What do we think Disney's END GAME is with resale restrictions

[sleepydog25]

I don't like the direction Disney has been going the past several years, but I don't for one moment think they are short-sighted. No major corporation goes without a strategic plan, and Disney plugs plenty of money and effort into figuring out what will work: what positions can they axe and still get decent customer service? what can they build that will bring in people but keep costs down? how do we design resorts where we can use mass purchases of look-alike furniture? what can we do to maximize our profits from DVC? Disney occasionally makes missteps, but they aren't stupid. They mostly know exactly what they're doing.

 

[AvidDisReader]

CanadaDisney05 is exactly correct. The new POS allows for Disney to make Resale as Direct--for a fee of course. This is all about controlling the Resale market. As others have said, it is greed. It seems to really gall Disney that a Resale Dealer makes money off their product. This of course makes No sense since the original purchases are extremely profitable--It has been reports that the signal biggest profit per ROI is DVC. So even though they will end up making over a BILLION dollars in profit on RIV, it still is not enough.

 

[Randywatson79]

I do actually think they have a long game....

Look at any "commodity" in our recent history. Prices take off when easy financing becomes normalized. Housing mortgages have been around the western world for a long time. What hasn't been normal for relatively long is a 30 year mortgage. They weren't very common until the 70s. Now it's the standard. It's accessible and easy for most to finance a house. If most people are now home buyers, demand increases, home prices increase.

College tuition skyrocketed as financing options increased. Again, demand increases. Before that, only privileged families sent their kids to college. Now most kids go.

DVC started off as something for privileged people only. Still is to a degree, but less so now. But now you're seeing more and more being able to afford it because they're willing to finance it.

Disney wants to control the entire market. There's an opportunity for them to get 4-5 sales in the lifetime of a typical deed, making 50% each time. In addition to that, get their own financing involved, and profit off of that.

They don't totally control the market now. The resale values are too high for their target profit margin on those "in between" sales. They're trying to squeeze down the value of the resale market. They can't do that with the original 14 resorts contractually, at least not without a huge backlash and PR disaster. The new policies on the new resorts are the new norm. People will accept it, and in time they will have total control of the market.

 

[littlestar]

https://www.redweek.com/resources/buy-a-timeshare/marriott-vacation-club-resales#restrictions
This is how Marriott deals with resales. Basically, the put restrictions on resales that get lifted if the buyer pays a "conversion fee" at closing.

My guess is that Disney will implement something like this. Allows them to still get a piece off of a resale transaction.

But at least a resale Marriott weeks only owner (that is not enrolled in developer points) can still trade thru Interval International exchange company (with a Marriott owner preference for inventory) to book other Marriotts. There is nothing like that available for a resale owner at DVC's Riviera resort - if you have a change of plans and need to rebook you will have to stalk Riviera inventory like a hawk (no access to the larger DVC resorts like SSR or OKW to try to grab a room somewhere on property).

DVC's end game is to make people buy direct (money). I think they are hurting their brand image in the long term (I don't think of DVC the same as I used to and don't recommend it like I used to). But, I am a very educated consumer when it comes to timeshare brands. Most timeshares are sold on impulse so DVC may get away with being like Westgate and Orange Lake timeshares in the short term. But to me with the new restrictions - why buy at all? You can use cash to stay at a Disney resort with a code and if you have to cancel, rebook at the resort of your choice (cash really is king after all). You could also rent from a DVC points broker like David's rentals and skip all the DVC restrictions of being an owner.

 

[BWV Dreamin]

Right now, buying the L14 resorts are the only resales that make sense. Until more DVC 2.0 are built, there are severe restrictions on the DVC 2.0 resales, which is in itself a deterrent to buying direct at the DVC 2.0 resorts.

 

[tjkraz]

Been saying it for years: Disney likes to say they're going with industry standard (rooms, theming, customer service, et.al.) where once they used to set industry standards. That is a fundamental shift in the way they do business.

