Disney executives worried about VGF sales?

[ParentsOf4]

So, your points is your maintenance fee? Or points needed and maintenance fee are separate fee's?

DVC members pay an annual Maintenance Fee (MF) on the points they own.

To book a room, DVC members don't pay cash, they pay points.

Ignoring the purchase price, the cost of a room then becomes MF times points.

As an example, it costs 10 points to stay at a Boardwalk Villas (BWV) Standard View Studio during a week night in September. (This basically is a hotel room with a view of the parking lot.) In 2013, the MF for BWV was $5.84/point. So, ignoring purchase price, it costs a DVC member who owns at BWV $58.40/night for that room in September.

All DVC points are assigned to a specific DVC resort (called the Home Resort) and DVC members who own there can book 11 months before arrival. DVC members who don't own at a resort can book 7 months before arrival. The extra 4 months is important because DVC resorts are close to 100% full and some rooms are much more popular than others.

For example, if you want to book at BWV or Beach Club Villas (BCV) during Food & Wine Festival, you pretty much have to own at those resorts. By the time the 7-month window rolls around, the rooms at these DVCs are mostly booked. DVC members who don't own there might be able to get 2-3 nights midweek but getting a full week or weekend is hard.

Note that each resort has unique MFs and point requirements. For example, BWV is $5.84/point and 10 points/night for a Studio in September while BCV is $5.65/point and 15 points/night for a similar room.

The points needed to stay on a particular night rarely changes from year-to-year. The total points for the entire year must remain constant but points on specific days change slightly, most noticeably to take into account the moving Easter holiday. Sometimes, there are special cases when Disney needs to reclassify rooms and points change but, again, the total points for the entire year must remain constant.

What does change every year is the MF. Historically, this has increased by 2-to-5% annually.

 

[flynnibus]

...or maybe.... How do you make the blt look more attractive??? You make it look like the cheaper alternative....

 

[brifraz]

Well, I can let you know about the contract terms on Monday. We added on 25 points at VGF yesterday. Small influx of cash allowed us to splurge (yup, 25 points is a splurge for a couple teachers).

Plan on just going for a couple of nights every other year and then having our week at OKW.

 

[willtravel]

DVC members pay an annual Maintenance Fee (MF) on the points they own.

To book a room, DVC members don't pay cash, they pay points.

Ignoring the purchase price, the cost of a room then becomes MF times points.

As an example, it costs 10 points to stay at a Boardwalk Villas (BWV) Standard View Studio during a week night in September. (This basically is a hotel room with a view of the parking lot.) In 2013, the MF for BWV was $5.84/point. So, ignoring purchase price, it costs a DVC member who owns at BWV $58.40/night for that room in September.

All DVC points are assigned to a specific DVC resort (called the Home Resort) and DVC members who own there can book 11 months before arrival. DVC members who don't own at a resort can book 7 months before arrival. The extra 4 months is important because DVC resorts are close to 100% full and some rooms are much more popular than others.

For example, if you want to book at BWV or Beach Club Villas (BCV) during Food & Wine Festival, you pretty much have to own at those resorts. By the time the 7-month window rolls around, the rooms at these DVCs are mostly booked. DVC members who don't own there might be able to get 2-3 nights midweek but getting a full week or weekend is hard.

Note that each resort has unique MFs and point requirements. For example, BWV is $5.84/point and 10 points/night for a Studio in September while BCV is $5.65/point and 15 points/night for a similar room.

The points needed to stay on a particular night rarely changes from year-to-year. The total points for the entire year must remain constant but points on specific days change slightly, most noticeably to take into account the moving Easter holiday. Sometimes, there are special cases when Disney needs to reclassify rooms and points change but, again, the total points for the entire year must remain constant.

What does change every year is the MF. Historically, this has increased by 2-to-5% annually.

You lost me at "To book a room, DVC members don't pay cash." I take your word for it. I think I'll just stick with renting DVC points periodically.

 

[GoofGoof]

You lost me at "To book a room, DVC members don't pay cash." I take your word for it. I think I'll just stick with renting DVC points periodically.

When you buy in you buy a fixed number of points per year. For example you could buy 150 point contract which entitles you to 150 points each year. When you book a room you use your points instead of paying cash like you would a normal hotel room. The number of points needed to book a room varies based on resort, time of year, view of the room and size of the room. So if a studio at BLT would cost you 150 for a week and a studio at VGF costs 195 points for the same week you have to use 30% more points to get the same sized room.

 

[tjkraz]

I wonder if some real pro regarding DVC will know the truth about the real costs of every single step of the process..... because at this point.. it seems to be reaching the mysterious levels of "We May Never Know"

For the most part, that is true. DVC is required to submit to an independent audit every year and the Florida Timeshare Bureau exists to provide state oversight. But the books will never be completely transparent to owners.

