DVC prices per point increasing in March

[WDW1974]

This may be my first ever post down here.

But I can't believe the INSANE (yes, that is what they are) prices that Disney is asking for its older properties and I am sure they are related to GF coming online.

I know Disney is trying to make the resale market (other than thru them) less attractive .... but when points at OKW and Vero have been going for as little as $35-55 a point, how anyone would ever even consider buying from Disney is beyond me.

I've never owned DVC. I think timeshare (even legit like DVC) is still largely a scame because of the way 'value' is determined. But I have to admit those Vero points are looking extremely attractive at what I can get as a resale.

 

[George]

I'm wondering if this could be an opening salvo in huge resort price increases, because if they're gonna start the GF villas at $200/pt, it is not as attractive an option. Or they may be hoping that there are a lot of upper middle class idiots out there.

 

[GoofGoof]

You're seriously playing its more burden to move money around than it is to undergo capital construction that takes years to complete??

I know that the new properties are huge profit centers... But to suggest that simply flipping contracts is hard is simply stupid.

It's a paper shuffle that can give Disney 50+% return on their dollar without doing anything than paying a few white collar workers.

It's just math. Building BLT cost $25 per point. They can sell it for $165 for a profit of $140 per point before selling costs. If they buy a BWV contract from ROFR for $60 they can sell it for $130 for a profit of $70 per point before selling costs. Building new has double the profit of buying resale. It takes much longer to build and it's more of a risk and depending on how long it takes to sell you have more capital deployed for a longer period of time so there are additional financing costs, but all of that is more than offset by the larger profit margin. They would need to buy contracts via ROFR for well under $50 to make it more profitable to buy back vs building new. There are only a finite number of locations where DVC units can be built, but as long as those locations are out there (GF and probably Poly next) it makes better business sense to build vs buy resale.

 

[ParentsOf4]

You're seriously playing its more burden to move money around than it is to undergo capital construction that takes years to complete??

I know that the new properties are huge profit centers... But to suggest that simply flipping contracts is hard is simply stupid.

It's a paper shuffle that can give Disney 50+% return on their dollar without doing anything than paying a few white collar workers.

I really don't understand your obsession with thinking constructing a timeshare somehow is a daunting task. Let's look at the facts:

• Depending on the resort, it costs Disney $45/point to $90/point to exercise ROFR on existing WDW properties.
• It costs Disney less than $30/point for new DVC construction.
• BLT is WDW's newest DVC resort. BLT's 5.6 million points sold out in just a few years.
• BLT currently is at $165/point. The other DVC properties asking prices are considerably below this. Even with the most recent price increases, AKV (the next most expensive WDW resort) is at $145/point, with other resorts at $130/point.
• In 2008, Disney exercised ROFR on over 46% of BWV contracts, 67% of OKW contracts, 56% of SSR contracts, 67% of VWL contracts, and 15% of BCV contracts.
• Today, Disney is exercising ROFR on almost no properties. With the exception of OKW, Disney has been exercising ROFR only on contracts that are significantly below the going rate.

Flipping contracts works only if Disney can sell them. The simple truth is that, through ROFR, Disney is sitting on excess points at all old DVC resorts and is having difficulty finding buyers. New DVCs tend to sell quickly. It's what people tend to want when buying directly from Disney.

Flipping a resale can have a price differential (sale price - cost price) as high as $80/point. With new construction at premium locations such as the GF or the Polynesian (the rumored next DVC location), Disney could very well achieve a price differential of $170/point and sell those points quickly. From a business perspective, it's a "no brainer".

There's a reason Disney keeps building new DVC resorts while rarely exercising ROFR anymore.

 

[George]

@ParentsOf4 - where did you get the ROFR stats? On one of my purchases (I believe it was BCV) they exercised the right once, but then caved in the second time. I believe it was typically selling for $90/pt at the time and I got it for $75/pt and they exercised ROFR at $76/pt. Confused me at the time (maybe 09, I'm too lazy to go upstairs and look at the contract and we've got to head towards indoor soccer), but I'm sure excess points caused the attitude change.

One thought - if they have trouble selling the excess points at the older resorts, why charge so much? They would still make money at more reasonable prices....I called Disney both times before I bought at the Timeshare Store and when they told me what they were charging, I said, "nope". I even asked the guy if he could move on price and he claimed he couldn't because you know, everyone else, would be jealous. Plus, I did tell him that I would have the details of my deal printed on white, cotton, fruit of the loom undershirts that my family would wear all over Orlando.

