Direct Purchase benefits announced!

[maminnie]

My view is that although they have the power, I would refrain from calling it a right. It is not reasonable in any stretch of the imagination for Disney to not have a responsibility for resale value.

ROFR is solely about establishing a certain re-sale value. Maintaining and updating properties is partially about retaining retaining a re-sale value. Changing benefits was solely about lowering the value so Disney can profit at current owners expense.

In my opinion Disney has also devalued direct purchase ownership and in the long run my effect sales. By making a DVC ownership worthless on the secondary market they have taken away a key purchasing point.

king974:

Many on the boards claim that many (some even say most) direct buyers don't even look into resale and/or don't care about resale as they claim they are likely never going to sell (as I have said, I hope these people's lives continue without any possible financial issues that may cause them to have to sell). I find this absolutely baffling and amazing. If one buys 250 points at BLT for $110 that is a $27,500 purchase!! People buy home theater systems in the thousands and spend hours and hours researching which is the best. People spend hours reseaching what car to buy some of whom even think about resale. (Toyota's advertising talks about it.) The list goes on and on. To think that someone makes a $27500 purchase without wondering what would happen if they have to sell, makes no sense to me at all unless one has unlimited funds.

So I too feel this may come back to haunt DVC/Disney down the rode with direct sales. DVC /Disney may be surprised to find out that resale value actually may have been a very key unstated selling point. History shows that DVC held its value better then some other timeshares hence why some may not have hesitated to purchase. That may change down the road.

I have monitored DVC resale values for years. There has been nothing but the economy and supply and demand for me to be concerned about relative to the resale values of my two owner interests. This new rule potentially changes everything.

In the meantime all we can do as owners is sell or hold on and hope that in the end it is not as bad as we expected.

 

[CMOORE185]

To maintain a healthy Vacation Club Disney needs to be able to sell their new properties. New properties also bring value to current members in that it gives us more options to vacation. Although none of us wants to see a decrease in value of our ownership, what is DVC suppose to do when the difference in resale vs direct stops people from buying direct. It benefits us all if they can sell out their new resorts and stay financially sound. If you are in the club for the long haul this is probably a sound business decision. I do not think DVC is just thinking of short term profit, but of long term health of the club.

 

[maminnie]

To maintain a healthy Vacation Club Disney needs to be able to sell their new properties. New properties also bring value to current members in that it gives us more options to vacation. Although none of us wants to see a decrease in value of our ownership, what is DVC suppose to do when the difference in resale vs direct stops people from buying direct. It benefits us all if they can sell out their new resorts and stay financially sound. If you are in the club for the long haul this is probably a sound business decision. I do not think DVC is just thinking of short term profit, but of long term health of the club.

Maybe DVC is simply charging too much per point and getting greedy. When there was less of a spread between resale and direct, there didn't seem to be quite so many problems for DVC/Disney...some chose resale to save a few dollars and many others preferred direct.

The difference between direct and resale may now get SO VAST that it may force even more to go resale as the direct purchase will just make no sense despite the additional vacation options/benefits.

 

[CMOORE185]

Maybe DVC is simply charging too much per point and getting greedy. When there was less of a spread between resale and direct, there didn't seem to be quite so many problems for DVC/Disney...some chose resale to save a few dollars and many others preferred direct.

The difference between direct and resale may now get SO VAST that it may force even more to go resale as the direct purchase will just make no sense despite the additional vacation options/benefits.

I actually hope this move works for them, because if it does not there may be more changes on the horizon. They are going to continue to do what they need to do to sell direct, at the price per point they think is necessary.

 

[disneynutz]

To maintain a healthy Vacation Club Disney needs to be able to sell their new properties. New properties also bring value to current members in that it gives us more options to vacation. Although none of us wants to see a decrease in value of our ownership, what is DVC suppose to do when the difference in resale vs direct stops people from buying direct. It benefits us all if they can sell out their new resorts and stay financially sound. If you are in the club for the long haul this is probably a sound business decision. I do not think DVC is just thinking of short term profit, but of long term health of the club.