I understand that DVC members do have the right to inspect certain financial documents. But this can only be done by scheduling a time to appear at the DVC corporate offices in Celebration. Documents must be reviewed on-site and cannot leave the building. And there are limits to what they will provide. For instance, DVC technically purchases services like housekeeping and maintenance from the respective Disney hotels. Agreements exist which define the nature and cost of the relationship, but DVC isn't going to show you those agreements.

I've never been interested enough to look into this myself. Frankly, I doubt that I could make heads or tails of any paperwork they wanted to supply. When you buy a timeshare, you're demonstrating a vote of confidence in the developer and management team. I wouldn't expect to uncover any great conspiracy to defraud owners. I have to trust that DVC executives, auditors and government officials are doing their jobs to properly protect my interests.

 

[jim1051]

We are DVC members, when we bought in I looked at the number of points required for a week during Peak season at a few of the WDW DVC resorts. We bought enough points to be able to do that. If VGF had been around, and I used that as a meassure, We would have needed to buy an additional 50 to 60% of points. Add to that the 150 bucks a point and you're talkin lots o cash. Throw in higher maintenance fees...

We bought 280 points 1n 1999, for $67 . Looks like a steal now

 

[tikiman]

Quite true, but popularity, or in more financial terms, demand, tends to weigh heavy on what can be charged for a particular thing. IMHO, Disney thinks more of the GF than a good portion of the guests do.

It’s ironic that Disney does not consider the Grand Floridian its “main” resort (not sure if that is the best word to use). Over the years the Polynesian was internally considered the top resort for many things. I’m not just talking as a fan of the resort, it was just something I discovered over the years researching the history. Back when the Contemporary was considered the “Flag Ship” the Polynesian was the one that still got most of the amenities first and even was pushed to open first. The Polynesian has always been the test bed for just about everything introduced to the other resorts. Thing list Conciege (club level), new computer systems, touch screen ordering, online check in etc. are some examples of thing that were tested at the Polynesian well before other resorts would ever get them. I even remember a time when CMs would work hard to get the privilege to work at the Polynesian. I don’t think that is so much the case anymore with the way management treats the staff but at one point it was a goal of most resort CMs.
I always found it strange that all of Disney’s statistics said the Polynesian had the highest repeat guests, location for honeymoons and anniversary trips and popularity yet all the magazine and news surveys showed it way behind the Wilderness Lodge.

 

[tikiman]

One of the reasons I bought DVC is that it does hold value. The ROFR that DVC exercizes helps to keep the resale market high.

As willtravel said, there are timeshares out there that you can buy for free. My friend has one in the Cayman's in you are interested. He owns it (actualy he owns two weeks, and wants to unload one) and has to pay yearly dues. He has found that he does not really have time to go for two weeks each year. dues have become quite high - especially after some hurricane damage, and he cannot just "give up" the time share. It is like owning a house - you cannot just walk away and not pay property taxes. You have to find somone to buy it (ot take it for free). The time share company does not want the week back either - they have a bunch they are still trying to sell. That was the main thing that scared me off of time shares. The track record of DVC's resale market is what attracted me to it. If I became financially strapped (or just no longer wanted it) I could easily unload it - and even get some of my money back. Of course it is going to loose value, but no where near as quickly as other time shares.

-dave

We love our Westin Villa in Maui but dues are shooting past $2500 a year and value if we sell it will be about $32,000 (purchased in 2007 for $62,000 and now sells through Westin at closer to $90k). On the other hand if we sell it and buy Polynesian DVC (which I am told will not be less than GF) I won’t be doing it as any sort of investment. I am just bowing down to Disney and paying them upfront for my trips. I won’t kid myself about owning anything. Our Maui property is owned (unfortunately comes with Hawaii property taxes) and does not expire. It is just getting to the point that our dues every year could be used to help pay for our Disney trips.

 

[GoofGoof]

We love our Westin Villa in Maui but dues are shooting past $2500 a year and value if we sell it will be about $32,000 (purchased in 2007 for $62,000 and now sells through Westin at closer to $90k). On the other hand if we sell it and buy Polynesian DVC (which I am told will not be less than GF) I won’t be doing it as any sort of investment. I am just bowing down to Disney and paying them upfront for my trips. I won’t kid myself about owning anything. Our Maui property is owned (unfortunately comes with Hawaii property taxes) and does not expire. It is just getting to the point that our dues every year could be used to help pay for our Disney trips.