 

[ParentsOf4]

One thought - if they have trouble selling the excess points at the older resorts, why charge so much?

IMHO, someone buying directly from Disney is going for the complete buying experience and is less focused on price. Let's face it, purchasing through resale is an impersonal, time-consuming process. Purchasing directly from Disney is a much more pleasant experience. Consider that many who purchase directly from Disney are spur-of-the-moment buyers. They are on vacation having a great time. Disney makes the DVC transaction pleasant. Frankly, the only thing unpleasant when buying directly from Disney is the price.

If I've already decided to buy directly from Disney, $130/point for (for example) BCV seems like a bargain compared to $165/point at BLT. I'm probably unaware that BCV was $115/point on March 19.

IMHO, the price sensitive shopper (i.e. the shopper for whom price is the overriding concern) rarely will purchase directly from Disney.

 

[George]

IMHO, someone buying directly from Disney is going for the complete buying experience and is less focused on price. Let's face it, purchasing through resale is an impersonal, time-consuming process. Purchasing directly from Disney is a much more pleasant experience. Consider that many who purchase directly from Disney are spur-of-the-moment buyers. They are on vacation having a great time. Disney makes the DVC transaction pleasant. Frankly, the only thing unpleasant when buying directly from Disney is the price.

If I've already decided to buy directly from Disney, $130/point for (for example) BCV seems like a bargain compared to $165/point at BLT. I'm probably unaware that BCV was $115/point on March 19.

IMHO, the price sensitive shopper (i.e. the shopper for whom price is the overriding concern) rarely will purchase directly from Disney.

Good point. Many aren't aware of the resale market and buying from Disney is a bit easier (though I didn't think buying resale was hard). In my case I suppose I felt like the 10 grand or so I saved by making my two purchases resale was worth it.

 

[captainkidd]

$165 per point times 160 point minimum = $26,400.

Yeah, OK.

 

[GoofGoof]

$165 per point times 160 point minimum = $26,400.

Yeah, OK.

But you can use the points for a magical cruise too...

 

[captainkidd]

But you can use the points for a magical cruise too...

 

[GoofGoof]

Or an African safari or trip to the Great Wall of China...not sold yet, guess I have no future selling DVCs

 

[captainkidd]

I wonder if this will see resale prices go up a crazy amount as well.

The good news is, I no longer have to worry about whether or not I should buy into DVC through Disney.

 

[Mr.Skunkape]

With DVC prices going up are they setting the stage for large rack rate increases on non DVC resorts. On the bright side you can now charge more to rent your points to others.

 

[GoofGoof]

I wonder if this will see resale prices go up a crazy amount as well.

The good news is, I no longer have to worry about whether or not I should buy into DVC through Disney.

I doubt it will really impact it too much. Seems like there are 2 camps, the buy direct or the buy resale. It doesn't seem that common to hear someone say they thought about buying direct from Disney but then realized it would be so much cheaper to buy resale so went that route. The resale market is largely based on available inventory and to a lesser extent years left on contract. If Disney starts exercising ROFR more frequently it could boost resale prices on the cheaper resorts like OKW or VB. As the years left start to get smaller and smaller on places like BWV and BCV it will be interesting to see how low resale goes and/or if Disney starts to offer an extension price for current owners. Since in reality you are prepaying a portion of your future hotel stays the buy in price should steadily decrease to zero as the number of years decreases. 2032 in less than 20 years away now. In the next 10 years I would expect to see extension offers.

 

[GoofGoof]

With DVC prices going up are they setting the stage for large rack rate increases on non DVC resorts. On the bright side you can now charge more to rent your points to others.

Rack rates going up is a certainty. Definitely factors in when Disney talks break even for DVC sales. Renting points is a tricky process. Seems there are some owners who just don't want to pay fees that keep the rental market in check and rates low. The point rental market is so hard to predict. In theory it should go up as rack rates and DVC fees go up, but if you ask people who regularly rent they pay virtually the same amount per point as they did 5 or more years ago. Defies basic economics and to some extent logic.

 

[captainkidd]

With DVC prices going up are they setting the stage for large rack rate increases on non DVC resorts. On the bright side you can now charge more to rent your points to others.

