Davids DVC: Rental reimbursement or rescheduling?

[Galun]

I think you ignore the fact that possibly 50% of small businesses will go out of business. This disrupts jobs for not only the owner but all the employees. If the owners have no money left and no credit, they won't be reopening. I think the concept that everything will just bounce back is overly optimistic. Some mortgage companies are giving 90 days but at end you owe all three months. If you were out of work where does money come from?

It’s certainly possible but I don’t think it’s probable. The government just injected 2 trillion into the economy at an unprecedented pace, and they signaled that the help would be basically unlimited. They recognize that it’s a cash flow issue. The new paycheck protection loans, specifically targeted toward small businesses with les than 500 employees, requires no personal guarantee, little to no underwriting (you can get the cash in as quick as a week), and covers 2.5 months of payroll / rent / utilities. If you are a small business, the feds just covered your fixed cost for 2.5 months, and possibly longer if this continues.

I don’t think it’s a V shape rebound but I think the doom and gloom scenario is vastly exaggerated. You see the unemployment numbers spike and news of massive layoffs / furloughs, but that’s so people can get unemployment insurance immediately while all the government stimulus is being sorted out. Just IMO.

 

[McCrae]

I’d caution against having too much confidence on a successful chargeback by the renter. The contract said it was non refundable and the renter was advised to purchase travel insurance. Granted nobody expected a pandemic, but cancel for any reason travel insurance does exist. David’s response to the chargeback will be that the renter should have purchased this type of insurance. Now he would certainly want to avoid the chargeback because it’s determined on a case by case basis, and he might lose. So he is offering the travel credit to avoid as many of those as possible.

Disney is refunding points for resorts that are closed, basically restoring them to whatever status they were before. There are really three categories of points status on the date of cancellation: 1). those that are in current UY that are still bankable, 2). those are are in current UY that are not bankable, and 3). those that were banked from previous UY. Not counting borrowed points because they will be restored to the future UY. Doubt there is a lot of those being rented anyways since rental prices had been going up.

If my points are in category 1 - points that are still bankable say by end of April (which seems to be when the feds are aiming to lift social distancing), I will provide a refund of the 70% paid to David’s and offer to re-rent my points, with the hope that the cash will allow David’s to survive this. Because If they don’t, I won’t get my remaining 30%. He is unlikely to get new reservations (and new cash) for the foreseeable future, so these points will likely be re-rented to someone with a travel credit. If the points are still bankable when I get them back due to a cancellation, then no harm no foul really, I don’t mind refunding the cash to give David’s a lifeline.

If my points are in category 2 and 3, the points are worth significantly less value to me, but I do already have the 70% which limits my maximum loss to 30% - the same amount I would have lost if David’s cease to exist. I am not providing a refund of any cash since that might be throwing good money after bad. However I will certainly offer to re-rent and it’s up to David’s to pull off the logistics of using those points given the more limited usage window. If David’s go under, that 70% I got would be enough to cover my MF, and then I have control in how to try to help the underlying renter.

If David’s go under, the bankruptcy trustee may go after the 70% he paid me for a reservation that had been cancelled. However I doubt a Canadian judgement is enforceable in the US.

David’s lose if the owner keeps the 70% payment AND the cancelled points. They will obviously never work with you again, but they may no longer exist in a couple months. They can probably come after you, although I don’t think they have the resource to do so. I’d hope owners won’t do this since we all benefit from a vibrant rental market. David’s also lose if the renter successfully pull off a chargeback. I think they are doing the right thing to try to minimize potential damage. If they do lose a chargeback, they don’t have to pay new cash to the credit card company, as the chargeback will be against future new credit card charges. If they got the points back from the owner to re-rent, then they are not spending new cash to fulfill reservations either. In theory they can survive the chargebacks.

This is a cash flow / liquidity issue. They can survive this if they can successfully utilize points in categories 2 and 3 to fulfill travel credit demands, while having the cash flow to weather through the storm before going under (they will get no new cash in for the foreseeable future due to significant drop off in travel demand - see the troubles with airlines / cruises / hotels right now). Large companies have credit lines for this reason. I hope he has access to liquidity to weather through this as he does have a good business model. I think this is why he is basically begging for the 70% back to get cash now.

