Resale Restriction Scenario

[crvetter]

I don't hear a lot of people saying they regret buying VGF (as opposed to CCV). Why is that? Or is it because there is that much more pressure with CCV because of all the points sold against the cabins?

My guess on why you don't hear a lot at VGF has a lot to do with the air of exclusivity that owning at VGF provides. I think that attitude on how VGF is viewed vs CCV helps alleviate owners at VGF. Basically they are willing to deal with any headaches to stay GF adjacent. But that is just my guess.

Edit: Also VGF sold way more Guaranteed Weeks vs. CCV (251ish vs 23)

 

[Novakm]

After reading tons of opinions on the resale restrictions, I still don’t get How limiting exchange rights for resale buyers does anything to help Disney be more profitable.

Removing exchange rights from resales does not increase the value of direct, so it does not let them increase prices.

Resale would need to get down to about $40 a point to be as profitable as new construction. The rental market will keep resale from falling much below $100, so they aren’t creating a new ROFR income stream.

Restrictions on resales won’t make a significant impact on availability at 7 or 11 months. That’s driven by the decisions DVC has made around how many of each room type to build and minimum contract size.

The idea of quarantine for failed resorts doesn’t fly either. It’s crazy to think that owners who bought a “failed” resort direct wouldn’t trade out just as much as resale buyers. And direct buyers are the majority at every resort.

I don’t think Disney is competing with resale either. Resale is a different market with different motivations.

I don’t get it. How does Disney benefit?

 

[Spartan86]

I *think* (although @dvcsince93 may be able to explain my thoughts better) what I meant was, if RIV is a hot mess at 7 mo, that means that DVD/the market/whatever has created an incentive to owning RIV points so you can book before it becomes a hot mess. If it's already a hot mess at 7mo before it sells out, then that's a great way to sell direct points. (And if it's a hot mess even after it sells out, then resale prices aren't going to dip that low either, because a knowledgeable resale buyer is going to buy those points also to avoid the 7mo mess.) I don't think DVD cares so much about ROFR and I think the resale restriction was meant to ease their burden on ROFR for future resorts.

Thanks @kboo, that makes sense

 

[Novakm]

If Disney did want to compete with resale prices, they could do that easily. Just charge more points per night, and less per point.

So instead of 204 points @ $188pp for a week in a Studio, they could do 274 points at $140pp for the same week. Either way it’s $38k

As an added benefit, maintenance fees per point would go from $8.31 to $6.26 per point

So then the sales pitch would be, you can buy PVB resale at $140pp, or you could buy Riviera direct for the same price, and have lower maintenance fees.

Plus, the high point charts would discourage trading in from an older resort, so availability would be better at the newest resort.

 

[summerw]

After reading tons of opinions on the resale restrictions, I still don’t get How limiting exchange rights for resale buyers does anything to help Disney be more profitable.

Removing exchange rights from resales does not increase the value of direct, so it does not let them increase prices.

Resale would need to get down to about $40 a point to be as profitable as new construction. The rental market will keep resale from falling much below $100, so they aren’t creating a new ROFR income stream.

Restrictions on resales won’t make a significant impact on availability at 7 or 11 months. That’s driven by the decisions DVC has made around how many of each room type to build and minimum contract size.

The idea of quarantine for failed resorts doesn’t fly either. It’s crazy to think that owners who bought a “failed” resort direct wouldn’t trade out just as much as resale buyers. And direct buyers are the majority at every resort.

I don’t think Disney is competing with resale either. Resale is a different market with different motivations.

I don’t get it. How does Disney benefit?

Maybe I don’t get what you’re saying but Disney benefits because it will help their direct sales move more quickly. All of the websites, posts, blogs etc that start “why buy direct” won’t have the same impact as more new resorts are added.

If they hadn’t added the resale restrictions, I’d buy Poly resale right now to be able to stay at Riviera and maybe add Riviera resale when it became available. Now, because we will want to stay at the Riviera at some point, I will buy direct. There’s one sale they managed to convert from resale to direct and therefore one less contract they have to sell. I do not think I am alone here either.

 

[dvcsince93]

Overall, I believe that the restrictions provide DVD with a sales pitch for direct sales fornew buyers and add-on buyers, which is big.

With the restriction, they can tell direct purchasers that they are getting something you can't get with resale-no matter the price-points that you can use throughout the system. They can make direct purchasers understand that resale purchasers are not on the same level- their points simply aren't as valuable.

