The race to worthless

[CastAStone]

I am not going to lie to you all, I am worried.

Part of the appeal of DVC is that it maintains its value. Or at least some value. No matter what, you’ll be able to unload it.

If there’s even one worthless resort, you really can’t say that anymore. And I’m concerned we’re headed that way.

First take Vero Beach. Dues are high and getting higher. They increased over $1 per point last year and are now nearly $14. Meanwhile, renting points at VB can be done via a broker for as low as $19, and if you rent out points with David’s or DVC Rental Store, you’re only going to get $14-$16 per point.

If you can’t rent out your points for enough to cover dues, is there any value left? This seems very likely to happen in the next 5 years.

And if there is, once non-owners can rent points for cheaper than owners MFs, is there any value left? It seems plausible this could eventually happen as well, as point rental prices are fundamentally tied to WDW, not VB.


And then there’s the Cabins at Fort Wilderness. What will resale look like for those? A resale owner will be locked in to Only vacationing at the cabins, in one room type, forever, no matter how much their family changes, no matter if they decide they want to have a restaurant nearby, no matter if they wind up needing a scooter, no matter what.

The appeal of that seems incredibly narrow. At least direct owners can occasionally use the points at Old Key West or whatever.

I don’t doubt that the initial resale contracts will sell for real money, but what happens when there’s 20 contracts for sale at once? What happens when there’s 50? I’m incredibly concerned that we will see the contracts selling for peanuts and potentially eventually nothing at all. Even if there’s value vs renting points or paying cash, the commitment I think will be intimidating; there’s timeshare all over the globe that you can buy for less than you can rent a week. Will there be one at WDW?

Anyway, happy Friday.

 

[MyDogTink]

Interesting discussion. Random thoughts:
- when people purchased VB (pre-1998 I believe), there weren’t many resorts. So, you bought to stay at VB or either OKW or BWV if you wanted WDW. There wasn’t really a resale market so buying then really didn’t have a concept of future value or exit strategy.
- Woud you say DVC has ebb and flow? Look at the resale prices for PVB once IT was announced.
- sometimes I look at DVC now and wonder if overall it has the value it did when I purchased in 1998. My fear is WDW running good promos like the bounce back offers on regular hotel rooms and villas is diminishing the value of a DVC contract. I feel like the break even point of buying a contract now is longer with the good cash offers. I suppose the economy could change that in the future. Revenge travel has diminished so Disney needs to offer better hotel pricing now.
- re: CFW, it seems like DVC is getting out of the deluxe business. Feels like they are now moving to a moderate tier.

Your concern about resale CFW selling for peanuts, do you think that brings down the whole DVC house or do you think the CFW resale issue will be siloed from the rest of the DVC product?

 

[ehh]

I think the Vero Beach price collapse is only going to happen a few dollars after the rental cross-over, which itself I think will be slightly deferred by rental agencies coming up with a VB rental premium (to preserve supply). So at least a few years away.

But I do feel VB will have a price collapse prior to 2041. Maybe not all the way down to $0, but potentially something nominal like $2-5/pt. There will still be a market of buyers who don't want to deal with the hassle of renting, making the ownership premium worth it.

As for CFW, ugh. As it is, it's a hopeless resort in terms of sales (I'm quite looking forward to a stay later this year). It's entirely possible that there's nominal value resale contracts even sooner than VB, but we'll need to see a few things first: 2025 and 2026 dues. If these manage to stay flat, it'll hold off some doomsday stuff a little bit.

CFW's only hope, and by this I mean DVD's only* hope for CFW, is Reflections getting lumped into the same association/trust/flippity-floppity-floop. Sure, this will bring some dues dilution and CFW owners will be able to have more than 1 accommodation, which will make CFW itself more appealing, but the real magic trick here is masquerading the CFW points as REF points. It's the only way they'll find a dance partner.

* DVD does actually have another option here: incentives along the lines of "50 CFW Points FREE with purchase of 200 Poly Points". I'd be curious how many 199pt Poly contracts sell with this. (this would also guarantee $0 resale contracts)

what happens when there’s 20 contracts for sale at once?