Question is, will people still pay for it?

There's been a dark cloud hanging over Disney for the past few years, for me anyways. I know our time there is coming to an end, at least, in the sense that we have come to know. Resort Prices are getting ridiculous. Ticket prices are getting ridiculous. Food prices are getting ridiculous. At the risk of insulting future members, I can't see how anyone could possibly want to buy DVC anymore. Putting aside the DVC expense, going to Disney in any respect is becoming a game for just the upper class. And give their decline in quality, it's even less attractive. On top of that, it will become more difficult to rent points as people will not want to pay what you have to charge to come out ahead. I honestly see Grand Floridian DVC opening, then Polynesian, then that's it. They'll be at a point from a cost perspective where they will have milked it for all they can.

I hate to turn this into a Disney VS. Universal thing, but right now, I'd be more apt to buy into some sort of Universal timeshare program. At least there, great and exciting things are happening at the parks.

 

[Disneykidder]

I'm guessing that points to stay at VGF will be pretty high. That and not having many of those rooms will definitely make it hard to book unless it's your home. I also think the price per point will be extremely high. How high? I'm not sure but if the highest is at $165 a point now, I would say at least $15 more per point. I could be way off but this is my hunch. There are very loyal GFers out there who will definitely pay it so I don't forsee Disney offering much of a deal on it at first.

 

[Phonedave]

Yes, but reselling points means you keep making money over and over without actually doing much... I think that was the poster's point.. that the cash cow keeps on giving when Disney sells the same points over and over..

Exactly "make" some points by building for $40. Sell them for $100, and then buy them back for $50 and sell them again for $100.

The closest business model I know of like that is my ex brother in laws pallet compnay. He would take the pallets you needed to get rid of for $4 each, then fix them, and sell them for $10 each. At least he was doing something by fixing them. DVC is just reselling teh same points over and over again. I have to applaud them.

-dave

 

[Phonedave]

The people making these decisions are looking at financial spreadsheets and making decisions based on ROI.

Disney is not selling the "same points over and over." It costs them money to buy them back. If I'm Disney, I can exercise ROFR at BWV at ~$60/point and then try to sell the points on a 17 year old facility for $130/point (BWV's new price), having to pay the DVC sales rep's commission above the $60/point that it cost me to exercise ROFR. Or I can build a brand new DVC next to the GF for under $30/point (see previous BLT example) and then sell it for close to $200/point.

5 or 6 years ago Disney used to exercise ROFR aggressively, snapping up about 40% of the sales. Now it's down to less than 10%. Disney has plenty of inventory at their older DVC resorts but when someone sits down for a discussion with a DVC sale rep, they're immediately drawn to the newest properties. The new resort is almost always going to be the faster moving sale than the well-established resort, even at a higher price.

There's a reason Disney keeps building these things.

Do you know that for a fact? They don't seem to be worried about holding on to points. Most timeshare companies do not want to hold a large inventory. They pay dues just like the rest of us do.

-dave

 

[Phonedave]

Question is, will people still pay for it?

There's been a dark cloud hanging over Disney for the past few years, for me anyways. I know our time there is coming to an end, at least, in the sense that we have come to know. Resort Prices are getting ridiculous. Ticket prices are getting ridiculous. Food prices are getting ridiculous. At the risk of insulting future members, I can't see how anyone could possibly want to buy DVC anymore. Putting aside the DVC expense, going to Disney in any respect is becoming a game for just the upper class. And give their decline in quality, it's even less attractive. On top of that, it will become more difficult to rent points as people will not want to pay what you have to charge to come out ahead. I honestly see Grand Floridian DVC opening, then Polynesian, then that's it. They'll be at a point from a cost perspective where they will have milked it for all they can.

I hate to turn this into a Disney VS. Universal thing, but right now, I'd be more apt to buy into some sort of Universal timeshare program. At least there, great and exciting things are happening at the parks.

Honestly, if I were thinking about buying to DVC now, as opposed to 5 years ago, there may have been a different outcome. I am still happy with my contract, and I still use it. But WDW has changed in the last two years for me as well. Maybe it is a change in the economy, maybe it is the now insane amount of federal taxes I pay, but WDW seems like more and more of a nickle and dime place to me now. We are no longer going every year, or multiple times a year. Something has changed.

-dave