Big DVC changes

As some of you may have read on the Western Resorts board here, today Disney officially confirmed long-standing rumors that it is expanding its timeshare locations to include California, albeit with a very small number of units (50 "2 bedroom equivalents"). Disney's press release is at
http://www.disneylandnews.com/article_display.cfm?article_id=234&view_id=5829

This is only one of many recent major DVC changes. Disney is also extending the RTU period on its original timeshare, Disney's Old Key West (at Disneyworld) from 2042 to 2057. Current OKW owners will either have to sign away their rights to the extended period, or pay a fee (officially $25 per point, but rumored to actually be $15 a point initially, which I still feel is very high. DVC rooms cost between 8 and about 200 points per night. )

Additionally, in the past couple of weeks, Disney has increased restrictions and fees (a bit) for using points outside of Disney's own properties. They have also changed the banking rules for points. (It's debatable which banking system was better for members, the old one or the new one.) Disney has also increased marketing efforts for DVC, including opening their first model outside of Disney property (in a mall in Chicago.)

Disney also currently has two properties in active sales, both at Disneyworld, Saratoga Springs and Animal Kingdom Villas. Disney has really speeded up contruction on Animal Kingdom Villas, closing much of the Animal Kingdom hotel units so that parts of the existing resort could be converted to timeshare units ahead of the original schedule.

Rumors are that there are two other new DVC resorts in the pipeline. Well-substantiated rumors say that the first DVC property on the Disney World Monorail is currently being built (the Villas at the Contemporary Hotel.) Less substantiated rumors say that Disney plans a DVC property in Hawaii.

All-in-all, I think this points to a major expansion of the DVC system. As an owner at Disney's Boardwalk Villas, I'm very excited.

I am very bullish on DVC.

My comments:

1. $15pp to upgrade OKW is CHEAP as this is only $1 pp per year. My suggestion, do it ASAP.

2. Only 50 2-bedroom units at Disneyland is too small. I wonder if that is a building restriction?

3. I hope the CR becomes a reality.

Steamboat Bill said:

I am very bullish on DVC.


2. Only 50 2-bedroom units at Disneyland is too small. I wonder if that is a building restriction?

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I think its more of a land restriction, It doesn't even seem like they had room for this much of an expansion.

Steamboat Bill said:

I am very bullish on DVC.

My comments:

1. $15pp to upgrade OKW is CHEAP as this is only $1 pp per year. My suggestion, do it ASAP.

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You don't seriously believe what you've posted here, do you Bill? If so, please lend me $1M. I will pay you back $1.5M in 2042.

BocaBum99 said:

You don't seriously believe what you've posted here, do you Bill?

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Sure...anyone who owns DVC OKW will have their contract expire in 2042 and they own nothing...i.e. $0.00.

To get an extra 15 years added to their contract and additional 15 years use of DVC, it would only cost $1pp per year ($15pp / 15 years) as compared to buying AKV that are about $2pp per year ($100pp / 50 years).

Also the annual dues for OKW is much lower than the other resorts.

This is a good deal for current owners of OKW that are happy visiting Disney.

Bill,

Your assessment ignores the time value of money. The most relevant comparison you can make is between Saratoga Springs and Old Key West.

Since SSR and OKW are about the same from a demand point of view (e.g. the most available resorts in DVC at the theme parks), the only difference between the two resorts is that owners at one resort have an RTU expiration date of 2057 and the other is 2042. So, the extra 15 years is identically equal to the price difference between today's market rate for OKW and SSR. Today, it's about $8. After the conversion, the resale values should be about equal.

So, it will cost DVC owners $15 today to get something worth $8 today.

THAT MAKES NO ECONOMIC SENSE. The numbers only work in fantasyland.

I am sure that some owners will use your logic to make that purchase. But, that is because they do not understand how to do a comparative market analysis.

Boca,

Let me see if I get this right. If you plan to keep this ownership until it expires. (which I assume is the reason people would upgrade)

The $15pp you pay now. Actually has zero effect on your ownership for another 35 years? If you took that $15 and put it in a CD for 35 years at 5%. You'll in essence be paying almost $80/pp or if it goes into the stock market at a 30yr average of 12%. You'll be paying $700.00 pp for a 15 year ownership?

I'm not that great at this, so if I missed something, let me know.

I don't figure time value of money. If I did, I would also have to figure it in "reverse", as DVC will pay for itself in around 7 years. After that, you must figure the "time value of the money" which you throw away on Disney deluxe hotels for the following 43 years.
You see, everyone forgets to subtract the hotel costs from that pile of money just sitting there collecting interest.

