Concerned about the Future of the DVC resale

[mustinjourney]

I am suffering from the exact same problem. There is no way I would buy at current prices combined with DVC's current management direction, so should I be selling? Theoretically I should be selling, but I find myself reluctant to do so. Am I being foolish and simply hoping that everything turns out okay?

from a purely economical theory standpoint -- the answer is yes, you should be selling. If you wouldn't purchase something at its current price, then you shouldn't be holding it at its current price. No different than a stock. If you think the stock is overpriced -- you sell.

The only difference here (and it is somewhat of a large difference) -- is that the costs associated with selling are not nominal -- you're looking at 6-10% commissions plus your time.

Your reluctance to sell is proof that as humans, we do not act as emotionless creatures like some economists would expect.

 

[BrerRabbit1119]

from a purely economical theory standpoint -- the answer is yes, you should be selling. If you wouldn't purchase something at its current price, then you shouldn't be holding it at its current price. No different than a stock. If you think the stock is overpriced -- you sell.

The only difference here (and it is somewhat of a large difference) -- is that the costs associated with selling are not nominal -- you're looking at 6-10% commissions plus your time.

Your reluctance to sell is proof that as humans, we do not act as emotionless creatures like some economists would expect.

It's completely different than owning a stock, though. If you own stock in Google, you don't get to go to Google every year with your family. If the price goes up on DVC and you are enjoying your trips to Disney staying in deluxe resorts, then there's really no need to sell. Now if you want to sell while the price is high and either not go back to Disney or maybe pay cash for moderate or value resorts, then maybe you can figure out what the math on that would look like. But comparing the way you make decisions on on a stock versus a timeshare is not comparing apples to apples. Buying into DVC (or any timeshare for that matter) by nature is loaded with emotion. Stocks are much easier to be emotionless about.

 

[mustinjourney]

You did - there's a reason that the availability at SSR on 1 bedrooms and 2 bedrooms are still available most of the year with a few weeks to go. The 14 million SSR points damages the system worse than anything Disney does - BUT it still only hurts things at the 7-month mark.

The new resale restrictions at Riviera is going to hurt owners at their own resorts. As the number of resale owners goes up over the years, there will be more and more people that can't book elsewhere - and those people will HAVE to book at 11 months to get what they want - meaning that DIRECT OWNERS will have to compete with those owners to get spots at their own resort. It might take 10, 20 years for this really to be a problem, but it will affect direct owners as well as resale owners. That's the reason I say Disney's decision here is bad. Not because resale restrictions devalue the resale value of the property - they do but as a buyer at Riviera you should know this going in and therefore it is your choice to have that facing you if you sell. But because long-term they made a change that hurts direct owners as well as resale owners.

I know one way to fix all of the problems associated with SSR!!!

Disney needs to build a 5th gate in between OKW and SSR on the land currently occupied by the treehouses and golf course. Park would need to be on the smaller side and the parking lot would be on the land near POFQ. Secondary benefits would be boat access to the parks via POR and POFQ, making them super moderates in which they could charge like 75% more than before!



***I was actually originally joking about this -- but it's crazy enough it could actually possibly work.

 

[mustinjourney]

It's completely different than owning a stock, though. If you own stock in Google, you don't get to go to Google every year with your family. If the price goes up on DVC and you are enjoying your trips to Disney staying in deluxe resorts, then there's really no need to sell. Now if you want to sell while the price is high and either not go back to Disney or maybe pay cash for moderate or value resorts, then maybe you can figure out what the math on that would look like. But comparing the way you make decisions on on a stock versus a timeshare is not comparing apples to apples. Buying into DVC (or any timeshare for that matter) by nature is loaded with emotion. Stocks are much easier to be emotionless about.

it actually is similar to a dividend producing stock. You hold -- you get a dividend. You hold DVC -- you get dividend in the form of a discounted stay.

 

[Bing Showei]

from a purely economical theory standpoint -- the answer is yes, you should be selling. If you wouldn't purchase something at its current price, then you shouldn't be holding it at its current price. No different than a stock. If you think the stock is overpriced -- you sell.

The only difference here (and it is somewhat of a large difference) -- is that the costs associated with selling are not nominal -- you're looking at 6-10% commissions plus your time.

