Will Disney Stop ROFR in the future?

[cdziuba]

Just curious, as if they do stop exercising ROFR some day, wouldn't it likely drive DVC prices down? Good for buyers, bad for sellers. Opinions?

 

[SoCalKDG]

I keep reading this, but would it really go down? Because many of the DVC's are attached to regular hotels(BW, BC, WL) the cost of regular rooms will always keep the DVC rooms up. If Disney charges $400 per night for their rooms 5-10 years from now, point value isn't going to drop to $50 per point. This would allow people to get studios for $65-$75 per night. Won't happen. The demand for points would be higher than the supply, keeping up the cost. Now if Disney goes downhill, thats another matter. All my opinion of course.

 

[Dean]

Yes they will stop at some point. And while it likely will affect prices not as much as some might think. What will likely happen is the prices will become more variable with some going for a lot less and others more in the traditional price range. This already happens but DVC buys them up when it comes through at $40 pp.

 

[FLYNZ4]

I think that DVC will offer contract extensions to the existing resorts... and then keep offering ROFR for contracts with a long (~40-50) year life. This will keep "like for like" property values high.

I think the market will then value the non-extended contacts as "damaged goods". I am not sure if DVC will buy up the devalued contracts or not using ROFR... but they will have that option.

Of course, this is 100% speculation.

/Jim

 

[Diznut84]

I believe that the price of DVC resales would be severely impacted if Disney quit buying back points (i.e. they would be much lower). If Disney did not think the same thing, I doubt they would tie up the resources in ROFR. I would bet that the properties most affected would be Vero and OKW.

In my opinion, as long as Disney is in active sales, they will continue to use the ROFR process. They need the gap between resales and new purchases from DVC to remain low. Because they will undoubtedly be in the DVC business for a LONG time (sales are strong and there is a LOT of property left), expect them to keep that difference small by supporting the ROFR process.

JMHO!
Greg

 

[jarestel]

Your guess is as good as anybody's. But even if they do, it only affects sellers, not owners, so as long as an owner doesn't want to sell their "investment" it won't matter.

 

[rwcmath]

If people still want to add on using Disney, they need to have points to sell. We added on through Disney. Since the pitch for selling SSR includes that you can stay at all of the DVC resorts, I think they would want to have points available for buyers to add on at the other resort. So, I think ROFR will be around for a long time.

 

[Dean]

Originally posted by FLYNZ4
I think that DVC will offer contract extensions to the existing resorts... and then keep offering ROFR for contracts with a long (~40-50) year life. This will keep "like for like" property values high.

I think the market will then value the non-extended contacts as "damaged goods". I am not sure if DVC will buy up the devalued contracts or not using ROFR... but they will have that option.

Of course, this is 100% speculation.

/Jim

I used to think that but the more I think about it the less I think it's workable. For DVC to do so, they'd either need to resell them actively, which I don't see, or have amost every member to buy in at a very low price. I'd think the price pp would have to be less than $10 pp to get members to even think about it.

 

[FLYNZ4]

Dean,

It is all speculation, but my hunch is that DVC is in the timeshare business for the long term. I do not suspect there will ever be a time when they stop selling DVC product.

As long as they are selling timeshares, it is clearly in their best interest to keep the resale prices high. DVC is one of the very few companies who have ever managed to keep resale prices, and new developer prices at near equal levels... and the amzing thing is that they have managed that even with a 50 year RTU contract. At some point... the diminishing number of years will catch up, and the prices has to plummet. I think that this cannot even be debated becasue by definition, in 38 years. the value goes to zero.

The folks at DVC are pretty sharp finanically... and they may figure some other way to prevent the price descrpency between new timeshares, and resales... but I think that offering "contract extensions" would be one way that they could do it most effectively. I have been unable to think of a method that would work as well as contract extensions (that doesnt mean that a better way does not exist )

One other thing: offering contract extensions should be even more lucrative than "printing disney dollars". They get to sell extended contracts without any current aquisition cost... nearly 100% short term profit. Clearly it effects their long term committment to a particular resort (including major maintenance and/or replacement)... but the busness people who make a decision to extend the contracts get to claim the increased sales revenue now... and most business (Disney is NOT an exception by any means)... tends to value short term revenue more than just about anything.

Who knows if I am right or not. I think it will be interesting to watch this unfold... and the speculation on my part is a big reason that I chose SSR over one of the resales... plus the fact that walking distance to DD is a major attraction for my family.