I don't see it that way. DVD/sales shouldn't have anything to do with maintaining a "healthy" DVC. We pay a management company to maintain the DVC. Depending who you talk to, Disney may or may not be providing at their cost upgrades to the existing proprieties. As an example, I have been told buy one Disney manager that the SSR pool upgrade is being paid out of the SSR owners capital fund. A different manager told me that Disney is paying for the upgrade. When I asked why Disney isn't advertising the fact that they are paying for the upgrade, he didn't know. Now it seems to me that they would be letting everyone know how wonderful they are if they are giving the Members this gift. The new pool does add additional value, but it also has additional maintenance costs which the SSR owners will be paying for during the length of their membership..

Having additional new resorts for existing Members to vacation at is a plus, but there isn't a guarantee that that perk will continue.

Bill

 

[king974]

To maintain a healthy Vacation Club Disney needs to be able to sell their new properties. New properties also bring value to current members in that it gives us more options to vacation. Although none of us wants to see a decrease in value of our ownership, what is DVC suppose to do when the difference in resale vs direct stops people from buying direct. It benefits us all if they can sell out their new resorts and stay financially sound. If you are in the club for the long haul this is probably a sound business decision. I do not think DVC is just thinking of short term profit, but of long term health of the club.

Disney could have taken many actions other then the action they did take.

They could have lowered the price point they are charging per point for one thing. Lowering the price of direct sales to bring them in line with what the market can sustain would have been the fairest action. What Disney did is akin to a car manufacture saying we are not going to make spare parts for your model car any longer thus killing any residual re-sale value forcing a buyer to buy a new car if they wanted to get a full value.

Disney could have offered incentives to increase new sales. 0% interest loans for example.

They also could have increased the amount of times they executed ROFR. That in turn would have raised the cost of re-sales and made them less attractive to buyers.

Increasing overseas marketing. The dollar is at a low which makes overseas purchases cheaper.

Disney could have cut overhead and costs at DVC thus lowering annual dues, which have been skyrocketing. That in turn would have made sales more affordable for a wide range of buyers and possible slowed the amount of people looking to sell off ownerships. Less ownerships for sale translates to higher re-sale cost.

Disney had many options. They chose to devalue current owners values on the secondary market instead.

 

[Chuck S]

My view is that although they have the power, I would refrain from calling it a right. It is not reasonable in any stretch of the imagination for Disney to not have a responsibility for resale value.

ROFR is solely about establishing a certain re-sale value. Maintaining and updating properties is partially about retaining retaining a re-sale value. Changing benefits was solely about lowering the value so Disney can profit at current owners expense.

In my opinion Disney has also devalued direct purchase ownership and in the long run my effect sales. By making a DVC ownership worthless on the secondary market they have taken away a key purchasing point.

Your opinion does not seem to be shared by too many people here. Many feel the true value of DVC, really of any timeshare, is in the personal use of that timeshare, not in any resale price. Viewed in that perspecitive, my DVC will be worth the same to me on March 21 as it is on March 20.

It is not the nature of timeshares to retain resale value. If it were left strictly to market forces, DVC would likely be worth far less than it is currently on the resale market.

Look at all the other timeshares (many of them fully deeded forever properties) that sell for literally pennies on the dollar resale, yet are still selling relatively well from the developer. A timeshare, any timeshare, should not be viewed as a means of financial investment or gain. If you purchased DVC thinking it would retain a very healthy resale price, then you simply did not do your homework prior to purchase. Any RTU lease timeshare, if left solely to resale market forces, will continually lose resale pricing the closer it gets to the contract ending date.

 

[tjkraz]

Disney could have taken many actions other then the action they did take.

They could have lowered the price point they are charging per point for one thing. Lowering the price of direct sales to bring them in line with what the market can sustain would have been the fairest action.

Disney could have offered incentives to increase new sales. 0% interest loans for example.

If DVC lowered its direct prices, more people would have bought direct. That lowers the market for resale points. Smaller market for resale means prices fall. That approach gets us to the same place we will be on March 20, except that DVC is also making less per point.

They also could have increased the amount of times they executed ROFR. That in turn would have raised the cost of re-sales and made them less attractive to buyers.

I agree they could have. In fact, backing off on ROFR almost certainly had a more damaging impact on resale prices than this pending restriction will ever have.

But DVC had no more obligation to continue ROFR than they do to offer identical perks to both direct and resale.

