Most Economical Resort

[CraigInPA]

One thing that is clear from this analysis is that the amount paid by brokers for renting points is too low for a new resale owner to break even, except for a few resorts.

 

[crvetter]

One thing that is clear from this analysis is that the amount paid by brokers for renting points is too low for a new resale owner to break even, except for a few resorts.

Well you have to assume some inflation of rental rates and discount that back to get the average rental rate expected per point over the life of the contract. Comparing directly the current rental rate to those points wouldn’t be appropriate.

Though I agree rental rates should be rising about 4% a year too as the MF increases at minimum. In reality it should rise similar to rack rates less some static discount value as that is what it would be compared too. But overall even with the limitations of renting points the discount is likely too high on some resorts. For instance VGC is way way too low for $18 a point. That puts a studio there cheaper than PPH and a huge 50+% discount on a GCH room while both are nice VGC is an upgrade over PPH IMO from staying at both.

 

[CanadaDisney05]

One thing that is clear from this analysis is that the amount paid by brokers for renting points is too low for a new resale owner to break even, except for a few resorts.

I thought this too. But keep in mind, rental brokers are not in the business of helping new owners break even. They are in the business of helping owners get rid of points that would have otherwise gone to waste.

Also, keep in mind that rental rates will like inflate in the future as well, but that doesn't make a material difference to the owner who is looking to buy and rent his points until he breaks even (there was a post yesterday about this).

 

[katandmouse]

Quick update. Looks like it may be hard to come by smaller contracts at Boulder Ridge. I really only need about 100 points, and almost everything I'm seeing on the resale sites is 200 points plus. I'll have to keep my eye out.

I think the minimum purchase for BRV (VWL) when it was sold was 150 points, so you may have a harder time finding less than that. Good luck!

https://www.disboards.com/threads/the-dvc-resource-center-updated-april-2019.3655476/post-58628430

 

[CanadaDisney05]

I think the minimum purchase for BRV (VWL) when it was sold was 150 points, so you may have a harder time finding less than that. Good luck!

https://www.disboards.com/threads/the-dvc-resource-center-updated-april-2019.3655476/post-58628430

Thanks for this. This makes sense.

 

[Katie L]

This really elucidates the crazy prices of Riviera... Especially when you factor in the big points chart. Of course, if MF inflation at Riviera is just 3% instead of 4% it changes the whole constellation on a per point basis. Or if 2020 MFs jump something like the ~10% we saw into 2019 while Riviera holds at $8.31 that changes a lot, too. We really liked Riviera when I looked. I think about it often. But financially, it's a lot harder for me to justify...

 

[CanadaDisney05]

This really elucidates the crazy prices of Riviera... Especially when you factor in the big points chart. Of course, if MF inflation at Riviera is just 3% instead of 4% it changes the whole constellation on a per point basis. We really liked Riviera when I looked. I think about it often. But financially, it's a lot harder for me to justify...

One thing to keep in mind is that I am using resale prices for all resorts other than Riviera. If you compared Riviera to other resorts Direct pricing, it may be a bit more even.

My guess will be that given the restrictions associated with Riviera, in a few years these will be going for pennies on the dollar on the resale market. DVC will be forced to exercise ROFR and will end up with inventory overload. Will probably be forced to waive restrictions.

 

[Katie L]

My guess will be that given the restrictions associated with Riviera, in a few years these will be going for pennies on the dollar on the resale market. DVC will be forced to exercise ROFR and will end up with inventory overload. Will probably be forced to waive restrictions.

I'm not as convinced of that. I think it'll settle in at the BLT/Poly levels - not quite as much as VGF. Disney is going to offer an "upgrade your resale points to full benefits" path - my guess is it would be about 50% in dollars per point between the difference between resale and direct pricing. I think the gondolas are going to be very appealing - far more appealing than the monorail, as iconic as it may be. They are banking on Riviera being a "buy where you want to stay" like BCV. To be continued, as they say...

The sales are not tanking thus far, based on the numbers shared here.

Then again, 7 years ago I paid $170 a night and got free dining (which included a TS - which they don't do at moderates anymore) at POR. This year I paid $260 without dining - granted different times of year. That being said, here I am going to WDW more often than ever. Disney has been outpacing inflation since the recession. It's not going to stop. So while the value prop of DVC has decreased substantially in the last few years, it hasn't gone away as long as people are still buying hotel nights at the prices they are. Like I am.

