What's with all the OKW buybacks by Disney?

[AllieV]

Since the ROFR board is pretty full, I started this to consolidate conspiracy theories on all the recent OKW contracts that Disney has excercised their ROFR to buy back.

There were 13 listed in the Orange County records for April and 20 for May. Compare that to 2 in march, 1 in February, and 3 in January. Late 2011 was active with Sep-Dec showing 36 total contracts bought back at OKW alone. By contrast, VWL has had 2 repurchased from July 2010 through May 2012.

And how do you think this will affect resales now? Slow them down since people may not want to take a chance on losing contract after contract? Or will it raise the price?

I won't presume to restate people's theories. I'll leave it to you to contribute if you wish.

 

[disneynutz]

There is one reason that Disney exercises ROFR, Money!

It's a business so everything they do is to make money, nothing wrong with that as long as buyers and Guests realize it and get the best deal possible.

Bill

 

[DougEMG]

Pick from the following theories:

1 - New fiscal year for Disney so they have money to buy back really good deals

2 - People want to buy OKW direct so will go on the waiting list cause they don't like the other options that are currently available direct

3 - Disney needs more people to have extended contracts at OKW

4 - Disney can't let prices at OKW go through for $40 resale and still sell AKV direct for $120-$130

Anyone got any others?

I've already got points at OKW and while I like the resort, I would never pay more to get points anywhere just on the hope that it passes ROFR.

If you really want to have the greatest chance of passing ROFR buy SSR or AKV resale. My personal preference is SSR because you'll get a better price per point and the MF are cheaper.

 

[AllieV]

So nothing more sinister, like they're repackaging them to sell to a foreign country of new fans? Or they're buying back enough points to tear down a few buildings for something else? I have nothing to base this on, btw, nor have any idea why any of those would be done.

 

[chalee94]

IMO they just need a little inventory to get them through to the opening of the VGF. (and maybe a "value" option at $100 per pt for buyers who balk at $160 per pt for BLT or worse for VGF.)

OKW has a bonus in that they can ROFR contracts that end in 2042 and sell them as contracts ending in 2057.

Disney can't let prices at OKW go through for $40 resale and still sell AKV direct for $120-$130

of course they can. not to knowledgeable buyers but a lot of timeshares have a larger margin than that and still sell direct...

Or they're buying back enough points to tear down a few buildings for something else?

i doubt there's much money to be made there. maybe they'll tear down a building or 2 in 2042 when the regular contracts expire but i doubt they'd do it with 30 years left...

 

[AllieV]

How is it that such a large company like Disney has no leaks on this?

 

[ELMC]

As long as we're calling this what it is....speculation...I'd love to join in.

I think there are two things at work.

First, I really think there is something going on with OKW being the pioneer 2042 contract slated for extension. There's a lot of value (as a pp said) of buying a 2042 contract and reselling it as a 2057.

Second, I think that DVD has a real problem when it comes to AKV. The perception is that they are unreasonably far away. So for someone looking to purchase DVC in that price range, DVD really doesn't have many options to offer when the buyer objects to AKV because it is "too far away". Enter OKW.

Those are my ideas. Of course when I get hired as an uppity up at DVD I'll know for sure...but then I will probably have signed a nondisclosure agreement so I won't be able to say.

 

[fmer55]

Think of the intrinsic value for them to buy back a contract that ends in 2042 and then they can sell it back as a 2057. They are buying back on 50cents to the dollar as it is and then covering 15 more years of maintenance fees.

One other theory i have is that OKW is viewed as one of the 2 "retirement communities" along with SSR, with the perception being that of a nice quiet resort. As PP poster said, they really do not have a resort currently for the budget minded retiree, whether these are delux or not. AKV is viewed as extremely kid friendly i think while the 2 afforementioned resorts carry the retirement moniker.

Strictly my biased opinions

 

[wdrl]

I think that DVD has a real problem when it comes to AKV. The perception is that they are unreasonably far away. So for someone looking to purchase DVC in that price range, DVD really doesn't have many options to offer when the buyer objects to AKV because it is "too far away". Enter OKW.

In April and May 2012, Disney Vacation Development sold 8,167 OKW points. By comparison, DVD sold 374,551 AKV points during those two months. And remember that OKW costs about $100 a point, while AKV is about 20% higher.

 

[ELMC]

In April and May 2012, Disney Vacation Development sold 8,167 OKW points. By comparison, DVD sold 374,551 AKV points during those two months. And remember that OKW costs about $100 a point, while AKV is about 20% higher.

I don't doubt that the difference is staggering. AKV has the full force of DVD marketing behind it. I'm just referring to what DVD does to reel in the ones that are about to get away. Again, just speculation.

 

[tjkraz]

How is it that such a large company like Disney has no leaks on this?

Confidentiality agreements are commonplace at a publicly-traded company like TWDC. As the old saying goes, those talk don't know and those who know aren't talking. Besides DVC Right of First Refusal policies don't exactly make for exciting water cooler conversation among coworkers.

That said, I suspect it relates back to the failed OKW extension attempt a few years ago. DVC is sitting on a huge obligation which kicks-in come 2042 thanks to the millions of points which were not extended. Gradual ROFR will allow DVC to rid itself of many of those points without creating an immediate financial burden.

Overall ROFR is not a money-making business for DVC. But the margins are a bit higher when they can buy-back a 29 year contract and re-sell a 46 year contract.

 

[AllieV]

Wow, if it really is about extending the contracts, then they're planning WAY ahead. Contracts don't expire for 30 more years.

