Will Corona Virus Force Lifting of Resale Restrictions at Riviera?

[ELMC]

I’m going to call it. DVC will lift the restrictions on Riviera at the conclusion of these lockdowns. They will return on future resorts but with the incoming recession and record high unemployment , DVC will have no choice.

This. Remember Disney is losing BILLIONS. Each day they stay closed bigger their deficit. Look at Disney Shanghi, Tokoyo, Paris, Hong Kong. What are their losses? Don’t think any have reopened ( to my knowledge). What going on 3-4 months now? I can only imagine the financial devastation if Disney stays closed for 6 months. They will take any cash they can get.

We've got ourselves a good ol' fashion showdown. I understand where you're coming from and respectfully disagree. Only one of us can be right. Oooh the suspense!

I'll say this, I've been paying close attention to Disney stock over the past few months as well as the market at large and there is definite disagreement as to the impact the closure will have on Disney. Major firms are either upgrading Disney from a "hold" to a "buy" or downgrading them and lowering share price targets. So who's to say, really? But I'll say this...Disney isn't going anywhere and they don't strike me as the type of company that panics. Worst case scenario they have to "give back" the money they made in FY19. Then they get to move forward as the moneymaking machine that they are. Not a terrible outcome and the stock price already reflects this loss so they don't have to worry about that. We shall see.

 

[BWV Dreamin]

You have to wonder.....Iger KNEW just how bad this was going to get. If this were going to be a quick recovery, do you honestly think he would have still gotten out as quick as he did? I’m sure there are other scenarios we have no idea about that is going to impact Disney. I do agree it will come back, but how long?We are not talking months.......

 

[Brian Noble]

With the economic downturn at Disney, do you think this will force Disney to lift the resales restrictions at Riviera to jump start sales?

I do not.

TWDC is more likely than the average consumer to take the long view on all of this. They've demonstrated patience in the past by being willing to e.g. close resorts, abandon construction, and offer short-term incentives to get through hard times. They know that hard times are short-lived. And, if they aren't short-lived, there are much bigger problems for TWDC than timeshare sales.

I expect that they will offer short-term incentives that will look generous compared to anything they've done in the last decade, but I do not expect that they will make structural changes that impact their ability to sell or compromise their position in the long run. I don't expect TWDC to suddenly start panic selling. If anything, I expect them to strategically buy when prices are low. For example, I recall them getting started on park and resort expansion before the recovery was obviously upon us. Partly that was to be ready for the increased demand represented by recovery, but partly it was also doing that when there was less competition for labor, materials, etc. It was very shrewd.

I know folks really want the restrictions lifted, and are looking for a reason they might be. But, I suspect that ship has probably sailed.

 

[Sandisw]

Thats if and when they can get people in those rooms. And only will help if other resorts are filled also. Selling DVC now gets cash immediately whether rooms are booked or not. Letting people book Riv rooms on a cash basis likely only gets them 1 nights deposit, selling points at Riv gets them much more whether those people are booked for trips or not. Something to think about also. Riv might be better of sold for points than cash rooms.

They don’t have to lift the restrictions to sell points, though, which was the question.

You discount at $30/point starting at 100 points, you will get new buyers who will overlook the restrictions,

They can do both. And, if Reflections is slowed down, then DVC doesn’t need to rush sales to the extent they did,

I would be shocked to see them lifted.

 

[ChipNdale8887]

They don’t have to lift the restrictions to sell points, though, which was the question.

You discount at $30/point starting at 100 points, you will get new buyers who will overlook the restrictions,

They can do both. And, if Reflections is slowed down, then DVC doesn’t need to rush sales to the extent they did,

I would be shocked to see them lifted.

I agree. The Restrictions didnt hurt sales much before. The only way I could see restrictions being lifted is this. If the Parks are closed past june 1st to july or august, where will your Sales for Riviera come from? Parks aren't open to solicit sales at their booths or at the hotels. So that severely limits sales to new members who I imagine are the bulk of new DVC resort sales. So then you go to the current members, who seem to know the most about restrictions and are the easiest to sell to since the Sales pitch is easier since they own and understand the system. Those might be the ones that would be beneficial to lifting the restrictions for.

 

[BWV Dreamin]

I agree. The Restrictions didnt hurt sales much before. The only way I could see restrictions being lifted is this. If the Parks are closed past june 1st to july or august, where will your Sales for Riviera come from? Parks aren't open to solicit sales at their booths or at the hotels. So that severely limits sales to new members who I imagine are the bulk of new DVC resort sales. So then you go to the current members, who seem to know the most about restrictions and are the easiest to sell to since the Sales pitch is easier since they own and understand the system. Those might be the ones that would be beneficial to lifting the restrictions for.

