Why no rental inflation?

[trasor]

I have friends who want to go to Disney next May and are deciding between staying at a moderate resort or renting points. My MIL has points to rent and since they're friends she said she would rent them very cheaply. I told her I would figure out what a moderate resort would cost and she should charge them that rate for a DVC studio. I figured that would be a pretty good deal.

Image my surprise when I crunched the numbers. I used November as a stay date because the computer wouldn't let me go all the way to May 2009. To stay at a moderate resort(Caribbean Beach, standard view, 7 nights) comes to $1,299.00, with tax. Assuming a rental of $10 a point, of which there are tons available, I could stay at an AKV studio for as low as $740.00 (value--least # of points for any DVC studio) to $1,260.00 (concierge--most points for any DVC studio).

To me, there is something seriously wrong if I can rent a concierge studio for less than a moderate resort room. Why haven't rental rates increased proportionately with resort rates? Rental rates should be twice what they are. Rack rates for a DVC studio in Nov. start at $315X7 nights=$2,480.00, with tax. Rental at $20x74 points =$1,480. $20 a point is a huge bargain.

Has DVC placed a cap on what we can charge for a rental? Why are we, as DVC owners, drastically undervaluing our property?

 

[Blahnde]

The real answer is because instead of renting a complete reservation with a verifiable comparison (CRO), we are stuck with this price per point system. It's a historical, DISboards started standard ... and until owners smarten up, the average price will stay at $10 per point. No matter how much a deal $15-20 per point is for most reservations when compared to CRO prices, no one will pay that when there are 50 other owners on the board only asking $10 per point.

I have done many specific comparisons over the last few years, and at $10 per point the savings has ALWAYS been over 25% off (and as much as 65% off!) CRO prices for the EXACT same reservations. I have seen a few more $11+ per point offers in the last few months, but unless the points are "distressed" $10 is still the norm. I wish more owners would do these comparisons for themselves and realize they are completely giving away their points at $10 per point.

Blahnde

 

[kimberh]

I wonder what the owners will do when dues hit $10.00 per point? The time will come. Some poor DVC owner will still for the sake of easy math give his points away. Dues go up every year, yet there are owners still giving the bank away. Go figure.

 

[tjkraz]

The real answer is because instead of renting a complete reservation with a verifiable comparison (CRO), we are stuck with this price per point system. It's a historical, DISboards started standard ...

Actually DVC set the price.

DVC used to have a sales promotion called Magical Beginnings wherein they would allow members to "sell back" their first year's points in return for a discount off of the purchase price. The most prevalent buy-back prices were $8 per point and later $10 per point. THAT is how the $10 figure was most recently attached to rentals.

The biggest hurdle renting can never overcome is the reality that most transactions involve sending a total stranger hundreds or thousands of dollars for the promise of a hotel room. Every single person that has ever rented has had that moment where they wonder "what will I do if I get to the front desk and they don't have a reservation in my name???"

Other noteworthy differences:

1. Cancellation policy. Most rental transactions have no cancellation policy--or if they do allow people to cancel, it's contingent upon finding other dates or someone else to assume the reservation. CRO reservations vary but usually have 7-30 days to cancel and get a full refund.

Booking thru CRO is like buying a refundable airline ticket, a ticket that always costs more. Renting is like buying a nonrefundable ticket which is always cheaper.

2. Rentals typically require a large up-front payment with the remainder due well before arrival at the resort. Those terms are understandable given the manner in which the DVC member must commit his points. However, with CRO you can get by with a deposit equal to one night and the remainder due upon arrival.

3. Comparing to rack rates is dicey because who really pays rack rates these days? Right now Disney is giving away hundreds of dollars worth of free food to guests booking thru CRO.

4. Daily housekeeping for CRO reservations.

All of these factors will keep renting from truly going mainstream. And unless that ever happens (doubtful), a large portion of the rental market will always be people who just want to get rid of a few points as quickly and easily as possible. Many of those people bought in at prices a fraction of what they are today, and thus don't feel the extreme pressure to get a dollar or two more per point.

Supply and demand can't be helping things right now either. If the resale market is any indication, a lower percentage of DVC owners are using their points right now. Those who would rather not sell may be trying to rent their points and weather the storm. Meanwhile the number of non-members looking for rentals may be inching downward slowly. Increased supply combined with lower demand makes for lower prices.

Dues are still a long way from hitting $10 per point. IMO, they may have to approach $7-8 per point before people will really use it as a rallying point for raising their asking prices.

I usually cringe when I see people talking about buying more points than they need in order to rent a few. When it comes to renting, it's been a buyer's market for a loooooong time now.

