Why Would Disney Ever Stop ROFR?

[DVCERSINCEDAY1]

I have seen the suggestion that they might several times recently. That doesn't make any sense to me. It seems it could have so many negative effects, e.g., on Disney's rental rates, on owner morale, on selling new properties, etc. Even if they don't do an extension at a particular resort, e.g., BCV, how could the positives of stopping ROFR ever outweigh the negatives. Perhaps I am missing something key here.

 

[bookwormde]

I would say that there is almost no chance while they are still selling new properties. As long as they can resell them at a profit there is no reason to. If the market completely dissolved like it has for many other timeshares due to the situation that you can rent a week for the same or less than the maintenance fees then there is a slim possibility. This would take many years of the maximum 15% increase in maintenance fees.


bookwormde

 

[OKW Lover]

Disney will stop ROFR when its beneficial for them to do so. Think about what will happen as we approach 2042. The value of the resorts that will be expiring then has got to be pretty low. I'd think that Disney wouldn't bother exercising ROFR at any price when it will wind up getting them for free in just a few more years.

 

[Dean]

I have seen the suggestion that they might several times recently. That doesn't make any sense to me. It seems it could have so many negative effects, e.g., on Disney's rental rates, on owner morale, on selling new properties, etc. Even if they don't do an extension at a particular resort, e.g., BCV, how could the positives of stopping ROFR ever outweigh the negatives. Perhaps I am missing something key here.

I doubt DVC cares much about the morale of anyone trying to sell. ROFR is there simply to drive new buyers to retail due to the fact they can't get a fire sale, it creates the uncertainty and risk that any contract will be bought under ROFR and the price difference is small enough to make the retail purchase not out of line with the resale. And DVC generally doesn't make enough money on the ROFR itself to justify the program in addition to actually competing with sales from the new property at the time.

 

[JimC]

ROFR is a flexible tool for DVC. They can adjust the price based on market conditions, including their need for points to meet Member demand at sold out resorts, pricing support for resorts not yet sold out and the remaining years on a contract.

The OKW extension is another tool that affects how ROFR will be used.

It is designed for DVC's benefit, but Members have enjoyed a better resale market value because of it.

 

[Ka-chow!]

Like JimC said, it will depend on market demand. If fewer people buy and more people need to sell, the market price will drop (or rise if conditions are reversed). Their ROFR price will depend solely on DVC's ability to resell those points for a profit at market price.

Disney's financial responsibilities are first and foremost to its stock and bond holders, not to DVC members.

 

[DVCERSINCEDAY1]

I was asking "why" from Disney's perspective...of it being right for Disney. I can't see why it would ever stop being right from Disney's perspective. Regarding seller morale, I am not referring to owners trying to sell, I am referring to all owners, present and potential. Disney's ROFR keeps market prices stable. This is an important consideration when making a purchase decision. And, any cessation of ROFR would likely have a negative effect on current owners' morale and word of mouth (e.g., on this board) and on future sales of new properties. Certainly, there may be cons but I believe that the pros of ROFR will always outweigh these for Disney. I believe that it is a key aspect of protecting the DVC brand. And, it just happens to help DVC owners well.

 

[chalee94]

Disney's ROFR keeps market prices stable.

i think you've got it backwards. supply and demand set market prices, not disney. if demand contracts, the real market price goes down and disney can't sell the points they have ROFRed without a lot of discounting...why should they continue to ROFR pts they can't resell at a profit?

 

[Brian Noble]

That's generally right, though there are a few sharp corners.

First, the timeshare resale market generally is very inefficient. DVC resales are better understood than most, but still---an average person taking the tour probably has no clue that one could get points from someone other than Disney. This tends to work agains a seller, and is why ROFR exists for many developers---the resale prices are lower than they "sould be" in a more efficient market with widespread information.

Second, Disney is unlikely to stop developing new DVC resorts---DVC is a big part of the profitability in Parks & Resorts, and they can't just stop without taking a big hit in the P&L sheet (and, ultimately, shareholder value). Disney is superb at marketing---witness the rates they get for what are rather ordinary resort rooms on property, and the number of people who would rather not go at all than stay offsite. This will tend to help keep the sales machine running, which will tend to work in a seller's favor.

 

[DVCERSINCEDAY1]

I don't expect that there's much profit in ROFR at all. Instead, I believe this is a strateigc tool that protects the value of the Disney (DVC) brand in the marketplace relative to other timeshares and other hotels and it continues to ensure high prices for new products and good owner word-of-mouth. It is naive to think that ROFR would stop if they stopped making profit on these resales. Does anyone know (for sure) if this if a profitable business unit in Disney operations. I bet the program is lucky to break even.

 

[starbox]

I'd guess they'd stop it when resorts start to near the end of their contracts. At some point the price of old DVCs will flat line. Why would Disney pay $$$ to ROFR something they can't really resell and will be getting back at no cost?

 

[DVCERSINCEDAY1]

I believe that Disney will do something (perhaps surprising) and that scenario will never occur. Disney is one of the savviest marketers out there.

 

[Brian Noble]

From where I sit, DVCERS, your glasses have a mighty strong rose tint to them.

 

[carlbarry]

Timeshares that do NOT have ROFR re-sell for 10% of what the developer is asking. That is the key reason Disney was brilliant to use ROFR: it artificially props up he price of timeshares. I'm sure Disney did not want to be in the situation of "suckering" people to buy timeshares from them that are available elsewhere for 1/10 the price. This definitely would not fit their corporate image.

 

[DVCERSINCEDAY1]

Where are you getting your information about timeshare resale values and Disney strategy?

 

[carlbarry]

Where are you getting your information about timeshare resale values and Disney strategy?

Disney strategy is just conjecture. But as far as timeshare resale values, just go on Ebay at look at what non-ROFR timeshares are selling for. I bought a "$9,000" timeshare (Wyndham Star Island, 49,000 annual points, $23 per month maintenance) for $100.

 

[Ka-chow!]

From where I sit, DVCERS, your glasses have a mighty strong rose tint to them.

Sound like you are the smart one around here.
Would you say there the DVCers have an "inertia bias" at play, professor?

 

[DVCERSINCEDAY1]

I think there are many more reasons that ROFR or non-ROFR that some timeshares are dirt cheap and Disney's resale values continue to rise. Key here is the value to the consumer of what they are buying. You couldn't give me most timeshares today...stuck with the maintenance fees indefinitely. Meanwhile, I am happy to buy BWV, VWL, and BCV on the resale market at current prices.

 

[Brian Noble]

I'm not a naysayer, by any stretch.

But, I do think it is dangerous to think that the ROFR floor will never drop significantly---it has to, because DVC is an RTU. The only question is when.

I also think it is a bit optimistic to think that Disney cares as much about current owners' resale values as they might about other things related to the DVC program. Like any timeshare program, the coin of the realm is developer sales---anything else is secondary. If preserving developer sales flow also happens to keep owners' resale values high, then that's fine. But, it's an effect, not a cause.

 

[DVCERSINCEDAY1]

I totally agree with the cause-effect statement. Disney, in pursuit of its own objectives, maintains the value of DVC ownership for current and future owners.