More than GFV??? I was hoping for a little less. I guess that is just wishful thinking on my part. I love the Poly and would definitely consider buying into a DVC there, but if it's too pricey I'll just visit on the monorail from over at BLT. I also prefer 1BR or 2BR villas to studios so I was a little disappointed they scaled back and likely won't have room for much more than studios with the exception of the waterfront huts.

 

[Phonedave]

We love our Westin Villa in Maui but dues are shooting past $2500 a year and value if we sell it will be about $32,000 (purchased in 2007 for $62,000 and now sells through Westin at closer to $90k). On the other hand if we sell it and buy Polynesian DVC (which I am told will not be less than GF) I won’t be doing it as any sort of investment. I am just bowing down to Disney and paying them upfront for my trips. I won’t kid myself about owning anything. Our Maui property is owned (unfortunately comes with Hawaii property taxes) and does not expire. It is just getting to the point that our dues every year could be used to help pay for our Disney trips.

And that was another selling point with me - DVC ends. Yes, on one hand you really don't own anything, it is more of a lease. But on the other hand, there is a definite out. When my contract with DVC expires, it will be over and done. If I owned a timeshare, I (and my estate/heirs) would be on the hook forever, unless I could unload it. It is a double edged sword. On one hand at contract expiration, you have nothing. But on the other hand, at contract expiration you owe nothing.

-dave

 

[Minthorne]

Disney builds more DVC resorts that cash resort at this point. I infer from this that Disney makes more money off selling DVC points than renting cash rooms.
Every time I try to break down buying DVC I just can't see it coming out as an advantage over investing the purchase price (safely and wisely of course!) and using the dividends every year to pay for a trip at a deluxe resort.

To my mind, as MFs keep rising and the new properties have such expensive point structures, the DVC looks like a questionable RoI over the long haul.

 

[flynnibus]

I think the endless building of DVC poses its own problem... the problems of point values vs older resorts. Disney has to keep jacking the points and prices up to compensate.. and its not a cycle they can repeat forever.

if DVC just sat by itself with the owners that bought in the 90s+... I doubt it would be much of a thorn in the side of most. It's the continued expansion that draws the eyes IMO.

 

[GoofGoof]

Disney builds more DVC resorts that cash resort at this point. I infer from this that Disney makes more money off selling DVC points than renting cash rooms.
Every time I try to break down buying DVC I just can't see it coming out as an advantage over investing the purchase price (safely and wisely of course!) and using the dividends every year to pay for a trip at a deluxe resort.

To my mind, as MFs keep rising and the new properties have such expensive point structures, the DVC looks like a questionable RoI over the long haul.

Disney cash room rates go up too. DVC dues have historically gone up about 3.5% a year. The cash room rate is higher and much higher in recent years. It really depends on what you use for inputs to your model. The variables are initial upfront cost of DVC, annual dues increase, cash room rate increase and return on your money if you invest it instead of buying in. When I ran through the numbers I assumed a 25% discount to cash rack rate. A maintenance fee increase of 3.5% a year, a cash room rate increase of 3.5% a year and a rate of return of 5% on my money if invested somewhere else. Using these assumptions the breakeven of buying at BLT vs staying at CR was 7 years. The breakeven is calculated by taking my initial investment of roughly $15,000 (169 points @$90 plus closing costs) and assuming I invest it earning 5% a year. Each year I add the earnings to my initial investment and remove the cost of staying at the hotel at the cash rate. After 7 years my initial investment would be used up and my account would go negative.

If you have a way to invest the cost of DVC and pay for a stay at a deluxe resort each year on just the dividends I would love to hire you as my financial advisor. A dividend yield around 4 to 5% is considered pretty solid with fed rates as low as they are. Considering the average room at CR goes for about $3,000 a week after sales tax I would need a $4,000 pre-tax return on my investment. That would be an almost 27% return. That would be one heck of a dividend. Maybe a mutual fund or individual stocks could appreciate at that rate, but one bad year (see 2008) and your investment would be seriously crippled. If you assume a 20% return on your investment the break even would be very far out, but you are also assuming a consistent return over a very long period of time in an extremely volatile market.

 

[GoofGoof]

I think the endless building of DVC poses its own problem... the problems of point values vs older resorts. Disney has to keep jacking the points and prices up to compensate.. and its not a cycle they can repeat forever.

if DVC just sat by itself with the owners that bought in the 90s+... I doubt it would be much of a thorn in the side of most. It's the continued expansion that draws the eyes IMO.

Not to mention the canabalization of the deluxe resorts. Disney loves the short term gain, but how many future stays at deluxe resorts did they lose to owners staying at DVC now. Gains today hurt the future. At least until all those contracts expire and you get to "resell" the points or sell extensions to current owners. Then the gravy train returns.

