The race to worthless

[OKW Lover]

Every time I see the "rooms available tonight" signs.

You mean the permanent signs along the roadways?

IIRC, Disney has one of the highest occupancy rates in the hotel industry.

 

[SL6827]

Disney should have put thier Florida beach DVC on that Emerald coast. Just saying...

 

[Maistre Gracey]

No resort will be worth $0 until the cost of maintenance are higher than the Disney booking rate.

 

[CastAStone]

You mean the permanent signs along the roadways?

IIRC, Disney has one of the highest occupancy rates in the hotel industry.

Disneys occupancy is reported quarterly in their 10Qs and 10Ks.

Total domestic occupancy was 84% last quarter which by Disney standards is awful (they tended to pull low 90s prior to the pandemic) yet by industry standards is stellar.

So I guess it depends on your baseline.


BTW declared rooms occupied by DVC members staying on points are NOT included in the calculation of that number.

 

[bakerr6]

I think you're confusing hotels with DVC... As DVC we don't pay anything when we stay whether we go or not, so there is no "vacant room" issue, they just get sucked up at 7 months from other DVC members. And whoever signed the contracts keeps paying the dues.

Now if were talking about some odd situation where hundreds (if not 1000's) of members gave up their contracts, then it all becomes rack rates, rentals, etc then there could be that vacancy issue.

I meant the entire vacancy rate. Although rooms are separated into cash vs dvc, I would imagine each room is assigned an average revenue value based on occupancy. While the rooms may be paid for, the additional amenities typically enjoyed by their guests would be considered lost revenue.

I've never been to VB, so I may be way off in terms of additional revenue generated from occupancy, but I know that number is significant for guests in Orlando hotels.

 

[2010dvcfan]

I think the other side of the coin needs to be taken into consideration on this discussion.

Disney parks have turned off a lot of guests since the closure with insane price increases, loss of the live entertainment, park reservations, AP tiers and the division of families with expressing opinions in their movies and media platforms other then "welcome one and all."

Disney is charging more than ever for a lesser than before experience, not offering any of the well known loved and included perks for staying on property as they once did, magical express, after hours for resort guests. Nostalgia is a big driver in return visits to the parks, we take our children and grandchildren to experience what we did, and then they take theirs etc. An argument could be presented that nostalgia is dying as the park experiences change.

All of this could change with a shift in leadership and direction of vision for the company, we've seen it many times over the past 50 years hopefully it is just a normal "ebb and flow".

My recent concern in the value of my membership is the condition of the rooms I have been checking into of the last 18 months. Grand California, Animal Kingdom Lodge and Bay Lake Tower are being allowed to get in very poor condition before actions to maintain a "deluxe accommodations" feel is being restored. Boulder Ridge Villas were to the point of unacceptable IMO before they were finally refurbished.

If that's a continuing trend then I believe the 2042 resorts will suffer as they near the end of their contracts especially Vero and Hilton Head if DVC has no plans to continue with them after current obligations have been met. If no one wants to stay in these resorts even the owners of the contracts then we've got a problem. Isn't one reason rental price of VB $14 a point is because so many owners want to rent out their points? or is it because no one wants to go to VB?

 

[Chili327]

I meant the entire vacancy rate. Although rooms are separated into cash vs dvc, I would imagine each room is assigned an average revenue value based on occupancy. While the rooms may be paid for, the additional amenities typically enjoyed by their guests would be considered lost revenue.

I've never been to VB, so I may be way off in terms of additional revenue generated from occupancy, but I know that number is significant for guests in Orlando hotels.

True, if there were empty rooms there is definitely lost revenue in other areas.
I’ve never been to VB either.

 

[peder]

No resort will be worth $0 until the cost of maintenance are higher than the Disney booking rate.

Not true. If someone can't afford the maintenance fees and they have to sell and there's little demand, resale contracts can even be *negative*.

