DVC Down Payments Reduced

[TimK]

For the past several years, the Disney Vacation Club has required a minimum downpayment of 10% on all point purchases. Recent changes to the application of promotional incentives has reduced the initial cash outlay.
DVC Down Payments Reduced (http://dvcnews.com/index.php?option=com_content&task=view&id=500)

[dwelty]

This will undoubtly open up DVC to a wider socioeconomic range of people. However, it might increase the number of defaulted loans as Disney is quite liberal with qualifying guidelines already.
It's almost like those Mortgage companies who gave loans to people who really had no business buying in the first place. I am wondering when they will get to the place where they will no longer be able to prop up the price thru FROR as the economy slows and more people have to sell because of job loss, or because they should not have bought in the first place.

[KNWVIKING 2.0]

I don't think Disney worries about foreclosures. They got your downpayment in the bank, they're not giving that back. The interest rate they charge is very high. If an owner manages just one year of payments, Disney made 10% ROI, not to shabby these days. Also, it's not like the owner had the oppotunity to "trash" the place before they were evicted. Disney doesn't have to spend a dime to refurb the property. Disney will simply resell the points to the next buyer or rent out for cash. Last bonus is that the 50 yr contract never stopped ticking, the new buyer only gets remaining years.

[dwelty]

I don't think Disney worries about foreclosures. They got your downpayment in the bank, they're not giving that back. The interest rate they charge is very high. If an owner manages just one year of payments, Disney made 10% ROI, not to shabby these days. Also, it's not like the owner had the oppotunity to "trash" the place before they were evicted. Disney doesn't have to spend a dime to refurb the property. Disney will simply resell the points to the next buyer or rent out for cash. Last bonus is that the 50 yr contract never stopped ticking, the new buyer only gets remaining years.

True, except if more buyers get into trouble and sell on the resale market, this could be a problem. There will come a point when Disney cannot prop up the price forever. This could hurt future sales.

[bwv dreamin]

True, except if more buyers get into trouble and sell on the resale market, this could be a problem. There will come a point when Disney cannot prop up the price forever. This could hurt future sales.

What about the maintenance fees? Who pays them if these contracts go into forclosure? If enough come back to Disney, is there a chance they could hike the MF's to cover this loss?

[PoohsPal]

It's my understanding that tehy pay MFs for all contracts not sold. So, that should not hurt us.

However, in teh days of people over-extending themselves (buying houses they can't afford, huge cc bills, etc), I worry that this just gives people one more way to get over their heads financially. I'm extra conservative, though.

[TimK]

This is just my $.02, but I think these recent changes to make DVC more affordable have probably come down from folks above Jim Lewis, and that they are NOT necessarily driven by slow DVC sales.

100-point contracts...lower downpayments...attractive incentives....Developer's Points. Disney is going crazy trying to get points in people's hands so that they can continue pouring the rest of their funds into park tickets and meals.

We've often talked about how DVC helps put bodies in the parks, and I think that may be an even bigger motivation than it is now.

[KNWVIKING 2.0]

True, except if more buyers get into trouble and sell on the resale market, this could be a problem. There will come a point when Disney cannot prop up the price forever. This could hurt future sales.

How is Disney propping (is that a word) up the price ? Thru ROFR ? Don't see how that is a problem.

The only reason Disney has ROFR is so they have an opportunity to double dip on the same points. If Disney chose to stay out of the resale market entirely they still wouldn't get hurt because they still got top dollar for the original sale.

[KNWVIKING 2.0]

Disney is going crazy trying to get points in people's hands so that they can continue pouring the rest of their funds into park tickets and meals.

We've often talked about how DVC helps put bodies in the parks, and I think that may be an even bigger motivation than it is now.


I think this is a failed busness plan. I've been an owner since '97. I can say with complete certainty that I am spending less & less in the parks/resorts with each trip. It's not in Disney's best interest to have a high percentage of their resorts filled with the likes of me.

[dwelty]

How is Disney propping (is that a word) up the price ? Thru ROFR ? Don't see how that is a problem.



Prop, prop·ping
–verb (used with object) 1. to support, or prevent from falling, with or as if with a prop (often fol. by up): to prop an old fence; to prop up an unpopular government.
2. to rest (a thing) against a support: He propped his cane against the wall.
3. to support or sustain (often fol. by up).
–noun 4. a stick, rod, pole, beam, or other rigid support.
5. a person or thing serving as a support or stay: His father is his financial prop.

[Origin: 1400–50; late ME proppe (n.); c. MD proppe bottle stopper]

—Synonyms 1. brace, buttress, bolster.
Dictionary.com Unabridged (v 1.1)
Based on the Random House Unabridged Dictionary, © Random House, Inc. 2006.