Given current technology, it’s only a matter of time before a vaccine is developed, and people have short memories. The market will be depressed this year and possibly next, but Disney and DVC will be fine. David’s may not exist, but a new company will fill the void, with new contract terms that spell out force majeure.

you follow the example you give for no1. David will receive the benefits of two commissions

I’d caution against having too much confidence on a successful chargeback by the renter. The contract said it was non refundable and the renter was advised to purchase travel insurance. Granted nobody expected a pandemic, but cancel for any reason travel insurance does exist. David’s response to the chargeback will be that the renter should have purchased this type of insurance. Now he would certainly want to avoid the chargeback because it’s determined on a case by case basis, and he might lose. So he is offering the travel credit to avoid as many of those as possible.

Disney is refunding points for resorts that are closed, basically restoring them to whatever status they were before. There are really three categories of points status on the date of cancellation: 1). those that are in current UY that are still bankable, 2). those are are in current UY that are not bankable, and 3). those that were banked from previous UY. Not counting borrowed points because they will be restored to the future UY. Doubt there is a lot of those being rented anyways since rental prices had been going up.

If my points are in category 1 - points that are still bankable say by end of April (which seems to be when the feds are aiming to lift social distancing), I will provide a refund of the 70% paid to David’s and offer to re-rent my points, with the hope that the cash will allow David’s to survive this. Because If they don’t, I won’t get my remaining 30%. He is unlikely to get new reservations (and new cash) for the foreseeable future, so these points will likely be re-rented to someone with a travel credit. If the points are still bankable when I get them back due to a cancellation, then no harm no foul really, I don’t mind refunding the cash to give David’s a lifeline.

If my points are in category 2 and 3, the points are worth significantly less value to me, but I do already have the 70% which limits my maximum loss to 30% - the same amount I would have lost if David’s cease to exist. I am not providing a refund of any cash since that might be throwing good money after bad. However I will certainly offer to re-rent and it’s up to David’s to pull off the logistics of using those points given the more limited usage window. If David’s go under, that 70% I got would be enough to cover my MF, and then I have control in how to try to help the underlying renter.

If David’s go under, the bankruptcy trustee may go after the 70% he paid me for a reservation that had been cancelled. However I doubt a Canadian judgement is enforceable in the US.

David’s lose if the owner keeps the 70% payment AND the cancelled points. They will obviously never work with you again, but they may no longer exist in a couple months. They can probably come after you, although I don’t think they have the resource to do so. I’d hope owners won’t do this since we all benefit from a vibrant rental market. David’s also lose if the renter successfully pull off a chargeback. I think they are doing the right thing to try to minimize potential damage. If they do lose a chargeback, they don’t have to pay new cash to the credit card company, as the chargeback will be against future new credit card charges. If they got the points back from the owner to re-rent, then they are not spending new cash to fulfill reservations either. In theory they can survive the chargebacks.

This is a cash flow / liquidity issue. They can survive this if they can successfully utilize points in categories 2 and 3 to fulfill travel credit demands, while having the cash flow to weather through the storm before going under (they will get no new cash in for the foreseeable future due to significant drop off in travel demand - see the troubles with airlines / cruises / hotels right now). Large companies have credit lines for this reason. I hope he has access to liquidity to weather through this as he does have a good business model. I think this is why he is basically begging for the 70% back to get cash now.

Given current technology, it’s only a matter of time before a vaccine is developed, and people have short memories. The market will be depressed this year and possibly next, but Disney and DVC will be fine. David’s may not exist, but a new company will fill the void, with new contract terms that spell out force majeure.

In option 1. David is keeping any cash that is refunded. I would be more likely to accept option 1. If the original renter was directly benefiting. I am also disappointed that David’s won’t consider other options, such as rebooking for the original owner or the transfer of points. I can see how David’s business could be at risk due to lack of future rentals. In the short term its not so clear what losses he would face. His own business insurance could cover him for much of this.

