The race to worthless

[tom1944]

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.

We are looking to add a 50 point contract so that we have 460 points every other year. We own at SSR and I have been only looking at those contracts. I have started to think about looking at 2042 contract’s because my wife and I will be mid 80s by then and most likely my daughter will not need as many points. It also lowers the cost for her if the contracts are passed to her.
A 50 point VB contact is about $280 more in dues than SSR right now but if I could get it for substantially less maybe it makes sense.

 

[gmi3804]

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.

There are so many Finance Deniers who can justify buying anything, and/or don't research their purchases, large or small. Many start off their DVC lives in debt, some never recover. That kind of person likely never considers how the "investment" is going to end.

 

[MISCdisney21]

We are looking to add a 50 point contract so that we have 460 points every other year. We own at SSR and I have been only looking at those contracts. I have started to think about looking at 2042 contract’s because my wife and I will be mid 80s by then and most likely my daughter will not need as many points. It also lowers the cost for her if the contracts are passed to her.
A 50 point VB contact is about $280 more in dues than SSR right now but if I could get it for substantially less maybe it makes sense.

How much are you saving upfront? I see an okw 2042 for good value. If it’s say $20-25 more per point than Vero but dues are $4 less per point.
$25 less per point saves you like $500-700 upfront depending on how many points but dues over 18 years, you save like $3500+ compared to VB.

 

[thanxfornoticin]

There are so many Finance Deniers who can justify buying anything, and/or don't research their purchases, large or small. Many start off their DVC lives in debt, some never recover. That kind of person likely never considers how the "investment" is going to end.

I agree with you to a point. But part of the investment is financial and part is less tangible - fun, memories, magic, etc. When we first purchased, the resale value never entered the decision-making. Maybe that made us a bit naive, but it wasn't why we purchased...... When our 2042 contracts run out, we're still fortunate to have 2057 points. When those run out - well, I'm hoping I'm still around to worry about it.....!

 

[Ronaldo17]

I cast VB, I just don't see it surviving long term

 

[Brian Noble]

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

Most will. All of them? Maybe.

One of the aphorisms at TUG is that "the value of a timeshare is in using it." And, for most timeshares, that's true, because the cost of ongoing ownership is less than the cost of renting the same lodging.

However, there are exceptions. For example, at highly seasonal resorts with fixed weeks, every owner pays the same in maintenance fees, but off-season weeks cost less to rent. Eventually, the off-season owners default, pushing up the costs for the rest of the owners, accelerating the rate of default and (eventually) pushing the cost of high season weeks below the cost to rent them. Once a resort hits this point, there is nothing you can do about it.

I think it is fair to say that if Vero's dues still stay under the costs to rent units there, then Vero has value. Whether or not that value can be realized in the resale market is a different question, and frankly less interesting for current owners.

There are cheaper ways to own DVC than Vero, but that doesn't mean Vero has no value as an ownership. But, over time, the set of DVC points available for resale is only going to grow. This is because the size of the total system is growing, while the chance that any particular owner decides to sell is at least roughly constant over the long run. Unless the pool of potential resale buyers is also growing, the market price of "less valuable" ownerships will eventually go to zero, and may even go below it.

Vero is probably the one that gets there first. That still doesn't mean Vero will be worthless--as long as there is a gap between owning it and using it.

 

[matt and beth]

We are under some fairly intense inflation. Car insurance alone went up 25% between 23 and 24. DVC dues has to follow along with increase of expenses. Hopefully, somehow, this can all get under control

 

[tom1944]

How much are you saving upfront? I see an okw 2042 for good value. If it’s say $20-25 more per point than Vero but dues are $4 less per point.
$25 less per point saves you like $500-700 upfront depending on how many points but dues over 18 years, you save like $3500+ compared to VB.

I have also added OKW to my search. I do not need any of the 50-point contracts until sometime in 2026 so no rush. I would only buy a contract if I got a really lowball deal and had time to use the points for my August 2025 trip- so points added to my account by January 2025. Our next trip after 2025 will not be until August 2027. We plan a different vacation for 2026.

 

[AstroBlasters]

Renting points is not the equivalent to owning because you don’t have control of the reservation.

 

[AdamsMum]

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

True. But I would have gone to Disney every year anyway, but now I stay in a resort that I love, whose price (even with promotions) would have been out of my league. I love Boardwalk, I'll turn 84 in 2041 and if at all possible I'll ride out the contract even if all I can do is sit on the balcony and watch the boats come and go. Then again there's always ECVs. I didn't buy it to sell it. I get that people's cirumstances sometimes dictate that it makes sense to get rid of their contracts and how fortunate is it that they can still get some value back. DVC had been a joy for me, even though I haven't liked the changes of the past several years...and it's still has $ value if I went crazy and decided to sell. The expiry date is something I really like about it.

Anyway, happy Friday

And a Happy Saturday to you!

Maybe I missed the point.