Your reluctance to sell is proof that as humans, we do not act as emotionless creatures like some economists would expect.

The dilemma for owners though is unlike a stock, what you're holding, you cannot buy back if you sell.

Suppose you know there will be a prolonged economic downturn and sold your Disney timeshare today at an apex. When the market hits bottom, what you would buy back into is a different product. The equation becomes less about straight price, and more about valuation based on flexibility of ownership which is crippled in the new Disney timeshare product you buy today forward. How you personally value that flexibility will affect the projected valuation.

In ELMC's case*, if he wanted to sell today and decide he wanted to buy back in later, the question becomes more of "how low would the price need to go for you to say that the flexibility isn't worth paying for at this rate," vs a straight dollar for dollar comparison.

* This particular instance is complicated by the shorter RTU at BWV and the unique property characteristic being that most people who buy there, buy there to stay there, not sleep around.

 

[Brianstl]

Wwwwwwt r

If the skyliner ends up being a success, and they end up connecting SSR, OKW, and AKL to it, this may alleviate the problem.

Why would Disney spend money on skyliner for resorts that already are "soldout"?

 

[KAT4DISNEY]

Wwwwwwt r

Why would Disney spend money on skyliner for resorts that already are "soldout"?

They do offer cash rooms there and potentially a long term cost savings over other transportation. I'm sure DS businesses would push for it to go in which may be the more likely scenario but could still benefit SSR at least as I'd guess they'd position it as a multi purpose station in between the two.

 

[mustinjourney]

The dilemma for owners though is unlike a stock, what you're holding, you cannot buy back if you sell.

Suppose you know there will be a prolonged economic downturn and sold your Disney timeshare today at an apex. When the market hits bottom, what you would buy back into is a different product. The equation becomes less about straight price, and more about valuation based on flexibility of ownership which is crippled in the new Disney timeshare product you buy today forward. How you personally value that flexibility will affect the projected valuation.

In ELMC's case*, if he wanted to sell today and decide he wanted to buy back in later, the question becomes more of "how low would the price need to go for you to say that the flexibility isn't worth paying for at this rate," vs a straight dollar for dollar comparison.

* This particular instance is complicated by the shorter RTU at BWV and the unique property characteristic being that most people who buy there, buy there to stay there, not sleep around.

Yes -- the new member benefits do change the equation as well. If your contracts are currently grandfathered in and you sold, if you wanted to buy-in later, you've lost those benefits. I should have included that in the discussion.

With that said -- the overall point is still true. An economist would look at this purely from a value proposition.

If the assumption is you have a 200 point BWV contract that you could get $125 per point -- by not selling, you are foregoing $25000 (assume no transactional costs).

It doesn't make a lot of sense to say then that you'd never spend $25000 on those points at today's prices -- b/c by NOT selling -- you are effectively spending that money.

Again -- this is from an economics point of view. There is no difference between spending $25000 and not receiving $25000.

The reason people don't typically sell is b/c they're worried that if they do -- and the prices continue to go up -- they'll never get back in. That and there's a huge emotional aspect to the whole thing.

 

[SG131]

Why would Disney spend money on skyliner for resorts that already are "soldout"?

I'm sure disney likes that they can charge more for rooms at skyliner resorts (which would also apply to the cash reservations they sell at OKW and SSR), but the primary reason for the skyliner is to alleviate some of the traffic on their existing roadways.

 

[skier_pete]

What difference does it make who is using the points?

I think Disney should be ENCOURAGING the rental market. Reason being, without it, anyone who is planning every-other-year trips would be more inclined to "flip" the contracts. The difference in price between loaded and stripped contracts is not that great. You could buy the contract, use the points, sell the stripped contract, wait a year, repeat. It would only cost you MF's on the points you use (and closing costs). That strategy makes no sense if you can rent those points out every-other-year though. IOW - be careful what you wish for.

It's makes the difference on availability being eaten up at 7 months, and it makes a difference (IMO) on the studio availabilty.

And besides - I'm not talking about someone that has a contract and rents out the points every other year. I'm talking about people that own 1000 points and rent them ALL out every year to make money.