 

[foreUT]

I’d caution against having too much confidence on a successful chargeback by the renter. The contract said it was non refundable and the renter was advised to purchase travel insurance. Granted nobody expected a pandemic, but cancel for any reason travel insurance does exist. David’s response to the chargeback will be that the renter should have purchased this type of insurance. Now he would certainly want to avoid the chargeback because it’s determined on a case by case basis, and he might lose. So he is offering the travel credit to avoid as many of those as possible.

Disney is refunding points for resorts that are closed, basically restoring them to whatever status they were before. There are really three categories of points status on the date of cancellation: 1). those that are in current UY that are still bankable, 2). those are are in current UY that are not bankable, and 3). those that were banked from previous UY. Not counting borrowed points because they will be restored to the future UY. Doubt there is a lot of those being rented anyways since rental prices had been going up.

If my points are in category 1 - points that are still bankable say by end of April (which seems to be when the feds are aiming to lift social distancing), I will provide a refund of the 70% paid to David’s and offer to re-rent my points, with the hope that the cash will allow David’s to survive this. Because If they don’t, I won’t get my remaining 30%. He is unlikely to get new reservations (and new cash) for the foreseeable future, so these points will likely be re-rented to someone with a travel credit. If the points are still bankable when I get them back due to a cancellation, then no harm no foul really, I don’t mind refunding the cash to give David’s a lifeline.

If my points are in category 2 and 3, the points are worth significantly less value to me, but I do already have the 70% which limits my maximum loss to 30% - the same amount I would have lost if David’s cease to exist. I am not providing a refund of any cash since that might be throwing good money after bad. However I will certainly offer to re-rent and it’s up to David’s to pull off the logistics of using those points given the more limited usage window. If David’s go under, that 70% I got would be enough to cover my MF, and then I have control in how to try to help the underlying renter.

If David’s go under, the bankruptcy trustee may go after the 70% he paid me for a reservation that had been cancelled. However I doubt a Canadian judgement is enforceable in the US.

David’s lose if the owner keeps the 70% payment AND the cancelled points. They will obviously never work with you again, but they may no longer exist in a couple months. They can probably come after you, although I don’t think they have the resource to do so. I’d hope owners won’t do this since we all benefit from a vibrant rental market. David’s also lose if the renter successfully pull off a chargeback. I think they are doing the right thing to try to minimize potential damage. If they do lose a chargeback, they don’t have to pay new cash to the credit card company, as the chargeback will be against future new credit card charges. If they got the points back from the owner to re-rent, then they are not spending new cash to fulfill reservations either. In theory they can survive the chargebacks.

This is a cash flow / liquidity issue. They can survive this if they can successfully utilize points in categories 2 and 3 to fulfill travel credit demands, while having the cash flow to weather through the storm before going under (they will get no new cash in for the foreseeable future due to significant drop off in travel demand - see the troubles with airlines / cruises / hotels right now). Large companies have credit lines for this reason. I hope he has access to liquidity to weather through this as he does have a good business model. I think this is why he is basically begging for the 70% back to get cash now.

Given current technology, it’s only a matter of time before a vaccine is developed, and people have short memories. The market will be depressed this year and possibly next, but Disney and DVC will be fine. David’s may not exist, but a new company will fill the void, with new contract terms that spell out force majeure.

I respectfully disagree about the Renters' ability to win a chargeback. I know of numerous cases of Owners of vacation rentals w, supposedly, non-refundable contracts that lost chargebacks for much flimsier situations than this. You only have to go to a Community Forum on VR sites to read accounts of that happening. Personally, if I was a Renter or an Owner, I'd be demanding what that commission promised: and, in the case of the Renter, he should have a trip or his money, not a possibly worthless travel credit. After 15 years of very lucrative commissions, I don't understand why both Renters and Owners aren't being made whole by the broker.

 

[CraigInPA]

I roughed out some numbers last night and I don't think this is nearly as dire as people are making it out to be. Lots of assumptions but I don't think I'm far off. Start with for a 6 week period (mid march to end of April) David has 10k points he's brokered. Out of that hes collected 200k, kept 45k, payed owners 108K and has 47k sitting in an account for check in day. I'm also assuming a 50% margin on the business meaning 22k of the 45K is profit.