 

[Chili327]

Not true. If someone can't afford the maintenance fees and they have to sell and there's little demand, resale contracts can even be *negative*.

Negative, meaning pay someone to take it??
Pretty sure you just stop paying dues and Disney will handle that for you. lol

 

[Cfabar1]

Total domestic occupancy was 84% last quarter which by Disney standards is awful (they tended to pull low 90s prior to the pandemic) yet by industry standards is stellar.

Given their prices, this tells me they are okay with lower occupancy to preserve the price point...

It feels like (totally unscientific) many of the other hotels in Orlando have dropped prices back down or have had to lower prices considerably to lure people back - including in peak times. Will be curious how long Disney preserves price integrity there - that could potentially be a HUGE factor in when disney goes negative/very bad for DVC future sales.

I think VB will hold some value until 2042, not much, but I doubt it goes to zero. In fact a small buy in price will always attract someone who is desperate to get into DVC.

To those who imagine DVC investing in new amenities or experiences in VB though, I think you will be sadly disappointed. There is a lot they could do, and also could have done over the years. I just don't see it. On the other hand, they have used those high dues to keep the hotel in tip top shape, and I am pleased with the amount of renovations they have done recently.

 

[Cfabar1]

Disney is charging more than ever for a lesser than before experience, not offering any of the well known loved and included perks for staying on property as they once did, magical express, after hours for resort guests. Nostalgia is a big driver in return visits to the parks, we take our children and grandchildren to experience what we did, and then they take theirs etc. An argument could be presented that nostalgia is dying as the park experiences change.

Part of the problem is this is the narrative that has emerged around Disney... So consumers/customers are looking for it everywhere.

I had the Sea Bass last night at Flying Fish. I found myself thinking, maybe they shrunk the portion/raised the price to cut costs/nickel and dime - thinking about Christine McCarthy, Bob Chapek etc.

Maybe they didn't - I don't remember - I haven't been to Flying Fish for at least a year, maybe longer. However, it did make me feel that way.

On the other hand, this morning in AK there was a lot more streetsmosphere than I have seen on my recent trips. That made me think, maybe they are feeling they have to invest in the product, and are putting those higher prices into rebuilding the experience post-Covid.

Who knows.... I just think perception matters.... and right now the runaway narrative is that Disney has become inaccessible and way too expensive.

 

[bakerr6]

Part of the problem is this is the narrative that has emerged around Disney... So consumers/customers are looking for it everywhere.

I had the Sea Bass last night at Flying Fish. I found myself thinking, maybe they shrunk the portion/raised the price to cut costs/nickel and dime - thinking about Christine McCarthy, Bob Chapek etc.

Maybe they didn't - I don't remember - I haven't been to Flying Fish for at least a year, maybe longer. However, it did make me feel that way.

On the other hand, this morning in AK there was a lot more streetsmosphere than I have seen on my recent trips. That made me think, maybe they are feeling they have to invest in the product, and are putting those higher prices into rebuilding the experience post-Covid.

Who knows.... I just think perception matters.... and right now the runaway narrative is that Disney has become inaccessible and way too expensive.

I may be of a different view, but I've heard many complain about the magic being gone at the parks, partially due to overcrowding. Whether this is the case or not, we've enjoyed the lower crowd levels and the avoidance of long lines.

I think Disney was previously positioned as a park for everyone. While we would all love a lower cost, my unpopular opinion is that I'm OK paying a premium to have access to a better experience. Time (especially with my kids) is the one thing I cannot earn back when it's all said and done.

Creating a higher barrier of entry allows us to maximize our time spent together on our annual disney trips with shorter ride times as well as easier access to restaurants and experiences.

 

[TheDailyMoo]

Being realistic VB will have a $0 sale at some point assuming the current trajectory of MF continues...and as of now there is no reason to think otherwise. An interesting side poll would be how many years from now does that happen? We already hit a low of $30 which with 18ish years left is pretty darn close to 0. To be fair the first few $0 sales will be from extremely distressed owners who can't even wait another minute to get rid of their contract. But that would mean it would be when MF are due and they are looking to just unload any expenses in their lives and not thinking about renting or trying to get $5 a contract. They'll just say get rid of it and someone will snatch it up in a nanosecond.

