Where do you think DVC resale prices are headed?

[ELMC]

Where do you think DVC resale prices are headed?

 

[MICKIMINI]

here is the longer term trend from this reseller
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Thanks for posting. It is helpful to see the trends however it is not the entire story IMHO. For instance, I paid $59 pp for two VBR's in 2018 and sold for $79 exactly one year later and just paid capital gains tax on the profit. It was a bundle so I only paid one closing. I also paid $98 pp for two OKW last year (also a bundle one closing) but it had triple points and I was able to rent many points (paid taxes on that too) which offset by $15 pp and then we also had a ton of points for our personal use. I also note that I negotiated for 0 MF's on one year and 50% on another year's worth which likely offset taxes I paid. With the rental market in question, I don't think I would gamble at this point, though I will be looking for a couple small contracts this fall. It is still the bottom line that matters. Be well.

 

[Starport Seven-Five]

Disney is not going to buy back contracts when they aren't selling any points and when they have next to zero revenue coming in. Disney will hold the line on expenses that are non essential to continue functioning.

Parks is ~40% of DIS revenue fwiw.

I think we are headed for something that will be worse than the Great Recession. Illinois saw 64,000 unemployment claims in three days starting on March 16. Ohio saw 140,000 in the week ending yesterday. The WSJ has a panel of economists estimating about 875,000 claims this week nationwide. Goldman Sachs thinks it could top 2,000,000 in the week ending next Thursday. It took more than three months for that to happen during the Great Recession.

Some of those jobs will come back, but some of them won't---at least, not right away. The underlying businesses will have failed in the meantime.

The Great Recession didn't have the entire service industry shut down via government order. I wouldn't be surprised to see those numbers fall off in a week or two.

 

[Brianstl]

Parks is ~40% of DIS revenue fwiw.

View attachment 482451

The Great Recession didn't have the entire service industry shut down via government order. I wouldn't be surprised to see those numbers fall off in a week or two.

Disney doesn’t have revenue coming in from other streams either. Theaters are closed and ad rates have tanked. They have no programming for ESPN and ESPN+. That is why they had to sell $6 billion in bonds.

 

[sethschroeder]

Much of the modeling I used was from the great recession (figuring this round would be 40 to 60% as bad from an economic perspective). As part of this I am expecting a dramatic reduction in ROFR in late spring and summer, except where they are selling new points and need to support the market.

Did it drop that fast though?

I think we are headed for something that will be worse than the Great Recession. Illinois saw 64,000 unemployment claims in three days starting on March 16. Ohio saw 140,000 in the week ending yesterday. The WSJ has a panel of economists estimating about 875,000 claims this week nationwide. Goldman Sachs thinks it could top 2,000,000 in the week ending next Thursday. It took more than three months for that to happen during the Great Recession.

Some of those jobs will come back, but some of them won't---at least, not right away. The underlying businesses will have failed in the meantime.

Much of that is forced closures though remeber.

At this point at least to my knowledge businesses are not going bankrupt left and right and being proactive. Instead they are cutting costs to survive the next 6-18 months.

Truly hoping these businesses can make it through to the other side.

 

[ELMC]

At this point at least to my knowledge businesses are not going bankrupt left and right and being proactive. Instead they are cutting costs to survive the next 6-18 months.

Truly hoping these businesses can make it through to the other side.

Larger businesses, yes. Companies like Uber and such that have six billion in cash to ride this out. Small businesses, however, don't, and they're going to start dropping like flies in another few weeks.

 

[sethschroeder]

Small businesses, however, don't, and they're going to start dropping like flies in another few weeks.

Hence why they are dropping employees and hopefully the building owners understand throwing out these small businesses will only hurt them long term since one is going to be replacing them to pay the lease anyways.

I was simply pointing out that the unemployment numbers will be misleading as this is unprecedented.

 

[bookwormde]

Did it drop that fast though?

It was not this fast but went significantly deeper but last time there was no interruption of the ability to book or loss of points. On the other side there was much more risk of primary residence foreclosure

My ,model assumed a 2.5 to 4 month closure

 

[Brian Noble]

The Great Recession didn't have the entire service industry shut down via government order.

Truly hoping these businesses can make it through to the other side.

Granted. But, even after the mandated closures are lifted (and I don't think that happens before mid-April at the earliest) many households may well still curtail a lot of their out-of-home consumption. So, some of these companies will reopen. But, some won't---particularly those with high debt service loads that were dependent on free cash flow at relatively low margins.

More importantly, there is essentially a global pause of in-person business. That's going to have real impacts. Some of it will create knock-on increases in demand once things let up, but some of it will also just stop for a while before coming back.

I was seeing signs of a slowdown even before all of this. For example, this year graduate school applications at my institution and many others were up across a wide variety of fields. That's not a demographic shift--there weren't suddenly more college graduates. Instead, graduate programs are often counter-cyclical; as the job market cools, applications go up, and vice versa.

I'm admittedly a contrarian, and so I've thought we were due for a pause or drop in growth for a while now. But, this is a pretty big shock to the system. If we were due, that bill is coming. Now. I definitely hope I am wrong about this, but time will tell.

 

[SherylLC]

View attachment 482448

succinct, and to the point. I like it.

 

[chalee94]

With all due respect, I've been in this game since 1996. DVC does hold the line and will never let prices go to zero. I've been through many downturns as an owner, 9/11, 2008 and watched prices drop. If DVC sees a sales price that is too low and "low" is whatever their definition is at the time, yes, they will ROFR a contract. DVC has value and it is in their best interest to protect the Disney brand through ROFR. Protecting the Disney brand is essential to continue functioning into "infinity and beyond" IMHO. Be well.