 

[Brian Noble]

How is it that such a large company like Disney has no leaks on this?

Well for starters, I'm pretty sure the guy selling frozen lemonade at the Splash Mountain cart doesn't know why DVD may or may not be ROFR'ing contracts.

Wow, if it really is about extending the contracts, then they're planning WAY ahead. Contracts don't expire for 30 more years.

True, but there are a lot of them! I'm not sure what fraction of contracts were extended, but I get the sense that most were not. If that's true, then when 2042 rolls around, some Disney entity suddenly owns the majority (but not all) of a resort that will be anything but the "latest and greatest" thing, and may find it difficult to add that much OKW rental inventory to its stable at CRO. Remember: they haven't built a new cash Deluxe resort in more than a decade, and six years ago converted two of the six floors at that resort from cash to DVC.

Now, if the *whole* resort turns over, they have more flexibility...so in some ways they'd've been better off not extending it at all.

 

[keishashadow]

Think of the intrinsic value for them to buy back a contract that ends in 2042 and then they can sell it back as a 2057. They are buying back on 50cents to the dollar as it is and then covering 15 more years of maintenance fees.

One other theory i have is that OKW is viewed as one of the 2 "retirement communities" along with SSR, with the perception being that of a nice quiet resort. As PP poster said, they really do not have a resort currently for the budget minded retiree, whether these are delux or not. AKV is viewed as extremely kid friendly i think while the 2 afforementioned resorts carry the retirement moniker.

I have a few too. Not sure if the legalities would permit, but perhaps they're buying up enough units to 'eliminate' a few buildings and add a spa or pool feature along line of SAB to the resort. Would jazz things up a bit in a that section to increase popularity but still preserve the remainder of resort as to current laid-back vibe; not to mention their resale value would jump.

 

[ELMC]

Wow, if it really is about extending the contracts, then they're planning WAY ahead. Contracts don't expire for 30 more years.

You're talking about about a company that bought 30,000 acres of land 40+ years in advance of ever needing it...

 

[ssawka]

Pick from the following theories:

1 - New fiscal year for Disney so they have money to buy back really good deals

2 - People want to buy OKW direct so will go on the waiting list cause they don't like the other options that are currently available direct

3 - Disney needs more people to have extended contracts at OKW

4 - Disney can't let prices at OKW go through for $40 resale and still sell AKV direct for $120-$130

Anyone got any others?

I've already got points at OKW and while I like the resort, I would never pay more to get points anywhere just on the hope that it passes ROFR.

If you really want to have the greatest chance of passing ROFR buy SSR or AKV resale. My personal preference is SSR because you'll get a better price per point and the MF are cheaper.

Here's one: New Management, New Rules!

Maybe we will start to see DVD ROFR more often. Right now DVD is still losing money on resales, so their options are to further restrict resale contracts, or ROFR contracts and make a profit off the margin. I think the PP is correct, with BLT selling out DVD lacks inventory at WDW. ROFR will increase revenue until VGF is built.

 

[wdrl]

I think the PP is correct, with BLT selling out DVD lacks inventory at WDW. ROFR will increase revenue until VGF is built.

The data doesn't support this assumption. Despite no longer actively marketing BLT or SSR, Disney Vacation Development sold more points in May 2012 than in any month since at least July 2010, when I started tracking sales. DVD sold an average of 205,629 points a month in calendar year 2011. So far in 2012, DVD's monthly sales are averaging 226,094 points a month. So to say that DVD currently "lacks inventory" is inconsistent with the facts.

By the way, since March 1, 2010, DVD has sold 147,193 OKW points, an average of 5,451 points a month. That might sound like a lot for a "sold out" resort, but it represents only 1.917% of OKW's total points. In addition, a large number of those points were sold in 2010 when DVD priced OKW at $90 a point and marketed it as a low cost alternative to BLT and AKV (see DVCNews thread for more details).

I see DVD's ability to extend the life of OKW's deeds from 2042 to 2057 as merely a byproduct of a much more simple and straightforward objective: Being able to reacquire points for under $50 and to resell them for $100 within a matter of days. If OKW resale transactions stayed above $50 a point, I think you'd see the number of ROFRed deeds drop to zero.

 

[DougEMG]

I was thinking that they were only ROFR'd OKW contracts that were at $50/point or less as well until I saw them ROFR on at $55/point.

 

[Sammie]

Confidentiality agreements are commonplace at a publicly-traded company like TWDC. As the old saying goes, those talk don't know and those who know aren't talking

. Besides DVC Right of First Refusal policies don't exactly make for exciting water cooler conversation among coworkers.

That said, I suspect it relates back to the failed OKW extension attempt a few years ago. DVC is sitting on a huge obligation which kicks-in come 2042 thanks to the millions of points which were not extended. Gradual ROFR will allow DVC to rid itself of many of those points without creating an immediate financial burden.

Overall ROFR is not a money-making business for DVC. But the margins are a bit higher when they can buy-back a 29 year contract and re-sell a 46 year contract.

Well said,

 

[Orsino]

Wow, if it really is about extending the contracts, then they're planning WAY ahead. Contracts don't expire for 30 more years.

I think advance planning is exactly it. While OKW doesn't expire for 30 more years, early DVC planning was myopic. Not only does OKW expire in 2042, but also VB, HHI, BWV, BCV, and VWL.

Starting with SSR Disney realized that having all those properties turn over AT THE SAME TIME was a bad idea. My wild speculation is that removing OKW points that expire in 2042 and replacing them with points that expire in 2057 is merely the first step in trying to manage the great turnover of 2042 that DVC will face.