 

[Chili327]

Being realistic VB will have a $0 sale at some point assuming the current trajectory of MF continues...and as of now there is no reason to think otherwise. An interesting side poll would be how many years from now does that happen? We already hit a low of $30 which with 18ish years left is pretty darn close to 0. To be fair the first few $0 sales will be from extremely distressed owners who can't even wait another minute to get rid of their contract. But that would mean it would be when MF are due and they are looking to just unload any expenses in their lives and not thinking about renting or trying to get $5 a contract. They'll just say get rid of it and someone will snatch it up in a nanosecond.

Would it actually be any cheaper to give it away (sell for $0), as opposed to just not paying the dues? (and letting Disney repo it)

 

[gmi3804]

The resort experience has suffered recently as well. Instead of professional, personalized service that used to be the norm, in unique settings which told you you were somewhere special, we're increasingly getting more and more undertrained, standardized employees (with ill-fitting uniforms) who don't have the freedom or authority to Make Things Right, more homogenous accommodations with standardized amenities, lackluster landscaping and less imaginative lighting, and a cookie-cutter experience differentiated only by less-effective-than-ever theming. There's no more "special touches" (buttons and stickers aren't special enough for me), which used to be the hallmark of these special resorts. I find myself booking them more out of habit and nostalgia for what was, and I find myself increasingly disappointed by the whole blasé experience.

 

[TheDailyMoo]

Would it actually be any cheaper to give it away (sell for $0), as opposed to just not paying the dues? (and letting Disney repo it)

I'm trying to envision the perfect storm scenario where an owner will want to be rid of and done with it. I imagine going the delinquency route would take longer and more stress added to a situation where finances are in dire situations. Yeah not really sure what would lead someone to sell for zero but it more than likely will happen at this current trajectory. In the best guess I can make I'd say as we approach 2030...maybe 2028 or 2029...somewhere in there will be the first zero contract.

Also I'd be interested to see what the 5 people that voted "something else" are thinking...HHI more than likely?

 

[SugarSweetLee]

I'm trying to envision the perfect storm scenario where an owner will want to be rid of and done with it. I imagine going the delinquency route would take longer and more stress added to a situation where finances are in dire situations. Yeah not really sure what would lead someone to sell for zero but it more than likely will happen at this current trajectory. In the best guess I can make I'd say as we approach 2030...maybe 2028 or 2029...somewhere in there will be the first zero contract.

Also I'd be interested to see what the 5 people that voted "something else" are thinking...HHI more than likely?

Aside from delinquency, could an owner not simply surrender the contract back to Disney? I thought I had read on these boards that such a thing happens, though infrequently.

 

[Maistre Gracey]

Not true. If someone can't afford the maintenance fees and they have to sell and there's little demand, resale contracts can even be *negative*.

If the mtc fees on the rental are $200, and the Disney rate is $500, you could sell the final year above $0 and the buyer would be on top.

Simple math.

 

[McCrae]

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.

Agreed.

 

[CastAStone]

Aside from delinquency, could an owner not simply surrender the contract back to Disney? I thought I had read on these boards that such a thing happens, though infrequently.

There’s no formal program for that, but it appears from the OC database that Disney does occasionally accept surrenders.

It’s not clear under what circumstances they take them.

As I mentioned upthread, there are developers willing to take back any of their timeshare contracts that are up to date on payments; according to TUG, they include Diamond Resorts, Wyndham, Worldmark, Holiday Inn Club, Bluegreen, Capital Resorts, Shell Vacations, Marriott, Hilton, Sheraton/Westin/Vistana, Welk, and Westgate.

Notice that Disney isn’t on that list today, but the active resale market has made it so they really haven’t had to.