Coronavirus and DVC prices

[MICKIMINI]

Anyone seeing any drops in resale prices? I am now thinking I may try to pick up an AKV resale contract if I can get one around $80 a point. They were around $80 a point when I started looking 4-5 years ago.

My target price too!

 

[OKW Lover]

Thinking that Disney will exercise ROFR if the prices get lower. They can turn around and resell at full price in a relatively short amount of time.

 

[Brian Noble]

Thinking that Disney will exercise ROFR if the prices get lower. They can turn around and resell at full price in a relatively short amount of time.

Two problems with that.

1: They didn't during the Great Recession.
2: Prices have to get quite a bit lower than you'd think for it to make sense.

Rule of thumb in the timeshare industry is that cost of goods (construction, land prep, etc.) is no more than 25% or so of the total cost of the timeshare. Almost 50% is marketing. In other words, unless resale prices drop to 1/4 (or less) of developer prices, it's cheaper for Disney to just build new resorts than to ROFR old ones. It's easier to sell new resorts, too.

 

[Brianstl]

Two problems with that.

1: They didn't during the Great Recession.
2: Prices have to get quite a bit lower than you'd think for it to make sense.

Rule of thumb in the timeshare industry is that cost of goods (construction, land prep, etc.) is no more than 25% or so of the total cost of the timeshare. Almost 50% is marketing. In other words, unless resale prices drop to 1/4 (or less) of developer prices, it's cheaper for Disney to just build new resorts than to ROFR old ones. It's easier to sell new resorts, too.

Plus, in uncertain financial climate with a huge downside for Disney........

It would be business malpractice to direct cash toward DVC buybacks. Disney isn’t generating anywhere close to enough revenue to direct any of it towards buybacks.

 

[OKW Lover]

Two problems with that.

1: They didn't during the Great Recession.
2: Prices have to get quite a bit lower than you'd think for it to make sense.

Rule of thumb in the timeshare industry is that cost of goods (construction, land prep, etc.) is no more than 25% or so of the total cost of the timeshare. Almost 50% is marketing. In other words, unless resale prices drop to 1/4 (or less) of developer prices, it's cheaper for Disney to just build new resorts than to ROFR old ones. It's easier to sell new resorts, too.

Two answers to that:
1: Past performance is no indication of future results
2: Disney has essentially no incremental marketing on existing properties.

 

[Grumpy by Birth]

So if or when resale prices fall a good bit, Disney will still keep their direct pricing the same, right? What is Riviera now, like close to like $190 a point? I just can't see Disney selling that many direct points at that price if many of the L14s are around $100 or less.

You can already get resale deals pretty close to $100/point now on several of the resorts. But that hasn't prevented Disney from doing pretty well selling Riviera at almost double that price. If many of the L14s are going for $100 or less? Maybe that could have a bigger impact on direct sales?

 

[a742246]

Anyone seeing any drops in resale prices? I am now thinking I may try to pick up an AKV resale contract if I can get one around $80 a point. They were around $80 a point when I started looking 4-5 years ago.

You can always speak to a broker and tell them what you want and how much you want to pay. The broker may know someone desperate to sell and you may get it. Disney will more then likely let it go during ROFR during this crisis.

 

[CraigInPA]

The fundamental difference between the pandemic and the recession of 2006-2009 is that the recession caused many middle class job losses, whereas the pandemic has caused job losses to primarily target relatively low wage jobs in retail and hospitality. While each is equally tragic, the number of relatively low wage job holders who are DVC members is probably low. On the other side of the coin, the number of middle class DVC members is quite high. As long as the middle class wage earners aren't concerned about, or experience, job loss, there will be no mass dumping of DVC points into the market at the kind of prices we saw in 2009.

 

[SL6827]

You can already get resale deals pretty close to $100/point now on several of the resorts. But that hasn't prevented Disney from doing pretty well selling Riviera at almost double that price. If many of the L14s are going for $100 or less? Maybe that could have a bigger impact on direct sales?

Ya, some of them you can get close to 100.00. I just wonder though if BCVs or BWVs, or any of the real premium resorts, will get that low? That could be some serious competition right there. It will be interesting to see how low HH and VB get.

 

[a742246]

The fundamental difference between the pandemic and the recession of 2006-2009 is that the recession caused many middle class job losses, whereas the pandemic has caused job losses to primarily target relatively low wage jobs in retail and hospitality. While each is equally tragic, the number of relatively low wage job holders who are DVC members is probably low. On the other side of the coin, the number of middle class DVC members is quite high. As long as the middle class wage earners aren't concerned about, or experience, job loss, there will be no mass dumping of DVC points into the market at the kind of prices we saw in 2009.

If this pandemic last more than 3 months it will begin to effect middle class workers very hard also. The banking industry will become in disarray which will in turn effect everyone.

 

[glamdring269]

If this pandemic last more than 3 months it will begin to effect middle class workers very hard also. The banking industry will become in disarray which will in turn effect everyone.

No doubt. We're talking about Disney not exercising ROFR because they have cash flow problems. This type of problem is plaguing pretty much every other company in the world right now. Eventually that is going to lead to pay cuts, layoffs, etc. even in the corporate sector in most every industry.

 

[Bing Showei]

As long as the middle class wage earners aren't concerned about, or experience, job loss, there will be no mass dumping of DVC points into the market at the kind of prices we saw in 2009.