This may be an unpopular opinion but I don't think Disney has slipped as much as people like to believe, at least not in terms of rooms and theming.

Quick refresher that here's what BWV and BCV rooms looked like less than 10 years ago:



There is very little in the way of "Disney theming" in these rooms, nor do they soar above what others in the industry were doing.

If we go back 15-20 years, the greater change (IMO) is that other hoteliers have closed the gap by improving their own quality. Many of us grew up with roadside motel chains like Red Roof Inn and Holiday Inn. By comparison, Disney hotels were once a clear step up. But now, most chains 3-star and up are also doing tile bathrooms, rain showers, enormous flat panels TV, kitchenettes, improved bedding and pillows, etc.

While we could each criticize specific design choices based upon our own tastes, it's hard for me to look at the likes of Riviera, Polynesian, Copper Creek and even recent refurbs like Saratoga and conclude that the rooms are a step backward. They all have a very elegant design with echoes of the resort theme and unique Disney touches. Pink walls and green sofas don't do more to transport me to the Jersey coast. And many guests don't want elaborate Mickey Mouse or Buzz Lightyear imagery in their room, particularly higher-end DVC villas.

 

[drusba]

I actually think DVC is thinking long term. Most likely what the "suits" wanted to do with the start of Riviera was to eliminate any viable resale market by limiting all resale purchasers, including of the 14 resorts that existed before Riviera, to reserving only their home resorts. That is where DVC wants to be so it can both sell new points at a very high price while being able to exercise right of first refusal on resales at a low offering price, caused by the resale restriction, so it can then make huge profits again selling those points as new. What probably occurred to that original idea for a major restriction was that its lawyers told DVC management that it could not possibly get away with limiting resale purchasers of the original 14 resorts to reserving only their home resort due to terms in the POS's for their resorts that declare that resale purchasers have the right to reserve DVC Resorts other than the one they own

As I have noted before, it is likely improper for DVC to do even what it is doing now by making Riviera a DVC Resort but preventing post-Jan 2019 resale purchasers of all other resorts from reserving it, but that decision left all pre-Jan 2019 purchasers able to reserve all resorts, including Riviera, and thus limited the risk of a lawsuit being pursued. Unable to completely destroy the current resale market for the original 14 resorts, DVC likely looked at it as long term. The "suits" believe DVC will be around for a long time, well into the next century. As the end date for resorts starts in 2042, DVC will be able to sell those resorts new under a new POS using the same resale restriction as the one at Riviera. As time passes all resorts will prohibit resale purchasers from reserving resorts other than the one they own. That should eventually result in resale purchase prices to fall or at least not rise as time progresses, giving DVC the ability to exercise the right of first refusal at favorable prices and then resell the points at very high prices. Moreover, if the resale restriction eventually appears to be doing any real injury to DVC's sales of points (and so far that does not appear to be the case), DVC has options available to increase sales while keeping the resale restriction, e.g., it could offer resale purchasers the ability to convert some of their resale points to having no reservation restrictions by buying some set amount of new points from Disney.

 

[StitchesGr8Fan]

I actually think DVC is thinking long term. Most likely what the "suits" wanted to do with the start of Riviera was to eliminate any viable resale market by limiting all resale purchasers, including of the 14 resorts that existed before Riviera, to reserving only their home resorts. That is where DVC wants to be so it can both sell new points at a very high price while being able to exercise right of first refusal on resales at a low offering price, caused by the resale restriction, so it can then make huge profits again selling those points as new. What probably occurred to that original idea for a major restriction was that its lawyers told DVC management that it could not possibly get away with limiting resale purchasers of the original 14 resorts to reserving only their home resort due to terms in the POS's for their resorts that declare that resale purchasers have the right to reserve DVC Resorts other than the one they own