Disney could have cut overhead and costs at DVC thus lowering annual dues, which have been skyrocketing. That in turn would have made sales more affordable for a wide range of buyers and possible slowed the amount of people looking to sell off ownerships. Less ownerships for sale translates to higher re-sale cost.

Skyrocketing? The numbers don't really support that. Annual increases of 1.5-2.5% are to be expected.

Our dues aren't based upon CPI or some other measure of consumer goods. Over 50% of our dues are tied to Cast Member salaries & benefits. Simply put, employees want raises and benefits (health care) continue to cost more every year.

Disney is in the midst of union negotiations with its workforce. The current proposal includes annual raises of 3%.

Dues also include volatile components such as fuel for theme park buses, DME, etc. Property taxes are set by the county.

 

[JimMIA]

Disney could have taken many actions other then the action they did take.

Yes, of course they could. There are always an array of options. Disney chose one which costs them little (in fact, reduces their costs going forward) and gives them a direct sales benefit to tout.

Disney could have offered incentives to increase new sales. 0% interest loans for example.

Yep, but instead of increasing their cost of sales considerably, they raised their interest rates and offered different inducements which cost them next to nothing.

They also could have increased the amount of times they executed ROFR. That in turn would have raised the cost of re-sales and made them less attractive to buyers.

Like the example of lower interest rates, Disney examined the options and decided to go in the opposite direction.

Sure greater use of ROFR would support resale prices at a higher level, but why should Disney pay out good money to do that? For the privilege of going into competition with themselves selling ROFR'd points at the same time they are currently actively selling several "new" resorts? That would be nuts.

Disney had many options. They chose to devalue current owners values on the secondary market instead.

No, they chose to create a differentiation between direct points and resale points, which offers an incentive to direct purchasers. The resale market is largely irrelevant to DVC direct sales and they certainly have no obligation to prop up prices.

 

[Brian Noble]

On March 21 a property will have a value of less then what it was on March 20.

It is not clear to me that this must be so. By my reckoning, the "missing" options have strictly less value than just renting your points out, and using the proceeds for the alternative vacation you desire. And, one can obtain that revenue by letting a service like DVC by request do all the legwork of advertising, customer acquisition, and payment processing---all you'd have to do is call and make the reservation.

If the resale market reacts rationally, there will be little to no difference in resale values that can't be attributed to other changes in supply and demand. That is perhaps a big if. Time will tell.

 

[cseca]

I think DVC dug themselves a big hole because they build too much too fast... SSR is huge and then Kidani follows. It takes/took them awhile to get those places to sell out.

I don't think that they are being unreasonable in the maintenance fee increases. I would rather they increase it a little bit more if it'll improve their system (mousekeeping, member services, maintenance). But I'm sure this opinion is not widely accepted since everybody wants as small of dues as possible (as do I).

 

[CMOORE185]

Disney could have taken many actions other then the action they did take.

They could have lowered the price point they are charging per point for one thing. Lowering the price of direct sales to bring them in line with what the market can sustain would have been the fairest action. What Disney did is akin to a car manufacture saying we are not going to make spare parts for your model car any longer thus killing any residual re-sale value forcing a buyer to buy a new car if they wanted to get a full value.

Disney could have offered incentives to increase new sales. 0% interest loans for example.

They also could have increased the amount of times they executed ROFR. That in turn would have raised the cost of re-sales and made them less attractive to buyers.

Increasing overseas marketing. The dollar is at a low which makes overseas purchases cheaper.

Disney could have cut overhead and costs at DVC thus lowering annual dues, which have been skyrocketing. That in turn would have made sales more affordable for a wide range of buyers and possible slowed the amount of people looking to sell off ownerships. Less ownerships for sale translates to higher re-sale cost.

Disney had many options. They chose to devalue current owners values on the secondary market instead.

Give Disney some credit that they know what they are doing. As others have said this change may have very little affect on your resale value at the same time increasing direct sales for Disney. As I said before, I hope this works or more changes may be on the way that will be worse than this change.

 

[zebsterama]

Disney could have taken many actions other then the action they did take.

They could have lowered the price point they are charging per point for one thing. Lowering the price of direct sales to bring them in line with what the market can sustain would have been the fairest action. What Disney did is akin to a car manufacture saying we are not going to make spare parts for your model car any longer thus killing any residual re-sale value forcing a buyer to buy a new car if they wanted to get a full value.