Finally - the reason your above comment doesn't work is the resale companies charge 8.5% commission on a resale. Otherwise it might work. There's rumors that some resale companies (not this sites sponsor) due this...buy contracts, strip and resell them. Dirty pool.

Why would Disney spend money on skyliner for resorts that already are "soldout"?

I agree - anyone that thinks they are building the skyliner to SSR and OKW lives in Fantasyland themselves. The only reason the Skyliner exists is to sell Riviera. The only way they extend it is if a new DVC resort is built.

 

[Katie L]

Wwwwwwt r

Why would Disney spend money on skyliner for resorts that already are "soldout"?

To hoist more skyliner costs onto DVC! They can get member fees to cover portions of it... see Riviera dues! (Genius of them to make Riviera the hingepoint...)

 

[KAT4DISNEY]

It's makes the difference on availability being eaten up at 7 months, and it makes a difference (IMO) on the studio availabilty.

I think studio availability has been more affected by 1 - the greatly increased price per point so more have to go for studios to afford DVC, 2- the increased point requirements at the newer resorts so more go for studios to afford DVC and 3 - the decrease in minimum points to buy in so that more than afford to buy in are much greater reason for the increased studio demand. Then you add in 4 -online booking which is showing everyone the availability of rooms they can switch to and they start switching more. When you had to call in you weren't certain if there was availability or not but it's a quick check online now. And - 5- modifying a reservation means you no longer risk losing what you have to switch so again, why not have a go at it?

Just my belief but I honestly don't think there are enough people who own only to rent that make any sort of a dent in availability like the things I have just mentioned.

What I don't really understand is the thought that 7 months shouldn't be either a frenzy or lacking on the most desirable inventory or even any inventory? Home resort priority for 1 month is the guarantee. The rest is gravy if there's something left in the pot to scoop up.

 

[Louis morrell]

How does renting cause availability issues? Someone owns points, someone will use those points to book. How does it matter who sleeps in the room? The room will be booked either way. We all have an 11 month home esort advantage, then all of points ( well almost all) are equal at 7 months. The only way availability gets better is if owners let their points expire without booking them. I just can't see it any other way. This argument just sounds like sour grapes to me. Correct me info I am wrong.

 

[Bing Showei]

Yes -- the new member benefits do change the equation as well. If your contracts are currently grandfathered in and you sold, if you wanted to buy-in later, you've lost those benefits. I should have included that in the discussion.

With that said -- the overall point is still true. An economist would look at this purely from a value proposition.

If the assumption is you have a 200 point BWV contract that you could get $125 per point -- by not selling, you are foregoing $25000 (assume no transactional costs).

It doesn't make a lot of sense to say then that you'd never spend $25000 on those points at today's prices -- b/c by NOT selling -- you are effectively spending that money.

Again -- this is from an economics point of view. There is no difference between spending $25000 and not receiving $25000.

The reason people don't typically sell is b/c they're worried that if they do -- and the prices continue to go up -- they'll never get back in. That and there's a huge emotional aspect to the whole thing.

No, no. I get the economic principle. What I’m saying is what you are looking at in terms of valuation is a very different product than what is ACTUALLY available to buy in at.

The saying, “If you’re not willing to buy today, you should sell.” Simply doesn’t work because what you buy today isn’t actually what you’re selling. The product is fundamentally different (way more than the “member benefits” you refer to). Assuming you bought pre-2019, an OKW-E you own today is worth much more after 2042 than an OKW-E you can buy anywhere (save for direct) today. Given this, the statement should actually be, “If you’re not willing to buy grandfathered points with the benefit of being completely whole past 2042 today, you should sell.”

It’s an important qualifier and changes the equation.

 

[ELMC]

Yes -- the new member benefits do change the equation as well. If your contracts are currently grandfathered in and you sold, if you wanted to buy-in later, you've lost those benefits. I should have included that in the discussion.

With that said -- the overall point is still true. An economist would look at this purely from a value proposition.

If the assumption is you have a 200 point BWV contract that you could get $125 per point -- by not selling, you are foregoing $25000 (assume no transactional costs).

It doesn't make a lot of sense to say then that you'd never spend $25000 on those points at today's prices -- b/c by NOT selling -- you are effectively spending that money.