 

[Katie L]

And according to inflation calculators, had Disney just kept pace with inflation, that $170 room should have been $189 this year. Holy. Crap.

 

[CanadaDisney05]

This is kind of tricky if you are doing the discounted average annual MF because it does lead to higher values for longer tenor resorts. Basically would over inflate something like CCV compare to say BRV. It’s sort of not an apples and orange comparison because of this.

I was thinking about the logic behind this again. The longer contract resorts will have higher average long term maintenance fees because of the spread between Maintenance Fee inflation (assumption) vs US inflation. This does get partially offset by the fact that your amortizing the upfront purchase over more points. I don't think you need to change the calculation because these are the realities of the economics (again assuming MF inflation outpaces US inflation) of the individual resorts.

The one thing I'd be afraid of would be that MF inflation in the later years exceeds Disney's inflation on their cash prices. We tend to assume they will remain in line, but in reality they are driven by two separate forces. MF are based on real world maintenance costs (which in theory has some correlation with US inflation). Cash rates on rooms is driven by consumer demand. This doesn't affect the calculations done above when comparing the different resorts, but it is something to think about when comparing DVC vs no DVC, or locking yourself into a 2042 contract vs a new 50 year contract.

 

[CanadaDisney05]

I'm not as convinced of that. I think it'll settle in at the BLT/Poly levels - not quite as much as VGF. Disney is going to offer an "upgrade your resale points to full benefits" path - my guess is it would be about 50% in dollars per point between the difference between resale and direct pricing.

This would be an interesting twist that could keep the value up. Not including the "buy where you want to stay" factors, this could still lead to lower pricing on the resale market because people will know that they will have to pay even more to get the benefits of the other resorts.

 

[Katie L]

This would be an interesting twist that could keep the value up. Not including the "buy where you want to stay" factors, this could still lead to lower pricing on the resale market because people will know that they will have to pay even more to get the benefits of the other resorts.

Agreed. I think Disney is under-valuing unintended consequences from this restriction. But they own the game. They can change it at any time. And we'll whine. And then accept it. The brand has diminished some in my eyes - and that makes me sad - but not sad enough to ditch them.

 

[Madame]

One thing that is clear from this analysis is that the amount paid by brokers for renting points is too low for a new resale owner to break even, except for a few resorts.

It's too low all together. Just a couple hrs ago I contacted David's about renting out 2 BCV 1bds for NYE and a CCV 2 bd for Dec 30. I have a BCV 2bd Jan 1-5 and do not want to have to switch rooms 2 times and split up my party. I have a waitlist for a a 2 bd at BCV or CCV for the 31st, but very little hope. I was planning on taking the cash and just booking through CRO. I was offered $13.50 pp. Uh, no. I'll just make due

 

[crvetter]

I was thinking about the logic behind this again. The longer contract resorts will have higher average long term maintenance fees because of the spread between Maintenance Fee inflation (assumption) vs US inflation. This does get partially offset by the fact that your amortizing the upfront purchase over more points. I don't think you need to change the calculation because these are the realities of the economics (again assuming MF inflation outpaces US inflation) of the individual resorts.

The one thing I'd be afraid of would be that MF inflation in the later years exceeds Disney's inflation on their cash prices. We tend to assume they will remain in line, but in reality they are driven by two separate forces. MF are based on real world maintenance costs (which in theory has some correlation with US inflation). Cash rates on rooms is driven by consumer demand. This doesn't affect the calculations done above when comparing the different resorts, but it is something to think about when comparing DVC vs no DVC, or locking yourself into a 2042 contract vs a new 50 year contract.

One would assume the upfront resale charge is building in the years on the contract, if BCV was 40+ years left it certainly wouldn't be selling for 140, same with BWV. As to your point that was my point people need to realize that the longer contract resorts have a higher average long term MF because of the longer contract. You don't need to change your calculation but you need to realize comparing CCV to BCV isn't apples to apples because one is assuming holding 48 years and the other 23 years, my original point.

I would assume MF inflation would never exceed Disney's inflation on their cash prices long term simply because if that is true Disney is eventually going to go below breaking even on the cash rooms or seriously below what their investors want. Thus if this is occurring Disney's theme parks' appeal as a vacation destination has fallen and the problems are worse than that because you'd be locked into a timeshare at a destination no one wants to go to. It probably happened in 2001 and 2008-2009 but then again that was short periods of time and Disney created artificial demand for their resorts by shutting some down and canceling new hotels. Also today they have quite diversified where they are pulling tourists from.