Yes, it is.

[JimP]

I think this is a failed busness plan. I've been an owner since '97. I can say with complete certainty that I am spending less & less in the parks/resorts with each trip. It's not in Disney's best interest to have a high percentage of their resorts filled with the likes of me.
Not necessarily true (nor am I saying that in your case... you are wrong either).

The larger variable is if you (and people like you) continue to spend money while there. Souvenirs and food especially.

The fact that some DVC'ers spend little time in the park... and even more of us refuse to wait in long lines... allows higher overall attendance levels of people spending money without taxing the infrastructure (ie: rides). It is ride capacity (ie: wait time) that affects visitor satisfaction more than anything.

I had a long conversation about this back in the Dick Nunis era with one of his VPs. The discussion was mostly about the effect of annual passes on the success of WDW... but I think the key biz issues parallel this discussion as well. They were very clear that someone like us... who buys tickets... and does not contribute to the length of lines (we almost never wait at all)... is actually very good for WDW (assuming we spend money on food and other items).

/Jim

[KNWVIKING 2.0]

My last cash trip to WDW cost approx $6500. in '97. $1000.00 would have been airfare & rental car. Rest went to Mr. M. Mouse.

In May, my total was $517.00.Add in a prorated portion for two PAP's ($300.00), annual dues ($520.00) and DVC purchase price ($930.00). Total: $2267.00 X 3 trips = $6800.00.

Without adjusting for inflation, $5500. for 8 nites vs $6800.00 for 33 nites, ( and that total will continue to drop ).

We now buy annual passes to SW and Aquatica. We purchased a Starwood timeshare. More than half our TS meals are off property. I haven't bought a T-shirt in years. I don't stand in lines but that doesn't mean I don't go on rides or see shows. I don't spend more money because I'm not in line. I also take advantage of the various discounts afforded DVC members and AP holders so not only am I spending less, their profit margin is lower.

Granted, some of the reasons I'm spending less are not directly related to my DVC purchase, ( less then impressive, overpriced menus ) but the familiarity I have with the entire Central Florida area because I spend 30 plus nites a year in WDW mean I'm very aware of outside options.

[JimP]

My last cash trip to WDW cost approx $6500. in '97. $1000.00 would have been airfare & rental car. Rest went to Mr. M. Mouse.

In May, my total was $517.00.Add in a prorated portion for two PAP's ($300.00), annual dues ($520.00) and DVC purchase price ($930.00). Total: $2267.00 X 3 trips = $6800.00.

Without adjusting for inflation, $5500. for 8 nites vs $6800.00 for 33 nites, ( and that total will continue to drop ).

We now buy annual passes to SW and Aquatica. We purchased a Starwood timeshare. More than half our TS meals are off property. I haven't bought a T-shirt in years. I don't stand in lines but that doesn't mean I don't go on rides or see shows. I don't spend more money because I'm not in line. I also take advantage of the various discounts afforded DVC members and AP holders so not only am I spending less, their profit margin is lower.

Granted, some of the reasons I'm spending less are not directly related to my DVC purchase, ( less then impressive, overpriced menus ) but the familiarity I have with the entire Central Florida area because I spend 30 plus nites a year in WDW mean I'm very aware of outside options.

In your case... yea.. they are probably better off without you ;)

However, I do not think you fit the normal DVC demographic. Few people go for 30 days a year. Most go for much shorter times... and do continue to spend money.

If you do not stand in lines... the seats you are occupying on the rides and shows are "free seats"... in that you did not push the infrastructure. That is the part that is good for WDW. I think that ovreall... DVC members drive that type of behavior... not because of being a DVC member per se... but because they probably travel to WDW much more than average... and after you have been going for a while... most people learn that standing in line is just not worth it.

/Jim

[KNWVIKING 2.0]

In your case... yea.. they are probably better off without you ;)

However, I do not think you fit the normal DVC demographic. Few people go for 30 days a year. Most go for much shorter times... and do continue to spend money.

/Jim

Really ? It would make for an interesting poll. I'm pushing 11 years of ownership so there are obviously many more members with less experience than myself, but eventually their years will add up also.

Disney keeps adding DVC resorts to the property, actually even reduced cash inventory when they closed the North Wing at CR and took over a junk of AKL. DVC is siphoning off a large percentage of cash customers. Maybe the beancounters have determined annual DVC sales are more profitable than operating cash resorts. Maybe Disney wants out of the hotel business. Maybe every 15 years DVC resells the points in 15 year upgrades. Maybe I need to see other parts of the country.