This is true even for the "sold out" resorts. I don't know the profit per point on new resorts vs old resorts. But, it seems that DVD comes out ahead when they sold an OKW point for $65 in 1995, bought it back for $85 in 2018 then sell it again for $156 point in 2019.

As pointed out by @summerw, they can further help direct sales with sold out resorts by convincing people who are considering add on points to think direct. Until this restriction, those people who sought to add on already had their blue card and had points with DC and CC exchange- so what was the real value of adding on direct pts? Now, that has all changed. If you want points that can be used at all present and future resorts you must buy direct.

Finally, considering it appears that 2 out of every 3 DVD direct sales also include a DVD mortgage, direct sales are arguably the holy grail for DVD.

 

[dvcsince93]

A point of clarification- for new resorts, 2 of 3 direct sales include a mortgage, looking at direct sales at supposedly "sold out" resorts since 2008, it appears to be only about 50%.

 

[Novakm]

Maybe I don’t get what you’re saying but Disney benefits because it will help their direct sales move more quickly. All of the websites, posts, blogs etc that start “why buy direct” won’t have the same impact as more new resorts are added.

If they hadn’t added the resale restrictions, I’d buy Poly resale right now to be able to stay at Riviera and maybe add Riviera resale when it became available. Now, because we will want to stay at the Riviera at some point, I will buy direct. There’s one sale they managed to convert from resale to direct and therefore one less contract they have to sell. I do not think I am alone here either.

As an example, let’s say you have the choice of buying 300 points direct, or a 300 point contract at PVB. You decide to buy direct. Just because you buy direct doesn’t mean the PVB contract will never sell. Someone will buy it instead of direct. It might be at a much lower price, but someone will buy it.

So if someone else buys that resale contract instead of direct points, how did Disney gain? They still lost a 300 point sale.

 

[dvcsince93]

I just noticed some things in the RIV docs that I hadn't heard about, seems the future includes more changes and charges:


In the RIV DVC Resort agreement:

In addition, with respect to certain DVC Resorts, including the Riviera Resort, BVTC reserves the right to charge an in-bound exchange fee, including if the DVC Resort experiences higher than anticipated use demand relative to other DVC Resorts.



In the RIV DVC Membership agreement:

4.10 DVD Future Restrictions, Limitations, or Chanqes.

As additional consideration for entering into this Agreement, DVD reserves the right, in its discretion, to restrict or limit certain reservation features for select Club Members or categories of Club Members (e.g., those who acquire an Ownership Interest at the Condominium after a date specified by DVD or not directly from DVD), as it determines in its discretion from time to time. Such restrictions, limitations, or changes may consist of the following or be applied as follows:

a. DVD may apply any restrictions, limitations, or changes pursuant to certain terms and conditions as it establishes in its discretion including implementing such restrictions, limitations, or changes for a defined period of time or for the duration of the Condominium; implementing, stopping, and re-implementing such restrictions, limitations, or changes; or charging (or allowing any of the TWDC Companies to charge) for exemptions or changes in the terms and conditions applied to such restrictions, limitations, or changes…

 

[summerw]

As an example, let’s say you have the choice of buying 300 points direct, or a 300 point contract at PVB. You decide to buy direct. Just because you buy direct doesn’t mean the PVB contract will never sell. Someone will buy it instead of direct. It might be at a much lower price, but someone will buy it.

So if someone else buys that resale contract instead of direct points, how did Disney gain? They still lost a 300 point sale.

Are you saying that for every person who buys direct because of the restrictions, there will be one who buys resale instead of direct because of them? I don't agree. I also don't think the restrictions will drive down resale prices on L14 because people will still want to buy and exchange within those since it's only Riviera and any future ones they affect.

If that's not what you're saying, the second buyer is a constant in my scenario, someone who would buy resale regardless, and irrelevant to the discussion as Disney would not have effected a change there.

 

[MickyLynn]

charging (or allowing any of the TWDC Companies to charge) for exemptions or changes in the terms and conditions applied to such restrictions, limitations, or changes…

So a year from now they'll offer every resale contract an upcharge to become full-benefit members regardless of direct points owned.

Or, I go in and say "I'm too old to own Riv for 50 years, and this resale restriction hurts my resale value. I may as well save 25% now and buy resale from the get go."
Then they say "For the tiny amount of $X per point, we can grant you an exemption from that restriction."

Sound about right?

 

[Hjs33]

Does anyone know the total number of points at each resort? Do the total number of points at SSR represent 30% of all DVC resorts (excluding RIV and maybe CCV which hasn’t been available for resale very long)? If not, that’s a disproportionately large number of SSR contracts being sold - so there is some issue with SSR going on.