With all due respect, I have also been in this game that long also. Disney simply doesn't have that much cash or that much control. OKW passed ROFR at $25 in the last recession (and resorts were not closed down and resale purchasers were still treated as equals to direct purchasers). For 18 months or so during the Great Recession, Disney only ROFRed a handful of BCV contracts.

ROFR is primarily a tool to annoy resale purchasers into paying direct pricing. It also allows Disney to pick up great deals when their economic models greenlight the purchase. But I keep telling you guys that you are confusing correlation with causation - supply and demand are central and ROFR is secondary. When demand collapses, Disney will drop out as valuations are uncertain. If you think DVC will "hold the line" and "protect the brand" by continuing to ROFR contracts that they are uncertain of being able to resell (and may have issues even renting), I think you are being wildly optimistic.

 

[ELMC]

ROFR is primarily a tool to annoy resale purchasers into paying direct pricing. It also allows Disney to pick up great deals when their economic models greenlight the purchase. But I keep telling you guys that you are confusing correlation with causation - supply and demand are central and ROFR is secondary. When demand collapses, Disney will drop out as valuations are uncertain. If you think DVC will "hold the line" and "protect the brand" by continuing to ROFR contracts that they are uncertain of being able to resell (and may have issues even renting), I think you are being wildly optimistic.

Agreed. Taking capital and tying it up in buybacks of DVC points that they may not be able to move is a terrible use of cash, especially given the other pressures already on Disney.

 

[Brianstl]

Agreed. Taking capital and tying it up in buybacks of DVC points that they may not be able to move is a terrible use of cash, especially given the other pressures already on Disney.

You don’t go out and borrow $6 billion to buyback DVC contracts. You do that to survive this crisis.

 

[Brian Noble]

Even if you wanted to, it wouldn't be prudent until prices drop much farther. Rule of thumb in the timeshare industry is that marketing is 40-50% of the total cost of the product. Actual construction/acquisition is closer to 20-30%. In other words, ROFR'ing resale deeds at 50% of the "full price" is still more expensive than just building a brand new resort.

 

[jarestel]

When there are more contracts on the market than buyers who want those contracts, prices will definitely drop. If unemployment problems stretch out longer than a month or two, people will be looking for alternate sources of income and DVC contracts will be among the first assets to go. ROFR won't protect contracts from decreasing in value, but it would probably keep them from becoming worthless.

 

[WeatherLights]

While it doesn't help anything for me to speculate, I'm doing it anyways. DVC is a completely useless product right now and into the foreseeable future. Resale contracts are likely to start free-falling in value in the next few days or weeks. Will likely end up nearly worthless. Even if the economy is able to partially recover this year (that's optimistic in my opinion) the cost for on-site rooms will likely be significantly reduced so the value of DVC will be reduced accordingly. I'm not a DVC owner and might not fully understand how it works, but I don't see a scenario where it retains value.

 

[TraderSamWDW]

With all due respect, I've been in this game since 1996. DVC does hold the line and will never let prices go to zero. I've been through many downturns as an owner, 9/11, 2008 and watched prices drop. If DVC sees a sales price that is too low and "low" is whatever their definition is at the time, yes, they will ROFR a contract. DVC has value and it is in their best interest to protect the Disney brand through ROFR. Protecting the Disney brand is essential to continue functioning into "infinity and beyond" IMHO. Be well.

Disney hasn't had their parks closed to 3 consecutive days in 25 years. Let alone 3 weeks...and they will probably be closed for at least a total of 2 months.. They aren't going to let points go for 20$ per, but rofr activity will diminish. Disney hasn't had to worry about bankruptcy in 25 years. They have a lot of debt right now (they just spent 70 billion). The "gane" hasn't seen Disney's operating income drop like this in 25 years. You have a lot of experience, but no one has seen anything like this. Hopefully it passes quickly, but even then, we don't know what the financial aftermath of this will be.

I honestly hope you are right, and that ROFR doesn't change much because that will mean we are past this with minimal damage.

 

[TraderSamWDW]

Disney doesn’t have revenue coming in from other streams either. Theaters are closed and ad rates have tanked. They have no programming for ESPN and ESPN+. That is why they had to sell $6 billion in bonds.

Not to mention they (purposely) cannabilized their own business units, knowing it would hurt short term income, to do Disney plus. They had to rework compensation models because various business units p&ls were going to get killed. .

Video is going to lose hundreds of millions in income from parting ways with Netflix. In the short term that is.

This is straight from "Ride of a lifetime", not speculation.

 

[RaymOOOnd]

I disagree.
Disney will be fine.
And to excitedly spend $20,000 rather than $30,000 on a timeshare while the market is crashing around oneself would be... Not the best use of one's money.

Dis current stock price of around $85 will look unbelievably low in 3-5yrs

 

[TraderSamWDW]

I disagree.
Disney will be fine.
And to excitedly spend $20,000 rather than $30,000 on a timeshare while the market is crashing around oneself would be... Not the best use of one's money.

Dis current stock price of around $85 will look unbelievably low in 3-5yrs

They will probably be fine. But wall street doesn't want fine in 3 to 5 years. They want fine in 3 months.

Why do u think it would not be there best use of one's money, but would be the best use of Disney's money.? Disney had debt to service. Stock holders are going to miss their dividends.

Disney exercising ROFR is exactly that, disney buying a time share.

I do think at 85 a share it is a good long term investment.