What Is the Lock Off Premium?

In the last few weeks, the term “lock off premium” has come into the spotlight Let’s look at what that term means and how it may affect the booking of villas at a Disney Vacation Club resort.

Disney's Beach Club Villas

Ed note: This story is intended to serve as the de facto second part to our prior look at the reallocated 2020 points charts which have since been rescinded by DVC

Disney Vacation Club resorts offer a mix of accommodation types that members can reserve including Deluxe Studio Villas, One Bedroom vacation homes, and Two Bedroom vacation homes. At most DVC resorts, there are "dedicated" Two Bedroom vacation homes which can only be booked as a Two Bedroom. Other rooms are configured with an interior connecting door between the One Bedroom portion of the room--including the master suite, kitchen and living room--and the Studio-sized second bedroom. These rooms are referred to as "lock off" Two Bedroom Villas because the component Studio and One Bedroom units may be locked-off and reserved to separate parties. 

The DVC Home Resort Rules and Regulations state that lock off Two Bedroom vacation homes and dedicated Two Bedroom vacation homes have the same vacation point reservation values. However, the Studio and One Bedroom vacation homes in a lock off Two Bedroom that are separately reserved may have a higher reservation value then they would if combined as a Two Bedroom vacation home.

In 2019, Disney's Beach Club Villas has lock off premiums ranging from 12.2% to 19.8%, depending on the Season. During the Magic Season, it costs 350 points to book a lock off Two Bedroom for a week. But if booked separately, the Studio portion costs 134 points and the One Bedroom costs 269 points. The difference — 53 points, or 15.1% above the cost of the Two Bedroom — represents the lock off premium.

Due to the lock off premium, it can require more points to book a resort for the entire year than has been allotted to a resort. Beach Club Villas has 36 dedicated Deluxe Studio, 20 dedicated One Bedroom, 78 dedicated Two Bedroom, and 74 lock off Two Bedroom villas. In 2019, if all of the lock off Two Bedroom vacation homes are reserved as Two Bedrooms, it will require about 3,027,300 points to book the entire resort. However, if all of the lock off Two Bedrooms are booked instead as studios and One Bedrooms, it will require about 3,219,058 points to book the entire resort.

That difference of about 191,758 points represents that maximum number of excess points that could be created by Beach Club Villas' lock off premium.

The lock off premium has been present in all point charts for all DVC resorts since the first point chart was introduced in 1992 for Disney’s Old Key West Resort. The size of the lock off premium varies from resort to resort and also by booking Season within each resort. The size of the lock off premiums have fluctuated — both up and down — over the years, but these fluctuations have only occurred when a resort’s point chart has undergone a reallocation. For most resorts, the lock off premiums have remained constant since 2011 when the last major system wide reallocation was made.

If they had not been revised, the original versions of the point charts for 2020 would have made the lock off premiums even larger. Those charts would have introduced increases in the costs for studios and one-bedrooms and decreases in the cost of the two-bedrooms. As a result, Beach Club Villas' lock off premium in the Magic Season would have jumped from 53 points (15.1%) to 76 points (23.2%).

This increase in Beach Club Villas' lock off premium would have resulted in owners using 3,282,118 points to book the entire resort in 2020. Not only is this 254,818 more points than Beach Club's total points, it is 63,060 more points than what could have been created by the lock off premium embedded in the 2019 point chart.

In reality, not all of a resort’s lock off Two Bedrooms are booked as Studios and One Bedroom. Thus, no resort would actually realize the maximum number of excess points possible. Nevertheless, there are a significant number of excess points created by the lock off premium.

If Beach Club owners have only 3,027,300 points to begin with, but the lock off premium requires 3,219,058 points to book the entire resort, then what happens to the extra 191,758 points?

Lockoff Premium BCV

The excess points would create an inventory of vacation homes that could only be reserved by guests who do are not owners of Beach Club Villas. These guests will either be DVC members of other resorts that book Beach Club's available inventory when the non-Home Resort Reservation window opens at the seven-month mark or they will be cash guests that book the excess inventory directly from Disney.

The Beach Club owners may benefit only minimally from this excess inventory. If Disney rents some of this inventory to cash guests during the Breakage Period, owners may receive part of the rental revenue in the form of “Breakage Income.” The Breakage Period is usually 60 days before the check-in date. In 2019, Beach Club is budgeted to receive $426,454 in Breakage Income, which translates into a credit of $0.1407 per point for every owner. As in recent years, the Breakage Income amount for 2019 is at the maximum allowable amount of 2.5%.

Its possible that these excess points fund an inventory of villas that used for maintenance purposes. When DVC renovates a resort, several vacation homes can be taken out of operation for weeks at a time. Or, on any given day, villas may be unusable due to maintenance issues. When these events happen, DVC must absorb the point costs of these vacation homes. For example, Disney's Saratoga Springs Resort & Spa will undergo a major refurbishment that will last for about 18 months. If each building is closed for about a month, DVC must absorb about 60,000 points each month to account for the accommodations that cannot be booked.

The obvious cost of the lock off premium for the DVC members is that studios and one-bedrooms require more points to book. If there was no lock off premium at all, the combined cost of a studio and a one-bedroom should be the same as the cost of a two-bedroom. Since a Beach Club Two Bedroom costs 350 points a week during the Magic Season, then a Studio would only cost about 117 points instead of the 134 points that is currently being charged. And a One Bedroom would see its weekly cost drop from 269 to about 233 points.

Wil Lovato is a contributor to DVCNews.com and has been a Disney Vacation Club owner since 2009. His DVC Home Resorts include Bay Lake Tower, Animal Kingdom Villas, and Aulani. He can be found posting on many Disney discussion forums under the username of “wdrl.”