Carl D said:

I don't figure time value of money. If I did, I would also have to figure it in "reverse", as DVC will pay for itself in around 7 years. After that, you must figure the "time value of the money" which you throw away on Disney deluxe hotels for the following 43 years.
You see, everyone forgets to subtract the hotel costs from that pile of money just sitting there collecting interest.

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Actually, I don't forget any of the costs. In fact, I am one of the only ones who actually does a true apples to apples comparison.

The BEST market based comparison of what the 15 year extension is worth in today's dollars is to compare the average market price of an SSR package net of all points and adjusted for anniversary date against an equivalent OKW 2042 package. That difference in price is what the extension is worth. Someone on this board told me that that difference is about $8 per point.

So, in essence, Disney is offering owners a product that is worth $8 for $15/point. That is about par for the course for timesharing.

The only people who will take this deal have no clue about how or desire to do a proper financial analysis.

Carl, since you don't care about time value of money, I'll offer you the exact same deal that I offered Steamboat Bill. Give me $1M now and I'll give you $1.5M in 2042. That should be a good deal in your book. It's 50% more than I you gave me.

Let me give you an example of what I mean.

Let's use the following examples:

Let's say that today a Saratoga Springs package goes for roughly $83/point on the resale market. And, at Old Key West, it's about $75.

Once, the owner pays the $15 extension, does this mean that their new ownership is worth $90/point = $75 + $15 they just paid?

No, it doesn't because owners will purchase the Saratoga Springs points for $83 instead.

The better option for the customer with the extra money is to purchase more new points at Saratoga Springs with the money instead of paying for something now that you won't be able to use for 35 years. At least they could use the points now instead of waiting 35 years to use them.

This extension IS a good idea for Disney. It provides a mechanism to sell the same product over and over again to customers over time. It's brilliant from their point of view.

The problem is it opens pandora's box for once Bliss customers to start looking more closely at what they actually own. Disney has basically sold owners on the concept that the RTU ends so far out that you practically own it outright. So, we are taking it back, but you will be long gone by then. That always happens with leaseholds. But, when the RTU gets close to expiring and people start thinking about losing their ownerships, that's when all heck breaks loose. Disney is very smart to have that break out now instead of 15 years from now.

I was comparing extending OKW to buying the new AKV, not buying a resale SSR.

AKV = $100pp and OKW resale = $75pp and SSR resale = $85pp, thus there is a $25pp spread and if you can upgrade your OKW to the same RTU expiration as AKV for $15pp then I think it is a good deal.

Also, OKW annual Dues is MUCH lower than AKV.

Now if you decide to buy SSR (my current favorite best deal...search TUG for my posts on this) then the upgrade may not be worth it, but you MUST include closing costs with buying SSR resale and that adds about $500 to any deal , thus negating any savings.

I am still of the opinion, if you LOVE DVC and are a current DVC OKW member that bought OKW in the $60pp range, then upgrading your account for $15pp (and this may not be the firm price) is a pretty good deal. If you are not a DVC OKW owner, then I would focus on a SSR resale and try to get the best deal out there.

This upgrade plan may actually do more harm to current OKW owners than if the plan did not exist.

Steamboat Bill said:

I was comparing extending OKW to buying the new AKV, not buying a resale SSR.

AKV = $100pp and OKW resale = $75pp and SSR resale = $85pp, thus there is a $25pp spread and if you can upgrade your OKW to the same RTU expiration as AKV for $15pp then I think it is a good deal.

Also, OKW annual Dues is MUCH lower than AKV.

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Therein lies the fallacy of your argument. And, it proves my point that many do not know how to do a comparable market analysis.

You cannot compare AKV to OKW. Those are apples and oranges in terms of products. OKW and SSR are most alike. Just like Beach Club and Boardwalk are more comparable as well.

Steamboat Bill said:

Now if you decide to buy SSR (my current favorite best deal...search TUG for my posts on this) then the upgrade may not be worth it, but you MUST include closing costs with buying SSR resale and that adds about $500 to any deal , thus negating any savings.

I am still of the opinion, if you LOVE DVC and are a current DVC OKW member that bought OKW in the $60pp range, then upgrading your account for $15pp (and this may not be the firm price) is a pretty good deal. If you are not a DVC OKW owner, then I would focus on a SSR resale and try to get the best deal out there.

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I love DVC and I love OKW as my personal favorite DVC resort in Orlando. I would STRONGLY recommend anyone wanting to purchase additional OKW points to buy another smaller OKW 2042 package.

And, I would recommend STRONGLY that OKW owners hold their money in an alternate investment and wait until the 2057 OKW packages start emerging on the resale market. I predict that the far better financial decision if everything plays out with the numbers described on this thread is to sell your current 2042 and buy a resale 2057. You will save about $8/point.

Steamboat Bill said:

This upgrade plan may actually do more harm to current OKW owners than if the plan did not exist.