The question maybe would current owner add ons be enough for them to lift the restrictions? Cash is cash, and if it comes at the expense of lifting restrictions ( which costs them nothing) it just may jump start the new DVC customer.

 

[ChipNdale8887]

The question maybe would current owner add ons be enough for them to lift the restrictions? Cash is cash, and if it comes at the expense of lifting restrictions ( which costs them nothing) it just may jump start the new DVC customer.

Still the problem lies in, how do you reach those new customers? Usually from Booths and Tours, sales pitches at Parks and Resorts that are now closed for how long we don't really know. How do you do that now? It's not easy for new potential members, who haven't seen Riviera or bought into DVC yet, be talked into dropping $15,000-$40,000.

 

[BWV Dreamin]

Still the problem lies in, how do you reach those new customers? Usually from Booths and Tours, sales pitches at Parks and Resorts that are now closed for how long we don't really know. How do you do that now? It's not easy for new potential members, who haven't seen Riviera or bought into DVC yet, be talked into dropping $15,000-$40,000.

This is where in ADDITION to lifting restrictions they will need to drastically incentivize......go back to DVC inception. Free tickets for a couple of years ( costs them nothing), maybe some food discounts, etc. They need to go back to the marketing that made DVC a bargain.

 

[OSUZorba]

If the economy is tanking, "look, no resale restriction if you sell this direct contract later" is not going to be a big winner. Removing the restriction or allowing O14 resale to book Riviera bolsters the resale market more than it does direct in a downturn.

What is going on right now is why I'd never buy a major asset that have a massive restriction on it that makes it worth pennies on the resell market. No one can see the future and sometimes you need to liquidate. I know a ton of people would never think about such things when purchasing DVC, but a lot will. And the type of people that'll be spending large sums of money right now are probably the type of people that have financial contingency plans.

 

[SL6827]

You have to wonder.....Iger KNEW just how bad this was going to get. If this were going to be a quick recovery, do you honestly think he would have still gotten out as quick as he did? I’m sure there are other scenarios we have no idea about that is going to impact Disney. I do agree it will come back, but how long?We are not talking months.......

I think he was on to something. He may have gotten some good info before others.

 

[Aussie RJ]

DVC will be looking for all the customers they can get. Cash is king, a fast quick injection may come from existing members with lifted restrictions. Unless Trump’s magic drug works soon, I can’t even see the parks reopening in June. Times they are about to change.

 

[BWV Dreamin]

Ok not good!!
https://finance.yahoo.com/m/5f06f4f8-421a-3ccf-b7d8-78b4753085a0/disney-stock-gets-a-downgrade.html

 

[Tax]

Any thoughts on whether the removal of restrictions would be applied to existing Riviera contracts?

 

[Aussie RJ]

Any thoughts on whether the removal of restrictions be applied to existing Riviera contracts?

I would think it would be a blanket removal.

 

[ELMC]

The question maybe would current owner add ons be enough for them to lift the restrictions? Cash is cash, and if it comes at the expense of lifting restrictions ( which costs them nothing) it just may jump start the new DVC customer.

I think they do have a monetary value assigned to the restrictions, so I don't think it costs them nothing. The restrictions were put in place to close an open wound in their timeshare system. To reopen it now for a short term cash infusion would be very short-sighted.

To put things in perspective, if they sold all of Riviera's available points today at going rates they would gross somewhere in the neighborhood of one billion dollars. That's it. For selling out the entire resort. By contrast, they just raised over seven billion dollars in cash at less than 4% with payback terms ranging up to 25 years. I hate to use the word "only" when talking about a billion dollars, but it's simply not enough cash to move the needle. It would have a significant impact on my balance sheet, however.

 

[DougEMG]

Possibly, but I'm not convinced. By all accounts this closure is going to cause Disney in the range of four billion dollars. By contrast, they made eleven billion dollars last year. This hurts, no doubt about it, but I don't think the damage is that long term or irreversible.