I think I remember a post when the RIV resale restrictions were first announced, someone reported that MS told them one of the reasons for the restrictions was to “quarantine failed resorts.”* I guess at first that seems to make sense - that a big issue is people buying resale points at the cheaper resorts (not just SSR, to be clear) but only intending to trade into other resorts at 7 months, making availability difficult for everyone. If DVC prevents resale buyers from accessing RIV, it lends RIV an air of exclusivity and gives all direct owners a better shot at reserving a room there. On the other hand, if the glamour fades and RIV tanks on the resale market, then those buyers can’t trade out anywhere - effectively quarantined!

However, that argument falls apart on closer inspection:
—On a DVC-system-wide level: As @dvcsince93 reported (thank you for sharing all the data you’ve found!), since DVC is constantly selling so many new contracts, the proportion of resale contracts to direct is actually very small (1-2% each year, or up to 12% in total if I follow correctly). So the number/percentage of resale purchasers trying to trade into all the different resorts is probably much smaller than we had assumed.
—That leaves how many direct purchasers also trying to switch resorts most of the time. As @KAT4DISNEY said, DVC sales guides push new resorts by offering the ability to trade into the resorts the buyer may actually desire (vs just buying them direct).
—In addition, DVC/DVD has created this situation where new resorts require more points to stay there, price per point has increased dramatically, they are allowing smaller minimum purchases, those contracts are being sold against units that contain bungalows/cabins/huge point carriers (that fewer new members have enough points to stay there)... which leads to more competition for smaller villas and more direct purchasers trying to switch into different resorts at 7 months.
—Now on a single resort level, it looks like up to 20% of owners could be resale (like OKW now), and the number may increase over time. As many people have said, quarantining members to one resort does not help others trading into that resort; it will actually make it more difficult. If they can’t trade out, others can’t trade in.

All this to say, I don’t buy the argument that restricting resale purchasers somehow helps open up availability for everyone else.

I do believe the restriction was done for profit - “to differentiate between direct and resale” (which is another reason DVC has given I think). I am upset that this profit is at the expense of owners’ ability to use their points, in contrast to prior member/resort agreements, and scapegoating certain members (whether resale or owners of a “failed” resort).


*https://www.disboards.com/threads/multi-site-pos-revision-dated-01-19-19.3734585/ (The failed resort discussion starts on page 2 and continues especially on page 3... and thanks to @crvetter for speaking to DVCM about this, and sharing with us.)

Why would you assume SSR is the “failed” resort?

I would think that Aulani and CCV were the failed resorts. Aulani because that resort will basically never sell out and CCV due to the cabin point mess. In particular CCV was horribly set up so that most owners can’t book a studio and there are too many small contracts. I would think that those small contract owners are desperate at 7 months to find something somewhere else and potentially Disney wants to protect RIV from that issue.

 

[Novakm]

Are you saying that for every person who buys direct because of the restrictions, there will be one who buys resale instead of direct because of them? I don't agree. I also don't think the restrictions will drive down resale prices on L14 because people will still want to buy and exchange within those since it's only Riviera and any future ones they affect.

If that's not what you're saying, the second buyer is a constant in my scenario, someone who would buy resale regardless, and irrelevant to the discussion as Disney would not have effected a change there.

I think you summed up my confusion pretty well.
1) Resale buyers are a constant. Restrictions won’t stop them. It won’t keep them out of RIV either. The only way to reduce Resale competition for direct points is to exercise ROFR more.

2) Resale restrictions are at best a subjective benefit for some direct buyers. Some see it as a benefit, some as a problem. They didn’t make RIV more desirable, they are trying to make resale less desirable.

So bottom line, they did something that’s legally ambiguous, and didn’t add any value for themselves or RIV buyers.

 

[crvetter]

Why would you assume SSR is the “failed” resort?

I would think that Aulani and CCV were the failed resorts. Aulani because that resort will basically never sell out and CCV due to the cabin point mess. In particular CCV was horribly set up so that most owners can’t book a studio and there are too many small contracts. I would think that those small contract owners are desperate at 7 months to find something somewhere else and potentially Disney wants to protect RIV from that issue.

What I was told is that from the perspective of DVC was a “failed” resort was a resort that the resale buyers are purchasing with little intention to use the points at the home resort and were priced below what they felt the 7 month trade component should have them be priced. To be fair they weren’t assuming SSR is failed they were actually scraping from my post the example from DVC.