Dang, every CFW owner selling at once, huh? Harsh.

 

[SleeplessInTO]

This is very interesting to think about.

I wonder if DVC / Disney in general would try to clamp down and somehow restrict the rental market. If people can’t easily rent points then the only comparison would be (discounted) rack rate vs DVC purchase… I don’t know how rack rates will fare in the future but rack rates in theory must exceed dues since dues should be an approximation of the expenses to operate the resort.

 

[CastAStone]

sometimes I look at DVC now and wonder if overall it has the value it did when I purchased in 1998. My fear is WDW running good promos like the bounce back offers on regular hotel rooms and villas is diminishing the value of a DVC contract. I feel like the break even point of buying a contract now is longer with the good cash offers

You don’t have to wonder; it’s empirically true that DVC was a better value in 1998 than 2024. There’s still value in a direct purchase for someone staying in a studio or a 2BR, but compared to the 70%+ savings offered by the early 90s OKW and BWV contracts (and points charts), the value equation is far far worse today.

 

[Chili327]

I Voted for Vero, but I also think the rental price for vero could climb pretty well too because of the 11mo window at Vero, if 11mo becomes more desirable (or is 7mo easy there?)

 

[CastAStone]

I Voted for Vero, but I also think the rental price for vero could climb pretty well too because of the 11mo window at Vero, if 11mo becomes more desirable (or is 7mo easy there?)

Only 1 room type needs the 11 month advantage at VB and it’s the most expensive one; wouldn’t be an option for most owners.

 

[TheDailyMoo]

It's very possible in the next 5-10 years you'll see a VB contract or two given away for free. There are always special cases where people's financial/life situation dictate extreme money saving moves. I don't think you'll see average resale prices reach 0 though...well...not until right close to the end. But then again like it's been said maybe DVC decides to implement some new failsafes when it comes to resale pricing not named ROFR. Who knows!

 

[BrianLo]

I don’t doubt that the initial resale contracts will sell for real money, but what happens when there’s 20 contracts for sale at once? What happens when there’s 50?

At this rate there will never even be a significant flow of resale contracts to begin with. The developer screwed itself on this one.

Though, I don't think the Cabins maintenance fee disparity is set in stone. In the same way that Vero Bay's necessarily are. If we see a bit of a settling where the fees are 10% above AKL's, maybe it starts to become more desirable.

Or even more nutty... maybe a developer subsidy?


I also think the rental markets are coming due for an owner bump. David's has really increased their margins. Which could stave off the price convergence on Vero for another few years. None of the other resorts really seem at risk though of crossing the rental threshold. I feel like the CAGR on renting points has been generally faster than maintenance fees have gone up.

 

[McCrae]

All of the DVC contracts will have value until the day they expire.

If you are buying any timeshare you should assume all of your initial investment is gone and you will get nothing back.

Most people who buy DVC probably don’t know about a resale market.

I would avoid buying any timeshare if writing off all of your investment isn’t an option for you.

 

[DVCsloth]

As long as you can use VB points to stay at other resorts it should still hold value. I'm not sure the availability of 3BR GV's or CCV Cabins at 7 months, but it seems like they would be good for certain people as SAP.

 

[AnnaKristoff2013]

I am not going to lie to you all, I am worried.

Part of the appeal of DVC is that it maintains its value. Or at least some value. No matter what, you’ll be able to unload it.

If there’s even one worthless resort, you really can’t say that anymore. And I’m concerned we’re headed that way.

First take Vero Beach. Dues are high and getting higher. They increased over $1 per point last year and are now nearly $14. Meanwhile, renting points at VB can be done via a broker for as low as $19, and if you rent out points with David’s or DVC Rental Store, you’re only going to get $14-$16 per point.

If you can’t rent out your points for enough to cover dues, is there any value left? This seems very likely to happen in the next 5 years.

And if there is, once non-owners can rent points for cheaper than owners MFs, is there any value left? It seems plausible this could eventually happen as well, as point rental prices are fundamentally tied to WDW, not VB.