I think that significant dollars off of a purchase...real cash money right now...is going to have more impact over a prospect's decision to buy than lifting of some restrictions. Furthermore, we still haven't established with any degree of certainty exactly what impact the resale restrictions have had on direct sales. Sure, people on here are upset, but we are less than 1% of the DVC population and we are also amongst the most sophisticated DVC buyers. Riviera is close to 20% sold out in less than a year. Animal Kingdom villas have roughly the same number of points and that took seven years to sell out (in a similar economic climate as the one we are heading into. With all due respect, I think peoples' desire to see the restrictions removed is allowing them to come up with justifications as to why Disney should remove them.


Cash is king. Also, in sales it's important to sell the sizzle, not the steak. Restrictions are part of the "meat" of DVC, good and bad. $20 off per point, free annual passes, comp for an existing stay, 10% free points...the list goes on. These are attractive, buzz-worthy incentives that will help sell more than the removal of restrictions that have not even been established to be a deterrent. Additionally, given that the restrictions are part of a long term master plan, I don't see them abandoning them in exchange for a short term boost. That's never been Disney's MO.

I agree with you, the restrictions are here to stay. Most buyers have no detailed understanding of the system that they are buying, let alone what the effect some of the rules have.

The only thing that surprises me is that the restrictions are really a 20+ year plan, what executive makes long term plans like that now. No one making those decisions is going to be around to see the benefits 20 years from now. So they must think it helps them with sales right now. IE Look at RIV, it is awesome, buy direct if you want to stay there, buying anywhere else resale and you will NEVER EVER be able to stay there.

 

[ELMC]

I agree with you, the restrictions are here to stay. Most buyers have no detailed understanding of the system that they are buying, let alone what the effect some of the rules have.

The only thing that surprises me is that the restrictions are really a 20+ year plan, what executive makes long term plans like that now. No one making those decisions is going to be around to see the benefits 20 years from now. So they must think it helps them with sales right now. IE Look at RIV, it is awesome, buy direct if you want to stay there, buying anywhere else resale and you will NEVER EVER be able to stay there.

I think it's both. There's a long game but there's also a short term benefit. I think the salespeople were sick of hearing people say they were going to get the same thing on the resale market for half off. A good salesperson will be able to turn that objection into a reason to buy easily. A prospective buyer will talk about how they are scared of how the resale restrictions impact resale value and the salesperson will very rightly say that they are buying to use, and because of these restrictions fewer people will be able to stay where you can stay.

Quite frankly, I don't see these restrictions as a stand-alone but rather another dart they are throwing at the dartboard. They tried three rounds of restrictions and none of them produced the desired effect. I think they went nuclear with the Riviera restrictions.

 

[Aussie RJ]

I think the long game is correct. I don't see the restrictions going away forever, they will return at the DL Hotel and future WDW hotels. But I definitely see this hit causing a ripple effect which may have DVC remove restrictions on Riviera. I would agree 'other' incentives will be tried first.

 

[BruinEd03]

All that undeclared inventory of RIV can be offered for cash. Disney Parks and Resorts will be looking to build up their division again, so having nice, brand, new rooms, with lots of space, to offer at a great discount...they did some 40% off already...allows them to do that. We could very well see 50% off if needed.

So, for Disney, as a company, if DVC sales slow, they have a back up to generate income on all those RIV rooms.

Let's pretend that the average contract is 150 points - at approx. $180/pt (after discounts), that's $27,000. Average room cost is $470/night. That's 57 nights that they would have to sell for each lost sale. That's not including the lost maintenance fees, either. In addition Riviera would be competing with all other DVC resorts, too - say ones that cost less than $470/night.

I would say the inability to obtain a good resale price is NOT a selling point for Disney - especially if people may be forced to sell if economic conditions deteriorate. People may not have been thinking about it before, but when 6.6 million new people file for unemployment, it starts to become front and center.

 

[Sandisw]

Let's pretend that the average contract is 150 points - at approx. $180/pt (after discounts), that's $27,000. Average room cost is $470/night. That's 57 nights that they would have to sell for each lost sale. That's not including the lost maintenance fees, either. In addition Riviera would be competing with all other DVC resorts, too - say ones that cost less than $470/night.

I would say the inability to obtain a good resale price is NOT a selling point for Disney - especially if people may be forced to sell if economic conditions deteriorate. People may not have been thinking about it before, but when 6.6 million new people file for unemployment, it starts to become front and center.

And I think they will offer an incentive much more than $15/point before lifting!

As I said, if we see resale prices drop...and market has slowed based on my current resale situation..Disney can point it out as not to be counted. They can also lower the interest rate to make buying very attractive. Through in some park passes too

Lots to do and lots of options.