Big DVC changes

[Steamboat Bill]

The offer received in the mail today from the DVC was $15 per point to extend the OKW contracts to 2057, if purchased before the end of February.

Does the $15 vs $25 change whether anyone thinks this is a good idea or not?

Vickie

$25pp is an absolute RIP-OFF!

Sell OKW and get ready for Hawaii DVC!

 

[JimC]

Most of my buyers with 2 grown children and no grandchildren tend to buy Marriott or Hilton rather than Disney. If they plan to trade the property, they like to know that it is deeded in perpetuity. Most of my buyers have 2 young children or a few grandchildren. They are more interested in being on Disney property, than having a deed in perpetuity.

We also own MVCI, but not because of the ownership difference. MVCI is a better value off Disney property. I have reached the conclusion that a deed in perpetuity is more sales hype than actual value.

 

[JimC]

Well now they announced the Hawaii project. Resort and DVC at Ko Olina.

Disney unveils plans for 800-room Oahu resort

 

[Steamboat Bill]

Well now they announced the Hawaii project. Resort and DVC at Ko Olina.

Disney unveils plans for 800-room Oahu resort

I guess DVC read my last post

 

[vittoria]

I wouldn't consider it at $25 pp, but the offer from the DVC which arrived yesterday was for $15 pp until the end of Feb. I'd like opinions on whether extending the ownership the extra 15 years is worth it at $15 pp.

Thanks-

Vickie

 

[Steamboat Bill]

One thing to consider is that OKW has the LOWEST annual dues of all the DVC properties and thus is the cheapest to own on a long term basis. When you consider California, Hawaii and amny more locations being added, OKW is a bargain that can trade into them at the 7 month window.

The $15pp is a "fair" deal, but not a great one. I would probably pass on this one as 2042 is still a long time away.

 

[Seth Nock]

One thing to consider is that OKW has the LOWEST annual dues of all the DVC properties and thus is the cheapest to own on a long term basis. When you consider California, Hawaii and amny more locations being added, OKW is a bargain that can trade into them at the 7 month window.

The $15pp is a "fair" deal, but not a great one. I would probably pass on this one as 2042 is still a long time away.

2nd lowest. Saratoga is the lowest. Most of my buyers are passing. I think I have about 5% extending.

 

[Steamboat Bill]

2nd lowest. Saratoga is the lowest. Most of my buyers are passing. I think I have about 5% extending.

my bad....I own 850 SSR points and should know better.

I would advise saving your upgade money for the DVC Hawaii project.

 

[barndweller]

I would guess that the maintenence fees at both the Ca. & Hawaii resorts will be quite high. Costs for everything in those two states are well above the national average, everything from water & electricity to wages for maids & gardeners is very high out here. And just keep rising at a rapid clip. Property taxes are high & are billed seperately on timeshares in Ca.

 

[JimC]

I'm expecting that both purchase price and annual fees will be very expensive in Hawaii. Anaheim will expensive, but probably less so than Hawaii.

 

[JimC]

I wouldn't consider it at $25 pp, but the offer from the DVC which arrived yesterday was for $15 pp until the end of Feb. I'd like opinions on whether extending the ownership the extra 15 years is worth it at $15 pp.

Thanks-

Vickie

I believe that it merits consideration at $15. One certainly can demonstrate it with reasonable assumptions regarding future room rates, DVC dues and factoring lost opportunity costs. For a younger OKW owner who is likely to still be able to use the extra years I would consider it very hard because it gets you access to the program for fifty years at lower costs than the other options (AKV and to a lesser extent SSR).

If you are like us, early 50s, then it is more a question of how the extension will affect resale value and marketability. Our evaluation is more along if we want to sell in ten years are we better off doing nothing or paying the extension fee. So far I have not heard an overwhelmingly convincing argument either way. So it will likely come down to a SWAG.

Another argument is this. We bought with a "pre-paid vacation" perspective. We will have offset the purchase price and opportunity costs by 2009 (seven years of ownership). So if the membership is not worth very much in a few years in resale we are still way ahead on overall vacation value. On that basis we would likely pass.