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This is not true. OKW owners were already going to be harmed. All Disney is doing now is focusing their attention on something they put their head in the sand about as they were trained by Disney. Now, they are telling them to take it out of the ground and look around.

Disney is in essence telling them to take a bite out of the forbidden fruit (sorry about the mixed metaphor). The potential downside is that they may no longer be ignorant and bliss.

BocaBum99 said:

And, I would recommend STRONGLY that OKW owners hold their money in an alternate investment and wait until the 2057 OKW packages start emerging on the resale market. I predict that the far better financial decision if everything plays out with the numbers described on this thread is to sell your current 2042 and buy a resale 2057. You will save about $8/point.

Disney is in essence telling them to take a bite out of the forbidden fruit (sorry about the mixed metaphor). The potential downside is that they may no longer be ignorant and bliss.

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I will agree with you on the first point, but it may take several years for this to come on the market as they have not even upgraded any OKW yet to the new RTU.

I also agree with you on the second point as many DVC owners have been bamboozled by the "pixie dust" and are the LEAST objective people I have ever met.

BocaBum99 said:

You cannot compare AKV to OKW. Those are apples and oranges in terms of products.

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DVC is "THE" product, not necessarily the individual resorts.

At 7 months before your desired DVC check-in date...all DVC properties are treated as "equals" in terms of trying to get a reservation at any of the DVC properties. The only difference at that point is the annual dues and there is a HUGE difference between OKW and AKV annual dues and VB for that matter.

The only advantage of owning at a particular location is getting the 11 month (4 extra months) window to make a reservation. This is usually necessary to get the HIGHEST in demand weeks like holiday and special events. These, by the way, are the times I avoid Disney.

I originally owned two 250 point contracts at VWL and never booked at the 11 month window, thus I sold them (for a $6,000.00 PROFIT) and bought 850 points at SSR in 5 different contracts. I like owning at SSR because they came up with a new RTU expiration (added 13 extra years) and the annual dues was much lower.

I have stayed at every DVC property at least once and like SSR the least. Because I usually book my trips at the 7 month window, I get to choose where I want to stay and paid the least for my membership and the least for my annual dues. Now that's what I call "welcome home"

BocaBum99 said:

The only people who will take this deal have no clue about how or desire to do a proper financial analysis.

Carl, since you don't care about time value of money, I'll offer you the exact same deal that I offered Steamboat Bill. Give me $1M now and I'll give you $1.5M in 2042. That should be a good deal in your book. It's 50% more than I you gave me.

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I have not looked at the extension of OKW to see if it is a good deal for me, but there are many people who have. There are some pretty smart folks, even those who do this stuff for a living, who feel it's a good deal after running the numbers. -- But I'm not here to argue that point.

I didn't mean to imply that I don't care about the time value of money. I just don't think it's relevent in this case since I would be spending all the money, and more, on the same product anyway. I wouldn't be investing that money, but rather drawing from it quickly for Disney deluxe hotel rooms. Once the money is gone I will be losing interest on the additional money I will have to pay for deluxe accommodations, that WOULD otherwise be invested.
That's different than giving you a million dollars. If I wasn't going to spend the million, than of course time value of money comes into play.

Carl D said:

That's different than giving you a million dollars. If I wasn't going to spend the million, than of course time value of money comes into play.

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While were on it...can I have a million too....I want to join Exclusive Resorts. I will promise to be your best friend and invite you to some nice locations (if you don't mind the guest room).

Carl D said:

I didn't mean to imply that I don't care about the time value of money. I just don't think it's relevent in this case since I would be spending all the money, and more, on the same product anyway. I wouldn't be investing that money, but rather drawing from it quickly for Disney deluxe hotel rooms. Once the money is gone I will be losing interest on the additional money I will have to pay for deluxe accommodations, that WOULD otherwise be invested.

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That's the beauty of the deal from a Disney stockholder perspective. You receive NOTHING but I get the cash. You would not be spending the money anyway because you already have your points. What you get is an option for another 15 years worth of points in 35 years. I would bet with Boca that if you invested this money in the S&P 500 for 35 years that you could purchase the points in 35 years at the then current price and still have a ton of cash left over.

It's funny because this is the reverse argument of the RTU which tells you not to worry about the expiration because the terminal value is zero. Now they are selling you that "worthless" terminal value for another $15 - brilliant!!!!

ok I give up....

I was comparing upgrading a "current OKW DVC owner" to the new RTU as compared to buying a new AKV contract....the cost still seems reasonable to me, but I own all my points at SSR and already have the extended RTU (minus 3 years). Thus, I did not put on my calculus hat to crunch these numbers as it is irrelevant to me.

If you invested $3,000 ($15pp x 200 points) in a 35-year CD for 35 years (@ 5%), it will grow to about $16,548.05 (but you have to pay taxes).