 

[brp]

1. Cancellation policy. Most rental transactions have no cancellation policy--or if they do allow people to cancel, it's contingent upon finding other dates or someone else to assume the reservation. CRO reservations vary but usually have 7-30 days to cancel and get a full refund.

Booking thru CRO is like buying a refundable airline ticket, a ticket that always costs more. Renting is like buying a nonrefundable ticket which is always cheaper.

I would posit that the rentals of points-based rooms more closely matches the non-refundable rates that some (most? all?) hotel chains offer. I can get a room with Hilton or Starwood (say) for $269 a night. I can get the same room for $229 a night if I book a non-refundable rate. They charge me up front and it's non-refundable. We're doing that next weekend for Taste of Sonoma in northern California wine country.

One difference is that I trust Hilton with a non-refundable reservation, but don't have as much reason to trust Jane Points-Owner. So, the rates for points owners have to represent even more of a discount than the non-refundable hotel chains.

Cheers.

 

[brp]

To me, there is something seriously wrong if I can rent a concierge studio for less than a moderate resort room. Why haven't rental rates increased proportionately with resort rates? Rental rates should be twice what they are. Rack rates for a DVC studio in Nov. start at $315X7 nights=$2,480.00, with tax. Rental at $20x74 points =$1,480. $20 a point is a huge bargain.

Do folks ever rent outside the owner or points-knowledgeable community? I would imagine that one could command a higher premium "on the outside" because folks wouldn't view it as $/point. Rather, they'd look at as $/night. And then the $15-$20/point count work out very well on a per night basis.

Cheers.

 

[Pootle]

This might be slightly off topic, but Disney also seem to be providing the tour operators with SSR and OKW cheaper than the moderates too.

This link shows that in the UK you can get SSR or OKW next year with the free DDP cheaper than CBR. What is going on?

 

[gobofraggle]

As in all things, it must be down not just to convention or 'what people usually charge' but down to supply and demand... It happens to be the case that not all DVC buyers are people who can afford the cost up front and buy the number they end up using every year.
A lot of people buy using finance and if things get tight they try to rent points to pay the dues... or they don't use all of their points and rent them instead of them being lost... or, as someone mentioned above, some people buy them intending to rent (which sounds slightly wacky to me, but there you go)...

This all leads to there being plenty of points available to rent, for anyone who wants to rent them. If 'spare points' were a rare occurrence, the points-buying rate to get into a DVC resort for non-DVC people would surely be higher.

 

[drakethib]

I will get flamed for this but if you don't like what you are getting rental wise per point, then don't rent them.

Yes renters get a great value compared to cash, but all anyone has to do to stop this is not rent them out to people.

This same argument has been on the DIS since I became a member as well as people griping because other have rented their points out for cheap. I have rented mine to someone for $5 per point before, but we now are usually looking to have some transferred as we always seem to run out these days.

Heck, If the economy keeps going like it is, it may drop below $10 as a "standard" if we are not already there.

 

[crisi]

I would posit that the rentals of points-based rooms more closely matches the non-refundable rates that some (most? all?) hotel chains offer. I can get a room with Hilton or Starwood (say) for $269 a night. I can get the same room for $229 a night if I book a non-refundable rate. They charge me up front and it's non-refundable. We're doing that next weekend for Taste of Sonoma in northern California wine country.

One difference is that I trust Hilton with a non-refundable reservation, but don't have as much reason to trust Jane Points-Owner. So, the rates for points owners have to represent even more of a discount than the non-refundable hotel chains.

Cheers.

What anyone other than CRO does, however, doesn't make a difference in the world of "which onsite hotel option should I choose." People comparing CRO to DVC have already made the onsite decision - or they'd go to Skyaction and get an offsite timeshare or home for $200 for the entire week. Poor cancellation policy, but if we start throwing offsite options in, then you are competing with a lot of additional options - some of them even more affordable than DVC points.

 

[crisi]

Tim addressed reasons why renters might not pay more. But there is an owner side as well.

There are certainly some owners that would like to get as much as possible for their points. But they have to compete with.

People who cancelled a trip, have 127 points that they can't bank and can't use before the end of their use year that are going to go to waste. All they want is to cover dues and get a few bucks for their bother - quickly.

People who just wants to cover their cruise - that's about $10 a point.

Peopl who bought OKW 15 years ago for $53 a point and think $10 a point is plenty of money for something that at this point has more than paid for itself.