If you assume 1/3 can be rebooked, then take 2/3 of all the above numbers. 132 collected, 30 kept, payed 71 and 31 sitting in an account. Out of the 132 liability now there is essentially 46 cash. the 31 not paid to owners and profit margin on the 30. so the cash needed is 86 at the most. Reduce the liability by 30% for owners who return payments and renters who take a voucher which is either for less value of never used. Leaves about 60k in liability. Now if 7 weeks equates to 22k in profit then you are looking at using the margin for another 21 weeks to cover the liability. Employees still paid, it's the 50% margin you are eating into and with bookings out 11 months covering 4 months is not the end of the world.

I think your figures grossly underestimate the volume of David's business. He says he has 40 employees. Assuming he is 100% virtual office with no overhead whatsoever, and paying his 40 part time employees minimum wage, he needs to rent more than 10k points every month just to break even. Let's pick 20k, giving him a 50% margin and something to pay himself.

For 6 weeks of outage, he has rented 30k points for a total of $540k. Of that, $305k has already been sent to the owners, leaving $235k. His wages for the period (using the minimum wage model and $15k for himself) are $55k, leaving $180k. Of the remaining amount, $90k is earmarked for owners final payment. In theory, he has $90k remaining. In practice, he has the full $180k because he hasn't been paying the owners their final payment. Now, let's see what happens to the renters. Let's assume that 1/3 of the points are able to be re-used, and the renters get a new reservation. The other two groups we'll split 50/50. 50% of the renters refuse to deal with David's any more, and 50% will take a chance on him with travel credits. The 10k points rented by those who want nothing to do with him will generate $180k in charge backs. He has $180k in the bank (in theory). He needs to find $180k to make up the future liability to those renters who got travel vouchers, and he needs to find $45k for the remaining 30% due to the owners who re-rented points through him. So, roughly $1 from every point rental for a year will pay back his future liabilities. That's not terrible, and he could survive this.

But wait... He survived because he didn't pay the owners the last 30% owed to them, and he's telling the owners who may re-rent that they may not get their 30% either. He may have greater liability if a lower number of owners don't want to re-rent through him knowing they won't get the remaining 30%. He's further angered some owners by asking them to refund the 70% already paid. He may have less liability if people don't or can't use the travel vouchers. He could also have a larger liability if the percentage of renters who issue a charge back is higher than 1/3. He could have a very serious problem if the number of owners who now have worthless points or won't re-rent with him is higher than 2/3. He could be funding his future liabilities based upon cash flow, and may not have sufficient funds in the bank to pay for what could be a tsunami of charge backs.

There are just too many unknown variables, starting with the number of points and ending with the renter and owner's behaviors to accurately model this.

But, you can see why many of us have a belief that David's will not survive.

 

[Lewisc]

I roughed out some numbers last night and I don't think this is nearly as dire as people are making it out to be. Lots of assumptions but I don't think I'm far off. Start with for a 6 week period (mid march to end of April) David has 10k points he's brokered. Out of that hes collected 200k, kept 45k, payed owners 108K and has 47k sitting in an account for check in day. I'm also assuming a 50% margin on the business meaning 22k of the 45K is profit.

Start with you 6 week assumption. June 1 possible opening suggests at least 10 weeks. All of your figures came out of thin air.

I actually read elsewhere that David's team is 42 employees. I think this is only the tip of the iceberg, and actual numbers are much higher.

We have no idea if those are 42 full time employees, part time employees or people paid on a commission basis. That said trying to sort this out, matching members UY limitations with renters desired dates with DVC inventory has to be labor intensive.

I’d caution against having too much confidence on a successful chargeback by the renter. The contract said it was non refundable and the renter was advised to purchase travel insurance. Granted nobody expected a pandemic, but cancel for any reason travel insurance does exist. David’s response to the chargeback will be that the renter should have purchased this type of insurance. Now he would certainly want to avoid the chargeback because it’s determined on a case by case basis, and he might lose. So he is offering the travel credit to avoid as many of those as possible.

......

Given current technology, it’s only a matter of time before a vaccine is developed, and people have short memories. The market will be depressed this year and possibly next, but Disney and DVC will be fine. David’s may not exist, but a new company will fill the void, with new contract terms that spell out force majeure.