While the terms is subjective when saying “failed” this is what DVC was using. While yes cabins (and don’t forget the bungalows) added points to the system DVC wouldn’t consider that failed because people may be paying more for CCV and PVB resale because trading in at the 7 months is hard for peak times (probably nearly impossible all year for CCV) this inflating resale prices because of this and owners would be buying to stay there. This was how they were spinning it. Now the entire process works in their favor from multiple fronts: 1) increase resale prices means less difference between resale and direct less to explain to perspective buyers and 2) if resale prices stay too low for some resorts well they have the resale restrictions to explain the difference

I personally don’t think they intend to kill resale as that is bad for their product but rather provide a reason for the direct and resale differences that exist currently. My guess is they don’t think the restrictions will impact resale prices too much and if they do and it hurts direct sales well they reserved the right to reverse the changes or sell enhancements.

 

[katandmouse]

Why would you assume SSR is the “failed” resort?

I would think that Aulani and CCV were the failed resorts. Aulani because that resort will basically never sell out and CCV due to the cabin point mess. In particular CCV was horribly set up so that most owners can’t book a studio and there are too many small contracts. I would think that those small contract owners are desperate at 7 months to find something somewhere else and potentially Disney wants to protect RIV from that issue.

You’re right. I wasn’t trying to single out SSR as a failed resort, and I personally don’t think any resorts are failed. I apologize for the confusion. I didn’t clarify well, but I was thinking of 2 separate points: (1) that maybe there’s some different reason for more SSR resales than anything else, and (2) the discussion about cheap resale points reminded me about that prior thread that mentioned a possible quarantine. But by cheap points I was also thinking of AUL, VB, HHI, OKW, etc... Even recently we’ve seen posts with people considering buying SSR or VB only intending to stay elsewhere at 7 months.

(To be clear, I also don’t think the number of people buying resale to do this outweighs the numbers of direct purchasers doing this, or that people shouldn’t buy resale to do this if they want.)

You make a really good point about CCV too. Unfortunately it looks like they might do the same thing with cabins/bungalows at Reflections.

ETA: I also think that the restrictions won’t help protect RIV, if DVC were trying to do that. On the one hand, RIV owners will be competing with everyone else at 7 months - more people vying for the L14, but fewer who can trade into RIV to alleviate that scrum. On the other hand, eventually more RIV owners can only stay there and book there no matter what - fewer rooms available for other owners to book. I really don’t see how this could help anyone except DVD.

 

[dvcsince93]

I think you summed up my confusion pretty well.
1) Resale buyers are a constant. Restrictions won’t stop them. It won’t keep them out of RIV either. The only way to reduce Resale competition for direct points is to exercise ROFR more.

Not sure I agree with that, depends on who you mean by resale buyers. For example, did you notice the other apparently new provisions in the RIV contracts:

In the RIV resort agreement:

In addition, with respect to certain DVC Resorts, including the Riviera Resort, BVTC reserves the right to charge an in-bound exchange fee, including if the DVC Resort experiences higher than anticipated use demand relative to other DVC Resorts.

And in the RIV Membership Agreement

...DVD reserves the right, in its discretion, to restrict or limit certain reservation features for select Club Members or categories of Club Members(e.g.,those who acquire an Ownership Interest at the Condominium after a date specified by DVD or not directly from DVD),as it determines in its discretion from time to time...


So while future resale buyers can certainly buy RIV, I am not sure about resale buyers at other resorts using RIV.

 

[Frederic Civish]

As an example, let’s say you have the choice of buying 300 points direct, or a 300 point contract at PVB. You decide to buy direct. Just because you buy direct doesn’t mean the PVB contract will never sell. Someone will buy it instead of direct. It might be at a much lower price, but someone will buy it.

So if someone else buys that resale contract instead of direct points, how did Disney gain? They still lost a 300 point sale.

I completely agree with you. Disney is not creating more sales for themselves by their restrictions. They are only trying to justify their higher prices. Unfortunately for them, their restrictions will not stop resales at all. They may cause resales to drop to a lower price. A lower price is bad for Disney. A lower price will make the resale even more attractive. Pretty much no matter what Disney does to resales all it will do is raise or lower the price of resales but not eliminate the resales Market at all. All of those contracts will still be sold. ALL if them. If the price is low enough it will be attractive and suck potential buyers away from Disney. As I said before they really should be crying to raise the price of resales rather than lower than. Higher resale prices make their own prices more competitive.