 

[FLYNZ4]

If you are like us, early 50s, then it is more a question of how the extension will affect resale value and marketability. Our evaluation is more along if we want to sell in ten years are we better off doing nothing or paying the extension fee. So far I have not heard an overwhelmingly convincing argument either way. So it will likely come down to a SWAG.

Jim,

Let's assume that you want to divest of DVC in a few years... do you think that there will be contracts available for resale with both 2042 and 2057 end dates? Those will be your "competition". What do you think the difference in price will be between the two types of contracts?

/Jim

 

[Steamboat Bill]

Jim,

Let's assume that you want to divest of DVC in a few years... do you think that there will be contracts available for resale with both 2042 and 2057 end dates? Those will be your "competition". What do you think the difference in price will be between the two types of contracts?

/Jim

At that time probably $8-10pp difference between the two contracts.

 

[Eli Mairs]

We probably won't live to see 2042, as we will be in our 90's.
However, we are seriously thinking of extending our membership for a couple of reasons.
We would like to pass it along to our children, their children and grandchildren, to carry on our tradition of Disney vacations. Our daughters grew up at Old Key West, and still love staying there, as adults. Even if they decided to rent out the points, they would make money. Imagine the cost of resort accommodation in 30-40 years.
If we ever do wish to sell, the additional years will probably have a positive impact on the selling price, keeping it more in line with the newer resorts. Those not extending will be the poor cousins.
By renting out this year's points, a good chunk of the cost will be covered, so it is not a big deal for us.
We bought in 1992, and have recouped our original cost several times over, so we're happy.

 

[JudyS]

I wouldn't consider it at $25 pp, but the offer from the DVC which arrived yesterday was for $15 pp until the end of Feb. I'd like opinions on whether extending the ownership the extra 15 years is worth it at $15 pp....

I own at Boardwalk, not OKW, but if I owned at OKW, I would pass. Disney is asking for money now for something they won't give you until 2042.

Seth mentioned that very few of his buyers are taking the extension, even at $15. That's what I'm hearing on the DVC boards, too -- most people aren't taking the extension.

I'm of the mind that Disney primarily wants to extend OKW so that it will be more competitive with their newer properties that are "good" until 2057. It seems to me that Disney is unhappy about current resale prices at OKW and are concerned low OKW resale prices will cut into new DVC sale. Therefore, they have been accumulating OKW points via ROFR rather than let OKW resale prices drop. Rumors are that Disney is sitting on 96,000 OKW points. My belief is that Disney will exercise its ROFR on any 2042 OKW contracts that sell for reasonable prices, and then re-sell them as 2057 contracts at a higher price point. I think any income Disney gets from people extending is just gravy; it's not their main goal.

 

[Steamboat Bill]

My belief is that Disney will exercise its ROFR on any 2042 OKW contracts that sell for reasonable prices, and then re-sell them as 2057 contracts at a higher price point. I think any income Disney gets from people extending is just gravy; it's not their main goal.

I think this is the BEST explanation I have heard on this topic.

 

[JimC]

Jim,

Let's assume that you want to divest of DVC in a few years... do you think that there will be contracts available for resale with both 2042 and 2057 end dates? Those will be your "competition". What do you think the difference in price will be between the two types of contracts?

/Jim

From what I have seen, resales hit the market within six months. We already saw AKV resales before it opened. So yes, I expect to see 2057 OKW contracts sometime in 2008.

If I could answer your second question with any assurance I would be a very happy camper!!! I just don't know for sure and have not heard a convincing argument either way.

 

[FLYNZ4]

From what I have seen, resales hit the market within six months. We already saw AKV resales before it opened. So yes, I expect to see 2057 OKW contracts sometime in 2008.

If I could answer your second question with any assurance I would be a very happy camper!!! I just don't know for sure and have not heard a convincing argument either way.