Disney could have offered incentives to increase new sales. 0% interest loans for example.

They also could have increased the amount of times they executed ROFR. That in turn would have raised the cost of re-sales and made them less attractive to buyers.

Increasing overseas marketing. The dollar is at a low which makes overseas purchases cheaper.

Disney could have cut overhead and costs at DVC thus lowering annual dues, which have been skyrocketing. That in turn would have made sales more affordable for a wide range of buyers and possible slowed the amount of people looking to sell off ownerships. Less ownerships for sale translates to higher re-sale cost.

Disney had many options. They chose to devalue current owners values on the secondary market instead.

I agree with you. Other's can sugar coat it anyway they want, in the end the value of the product has been lowered - not raised.

I think the true test will be seeing what DVC ROFRs after the March 21st deadline hits.

There are many - existing owners - which I've seen on these boards posting that they plan on picking up more points, but only after March 21st. I think that says it all; examples of persons who firsthand know the true value of DVC points but would rather wait because they feel that a better price point can be had by waiting. That above all - is a clear market indicator IMO.

Cheers,
Zebsterama

 

[JimMIA]

I agree with you. Other's can sugar coat it anyway they want, in the end the value of the product has been lowered - not raised.

Only to the degree that the new restrictions actually have an effect on resale price levels. It is unclear whether this change will actually affect resale prices, and none of us have a clue. We'll just have to see what happens.

I think the true test will be seeing what DVC ROFRs after the March 21st deadline hits.

I agree, but not just on March 21st. The key is what DVC does with ROFR over the long term.

For quiet a while now, DVC has used ROFR very sparingly and that has resulted in a substantial reduction in resale prices. I suspect current resale prices more closely reflect an accurate market valuation of DVC ownership, and if that's so, the pending minor change in the use of resale points will have little effect on prices.

What the change should do is make direct purchases less attractive between now and March 20, but MOST direct buyers are probably not aware of the resale marketplace to begin with. And those who are will be misled by DVC timeshare salesmen with their talk of ROFR.

There are many - existing owners - which I've seen on these boards posting that they plan on picking up more points, but only after March 21st. I think that says it all; examples of persons who firsthand know the true value of DVC points but would rather wait because they feel that a better price point can be had by waiting. That above all - is a clear market indicator IMO.

I think there are actually two distinct groups of knowledgeable resale buyers right now. One is the group you reference, who assume prices will drop after March 20. The other is the group which finds value in the pre-March 20 benefits and knows that NOW is the time for them to buy. We see clear evidence of both groups -- the "wait and see" group in posts here on the DIS, and the "buy now" group in the contracts flying out the doors of the resale brokers.

 

[tjkraz]

There are many - existing owners - which I've seen on these boards posting that they plan on picking up more points, but only after March 21st. I think that says it all; examples of persons who firsthand know the true value of DVC points but would rather wait because they feel that a better price point can be had by waiting. That above all - is a clear market indicator IMO.

Interesting thing, though, is that it takes two to tango. Just because a buyer offers doesn't mean it will get accepted.

Looking at TTS listings now, all decent (i.e. non-stripped) Animal Kingdom Villas contracts with 150-250 points have asking prices from $73 - 85 per point. In general, the ones with asking prices of $73 - 76 are sale pending.

If March 20 rolls around and the contracts remaining are all priced $77 and up, those sellers have absolutely no obligation to accept an offer of $68 per point, or whatever price some buyers now feel is justified.

DVC resale contracts are an extremely small system with sellers acting autonomously. While the rational response may be for prices to decline, the market is so small that prices could easily have an irrational response. Look no further than the fact that TODAY there are sellers asking asking $80-85 per point when only those priced >$76 have offers.

 

[crisi]

Disney had many options. They chose to devalue current owners values on the secondary market instead.

They could have done any of those things. But all of those things cost THEM money. What they did might cost you and me money. Why should Disney - a large publicly traded company with fiduciary responsibilities to its shareholders - put the need for my net worth to remain stable or increase over the need for their own net worth to remain stable or increase?