 

[GoofGoof]

It's interesting you mention that. I was just looking at the numbers in detail.

Since the opening of the first DVC at Old Key West (OKW) in 1991, DVC resorts at WDW have averaged a 3.2% annual increase in Maintenance Fees (MF). For some perspective, the average U.S. Consumer Price Index (CPI) increase over the same period was 2.5%.

Leading the way (by far) is Bay Lake Towers (BLT), which has averaged a 5.3% increase since opening in 2009. Second is the Beach Club Villas (BCV) at 3.8%.

At the other end of the spectrum, Saratoga Springs Resort (SSR) and Boardwalk Villas (BWV) are both at 2.7% average annual increases.

The worst year of WDW MF increases was 2003, when fees increased 6.3%. Since 2007, there has been only one year (2012) where the average MF has increased by more than 3.6%.

There have been a number of years where the average WDW MF increased by less than the CPI, most recently in 2011.

During the last 3 years, Magic Your Way (MYW) tickets have averaged a 7.8% increase. By comparison, MF have increased by 3.7% annually over the same period, 3.3% if BLT is excluded.

With the exception of BLT, Disney has done a reasonably good job of containing DVC costs at WDW. I'm not sure how 2014 is shaping up though.

Performance has been appreciably worse at non-WDW DVCs. Vero Beach has averaged 6.3%, Hilton Head 4.7%, Grand Californian 4.7%, and Aulani 4.4%.

I just started a thread in the DVC section. BLT is going up 6.3% this year. It is definitely trending higher than the others, but started out lower so it may be a bit of catchup. I'm curious what the others did this year.

 

[tikiman]

And that was another selling point with me - DVC ends. Yes, on one hand you really don't own anything, it is more of a lease. But on the other hand, there is a definite out. When my contract with DVC expires, it will be over and done. If I owned a timeshare, I (and my estate/heirs) would be on the hook forever, unless I could unload it. It is a double edged sword. On one hand at contract expiration, you have nothing. But on the other hand, at contract expiration you owe nothing.

-dave

Yeah but if my kids end up with it and don’t want to pay the dues the villa is paid for and they can get something for it. They won’t lose any money but they will get something for it. When DVC expires they have nothing to get any money from. $30k or $40k for my kids is better than a kick in the head

 

[Cesar R M]

Not to mention the canabalization of the deluxe resorts. Disney loves the short term gain, but how many future stays at deluxe resorts did they lose to owners staying at DVC now. Gains today hurt the future. At least until all those contracts expire and you get to "resell" the points or sell extensions to current owners. Then the gravy train returns.

considering most corporations, specially insurance,have huge teams of accountants to ensure they never lose.. pretty sure that Disney as its points, values and rates very well balanced so the gravy train is a continuous stream.

 

[willtravel]

We love our Westin Villa in Maui but dues are shooting past $2500 a year and value if we sell it will be about $32,000 (purchased in 2007 for $62,000 and now sells through Westin at closer to $90k). On the other hand if we sell it and buy Polynesian DVC (which I am told will not be less than GF) I won’t be doing it as any sort of investment. I am just bowing down to Disney and paying them upfront for my trips. I won’t kid myself about owning anything. Our Maui property is owned (unfortunately comes with Hawaii property taxes) and does not expire. It is just getting to the point that our dues every year could be used to help pay for our Disney trips.

I am assuming you are saying you do not have a 20 or 30 year contract? The timeshare I had owned was a does not expire contract also. And that was a big problem because no one within family wanted it free now or in the future. Fortunately we found a good timeshare resell. $2500 a year for dues I thought I had it bad. Ya beat me.

 

[willtravel]

One of the reasons I bought DVC is that it does hold value. The ROFR that DVC exercizes helps to keep the resale market high.

As willtravel said, there are timeshares out there that you can buy for free. My friend has one in the Cayman's in you are interested. He owns it (actualy he owns two weeks, and wants to unload one) and has to pay yearly dues. He has found that he does not really have time to go for two weeks each year. dues have become quite high - especially after some hurricane damage, and he cannot just "give up" the time share. It is like owning a house - you cannot just walk away and not pay property taxes. You have to find somone to buy it (ot take it for free). The time share company does not want the week back either - they have a bunch they are still trying to sell. That was the main thing that scared me off of time shares. The track record of DVC's resale market is what attracted me to it. If I became financially strapped (or just no longer wanted it) I could easily unload it - and even get some of my money back. Of course it is going to loose value, but no where near as quickly as other time shares.

-dave

I understand that DVC hold there value but isn't there also a point where people will not buy resale because of the cost of points?