The value of a DVC point in the rental market

[lowlight]

What determines the value of a DVC point in the rental market? I know the answer in a free market is typically "what the market will allow" or "what someone will pay for it", but it seems like it's artificially tied to something in this case, and I know there is a smart person here with the answer. From quick research, and please correct me if I'm wrong because finding numbers from 20 years ago is hard, it seems like DVC points rented out for $9 in 2002, rising about half a dollar a year to $12 in 2008, and when the real estate collapse happened, back down to $9, and then steadily back up about a dollar a year until 2020/early 2021 when it shot back down to $16, and now it's hovering around $19 or so. I did the math for room value like this:

Resort room (no DVC at that point) at Poly in 2003 was around $299 early October.
Villa studio at Poly today is around $790 early October.
I know a resort room doesn't equal villa, but for cash purposes I believe they are very close in price.

If we give each room an equal point value (24 points, a weekend night in early Oct), that means the resort room in 2003 could be had for $216 on rental points, a savings of 28%.
The villa studio at Poly today could be had for $456 on rental points, a savings of 43%.

This leads me to believe that the value of DVC rental points have not kept up with cash rates. Even taking into account the fact that Disney gives great discounts sometimes, they are still undervalued historically. Add to that the fact that Disney discounts are much fewer and far between now, DVC rental points value should have risen more quickly, but they haven't.

So I'm guessing 1) my math is wrong 2) I'm stupid, or a combination of 1+2, or maybe just 3) there is a glut of points keeping the value down, or 4) something I haven't thought of. I swear I don't work for a point rental company, but a family friend just bragged they saved almost 60% off room rates by renting DVC points, and it made me wonder why the discount is so deep when DVC points aren't cheap to buy anymore.

 

[Marionnette]

What determines the value of a DVC point in the rental market? I know the answer in a free market is typically "what the market will allow" or "what someone will pay for it", but it seems like it's artificially tied to something in this case, and I know there is a smart person here with the answer. From quick research, and please correct me if I'm wrong because finding numbers from 20 years ago is hard, it seems like DVC points rented out for $9 in 2002, rising about half a dollar a year to $12 in 2008, and when the real estate collapse happened, back down to $9, and then steadily back up about a dollar a year until 2020/early 2021 when it shot back down to $16, and now it's hovering around $19 or so. I did the math for room value like this:

Resort room (no DVC at that point) at Poly in 2003 was around $299 early October.
Villa studio at Poly today is around $790 early October.
I know a resort room doesn't equal villa, but for cash purposes I believe they are very close in price.

If we give each room an equal point value (24 points, a weekend night in early Oct), that means the resort room in 2003 could be had for $216 on rental points, a savings of 28%.
The villa studio at Poly today could be had for $456 on rental points, a savings of 43%.

This leads me to believe that the value of DVC rental points have not kept up with cash rates. Even taking into account the fact that Disney gives great discounts sometimes, they are still undervalued historically. Add to that the fact that Disney discounts are much fewer and far between now, DVC rental points value should have risen more quickly, but they haven't.

So I'm guessing 1) my math is wrong 2) I'm stupid, or a combination of 1+2, or maybe just 3) there is a glut of points keeping the value down, or 4) something I haven't thought of. I swear I don't work for a point rental company, but a family friend just bragged they saved almost 60% off room rates by renting DVC points, and it made me wonder why the discount is so deep when DVC points aren't cheap to buy anymore.

I think that to do a true apples-to-apples comparison, you need to look at Poly hotel room prices from the time that PVB sold out to the present in order to compare it with rental rates over the same timeframe.

In the case of Poly, 360 hotel rooms were converted to studios. That reduced the number of hotel rooms to 479, some of which are suites and CL rooms. That meant that cash inventory was reduced by a total of 43% once PVB sold out. Supply went down, demand remained constant or even increased. As a result, cash reservations increased in price.

Furthermore, you really should look at how resort price inflation compares for hotel rooms vs DVC across the spectrum of DVC resorts, not just cherry pick one resort and compare data from two different time periods.

 

[lowlight]

Furthermore, you really should look at resort price inflation compares for hotel rooms vs DVC across the spectrum of DVC resorts, not just cherry pick one resort and compare data from two different time periods.

I probably shouldn't have even included the historical numbers, I just used those as an example of what was considered a good deal at that moment in time. Several big sites have done more detailed comparisons in the past year between cash rates and renting points, and found that depending on resort, room type, and time of year, the savings are often 50-70%. Even accounting for room discount deals (does Disney do those still?), that's a big percentage. I guess I'm curious why that much of a discount is being passed on to renters, instead of the market price of points going up. Basically, what's holding it down?

 

[Brian Noble]

Basically, what's holding it down?

IMO, the thing holding it down is that rentals are priced per point instead of per rental. Those 50-70% discounts are only off of studios, and usually cherry-picked examples. For larger units and most of the year, the prevailing rental rates are much closer to par with Disney's typical net pricing---and that's especially true for 1BRs.