 

[Chili327]

The value should definitely still be there, but if it costs more to pay dues than to rent it just isn’t worth owning… but (I think I touched on it before), we don’t know what will happen down the road, maybe people won’t put their points up for rent if they aren’t making a profit or even enough on them? So the rental market dries up for Vero or it becomes a premier plus resort that costs more to rent than others.$25 vs $20, or whatever the current rate is.?

Is there some reason the rental rate has to stay on the level of other resorts?

I think at some point the cost could just be so high that other beach resorts in general would be the better idea for a beach vacation.

 

[CastAStone]

Is there some reason the rental rate has to stay on the level of other resorts?

Currently DVC rental store has different rates for every resort and David’s pays out (and charges) a lower rate for SSR, VB, HHI, and OKW.

The thing is that within 7 months, when (virtually) all points are the same, they all pay their lowest rate and they all charge less too. So VB’s rate is tied to WDW at that point. And before that point, the fact that DVC rental store and David’s are already charging their lowest rates tells me the demand isn’t there for them to charge more. Or they would.

 

[bakerr6]

I think one thing we are all missing is the fact that Disney can price fix any resort with ROFR. They will be happy to provide equity neutral cash rentals and suck contracts up for a premium, in order to maintain stability in the Rental market. I don't see them going to zero, as Disney will most likely foot the bill.

My understanding is that Vero rarely has additional vacancies that aren't filled by cash.

 

[Brian Noble]

History suggests that you are wrong about that. ROFR has tended to stop exactly when prices crash, because demand is down. See for example The Great Recession.

 

[atthebeachclub]

History suggests that you are wrong about that. ROFR has tended to stop exactly when prices crash, because demand is down. See for example The Great Recession.

I would think they’d want to buy while prices are low. Or maybe the cash flow in recessions just doesn’t permit for that.

 

[bakerr6]

History suggests that you are wrong about that. ROFR has tended to stop exactly when prices crash, because demand is down. See for example The Great Recession.

You're comparing an abnormal time for the economy where all markets were in financial ruins. If we look historically, the global financial crisis has an extremely low probability of occuring vs prior economic cycles.

When analyzing the data, there was little reason for disney to repurchase contracts during the GFC. They had ample supply in most resorts and resale values were down 11.2% over a 9 month period. When comparing average prices in 2005 to 2010, the resale value was $2 less. I would hardly call this an indication of DVD allowing rates to plummet.

 

[ehh]

Why would Disney exercise ROFR at the time owners are demonstrating, essentially by any means necessary, that they don't want to own?

If they exercise ROFR either they need to own (and pay to maintain) those points. Or try to sell them when the market doesn't want them.

To date, Disney exercises ROFR when they calculate they can turn a decent profit. A worthless VB contract is not that.

 

[AnnaKristoff2013]

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 its myriad of maintenance issues and bus transpo.

OKW points can be used to book at alll the other unrestricted resorts nad the maintenance fees are much lower than CFW.

 

[MISCdisney21]

OKW points can be used to book at alll the other unrestricted resorts nad the maintenance fees are much lower than CFW.

I missed that original post. CFW if in resale doesn’t have access to anything other than what’s in the trust. And so far only thing is trust is CFW

 

[bakerr6]

Why would Disney exercise ROFR at the time owners are demonstrating, essentially by any means necessary, that they don't want to own?

If they exercise ROFR either they need to own (and pay to maintain) those points. Or try to sell them when the market doesn't want them.

To date, Disney exercises ROFR when they calculate they can turn a decent profit. A worthless VB contract is not that.

DVD has a brand to maintain for future years with their new premium product. I do think eventually it will no longer make sense to ROFR these contracts, but it will be much closer to the end of the contract (maybe 8 years from now).

While VB is not a parks hotel, Disney will do whatever they deem reasonable to drive revenue for parks (at least until other business units increase margins). DVD is a great way for them to generate additional mandatory revenue for parks, as it forces people to spend their points on disney hotels. They must have a general knowledge of average attendance and expenditures for DVC owners over the life of the contract.

These contracts are worth more in their eyes than just the sunk real estate cost. There's additional revenue Disney earns and retains from higher income earners spending time and money in the disney ecosystem.

A good example of this outside of disney is to look at caterpillar. They've significantly increased revenues per sale through offering customer value agreements.

In a vacuum, they typically would want to purchase when the cash rental values exceed acquisition costs for the contract. We forget the two items below (and many other criteria unknown to us) when analyzing contract values:

The contract value is comprised of hotel cash values and service value add (what amount is spent by customers on an average basis during each stay).

Disney still sets pricing for these hotels. Rental values are derived from the pricing strategy held by disney. Theory would suggest there will always be a market for renting points, as disney will do whatever they can to avoid renting at a loss. I would anticipate a squeeze on further. Increases where possible in the future, as they still need the hotel to be profitable.


The third unknown that I'm not sure how they would calculate is the goodwill value for their brand. If the resale market is a benefit for maintaining higher direct sales (I would argue this is probably not the case), the value of VB would have some arbitrary value assigned for goodwill as well.