Jim,

I also do not have a good feeling for what the resale difference will be between the 2042 and 2057 OKW contracts. To me... IF (big IF) the gap gets extremely wide... that would be the primary reason to bother with the contract extension.

One thing seems clear to me: As the remaining life drops to a lower number... which I estimate at about 25 years... then the "resale threat" to Disney decreases... and they may no longer need to keep the resale price artificially inflated as they do now via ROFR. The basis of this agrument is because at some point in time... I think most new buyers will factor in their own mortality into the decision making process. Once the lifespan of the new purchase is less than the buyer's expected lifespan... and to a lesser degree... the expected lifespan of their children... then I think it will be fairly easy for Disney to effectively market the newer properties against the ones with limited lifespan.

/Jim

 

[bobh]

Old Key West Extension

I am in my 50's and will decline the offer to extend for something I can't use.
Any money I put into Disney will be for points I can use right now rather than pay for something that my family can't use for 35 years. My children can use my membership until they are 60 years old which should take care of the grandchildren as well. In addition, I do not want to saddle my kids with maintenance dues that far out in the future. It makes no sense for someone in my age group. Perhaps it might make sense to a younger owner. My complements to JudyS for an excellent explanation. I read the DVC Board for days and saw no explanation that captured what Disney is doing as well as her description.

 

[bobh]

Question for JudyS

If Disney is sitting on 96,000 points does anyone have any idea how many total points are available at Old Key West. I am an owner and am sory to say I have no idea. Anyone?

 

[Steamboat Bill]

96,000 points divided by 300 points per week = 320 weeks

320 weeks divided by 52 weeks = 6.15 timeshares rented year-round.

Considering OKW has over 300 rooms...this is hardly a drop in the bucket if the rumor is true.

 

[bobh]

Good point

Steamboat Bill - your explanation sounds very logical. The number of rooms is easily determined but how did you come up with the 300 points per week. Is that just a reasonable estimate or have you done the math. I just took an average of the points for the premier season for accomdodations raging from studio to Grand Villa and came up with a maximum average of 375 points per week so I am estimating that your 300 point figure is probably very accurate if one did the math for the lower demand periods in the year. Thanks for the
information.

 

[Steamboat Bill]

The actual average for OKW 2 bedroom is closer to 280 points per week..I just rounded to 300.

There are 709 rooms at OKW and I assumed that only 1/2 are 2 bedrooms. Thus I estimated 300 rooms.

Either way, my estimate was very close that these 96,000 points (if they even exist) are a small number compared to the total.

 

[JudyS]

If Disney is sitting on 96,000 points does anyone have any idea how many total points are available at Old Key West. I am an owner and am sory to say I have no idea. Anyone?

I agree with Bill here, it's about the equivalent of 6 two-bedrooms, or so.

No, this isn't a big fraction of OKW. It's not like Disney is going to have trouble balancing the MF budget because they own six units or anything. However, at the other DVC resorts that have completed sales (at least the ones in Orlando) Disney doesn't seem to be sitting on much inventory at all. For Boardwalk, Beach Club, and Wilderness Lodge, there is a waitlist for most months. The fact that Disney has inventory at OKW suggests that Disney is having trouble getting resale prices up to where they want, and is using ROFR to buy and hold inventory that would otherwise sell for less than what Disney finds acceptable.

It also seems that Disney may run short of new points to sell. They have a lot of projects in the pipeline (CA, HI, the new AKL buildings) but these won't be completed for a couple of years. Disney may not have enough inventory to sell during 2008. Extending OKW until 2057 gives them something they can market during 2008 to new buyers, without necessarily having to drop the price per point below that of AKL.

 

[Steamboat Bill]

Extending OKW until 2057 gives them something they can market during 2008 to new buyers, without necessarily having to drop the price per point below that of AKL.

Judy continues to hit the DVC nail on the head in regards to the OKW extension as I agree with her analysis.

I don't read DISboards too often, so I don't know if this opinion is reflected over there.

I have been a DVC owner since y2k and have bought over 1,000 points. DVC is always in demand and the California and Hawaii projects will only add fuel to the fire.