And then there’s the Cabins at Fort Wilderness. What will resale look like for those? A resale owner will be locked in to Only vacationing at the cabins, in one room type, forever, no matter how much their family changes, no matter if they decide they want to have a restaurant nearby, no matter if they wind up needing a scooter, no matter what.

The appeal of that seems incredibly narrow. At least direct owners can occasionally use the points at Old Key West or whatever.

I don’t doubt that the initial resale contracts will sell for real money, but what happens when there’s 20 contracts for sale at once? What happens when there’s 50? I’m incredibly concerned that we will see the contracts selling for peanuts and potentially eventually nothing at all. Even if there’s value vs renting points or paying cash, the commitment I think will be intimidating; there’s timeshare all over the globe that you can buy for less than you can rent a week. Will there be one at WDW?

Anyway, happy Friday.

VB is definitely going to zero, and soon. I mean, all DVC resorts eventually go to zero because of the expiration, but I agree that VB will hit that once the dues exceed rental costs. CFW will hit zero before that magic number because of resale restrictions AND ridiculous dues. Whereas VB may only have 10-15 years left on its contract when it hits 0 and becomes a liability rather than an asset, CFW may hit zero with decades left on its contract. Given the high dues and resale restrictions, is there really much difference between a CFW resale contract and a Westgate resale contract? And look what those sell for (hint: they don’t sell at any price).

 

[Lorana]

The other concern with a resort like VB is hurricanes. Given that climate change is lengthening and increasing hurricane season, the chances of the resort getting hit with a hurricane and requiring increased expenses to deal with the damage is getting exponentially higher.

Don't get me wrong, every now and again I look at where some of the contract prices have gone / are going, and thinking it would be a relatively easy way to pick up extra points (we have gotten spoiled with larger accommodations, and we really love the CCV Cabins), but the dues cost and the risk of future dues increases keep me away. Even if I do really want to try those 3BR Cottages at VB.

 

[mgarbowski]

Everyone always knew (or should have known) that every DVC contract has an eventual value of $0 because of the expirations.
Oddly, the expiration is one of the factors that helped DVC contracts maintain an actual value, as you know you and your heirs won't get stuck with a contract forever. This confused me when I first bought, but as I have seen and learned more about timeshares generally it makes absolute sense.
The offsite locations have always been different in kind from the theme park locations, including their annual maintenance due structure. If/when VB goes to nominal contract values of $1 I don't think it causes much if any spilllover to reduced values in DVC contracts at WDW or DL locations.
I think the public is much more taken aback at the CFW sales situation than DVD is. I think Disney always expected slow sales, and does not care. Roughly 20 years ago Disney largely stopped building cash hotel rooms in favor of DVC and that has included converting cash rooms to DVC. The existing Cabins were at the end of their life and needed to be replaced. Disney is happier having DVC buyers bear as much of the capital cost of that replacement as buyers are willing to take, at whatever pace. Disney can always rent out the excess Cabins for cash to the extent the points do not sell, which is exactly what they would have had to do with the entire inventory absent the DVC conversion.
I also expect CFW dues to grow somewhat slowly for a few years at least as that seems to be Disney's preferred pattern now.
If VB and CFW resale contracts do both end up selling for $0 to $5 per point in 5 years, I do not see that tanking the value of GF, AK, BLT, etc. Markets aren't perfect but they are very good at noticing differences in value when applicable. I don't think even the fall of CFW resale value will hurt Riviera resale, despite sharing resale restrictions. Riviera has a much higher inherent appeal for obvious reasons of amenities, location and transportation.

 

[OKW Lover]

It's a slow race. It has been since DVC started in 1991 because the properties will have no value at the end of the contract

 

[MICKIMINI]

Vero has 19 years left (assuming one has 2023 points through 2041 points). It is a lovely resort though I am pretty confident it will be sold at the end (2042). We have bought and sold several VBR contracts (buy low/sell high) over the years mostly as SAP and did well when the MF's were lower. We sold one last fall in one day at a decent profit.