However, the price of joining DVC will probably be $400pp in 35 years and the cost of one night at Disney will probably be $1500 per night.

Another strategy is to do nothing as most of the original OKW owners will be going to the "Big Magic Kingdom in the Sky" if you know what I mean before they ever get to the end of their RTU contract. I am NOT a believer in leaving a timeshare to my kids in a will.

I will follow this thread as I am interested in what people do....but I must bow out from the debate as I have NOT read all the fine print.

Steamboat Bill said:

If you invested $3,000 ($15pp x 200 points) in a 35-year CD for 35 years (@ 5%), it will grow to about $16,548.05 (but you have to pay taxes).

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Right, and if you discount this back to today at Disneys 10.6% ROI then the points "cost" them $487 or $2.43 each. If you discount it at 7% then it is worth about $8, which is about where the market seems to value it.

Seems a little piggish to charge $15 for something that costs $2.43 or $8, but as a shareholder I will not complain.

Also, don't forget that this is the "special" price, the regular price is supposed to be $25 with a $10 discount :ignore:

wuv pooh said:

Also, don't forget that this is the "special" price, the regular price is supposed to be $25 with a $10 discount :ignore:

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$25pp is an absolute rip-off...just like the $10 per day Coke's at the water parks.

Steamboat Bill said:

$25pp is an absolute rip-off...just like the $10 per day Coke's at the water parks.

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Thats something I didn't think of. If you stay on-site at DVC in California. You can easily go back to the room to get drinks, snacks, food.

You can spend $200/day in the Park for a family

wuv pooh said:

That's the beauty of the deal from a Disney stockholder perspective. You receive NOTHING but I get the cash. You would not be spending the money anyway because you already have your points. What you get is an option for another 15 years worth of points in 35 years. I would bet with Boca that if you invested this money in the S&P 500 for 35 years that you could purchase the points in 35 years at the then current price and still have a ton of cash left over.

It's funny because this is the reverse argument of the RTU which tells you not to worry about the expiration because the terminal value is zero. Now they are selling you that "worthless" terminal value for another $15 - brilliant!!!!

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With all due respect, I don't think you understood what I was saying.

I thought I made it clear that I would be spending the money on hotel rooms, not investing it for 35 years. Further more, if I had that money, I wouldn't have the points.

To say we get nothing couldn't be further from the truth. I get a lifetime of Disney accommodations. Is that "nothing"? Even better, I won't burden my heirs with a timeshare after I'm gone.

Some of us do put a high value on quality of life, where as some only put value on a dollar bill.

Carl D said:

With all due respect, I don't think you understood what I was saying.

I thought I made it clear that I would be spending the money on hotel rooms, not investing it for 35 years. Further more, if I had that money, I wouldn't have the points.

To say we get nothing couldn't be further from the truth. I get a lifetime of Disney accommodations. Is that "nothing"? Even better, I won't burden my heirs with a timeshare after I'm gone.

Some of us do put a high value on quality of life, where as some only put value on a dollar bill.

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Carl - I understand your argument for a NEW purchase. If that is how you choose to spend your money that is fine. I made the same rationalization buying Marriott from the developer (which has let me use 907 DVC points over the last 5 years :rofl: )

For an EXTENSION you really are getting nothing. You get no new points until 2043 so you still have to buy the hotel room, your quality of life is unchanged, only your wallet is lighter. Disney has free use of your money for 35 years.

It is purely a financial transaction of which will be the better way to purchase points in 35 years. Given the fact that you might not even want the points then and the high cost, it appears more smoke and mirrors than magic to me. YMMV.

wuv pooh said:

It is purely a financial transaction of which will be the better way to purchase points in 35 years. Given the fact that you might not even want the points then and the high cost...

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...or you're 75 - 80 years old and find that staying at Disney doesn't have quite the same appeal as it did 35 years ago. Besides...who will want to stay at a resort that is 50 years old? Purchasing points for OKW in 2042 will probably be a really good deal, either that or Disney brings in the bulldozers and creates "Disney's New Key West Resort".

Many of the discussions about whether or not DVC is a good deal seem to leave out the "resale-ability" of this particular timeshare.

When we bought DVC, we thought all our kids (3) would enjoy it for their families. It turned out that only one of our children is as much of a Disney fan as we are. However, we are still going to WDW quite often every year.
When, and if, we're too old to go as often, possibly 10-15 years from now, we'll give her the option of inheriting some of our points, and we'll sell the rest. Since we originally bought DVC in the '90s, we didn't spend close to the current cost.

Even if the prices don't continue to rise for DVC resales, we'll still have made out quite well, since thanks to ROFR, DVC holds its value pretty well. We feel very good about what we've received vs the $ we put in.