/Jim

 

[Desperado]

Originally posted by cdziuba
Just curious, as if they do stop exercising ROFR some day, wouldn't it likely drive DVC prices down? Good for buyers, bad for sellers. Opinions?

Nope. It's in thier best interest to continue ROFR, so they will.

 

[Dean]

Originally posted by FLYNZ4
Dean,

It is all speculation, but my hunch is that DVC is in the timeshare business for the long term. I do not suspect there will ever be a time when they stop selling DVC product./Jim

Jim, I guess we vary on the basic accumptions. I'm figuring that SSR or at most, one more will be it. I think Disney will have rode this horse about as far as it will go by then. In general, marketing, etc is about 50% of timeshare sales. Maybe a little less with DVC due to the mix but a lot more for selling 12 year intervals, which is all I think it would be. It'd only make sense for the current members to extend for that situation. I don't see DVC turning around and selling the same resorts for another 50 or so years. If they did, I'd agree with your assumptions far more.

To me it seems the cost of selling would be as much as the money brought in. Thus the only advantages is to keep the system intact rather than simply having 1 or 2 resorts that last 12 more years. If the other resorts fall out, can you imagine trying to trim the beaurocracy and costs that would have accumulated by then. And paying the maint fees afterwards on the remaining resorts. Of course you'll see them cutting MS before they do admin, just like most companies do when trying to downsize so you might be on hold 2 hours consistently to get to talk to MS. Or they could move it to India.

It's only in their best interest to continue ROFR until sometime before they stop selling, after that there's no more advantage.

What I think DVC should do is to offer current members an extension now to the same ending date as SSR. They'd have to charge enough to make it worthwhile but low enough for most members to bite. As I said earlier, I think that is at around $10 pp or a little less to get 70-80% to extend eventually, todays dollars and done within the next few years. If they upped it to $15 pp, I think they'd have far less than 50% takers. But it's all simply speculation at this point.

 

[Winksst]

I asked my guide about this today (still trying to decide about buying). He said Disney will not give up ROFR. In fact he laughed at me when I asked. He said it keeps them from being bought out by another company or sleezy travel agents, etc.

He also said Disney may be getting into the resale business themselves...very soon. So I don't think resale prices going down drastically will happen any time soon.

Thought y'all would like to know.

 

[FLYNZ4]

Originally posted by Dean
What I think DVC should do is to offer current members an extension now to the same ending date as SSR. They'd have to charge enough to make it worthwhile but low enough for most members to bite. As I said earlier, I think that is at around $10 pp or a little less to get 70-80% to extend eventually, todays dollars and done within the next few years. If they upped it to $15 pp, I think they'd have far less than 50% takers. But it's all simply speculation at this point.

I agree they should offer extensions to the existing 4 resorts to bring them to the same date as SSR. That is exactly what I expect them to do. I am not sure what they would charge.

/Jim

 

[JimC]

Originally posted by FLYNZ4
...One other thing: offering contract extensions should be even more lucrative than "printing disney dollars". They get to sell extended contracts without any current aquisition cost... nearly 100% short term profit. Clearly it effects their long term committment to a particular resort (including major maintenance and/or replacement)... but the busness people who make a decision to extend the contracts get to claim the increased sales revenue now... and most business (Disney is NOT an exception by any means)... tends to value short term revenue more than just about anything.
/Jim

Jim, interesting points. But do extensions affect DVC's investment in the properties (capital or maintenance)? The refurbishment is already reserved for in our dues as are the ongoing maintenance and operating costs. Does Florida law or the DVC POS cover provide for a reduction in reserves, refurbishment or maintenance near the end of a RTU contract?

 

[JimC]

Originally posted by Dean
Jim, I guess we vary on the basic accumptions. I'm figuring that SSR or at most, one more will be it. I think Disney will have rode this horse about as far as it will go by then. In general, marketing, etc is about 50% of timeshare sales. Maybe a little less with DVC due to the mix but a lot more for selling 12 year intervals, which is all I think it would be....

Dean, Do you think that the internet and email might have reduced the cost of marketing timeshares? Pushing emails out is pretty cheap. I guess the gifts and discounts are part of the marketing budget as are the sales center operations? I am not a marketing person so I may be missing big pieces of what goes into marketing, but with an extention what costs do they have since we are already members? As I write this I guess some legal to set it up, administration to handle the paperwork and then additional filing fees to record amended deeds. Maybe some of that will be absorbed within the current cost structure so very little marginal costs. What am I missing?