As an example, I've got several weeks booked in a 1BR Standard at SSR later this month. At Disney's prevailing rate under the current promotion (rack minus $100/night), the rental cost from Disney is equivalent to about $21.75/point. There is no reason to rent from an owner at anything above that. But, Disney's reservations are fully refundable and flexible, and Disney is (presumably) fully trustworthy. In contrast, a DVC rental is generally non-refundable, and you have to bake in the risk that the owner cancels the reservation out from under you. So, there has to be some functional discount under that to make a private rental worth doing. There's no way I would pay $19/pt for a private rental on that room; the $600 I'd save is not worth the hassle. I'd probably need to save at least 20% over Disney, which gets you into the low-to-mid $17s.

As an aside, this is one of the reasons I think there's been an increase in reservations for rent; reserved studios can be priced above prevailing per-point rental prices but still represent a fair deal to the renter.

 

[MMSM]

IMO, the thing holding it down is that rentals are priced per point instead of per rental. Those 50-70% discounts are only off of studios, and usually cherry-picked examples. For larger units and most of the year, the prevailing rental rates are much closer to par with Disney's typical net pricing---and that's especially true for 1BRs.

As an example, I've got several weeks booked in a 1BR Standard at SSR later this month. At Disney's prevailing rate under the current promotion (rack minus $100/night), the rental cost from Disney is equivalent to about $21.75/point. There is no reason to rent from an owner at anything above that. But, Disney's reservations are fully refundable and flexible, and Disney is (presumably) fully trustworthy. In contrast, a DVC rental is generally non-refundable, and you have to bake in the risk that the owner cancels the reservation out from under you. So, there has to be some functional discount under that to make a private rental worth doing. There's no way I would pay $19/pt for a private rental on that room; the $600 I'd save is not worth the hassle. I'd probably need to save at least 20% over Disney, which gets you into the low-to-mid $17s.

As an aside, this is one of the reasons I think there's been an increase in reservations for rent; reserved studios can be priced above prevailing per-point rental prices but still represent a fair deal to the renter.

This is very true for me. I am renting points from a member for this April for $16.50 a point. (He used to be $15). If that goes above $17.50 a point, I will go through Disney. Yes, you save money but not enough for a non refundable rental that requires payment in full up front.

 

[RoseGold]

Cash Disney hotel rooms.

 

[RivShore]

You should also look at the pre-covid 2019 numbers, I would think that the risk around rentals being non-refundable has distorted the current market a bit.

 

[KAT4DISNEY]

You should also look at the pre-covid 2019 numbers, I would think that the risk around rentals being non-refundable has distorted the current market a bit.

Rental market is more brisk than ever from what I've experienced. Disney still doesn't have all resorts open so rooms are more scarce than pre-covid yet people are wanting to go.

 

[DVCanadian]

I’m not convinced the price is based on anything but psychological factors.
Renters want a deal.
Owners want to offload points.
Rack rate is a comparator.
There are people with wildly variable amounts of information and experience. It isn’t an even playing field or fully rational market.

I rent points on Facebook and every day there are owners who have never rented before trying to figure it out, alongside the professional renters, brokers, and experienced owners and renters. The highest volume of rentals are 1-3 nights in a studio.

you’ve got owners trying to get rid of points they forgot to bank at distressed prices ($10-12 pp) beside posts hopefully asking for $22+ per point.

I’m happy to rent for $16 per point as it is double my dues and I feel a fair price for the “pay upfront no refunds ever” rental model.
The points usually move quickly at $16.
once I’ve decided to rent I don’t want to spend 2 extra weeks for an extra $2 per point.

I think I could maybe even get more money if I used a broker .

 

[lowlight]

IMO, the thing holding it down is that rentals are priced per point instead of per rental. Those 50-70% discounts are only off of studios, and usually cherry-picked examples. For larger units and most of the year, the prevailing rental rates are much closer to par with Disney's typical net pricing---and that's especially true for 1BRs.

As an example, I've got several weeks booked in a 1BR Standard at SSR later this month. At Disney's prevailing rate under the current promotion (rack minus $100/night), the rental cost from Disney is equivalent to about $21.75/point. There is no reason to rent from an owner at anything above that. But, Disney's reservations are fully refundable and flexible, and Disney is (presumably) fully trustworthy. In contrast, a DVC rental is generally non-refundable, and you have to bake in the risk that the owner cancels the reservation out from under you. So, there has to be some functional discount under that to make a private rental worth doing. There's no way I would pay $19/pt for a private rental on that room; the $600 I'd save is not worth the hassle. I'd probably need to save at least 20% over Disney, which gets you into the low-to-mid $17s.

As an aside, this is one of the reasons I think there's been an increase in reservations for rent; reserved studios can be priced above prevailing per-point rental prices but still represent a fair deal to the renter.

Thank you, that makes sense when I look at it that way.

 

[RivShore]

Rental market is more brisk than ever from what I've experienced. Disney still doesn't have all resorts open so rooms are more scarce than pre-covid yet people are wanting to go.

True, that is yet another distortion of the current market and another reason to look at data prior to all the changes covid brought.