Being viewed as a commodity, its easy to see why - when someone is offering up distressed points for $6, renters - particularly uninformed ones - think $12 is too much. Or when, if you are patient, someone will have points for $10 or $11 instead of $15.

 

[twinklebug]

Actually DVC set the price.

DVC used to have a sales promotion called Magical Beginnings wherein they would allow members to "sell back" their first year's points in return for a discount off of the purchase price. The most prevalent buy-back prices were $8 per point and later $10 per point. THAT is how the $10 figure was most recently attached to rentals.

The biggest hurdle renting can never overcome is the reality that most transactions involve sending a total stranger hundreds or thousands of dollars for the promise of a hotel room. Every single person that has ever rented has had that moment where they wonder "what will I do if I get to the front desk and they don't have a reservation in my name???"

Other noteworthy differences:

1. Cancellation policy. Most rental transactions have no cancellation policy--or if they do allow people to cancel, it's contingent upon finding other dates or someone else to assume the reservation. CRO reservations vary but usually have 7-30 days to cancel and get a full refund.

Booking thru CRO is like buying a refundable airline ticket, a ticket that always costs more. Renting is like buying a nonrefundable ticket which is always cheaper.

2. Rentals typically require a large up-front payment with the remainder due well before arrival at the resort. Those terms are understandable given the manner in which the DVC member must commit his points. However, with CRO you can get by with a deposit equal to one night and the remainder due upon arrival.

3. Comparing to rack rates is dicey because who really pays rack rates these days? Right now Disney is giving away hundreds of dollars worth of free food to guests booking thru CRO.

4. Daily housekeeping for CRO reservations.

All of these factors will keep renting from truly going mainstream. And unless that ever happens (doubtful), a large portion of the rental market will always be people who just want to get rid of a few points as quickly and easily as possible. Many of those people bought in at prices a fraction of what they are today, and thus don't feel the extreme pressure to get a dollar or two more per point.

Supply and demand can't be helping things right now either. If the resale market is any indication, a lower percentage of DVC owners are using their points right now. Those who would rather not sell may be trying to rent their points and weather the storm. Meanwhile the number of non-members looking for rentals may be inching downward slowly. Increased supply combined with lower demand makes for lower prices.

Dues are still a long way from hitting $10 per point. IMO, they may have to approach $7-8 per point before people will really use it as a rallying point for raising their asking prices.

I usually cringe when I see people talking about buying more points than they need in order to rent a few. When it comes to renting, it's been a buyer's market for a loooooong time now.

Well thought out post tjkraz

I'm buying into AKV this coming weekend for many of the reasons noted above as to why renting is riskier than going direct through Disney. If I thought I could rent out my extra points at $20 each right now I'd buy 2000 points Heck, I'd go for 10000 and just retire on the income.

 

[littlewilson25]

Just simple supply and demand....if the current rental market shifted slightly to having more people looking to rent vs. owners needing to rent at xxx dollars, you'd see the price per point go up.

The posts above speak pretty well to the reasons why there aren't more renters willing to pay more than $10pp. It's just not worth it for many, considering the tenuous personal rental agreement, money transfer, inability to change/cancel, and often limited choice of location.

 

[littlewilson25]

I have friends who want to go to Disney next May and are deciding between staying at a moderate resort or renting points. My MIL has points to rent and since they're friends she said she would rent them very cheaply. I told her I would figure out what a moderate resort would cost and she should charge them that rate for a DVC studio. I figured that would be a pretty good deal.

Image my surprise when I crunched the numbers. I used November as a stay date because the computer wouldn't let me go all the way to May 2009. To stay at a moderate resort(Caribbean Beach, standard view, 7 nights) comes to $1,299.00, with tax. Assuming a rental of $10 a point, of which there are tons available, I could stay at an AKV studio for as low as $740.00 (value--least # of points for any DVC studio) to $1,260.00 (concierge--most points for any DVC studio).

To me, there is something seriously wrong if I can rent a concierge studio for less than a moderate resort room. Why haven't rental rates increased proportionately with resort rates? Rental rates should be twice what they are. Rack rates for a DVC studio in Nov. start at $315X7 nights=$2,480.00, with tax. Rental at $20x74 points =$1,480. $20 a point is a huge bargain.

Has DVC placed a cap on what we can charge for a rental? Why are we, as DVC owners, drastically undervaluing our property?

I wouldn't see it as undervaluing at all. If you want more for your points, charge more, but you may be going higher than what the market will bear. Rented points are only worth as much as someone will pay for them. The reason that so many other owners are charging $10 is because this seems to be the price at which they are able to find renters.