The contract specified a non-refundable payment in exchange for a specific resort reservation. David's stated in an email the contract became invalid (void) when the reservation was cancelled. Some posters in this thread disagree. Do you get a refund if a concert is cancelled? Even though the ticket says nonrefundable? Common sense suggests if the actual service being contracted for isn't performed the customer gets a refund.

Most travel insurance excludes coverage for pandemics. At least one poster is having issues collecting on a CFAR policy. Polices only insure non-refundable expenses. A case can be made a refund should be obtained from the supplier instead of from the insurance company.

The annual vaccine for seasonal flu is only 50% effective, or less. Some people think, I'm not sure of the evidence, COVID is (or will) mutate frustrating vaccines.

 

[DGsAtBLT]

Uh, so I tried to call and can’t connect. Is this a high volume of calls or are they disconnected? Apologies if this is not a new development.

 

[McCrae]

I read on David’s Facebook page comments from renters asking about rebooking. I wonder why David is not talking up owners offers to rebook for their renters?

 

[Brian Noble]

If I were a renter with a reservation that has a check-in date that has already passed, I would initiate a chargeback request right now, using the travel voucher email as evidence that the trip was not delivered and the money was not refunded. It might not work, but credit card companies tend to err on the side of their direct customers, because that's who pays the bills.

Charge back rules are different in each country, I've read that in the U.S you need to do it with 6 months

There is a minimum in which the CC issuer is required to offer the opportunity to make a request. In practice some will go longer, especially for customers they want to keep.

 

[ziravan]

I read it again and it doesn't say anything to that effect. It does say I'm responsible to pay for any reservations I cancel. So I must pay him back. But since I'm not cancelling the reservation then, that becomes a grey area. I have a feeling DVC will cancel two of the reservations as they are in April. So at that point I have to return the money. Right but I prefer to return to the renter but I'm not sure I can. I'll never rent through him again. Never... Never...

I would contact the renters directly, and work to rebook with them or refund them the 70% directly.

At this point, my guess is the renter will jump at being made 70% whole, especially when they know or understand that you aren’t holding the remaining 30%.

 

[starry_solo]

I read it again and it doesn't say anything to that effect. It does say I'm responsible to pay for any reservations I cancel. So I must pay him back. But since I'm not cancelling the reservation then, that becomes a grey area. I have a feeling DVC will cancel two of the reservations as they are in April. So at that point I have to return the money. Right but I prefer to return to the renter but I'm not sure I can. I'll never rent through him again. Never... Never...

does the contract say you have to return the funds to him? Davids doesn’t seem to be saying that the contract says that (to the owners)
it seems like he is asking owners to return funds to him but not because the contract requires it

 

[Krandor]

I respectfully disagree about the Renters' ability to win a chargeback. I know of numerous cases of Owners of vacation rentals w, supposedly, non-refundable contracts that lost chargebacks for much flimsier situations than this. You only have to go to a Community Forum on VR sites to read accounts of that happening. Personally, if I was a Renter or an Owner, I'd be demanding what that commission promised: and, in the case of the Renter, he should have a trip or his money, not a possibly worthless travel credit. After 15 years of very lucrative commissions, I don't understand why both Renters and Owners aren't being made whole by the broker.

And don't forget Davids has send an email wherehe believes the ccontract with the renter is no longer valid. If the contract isn't valid, renter shoould get a refund. I'd include that email with any chargeback request.

 

[fsjking]

It’s certainly possible but I don’t think it’s probable. The government just injected 2 trillion into the economy at an unprecedented pace, and they signaled that the help would be basically unlimited. They recognize that it’s a cash flow issue. The new paycheck protection loans, specifically targeted toward small businesses with les than 500 employees, requires no personal guarantee, little to no underwriting (you can get the cash in as quick as a week), and covers 2.5 months of payroll / rent / utilities. If you are a small business, the feds just covered your fixed cost for 2.5 months, and possibly longer if this continues.

