Where does the CRO rental money go?

[Mississippian]

Could someone explain to me where the CRO rental money goes? I'm sure this has been asked before, and feel free to refer me to a link. The search feature on this website doesn't work. The hound dog just changes color.

I know a certain number of DVC units are set aside to go into the CRO rental pool. Where does this income go? I also understand that rooms that are not rented by members go to CRO at 60 days out. Where does this income go? And if they are in the CRO pool can they still be rented by members? I've rented during the 60-day window.

Back when Disney oversold Pop Century and housed everyone in SSR, how much did they pay and where did the money go? Just because a room is empty does not mean that it is not quite expensive to lodge guests in it.

Is it possible that a resort with a lot of rental income could have lower member dues? I would assume that OKW and SSR have a relatively high number of rentals while BCV has virtually none. Is rental income shared or resort specific?

Thanks.

 

[Chuck S]

The 60 day cash rooms produce income that offsets dues, this is listed in the budgets as breakage income.

Cash rooms resulting from a member trading to non-DVC locatios is used to recoup the cost of the trade, any additional would likely be profit for Disney.

Cash rooms resulting for surplus inventory acquired through ROFR, defaults, or the retained resort ownership of Disney is money for Disney or DVD to show as profit.

 

[drusba]

Sources and where it goes:

1. Disney Vacation Development Co. (DVD, the lead Disney Vacation Club company)) retains a small percentage of all DVC units (2 to 4%) which it can rent and usually owns more than that at any given time while a resort is selling or through excercise of ROFR or via foreclosures. It keeps anything except it pays a certain amount to another Disney company which controls Central Reservations. Ultimately, any profits of DVD are part of the overall Disney profits.

2. DVD can rent units not reserved by members by 60 days out (called breakage income). After deducting charges by CRO for handling the rental, the amounts go to following: (a) to offset the dues per resort up to a maximum of 2 1/2% of the total estimated operating budget for a year; (b) as to amounts in excess of that 2 1/2%, they go first to the Disney Vacation Club Management Co. (a DVD subsidiary which controls Member Services along with another subsidiary called the Lake Buena Vista Trading Co.) to offset the annual costs of MS plus up to 5% above the costs of MS, and then anything above that amount goes to DVD (and ultimately to Disney in general).

3. When members trade out of DVC, the Lake Buena Vista Trading Co. (a DVD subsidiary) rents any DVC time (through CRO which gets a fee for doing so) which amounts offset anything paid to the resort to which a trade-out was made and the remainder ultimately becomes profit of Disney.

In essence, the members dues are offset only by a small portion of all rental income -- that amount of the 60 day breakage income up to 2 1/2% of the resort's annual budget. That one resort may have more rental income than another does not mean one resort will have lower dues than another.

 

[LisaS]

The search feature on this website doesn't work. The hound dog just changes color.

Have you tried searching since the new search functionality was implemented a couple of months ago? The hound dog has been retired and the new search works really well and is very fast. You can restrict a search to just the DVC boards if you know the info you are looking for is most likely to be found here.

 

[Mississippian]

I guess what I don't understand is how I've been able to book within the 60-day window if these rooms are "turned over" to CRO, and how it is that Disney is "entitled" to any of the rental money from the DVC units. It seems that all of this money ought to be turned back over to the members to reduce the dues.

I'm glad to see the hound dog is replaced. I had given up on searching.

 

[Chuck S]

I guess what I don't understand is how I've been able to book within the 60-day window if these rooms are "turned over" to CRO, and how it is that Disney is "entitled" to any of the rental money from the DVC units. It seems that all of this money ought to be turned back over to the members to reduce the dues.

I'm glad to see the hound dog is replaced. I had given up on searching.

The 60 day turn overs can be reclaimed for use by DVCers on points, if needed and not already rented. Disney is "entitled" to a portion of the proceeds received on DVC rentals by contract. In other words, they are acting as a paid rental agency, like a resale broker is paid commission on sales. Without a way to rent the units to non-DVCers, there would be no exchanges to non-DVC locations, other than RCI, and no breakage income.

As far as unsold points in new resorts, ROFR points, and default points, those are owned by DVD, and they can do with them what they wish...much like a DVC owner renting their unit on the R/T Board....it is theirs to do with as they please. Those points/rooms are not in DVC inventory.

 

[mydogdrew]

The 60 day turn overs can be reclaimed for use by DVCers on points, if needed and not already rented. Disney is "entitled" to a portion of the proceeds received on DVC rentals by contract. In other words, they are acting as a paid rental agency, like a resale broker is paid commission on sales. Without a way to rent the units to non-DVCers, there would be no exchanges to non-DVC locations, other than RCI, and no breakage income.

As far as unsold points in new resorts, ROFR points, and default points, those are owned by DVD, and they can do with them what they wish...much like a DVC owner renting their unit on the R/T Board....it is theirs to do with as they please. Those points/rooms are not in DVC inventory.

So how are annual dues handled for each category? I assume in most cases DVD pays.
Unsold points for units placed in inventory?
Defaults (assume DVD obligation once foreclosed - what about back dues?)
2% DVD retained?
trades (paid by owner)?
I'm guessing they rent "their" 2% first before any breakage comes into play.

 

[Chuck S]

So how are annual dues handled for each category? I assume in most cases DVD pays.
Unsold points for units placed in inventory?
Defaults (assume DVD obligation once foreclosed - what about back dues?)
2% DVD retained?
trades (paid by owner)?
I'm guessing they rent "their" 2% first before any breakage comes into play.