You do sometimes see "niche" points, like those at the prime locations offered with ample time to book at the 11-month window, renting for a significantly higher per-point value, because there is more value in the offering.

 

[CarolMN]

Just a couple of random additions

1. You won't be able to rent a concierge studio at AKV at all unless you are very, very lucky. There are only five 2 bedroom lock off units in that category. If all were separated into a studio and a 1 bedroom, that would be a MAX of 10 rooms available. SInce at least one unit is usually rented as a 2 b edroom, there are often less than 10 rooms available.

Concierge units are very, very popular and are usually booked within a few minutes of the 11 month window opening. Those who want to rent points for one of those units would have to find an AKV owner well ahead of the window opening who was willng and able to call at 9 am Eastern on. Due to the new policy of reserving from arrival, the renter would also need luck. IMHO, a renter is unlikely to find an AKV owner who is willing to rent a concierge unit for $10 / point. Too much effort for little return. The same logic applies to the more popular resorts and unit types during more popular seasons. DVC popularity is not always the same as busy times for the parks.

That said, you may have used a bad example, but your question is a reasonable one.

2. There are lots of members willing to rent for $10 per point. There are also lots and lots of members who rent for much higher prices. Many of them do not use the DIS to find renters. Those that use the DIS and rent for higher prices ($12-$16 +) simply avoid the "bargain seekers" and those who seem to think DVC owners provide the same services as Travel Agents.

FWIW, almost all of the problems we hear about with renting come from inexperienced owners renting to first time renters. (There are many new owners out there right now trying to rent developer points. Those are especially tricky to use for renting, IMHO). If an owner does not understand how DVC really works, the chances of a problem or misunderstanding are significantly higher. JMHO. YMMV.

 

[littlewilson25]

This is such an interesting thread to me...both because the posts are well-reasoned and expressed, and because I am soon to go on my first DVC trip with rented points, yet have concluded that if we decide to make it a regular trip that we will absolutely become owners instead of renting in the future.

As a renter, I am simply unable to get the accomodations I would like, and am uneasy about the total lack of ownership/confirmation of the reservation. As an owner, I would ensure the ability to book the location of my choice, and to change/cancel reservations if necessary.

 

[Blahnde]

Do folks ever rent outside the owner or points-knowledgeable community? I would imagine that one could command a higher premium "on the outside" because folks wouldn't view it as $/point. Rather, they'd look at as $/night. And then the $15-$20/point count work out very well on a per night basis.

Cheers.

One thing I can say is that eBay is not the answer!

If you look at eBay you will see that there are people who try to do this very thing, but it is very costly and generally unsuccessful to do so. Not only do you have to pay all the eBay fees, but in order to sell real estate (even just a reservation!) you have to prove to one of eBay's partner companies, Square Trade, that you own the property. Oh, and you have to pay Square Trade for the priviledge of proving your ownership ... over and over and over again! It is really prohibitive!

While there may be other ways to rent "outside" the DVC obsessed community, it is not eBay ... and I do not know what else it would be.

Blahnde

 

[DeeCee735]

I wonder what the owners will do when dues hit $10.00 per point? The time will come. Some poor DVC owner will still for the sake of easy math give his points away. Dues go up every year, yet there are owners still giving the bank away. Go figure.

Sell

 

[DeeCee735]

This is such an interesting thread to me...both because the posts are well-reasoned and expressed, and because I am soon to go on my first DVC trip with rented points, yet have concluded that if we decide to make it a regular trip that we will absolutely become owners instead of renting in the future.

As a renter, I am simply unable to get the accomodations I would like, and am uneasy about the total lack of ownership/confirmation of the reservation. As an owner, I would ensure the ability to book the location of my choice, and to change/cancel reservations if necessary.

I only rented once, but I think if I were to do it again it would be a complete reservation I'd list (that's what I did the first time as a matter of fact), and I'd list it at higher than $10 per point, that's what it basically went for the first time I rented, I'd be nuts to rent something 5, 8 or 10 years down the road for the same price. Whether or not I'd be successful would remain to be seen, nothing wrong with trying to get a more fair price.....

 

[simmons_m]

We rented points for our first DVC visit, 2 months later we decided to purchase points for future vacations. In the long run we like the piece of mind of owning, and the control. As for the price per point from a rental perspective. I guess supply and demand will continue to drive this discussion and the outcome.
We are very happy that we were able to rent, and happier that we were able to purchase.
In the future, if we need to rent extra points, I'll ping both the seller of our current contract, and the renters we used previously, as I would prefer to do business with someone we have had success with. Also, I'd pay a premium to do so.
Mike