We are two weeks into paralysis of the world's largest economy. We are three months into an iron-fisted shutdown of the second largest world economy that only loosened its grip recently. And while China may be prepared to fire up the supply chain, the rest of the world just buckled down and is not buying anything. The full weight of what we are catching a glimpse of has only just begun, and no class will be spared, save for those who helped orchestrate this grand calamity.

 

[Brian Noble]

Two answers to that:
1: Past performance is no indication of future results
2: Disney has essentially no incremental marketing on existing properties.

I think we are about to find out which of us is right, unfortunately.

 

[Brianstl]

People are paying too much attention to who is losing their job and not enough to the psychological effect that what is happening is having on potential buyers. That was what caused buyers to dry up in 2008 and is what is the biggest threat to buyers drying up again.

 

[FireflyTrance]

I disagree that only low wage workers are losing their jobs. I have many friends and neighbors who are middle class small business owners that are also being hurt by this.

 

[CanadaDisney05]

The fundamental difference between the pandemic and the recession of 2006-2009 is that the recession caused many middle class job losses, whereas the pandemic has caused job losses to primarily target relatively low wage jobs in retail and hospitality. While each is equally tragic, the number of relatively low wage job holders who are DVC members is probably low. On the other side of the coin, the number of middle class DVC members is quite high. As long as the middle class wage earners aren't concerned about, or experience, job loss, there will be no mass dumping of DVC points into the market at the kind of prices we saw in 2009.

I disagree that only low wage workers are losing their jobs. I have many friends and neighbors who are middle class small business owners that are also being hurt by this.

No doubt that it's not "only low wage workers losing their jobs". However, it is far more likely that we are seeing a disproportionate amount of job loss in the "low wage" category. Without formalized statistics, the vast majority of job losses so far have been in the front facing service sector (retail, restaurants, bars, airlines, hair dressers, etc....). These groups represent a much larger percentage of the overall population, than they do the DVC Owner population. As @CraigInPA was suggesting, until the economic fallout from all of this starts having a "major" impact on the job security of the upper middle class (which I would expect to be the vast majority of the DVC population), there likely won't be the fire sale on DVC contracts that some are expecting.

What you may be seeing is sample bias. I don't know your personal situation, but most people tend to socialize in similar economic circles as their own situation. If you fall into the "middle class", you likely are socializing with others in the "middle class", therefore those job losses are being magnified.

 

[ELMC]

No doubt that it's not "only low wage workers losing their jobs". However, it is far more likely that we are seeing a disproportionate amount of job loss in the "low wage" category. Without formalized statistics, the vast majority of job losses so far have been in the front facing service sector (retail, restaurants, bars, airlines, hair dressers, etc....). These groups represent a much larger percentage of the overall population, than they do the DVC Owner population. As @CraigInPA was suggesting, until the economic fallout from all of this starts having a "major" impact on the job security of the upper middle class (which I would expect to be the vast majority of the DVC population), there likely won't be the fire sale on DVC contracts that some are expecting.

What you may be seeing is sample bias. I don't know your personal situation, but most people tend to socialize in similar economic circles as their own situation. If you fall into the "middle class", you likely are socializing with others in the "middle class", therefore those job losses are being magnified.

I was thinking similarly to this but quite frankly, I couldn't find a way to phrase it that isn't, well, harsh. But I think you've done a nice job ripping the band-aid off the topic so I'll weigh in, with apologies in advance if what I'm saying comes across the wrong way.

I agree with the general premise above. The issue we're having is that big corporations and the stock market are having undue influence over how this economic situation is being handled. Furthermore, the people who are in those circles are by and large not the ones being immediately punished by the economic shut down. Most executives are working from home and it is business as usual whereas small business owners, hourly workers (regardless of pay level), and those in the service industry are being decimated. Unfortunately, those aren't the people who have an influence over the politicians or the economy. Bringing it back to DVC, I wonder which group of people best represents DVC owners. If it's group A, then the impact on DVC prices will only be as severe as the financial fallout is to those with influence over the situation. If it's group B (those getting hammered) then the impact on DVC pricing will be significant and severe. I can't say because I don't know who DVC owners are, by and large.

To contradict this point (and the one above that is very similar, so similar in fact that it appears as if I just stole that idea and made it my own), if the ramifications of our current situation continue to impact the stock market after this minor recovery (which I think they will) then everyone will be in the same boat....screwed. Once that happens, that's when you'll see the fire sale. Come to think of it, I think that was said above too.

 

[purplenancy27]

Is there no one from Texas on here. We are an oil and gas state and many big companies are furloughing your “ middle class” earners. If you dont think the middle class will be affected -that is just not realistic.

 

[sethschroeder]

Is there no one from Texas on here. We are an oil and gas state and many big companies are furloughing your “ middle class” earners. If you dont think the middle class will be affected -that is just not realistic.

Is there any benefit to a worker to be furloughed vs let go? I mean I know you are more likely to be brought back to work at some point in the future but I mean for that time you are out of work is there any benefit?

 

[TexasChick123]

Is there no one from Texas on here. We are an oil and gas state and many big companies are furloughing your “ middle class” earners. If you dont think the middle class will be affected -that is just not realistic.

Many of my family members work in oil and gas and many have lost their jobs. They’re upper middle class too.