I try to look past the crowd especially in real estate. It has been very successful for us all of our lives. We tend to zig when everyone zags. I see listings under $50 and wonder how long it will take to get to $25. For someone that wants another 200 points it would take about 6K at that price to purchase with closing. At $15 PP MF's or even $20 using for SAP at a 15 point per night studio it would range from $225-300 per night. I can certainly see someone buying a fully loaded contract for a scenario like that.

DH and I are getting up there in age and we thought it impossible when we bought DVC (OKW) in 1996 that 2042 would never, ever come! Well, it is coming closer and we really may not have another 20 years in us. Our direct has our son and DIL on the contract so they will own it when we are gone. I was actually looking at a few of those VBR contracts yesterday wondering if getting one for a steal would give us some awesome stays. I did the math and walked away since it is a bit early for $25 PP, however it is still churning in my brain, what if:

*200 points @ $25 point + closing = $6000
*Fully loaded with 4 years points (2023 & 2024) seller pays 2 years points
*Rent those 2023 & 2024 *free* 400 points @ 18 = $14400 (net $8400 after $6000 purchase)
*Use $3000 to pay for 2025 points $3000 and to pay for 2026 points and $2400 for taxes +/-
*YOU GOT THE CONTRACT FOR $0 PLUS MADE ABOUT $6000 AFTER TAXES

2027 through 2041 will be the wild west of MF's at VBR, but for someone that wants short term ownership, I can see the potential. Call me crazy, but I've bought and sold more than a dozen and a half contracts and see potential where others may not and it has worked to my advantage. I'm down to two now, one direct but after the distraction of building a home over the past two years, call me crazy, but it might be time to get creative!

 

[intamin]

VB is definitely going to zero, and soon. I mean, all DVC resorts eventually go to zero because of the expiration, but I agree that VB will hit that once the dues exceed rental costs. CFW will hit zero before that magic number because of resale restrictions AND ridiculous dues. Whereas VB may only have 10-15 years left on its contract when it hits 0 and becomes a liability rather than an asset, CFW may hit zero with decades left on its contract. Given the high dues and resale restrictions, is there really much difference between a CFW resale contract and a Westgate resale contract? And look what those sell for (hint: they don’t sell at any price).

Agreed, once VB dues pass the rental cost per point which I imagine will happen in the next 10 years or so those contracts will be worthless, even with their ability to be able to trade into the DVC system. The only benefit they have is booking Beach Cottages but at that point you’re basically just paying cash with how high those dues are..

 

[bakerworld]

I cast my vote for Vero Beach. We make an effort to stay at least once everywhere on the east coast. Vero was nice - we liked the room with a ocean view, the Green Room, the pool with lots of pool side entertainment and food. BUT as someone who has access to beaches about 60 to 90 minutes from our home door, Vero provides nothing 'new'.

I think the next lost value will be Hilton Head. HH has more of a swampy southern vibe but it is just as small as Vero with the surrounding areas a car ride away.

The Cabins at FW at least have access to all of WDW. No, I don't think they'll lose value quicker than Vero or Hilton and less quicker than OKW with it's myriad of maintenance issues and bus transpo.

 

[Hubalorian]

I think VB will hit zero

I personally don’t think CFW will ever hit zero because I think they have a few tricks yet to be seen. It’s a trust which gives them a lot of flexibility moving forward plus they could roll the cancelled reflections project into the CFW to make it more attractive

 

[CraigInPA]

CFW and VB are so far and away so much more expensive, maintenance fee-wise, than other resorts, that I see them as potentials to go to a "take this contract off my hands for $1" level. In that case, you're paying only the maintenance fees on your points, which is great if you like to vacation at that resort, or you want to spin the wheel and hope for the ability to get another resort at 7 months. Personally, I'd take about 1000 points at $1 per contract, and use them as SAP's. Yes, more expensive than the rental INCOME, but cheaper than the retail price of a rental, and certainly cheaper than what Disney charges for a room.