I don’t think it’s a V shape rebound but I think the doom and gloom scenario is vastly exaggerated. You see the unemployment numbers spike and news of massive layoffs / furloughs, but that’s so people can get unemployment insurance immediately while all the government stimulus is being sorted out. Just IMO.

lol I must have missed the part of the stimulus that covers installment loans and lines of credit. A lot of businesses own their building, so no rent/mortgage. If you are shut down, you probably aren't paying payroll either as you would have laid most of your employees off. Companies like that use loans to buy equipment, or lines of credit to buy supplies or get 30 day net bills from suppliers. Those payments are still having to be made and there is no income coming in. If you are a business thats still open and rent a storefront, this is great. If you are shut down completely and own your location this does almost nothing for you.

 

[fsjking]

If David’s were going to pay my renters the cash back I would be thinking differently about them. In my case the original renters would only get a travel voucher. If I returned the cash to David’s it would go in his pocket rather than being returned to the renter.

And then use that money to pay another owner for the reservation to fulfill the voucher. It's not like he gets to keep it.

 

[PrincessNelly]

I’d caution against having too much confidence on a successful chargeback by the renter. The contract said it was non refundable and the renter was advised to purchase travel insurance. Granted nobody expected a pandemic, but cancel for any reason travel insurance does exist. David’s response to the chargeback will be that the renter should have purchased this type of insurance. Now he would certainly want to avoid the chargeback because it’s determined on a case by case basis, and he might lose. So he is offering the travel credit to avoid as many of those as possible.

I actually think quite the opposite. Many credit card companies will side with the renter. The contract stated they rented X type of room at X resort for X amount of points/dollars, but since the resort closed the reservation could not be fulfilled. Therefore the customer is entitled to a refund.

IMO "no refunds" is totally different than a contract not fulfilled.

 

[vnovabri]

I would contact the renters directly, and work to rebook with them or refund them the 70% directly.

At this point, my guess is the renter will jump at being made 70% whole, especially when they know or understand that you aren’t holding the remaining 30%.

Although this may be the most fair solution, I would be cautious to actually do this. Without fully understanding how things will play out and the respective recourse sought by Renters, Rentees, and Davids. For example you could be creating double compensation situation where renters get your 70% back then a full credit from Davids and/or Davids comes seeking that 70% directly from you, which you already paid to the renters.

Unfortunately, Davids has created a situation that we will have to directly deal with them as the middle man on way or the other.

 

[McCrae]

And then use that money to pay another owner for the reservation to fulfill the voucher. It's not like he gets to keep it.

He gets to keep 2 lots of commission and not everyone will be able to use the voucher. Why not directly refund the Original renter?

 

[fsjking]

He gets to keep 2 lots of commission and not everyone will be able to use the voucher. Why not directly refund the Original renter?

The why he's doing it this way has been discussed. It's to keep liquid enough to try to survive this.

Where are you getting that he gets 2 commissions?

 

[Krandor]

The why he's doing it this way has been discussed. It's to keep liquid enough to try to survive this.

Where are you getting that he gets 2 commissions?

I think he's referring to an owner who lets david's re-rent their points.

 

[DGsAtBLT]

Wouldn’t re renting also complicate things in that prices have since gone up, so if for example an owner had initially used 300 points there’s now an extra $300 David’s collects assuming they’re all used for a new reservation, multiplied by how ever many new reservations there are. Where does that go? Maybe a buffer for situations where they can’t rent out the entire amount of original points.

 

[fsjking]

I think he's referring to an owner who lets david's re-rent their points.

He said if he returns the money it goes in David's pocket.

And even in a re-rent, there will end up being 2 reservations(original renters new res, and original owners new res), so he should get 2 commissions, all else being equal.

Wouldn’t re renting also complicate things in that prices have since gone up, so if for example an owner had initially used 300 points there’s now an extra $300 David’s collects assuming they’re all used for a new reservation, multiplied by how ever many new reservations there are. Where does that go? Maybe a buffer for situations where they can’t rent out the entire amount of original points.

Prices change. Disney has raised prices since a lot of people booked their vacations too. Rebooking means you pay what the price is for the new vacation. If you have a credit, it's going to be for what you paid out originally. The price increase was before all of this started, so it is what it is. There's nothing nefarious to it.