Don't drink the kool-aid. Its spiked. Disney is not interested in the end result being "making you happy" - their desired end result is "turning a profit." It happens to be that they can usually do that while giving people happy memories - and their marketing is all about how happy Disney will make you. But when the goal of making you happy with the goal of turning a profit conflict - they'll disappoint.

Also, Axe body spray does nothing to attract hot women - though my 12 year old sometimes seems convinced that is because he hasn't yet applied ENOUGH. And my husband has yet to turn into Isaiah Mustafa despite using Old Spice. I'm hoping it happens today.

 

[jodifla]

There were times in the past 15 years I could have sold my memberships for MORE than I paid for them, and that's after years of using them, and when they have less available years on them.

Yes, that was great, but not really all that realistic for the long term. (Although my BCV points are still worth more than I paid for them, and likely will be after March 20th as well, because of the small amount of points available there.)

It was inevitable that our contracts would eventually start to fall in value. I'm not convinced that there won't be a resale market after March 20. Most people simply don't use their points to trade out.

 

[CarolMN]

I.......(snip)..If the resale market reacts rationally, there will be little to no difference in resale values that can't be attributed to other changes in supply and demand. That is perhaps a big if. Time will tell.

I agree with you. Other's can sugar coat it anyway they want, in the end the value of the product has been lowered - not raised.......:

....(snip).....I'm not convinced that there won't be a resale market after March 20. Most people simply don't use their points to trade out.

I have to go with Brian and Jodi. Why would a rational person pay MORE to get an option to buy something that costs more with the option than the something costs without the option? (IMO, resale buyers as a group, are generally more informed & less emotional than direct buyers).

Rational buyers will see that a resale contract has the same value on 3/21 as it did on 3/20 (except that the RTU is one day closer to expiring.

 

[king974]

There were times in the past 15 years I could have sold my memberships for MORE than I paid for them, and that's after years of using them, and when they have less available years on them.

Yes, that was great, but not really all that realistic for the long term. (Although my BCV points are still worth more than I paid for them, and likely will be after March 20th as well, because of the small amount of points available there.)

It was inevitable that our contracts would eventually start to fall in value. I'm not convinced that there won't be a resale market after March 20. Most people simply don't use their points to trade out.

I don't believe that it was "inevitable" that value would start to fall further then the economy called for if Disney had not intentionally devalued it.

Of course there will be a market after 3/20. But Disney's stated mission was to make that market far less valuable.

And yes annual dues have been skyrocketing. Look at the numbers:
Old Key West Resort, the oldest of the DVC resorts had dues of $2.51 in 1991 and in 2008 had dues of $4.56. That means it has averaged a 3.57% increase, compounded annually.
BoardWalk Villas went from $3.70 in 1996 to $5.04 in 2008, an average annual compounded increase of 2.61%.
Villas at Wilderness Lodge went from $3.62 in 2000 to $4.87 in 2008, an average annual compounded increase of 3.77%.
So on average dues have increased 3.3% a year. Over a 10 year span that is a 33% increase! What offset that impact to me was the basically stable value of my ownership. Disney has now acted to remove that stability.

The market for re-sale is obviously not so small that Disney didn't find it attractive to them to devalue re-sales.

As was pointed out Disney did not use ROFR because it would have cost them money. By not doing so Disney allowed a wider spread between the secondary market and direct sales. Then Disney decided that spread was to wide and hurting direct sales so they decided to devalue the secondary market.

If the posts here are accurate Disney is researching ways to further reduce the value of ownership.

I never said that Disney had to "prop up" re-sale values. But I don't want to see my ownership value go the way of many, many, many other timeshare re-sales that have been devalued to pennies on the dollar.

 

[canoe86]

It is not clear to me that this must be so. By my reckoning, the "missing" options have strictly less value than just renting your points out, and using the proceeds for the alternative vacation you desire. And, one can obtain that revenue by letting a service like DVC by request do all the legwork of advertising, customer acquisition, and payment processing---all you'd have to do is call and make the reservation.

If the resale market reacts rationally, there will be little to no difference in resale values that can't be attributed to other changes in supply and demand. That is perhaps a big if. Time will tell.

I think prices fall. I think the changes have propped prices up in the short term. Maybe the will equalize after a bit, but they will fall.