Again -- this is from an economics point of view. There is no difference between spending $25000 and not receiving $25000.

The reason people don't typically sell is b/c they're worried that if they do -- and the prices continue to go up -- they'll never get back in. That and there's a huge emotional aspect to the whole thing.

No, no. I get the economic principle. What I’m saying is what you are looking at in terms of valuation is a very different product than what is ACTUALLY available to buy in at.

The saying, “If you’re not willing to buy today, you should sell.” Simply doesn’t work because what you buy today isn’t actually what you’re selling. The product is fundamentally different (way more than the “member benefits” you refer to). Assuming you bought pre-2019, an OKW-E you own today is worth much more after 2042 than an OKW-E you can buy anywhere (save for direct) today. Given this, the statement should actually be, “If you’re not willing to buy grandfathered points with the benefit of being completely whole past 2042 today, you should sell.”

It’s an important qualifier and changes the equation.

True, but I'm going to make it easier and remove the variable from the equation. I have three contracts, all grandfathered. 150 BWV, 175 BWV, 200 BLT. So let's say for sake of argument that I will hold the BWV 150 until expiration for a variety of reasons, many of which you mentioned here. With that being said, we can assume that for all practical purposes what I can buy today is equal to what I can sell today (DRR access notwithstanding).

What should I do with the other two? Well, I am sort of an economic robot as @mustinjourney suggested and I listed the 200 BLT. So do I continue that thinking with the BWV 175?

 

[jlb727]

What should I do with the other two?

I can take them off your hands (for a low low fee) if you'd like.

 

[CarolMN]

How does renting cause availability issues? Someone owns points, someone will use those points to book. How does it matter who sleeps in the room? The room will be booked either way. We all have an 11 month home esort advantage, then all of points ( well almost all) are equal at 7 months. The only way availability gets better is if owners let their points expire without booking them. I just can't see it any other way. This argument just sounds like sour grapes to me. Correct me info I am wrong.

IMO, renting has increased the SPEED at which the resorts fill up (at least the near park resorts). Before renting got so popular ( and easy), it wasn't as necessary to book so early in the window. Now an owner has to worry about all the renters out there who may want the same time or room as he does.

So, while it's true that someone will end up in the room, it may be a renter and not you. Your fellow owner wouldn't have chosen that room or time, but his renter did, so he booked it. You lose because the demand is coming earlier than it did in the past for what you want.

It's not the only factor, but it contributes.

 

[Brianstl]

How does renting cause availability issues? Someone owns points, someone will use those points to book. How does it matter who sleeps in the room? The room will be booked either way. We all have an 11 month home esort advantage, then all of points ( well almost all) are equal at 7 months. The only way availability gets better is if owners let their points expire without booking them. I just can't see it any other way. This argument just sounds like sour grapes to me. Correct me info I am wrong.

I think people that buy with the intention of renting out points tend to buy large point contracts on the resale market. Large point contracts are cheaper. The original owners of those contracts used them for stays in units larger than a studio. The people who now rent those points more often than not use them on studios. That creates an increased demand on studio units that didn’t exist a decade ago.

 

[Lumpy1106]

I think people that buy with the intention of renting out points tend to buy large point contracts on the resale market. Large point contracts are cheaper. The original owners of those contracts used them for stays in units larger than a studio. The people who now rent those points more often than not use them on studios. That creates an increased demand on studio units that didn’t exist a decade ago.

OK, but then why wouldn't Disney just adjust the points needed for a studio up (a little), and the 1br's down since those have much better availability? Oh yeah, that's right...everyone screamed bloody murder when they tried to do that earlier this year.

Full disclosure; I like this idea because my family of 5 with 2 older kids kindof needs the 1 br's

 

[KAT4DISNEY]

OK, but then why wouldn't Disney just adjust the points needed for a studio up (a little), and the 1br's down since those have much better availability? Oh yeah, that's right...everyone screamed bloody murder when they tried to do that earlier this year.

Full disclosure; I like this idea because my family of 5 with 2 older kids kindof needs the 1 br's

While I agree there would be an outcry against that I don’t think you fully followed what DVC tried to do. They wanted to increase your 1brs right along with the studios. They say 1BRs are more popular than 2 BRs so you should pay more for them.