 

[Dean]

Originally posted by JimC
Jim, interesting points. But do extensions affect DVC's investment in the properties (capital or maintenance)? The refurbishment is already reserved for in our dues as are the ongoing maintenance and operating costs. Does Florida law or the DVC POS cover provide for a reduction in reserves, refurbishment or maintenance near the end of a RTU contract?

Indirectly they are covered. The real question is how will they implement it those last few years. Will they spend all our money for their benefit or be more reasonable, we shall see but legally they are covered either way I believe.

As for marketing, I don't think email will make much difference. They still have to have sales and admin staff, pay legal department and the like. It's the same reason they won't make any money with ROFR unless the spread hits at least $15 or more pp difference. In selling timeshares, making a few hundred here and there won't cut it, you have to make thousands to make it truly worthwhile. So to repeat, DVC won't do it simply to get the income from the resale, not enough money in it. They reason to do it is to keep the management company and team in tact, that's where they'll make the money. Remember we are paying BIG bucks to have Disney management this thing for us.

 

[tjkraz]

Originally posted by Dean
What I think DVC should do is to offer current members an extension now to the same ending date as SSR. They'd have to charge enough to make it worthwhile but low enough for most members to bite. As I said earlier, I think that is at around $10 pp or a little less to get 70-80% to extend eventually, todays dollars and done within the next few years. If they upped it to $15 pp, I think they'd have far less than 50% takers. But it's all simply speculation at this point.

...and I think you touched on a significant issue here, Dean.

If participation comes in at only 50%, Disney is on the hook for Millions of points' worth of Maintenance Fees annually for 12 years. Sure they could rent those rooms for cash, but that would have to figure into the cash demand for DVC-quality accommodations at that point. Right now, DVC only holds about 4% of the points at each resort, and I don't hear a lot of complaints from people who are disappointed that they can't get a room for cash. I think there is little reason to believe that they could rent out 200 rooms nightly at a resort like OKW.

If they are still actively selling DVC, they could sell 12-year contracts for those who did not elect to extend. But that sounds cost-prohibitive to me, as well.

Personally, I think decisions will be made on each resort individually. Given that they are attached to existing stand-alone properties, VWL, BCV and BWV would be the most likely to survive. As much as I like OKW, of the on-site DVC properties it may prove to be the most likely to get bulldozed if Disney decides they want to go another direction with the land on which it sits.

 

[FLYNZ4]

My guess is that they will offer contract extentions every 10-15 years or so.... timed to the dates of new resorts.

For example... at some point within the next few years, I expect DVC to offer contract extensions for BWV, BCV, OKW and VWL for the same date as SSR. As they open new resorts (eagle pines, CR, etc) they would share the same expiration date.

Then, sometime in the future, they might offer a new resort with a new 50 year RTU... at which point all existing resorts (including SSR) would be offered a contract extension.

This way, they get to sell the same property over and over again (30-40 years out)... without any aquistion cost, minimal marketing costs (they already know who the customer is)... while using the existing legal and administrative infrastructure.

/Jim

 

[Dean]

Originally posted by tjkraz
...and I think you touched on a significant issue here, Dean.

If participation comes in at only 50%, Disney is on the hook for Millions of points' worth of Maintenance Fees annually for 12 years. Sure they could rent those rooms for cash, but that would have to figure into the cash demand for DVC-quality accommodations at that point. Right now, DVC only holds about 4% of the points at each resort, and I don't hear a lot of complaints from people who are disappointed that they can't get a room for cash. I think there is little reason to believe that they could rent out 200 rooms nightly at a resort like OKW.

Thus my thinking of needing a high percentage of members to extend. Still, lots of variables and it's likely no final decisions have been made. My guess is they'll wait until a large percentage of SSR and possibly any other resort has been sold else they'd be competing with themselves.

Jim, I think you overestimate the life of the DVC resorts. The older units at the old Villas, treehouse units and the like are no longer being rented and in many cases, not even being used. At 30 years out some are speculating that one Wing of the CR may be torn down. I doubt it but it's only 33 years old or so. I just don't see much life left past 62 years out for any of the resorts.