Dues for the inventory of points owned by Disney/DVD are paid by them. Trades, of course, the dues are paid by the owner of the points or the points couldn't have been traded or used for a reservation. Breakage inventory is unreserved nights on points...so if they came from members who simply let points expire by missing their banking deadline, they are paid by the owner. In theory, DVC should use all available points every year, meaning the DVC inventory of rooms should always operate at near capacity. Breakage should be a very small percentage of cash rooms. Too much breakage inventory would be a contributing factor to a point reallocation.

 

[Dean]

I guess what I don't understand is how I've been able to book within the 60-day window if these rooms are "turned over" to CRO, and how it is that Disney is "entitled" to any of the rental money from the DVC units. It seems that all of this money ought to be turned back over to the members to reduce the dues.

I'm glad to see the hound dog is replaced. I had given up on searching.

They don't turn all the rooms over PLUS DVC can anticipate breakage inventory and give it to CRO as early as 11 months out. As noted, very little of the CRO rental income gets back to the DVC owners by way off a dues offset.

 

[drusba]

So how are annual dues handled for each category? I assume in most cases DVD pays.
Unsold points for units placed in inventory?
Defaults (assume DVD obligation once foreclosed - what about back dues?)
2% DVD retained?
trades (paid by owner)?
I'm guessing they rent "their" 2% first before any breakage comes into play.

Members pay dues on the interest they own and thus when they trade out they are still the one paying the dues. As to the other categories you list, in which DVD owns the interest, DVD does not pay dues. An annual budget is prepared based on the total estimate of costs for the upcoming calendar year applicable to the entire resort. That amount is then allocated among all the units in the resort (whether sold or unsold). The amount per unit is then allocated among the owners of the unit (which includes Disney which keeps a 2% to 4% interest in each unit even after the resort is "sold out"), and your share is defined as per point. You then get charged the amount per point you own. For interests it owns DVD has two options: (a) it can pay the dues applicable to those interests, or (b) it can guarantee at the beginning of each calendar year that there will be no special assessment to members in the upcoming calendar year (with some exceptions such as due to a disaster) and therefore if costs actually exceed amounts collected from members, DVD absorbs the excess; if it takes that option, DVD does not pay dues. Since the beginning, DVD has always excercised that second option annually.

 

[Mickey'sApprentice]

This is somewhat off-topic, but I've always wondered about the defaults/foreclosures on timeshares. I really don't think this would happen with DVC, but I would really like to know.

Tell me if I'm off base here...It seems like as resorts get older, more owners would eventually quit paying the dues...which would put more pressure on the developer/management company to rent out and old dumpy property. Then as that happens...dues would be raised...and more people would quit paying...until you have an awful domino that would result in everybody defaulting.

Does this happen?? What are the consequences?

BTW, I think Disney lost my BIL's sale. I had agreed to let them use my points, and tried to reserve about 6 months out. OKW and SSR were the only resort available. However, all DVC resorts were available through CRO. They did not understand and did not like the situation at all.

 

[Dean]

This is somewhat off-topic, but I've always wondered about the defaults/foreclosures on timeshares. I really don't think this would happen with DVC, but I would really like to know.

Tell me if I'm off base here...It seems like as resorts get older, more owners would eventually quit paying the dues...which would put more pressure on the developer/management company to rent out and old dumpy property. Then as that happens...dues would be raised...and more people would quit paying...until you have an awful domino that would result in everybody defaulting.

Does this happen?? What are the consequences?

BTW, I think Disney lost my BIL's sale. I had agreed to let them use my points, and tried to reserve about 6 months out. OKW and SSR were the only resort available. However, all DVC resorts were available through CRO. They did not understand and did not like the situation at all.

There are some, have always been and likely are more now. Your BIL is not ready to buy because he does not yet understand timeshares, esp DVC, if this is an issue with him. Once he is more comfortable with the process and more knowledgeable, he can make a better decision as to what's right for him and his family, assuming he can get over his initial negative emotional reaction.

 

[Mississippian]

This is somewhat off-topic, but I've always wondered about the defaults/foreclosures on timeshares. I really don't think this would happen with DVC, but I would really like to know.

Tell me if I'm off base here...It seems like as resorts get older, more owners would eventually quit paying the dues...which would put more pressure on the developer/management company to rent out and old dumpy property. Then as that happens...dues would be raised...and more people would quit paying...until you have an awful domino that would result in everybody defaulting.

Does this happen?? What are the consequences?

I'm sure there are defaulting dues payers, but not like there are at some resorts.

At some resorts, the timeshare literally isn't worth the dues. So yes, they end up foreclosing on the dues cost. At Disney it would be foolish to not pay the dues because the timeshare is actually worth something.

There are a number of foreclosures for failure to pay. I looked last year at the Vero newspaper online and saw 10 or 12 timeshare interests being foreclosed. Since Disney doesn't offer incentives for "sold out" resorts, I do wonder how much of a backlog they are getting. In fact, I think one of the reasons they are building the treehouses at SSR is so they could continue to sell there and offer incentives, as I don't think they ever really sold out completely, and I'm sure they have gotten more than the normal share back from customers who were oversold and overpromised.

 

[Mickey'sApprentice]

When this Domino effect does happen, what is the end result?

Is the resort sold? How do the perpetual resorts end?