vs. stripped contract that they will not see an immediate return on so they buy the contract to turn a profit by resale. Seems like Disney wants the "Now" money.

I say this because about a week after turning in a bid Disney sends me info on buying direct. I've not requested anything from Disney on DVC.

I just think another tool is used other than the dollar amount per point to decide ROFR.

 

[chalee94]

What if Disney looks at your past travel history in their system to determine ROFR (once a year traveler or every other year). If the contract is loaded they know you are planning a trip soon and will make money on tickets and food sales vs. stripped contract that they will not see an immediate return on so they buy the contract to turn a profit by resale. Seems like Disney wants the "Now" money.

Disney isn't really run as a single company, though. DVC executives get paid based on DVC's results as a segment. They don't get bonuses for driving business towards the parks.

 

[Fred M]

I thought there was something in my DVC paperwork or from an article that in Florida timeshare developers can't keep more than 3% of the inventory for their use. So if they are under the 3% cap and don't have their own inventory to sell, even if they don't have an immediate buyer lined up, why not take the room back as rental inventory until the buyer shows up? Prices on direct purchases aren't going down.

 

[doubletoast]

Probably buying them up for people on waitlists.

 

[crvetter]

I thought there was something in my DVC paperwork or from an article that in Florida timeshare developers can't keep more than 3% of the inventory for their use. So if they are under the 3% cap and don't have their own inventory to sell, even if they don't have an immediate buyer lined up, why not take the room back as rental inventory until the buyer shows up? Prices on direct purchases aren't going down.

They must keep a minimum of 2% in each Unit (not vacation home, unit is the representation of ownership) per FL law if they desire to maintain the voting rights for that Unit. As far as I know there is nothing barring them from owning more than 3% of the inventory for their use, in fact each active resort being sold they own all of each declaration initially (and far more than 3% for a long time).

If you look at the 2019 Resort budgets you can see the total number of points DVC owned (many of the resorts come in right at 2%) and the number of points DVC had on hand to sell at the end of 2017.

 

[Fred M]

They must keep a minimum of 2% in each Unit (not vacation home, unit is the representation of ownership) per FL law if they desire to maintain the voting rights for that Unit. As far as I know there is nothing barring them from owning more than 3% of the inventory for their use, in fact each active resort being sold they own all of each declaration initially (and far more than 3% for a long time).

If you look at the 2019 Resort budgets you can see the total number of points DVC owned (many of the resorts come in right at 2%) and the number of points DVC had on hand to sell at the end of 2017.

Thanks for clarifying! It was one of those nuggets stuck in my head that I couldn't recall all the details.

 

[dvcsince93]

DVD is selling the contracts. The same thing they do with the foreclosed contracts they buy at auction.

It came as a surprise to me, but over the years, Disney has sold alot of contracts in "sold out" resorts- in fact, every year until 2013 DVD sold more contracts in "sold-out" resorts than were sold resale. During the last 10 years, there were more OKW contracts sold by DVD (about 4600) than by resale (about 3900).

Since 2013, resale has sold more-but not alot more. DVD has sold about 21000 contracts in "sold-out" resorts (meaning OKW, BWV, VWL, BCV, SSR and including, starting in 2014-BLT, starting in 2015-AKV, starting in 2016-VGF and 2019-PVB) . At the same time there were about 23000 contracts in those same resorts sold on the resale market.

Since 2013, DVD has also sold almost 80000 contracts at new resorts-BLT/2013, AKV/2013-14, VGF/2013-2015, PVB/2015-2018, CCV and RIV.

 

[Noah_t]

What if Disney looks at your past travel history in their system to determine ROFR (once a year traveler or every other year). If the contract is loaded they know you are planning a trip soon and will make money on tickets and food sales vs. stripped contract that they will not see an immediate return on so they buy the contract to turn a profit by resale. Seems like Disney wants the "Now" money.

I say this because about a week after turning in a bid Disney sends me info on buying direct. I've not requested anything from Disney on DVC.

I just think another tool is used other than the dollar amount per point to decide ROFR.

I took have wondered how sophisticated the process is such as how close do they look at the buyers? I had a theory they might not ROFR Webmaster Pete's offer's because of the amount of free DVC promotion Disney receives from him but I believe they grabbed at least one of his contracts.