 

[CanadaDisney05]

I would assume MF inflation would never exceed Disney's inflation on their cash prices long term simply because if that is true Disney is eventually going to go below breaking even on the cash rooms or seriously below what their investors want. Thus if this is occurring Disney's theme parks' appeal as a vacation destination has fallen and the problems are worse than that because you'd be locked into a timeshare at a destination no one wants to go to. It probably happened in 2001 and 2008-2009 but then again that was short periods of time and Disney created artificial demand for their resorts by shutting some down and canceling new hotels. Also today they have quite diversified where they are pulling tourists from.

The problem is at some point it may be out of Disney's control. I'm going to use $17/point rental rates (which is a function of DVC cash rates) for comparison because it's simpler to compare per point costs. At 4% Disney inflation and 2% US inflation, that would mean that points would be renting out at around $37 per point in today's dollars in 40 years. That's around $666 (in today's dollars) for a weekend night during Magic Season at Saratoga Springs for a standard studio. And that is using DVC rental points which must be lower than the cash rates or else nobody would use them. I have to imagine there will be a breaking point for consumer's wallets. I don't like to admit it, but hey, I've been wrong before.

 

[katandmouse]

Disney is going to offer an "upgrade your resale points to full benefits" path - my guess is it would be about 50% in dollars per point between the difference between resale and direct pricing. I think the gondolas are going to be very appealing - far more appealing than the monorail, as iconic as it may be. They are banking on Riviera being a "buy where you want to stay" like BCV. To be continued, as they say...

This would be an interesting twist that could keep the value up. Not including the "buy where you want to stay" factors, this could still lead to lower pricing on the resale market because people will know that they will have to pay even more to get the benefits of the other resorts.

I agree with this. That way DVC gets to make something off the rising resale numbers. And I think they want to position RIV as the BCV/BWV for everyone who wants to own longer than 2042.

I think it [an upgrade charge] would make the resale value drop some, but probably not to pennies on the dollar, just enough to cover the added upgrade cost. All my speculation of course...

I have to imagine there will be a breaking point for consumer's wallets.

And I’m wondering if DVC isn’t starting to reach that point already, which is why we’re seeing the increased interest in resales (and then increased restrictions)...

 

[crvetter]

The problem is at some point it may be out of Disney's control. I'm going to use $17/point rental rates (which is a function of DVC cash rates) for comparison because it's simpler to compare per point costs. At 4% Disney inflation and 2% US inflation, that would mean that points would be renting out at around $37 per point in today's dollars in 40 years. That's around $666 (in today's dollars) for a weekend night during Magic Season at Saratoga Springs for a standard studio. And that is using DVC rental points which must be lower than the cash rates or else nobody would use them. I have to imagine there will be a breaking point for consumer's wallets. I don't like to admit it, but hey, I've been wrong before.

I would agree it could be out of their hands but then at that point Disney simply isn't a desirable vacation destination thus you are stuck with high MF at a location no one wants to go to (likely not even you as an owner). As long as they keep direct sales of DVC there will always have to be some savings in owning else the business model fails but I agree there could be a failure but that happens when Disney is no longer desirable.

I wonder how many said the same thing in 1980's looking at Disney inflation and seeing where it costs now. I'm assuming similar things were thought at the time but WDW stayed a popular tourist destination thus demanded the prices.

 

[katandmouse]

I wonder how many said the same thing in 1980's looking at Disney inflation and seeing where it costs now. I'm assuming similar things were thought at the time but WDW stayed a popular tourist destination thus demanded the prices.

And this is why I like to have historical context too!

 

[BillPA]

We stayed at the poly in 1979 on our first trip. Cost $55 a night. We thought that was high, but never imagined it would be 10 times that price now, 40 years later.

 

[Minniesgal]

I don't understand why you would take out inflation, I still am required to pay the full price regardless if my salary lags or exceeds inflation. I also think it's missing the important part of point requirements for Studios, 1BR, 2BR per the resort being measured. As a great example with AKV you can grab value Studios which are drastically more point efficent that would not be available at 7 months when SSR is able to book the resort.

To be honest this board in general always seems to want to discount inflation when in reality you still need to pay that money. You should adjust your available spending money not what things cost.

Discounting doesn't take out inflation it simply converts all monetary values to todays money to allow an apples to apples comparaison in real terms.