 

[hhisc16]

Also, Disney sells one time use points for $19 per point.
Many people equate that to a gauge for DVC rental point prices.

 

[jbish]

For what it's worth, I was curious about rentals and found the Confirmed Reservations section of DVC Rental (hope I can share all of this as I believe they are a sponsor). Here's a reservation that is available:

This same room is available to be booked for an owner for 201 points. So that equates to $26/point being paid by the renter (higher than the OP's example, but this is a 1 BR vs. Studio). And I believe that payout to the DVC owner is $14.50/point? We are within the 7 month window, so no premium for home resort. So while the rental rate seems to have gone up quite a bit, the payout to the owner hasn't changed much over the years.

 

[justadreamaway77]

You are also forgetting that people have bought at different rates. OG owners bought at like $60/point. They can easily go lower and still "make a profit". Also, some resorts have less owners and less rooms so the demand is higher....hence the price is higher.

 

[jbish]

You are also forgetting that people have bought at different rates. OG owners bought at like $60/point. They can easily go lower and still "make a profit". Also, some resorts have less owners and less rooms so the demand is higher....hence the price is higher.

I think the original cost of acquiring the points is not exactly relevant to the OP's point. We're specifically talking about the value of the points in the rental market - not resale. In my example, I'm showing a listing for what someone who wanted to RENT at BLT in October could get for a confirmed reservation, so it's take it or leave it - not even asking for a specific reservation and then paying the going rate. In this example, it's $26 pp (though I can't compare to OPs 20-years-ago examples for Poly). I just know that the spread between what the renter is paying at $26 versus what the owner receives in rental income of $14.50 seems pretty big. That's a nice profit margin to the broker. And, per @DVCanadian, direct rentals are $16 pp.

Now to compare to OP's example, here's a listing for a Poly Studio in October, which is still available on DVC's website for anyone to book:

This reservation would cost a member 153 points. For the renter, it costs $26.14 per point - so right in line with my BLT example. Convert it to cash, it's $666.50/night - a discount of 15.6% of the $780/night rate per @lowlight in the OP. So maybe the open market is keeping up with the going rate of booking through Disney - it's just a combo of what the DVC owner gets and what the broker gets. Direct rentals offer the biggest savings to the visitor.

 

[Mle8308]

For what it's worth, I was curious about rentals and found the Confirmed Reservations section of DVC Rental (hope I can share all of this as I believe they are a sponsor). Here's a reservation that is available:
View attachment 653093
This same room is available to be booked for an owner for 201 points. So that equates to $26/point being paid by the renter (higher than the OP's example, but this is a 1 BR vs. Studio). And I believe that payout to the DVC owner is $14.50/point? We are within the 7 month window, so no premium for home resort. So while the rental rate seems to have gone up quite a bit, the payout to the owner hasn't changed much over the years.

And it's interesting how if this were booked directly with Disney for the 5 nights during a similar season (those above dates are not currently available), a lake view is about $600 more (taxes, rate is almost the same before taxes are added), but it is fully cancelable/refundable. I think I would book directly for that assurance alone. And yes, parking would be free, but a lot of people don't drive. Better value for a renter would be a studio.

 

[jbish]

And it's interesting how if this were booked directly with Disney for the 5 nights during a similar season (those above dates are not currently available), a lake view is about $600 more (taxes, rate is almost the same before taxes are added), but it is fully cancelable/refundable. I think I would book directly for that assurance alone. And yes, parking would be free, but a lot of people don't drive. Better value for a renter would be a studio.

Except nothing is available directly through Disney, particularly at both Poly or BLT. So the only choice someone has, right now if they're planning on staying at one of those two places in October, is to rent points.

 

[DVCanadian]

You are also forgetting that people have bought at different rates. OG owners bought at like $60/point. They can easily go lower and still "make a profit". Also, some resorts have less owners and less rooms so the demand is higher....hence the price is higher.

My original buy-in plays 0% into renting ($50 pp ).
I’m just trying to offset my dues on points I can’t use.
Maybe if owners borrowed and were still making payments they might factor that in (cover the dues and some payments).

my buy-in payment is long gone and I’m not trying to do any “accounting” where I spread it across the years.

when we purchased we just hoped we wouldn’t lose too much money on a timeshare

 

[Brian Noble]

Here's a reservation that is available:

I would not rent that under private rental terms at that price. It is only 17-18% off of rack rate, all-in. Granted BLT is rarely discounted off of rack, but still…not enough of a discount to account for the less flexible rental terms.

I suppose someone might still take them up on it but I’d probably just get a room at GF which is availablefor those same dates directly from Disney for even less.

 

[jbish]

I suppose someone might still take them up on it but I’d probably just get a room at GF which is availablefor those same dates directly from Disney for even less.

Totally fair. But the Villas at GF aren't available direct right now either. A room in GF is not exactly comparable to the 1BR option. I do wonder, then, if people are comparing two different things as cash rooms direct from Disney are not widely available. That is probably a short-term issue since DVC owners are trying to use up those banked points from 2020/2021.