As I have noted before, it is likely improper for DVC to do even what it is doing now by making Riviera a DVC Resort but preventing post-Jan 2019 resale purchasers of all other resorts from reserving it, but that decision left all pre-Jan 2019 purchasers able to reserve all resorts, including Riviera, and thus limited the risk of a lawsuit being pursued. Unable to completely destroy the current resale market for the original 14 resorts, DVC likely looked at it as long term. The "suits" believe DVC will be around for a long time, well into the next century. As the end date for resorts starts in 2042, DVC will be able to sell those resorts new under a new POS using the same resale restriction as the one at Riviera. As time passes all resorts will prohibit resale purchasers from reserving resorts other than the one they own. That should eventually result in resale purchase prices to fall or at least not rise as time progresses, giving DVC the ability to exercise the right of first refusal at favorable prices and then resell the points at very high prices. Moreover, if the resale restriction eventually appears to be doing any real injury to DVC's sales of points (and so far that does not appear to be the case), DVC has options available to increase sales while keeping the resale restriction, e.g., it could offer resale purchasers the ability to convert some of their resale points to having no reservation restrictions by buying some set amount of new points from Disney.

I think you make a lot of excellent points. What I don’t think Disneybis thinking about is some people just can’t afford enough direct points to vacation the way they want to. Pricing them out will drive them to rent, get a regular hotel room, or go elsewhere. And every year the families will decide whether to go to Disney or not, where with DVC that decision is made for them. And if they go elsewhere, so does the revenue from food, merch, and tickets.

 

[BWV Dreamin]

The other question I have is what is Disney’s plans for future fixed weeks? Will they severely inflate the fixed week points over the standard points chart week? The fixed week is a great hedge over the points chart changes currently. However, if they inflate the fixed week points, that hedge is negated. This would be another money maker for DVC with the new 2.0 resorts. Right now, the L14 fixed week points are a steal.

 

[tjkraz]

To answer the original question, I don't believe there is a long-term "end game" in mind. Large organizations like The Walt Disney Company have hundreds of small divisions with their own financial goals. Heading those divisions are executives looking to make an impact. Whether the resale restrictions are the brainchild of Terri Schultz or someone underneath her, it's simply one attempt to boost DVC profitability. Emphasis on "attempt."

Regardless of the outcome, people who spearheaded these moves are unlikely to be around to deal with the fallout. DVC did quite well during 4-5 recession-free years under Ken Potrock and he is now president of Disney consumer products. If DVC sales continue to flourish over the next few years, other execs will be elevated to new positions. If sales begin to lag, expect key executives to leverage their Disney pedigree and move on to prime positions elsewhere.

At the end of the day, there's really no master plan. Rather, it's a small group of decision makers attempting to best meet the business goals laid out for them.

The other question I have is what is Disney’s plans for future fixed weeks? Will they severely inflate the fixed week points over the standard points chart week? The fixed week is a great hedge over the points chart changes currently. However, if they inflate the fixed week points, that hedge is negated. This would be another money maker for DVC with the new 2.0 resorts. Right now, the L14 fixed week points are a steal.

Fixed week buyers are required to purchase 110% of the charted points for their week. I wouldn't expect that to change much, if at all. Owning a fixed week has some advantages to some owners. But the program hasn't really taken off. There really isn't enough demand to justify trying to make it even more profitable.

 

[BrerRabbit1119]

Just curious - does anyone know if the new Riviera resale restrictions are hurting Disney's direct sales at the resort? Is there any way to have an indication of that?

I feel like it may be, although I suppose a lot of people who buy direct from Disney do so on impulse and may not be aware of the resale market, restrictions, and the potential for reduced demand when they go to sell their contracts. I would think if Disney is having a hard time selling Riviera, though, perhaps they would rethink the restrictions.

 

[BrerRabbit1119]

We have been waiting to buy for two years now till we could do a cash buy , and now we can, we have to deal with all this. It has left me thinking that I may just wait and see. We for sure won’t even consider Rivera.

Interesting approach - my wife and I actually just had the opposite reaction to the new restrictions. We've also been waiting a while to buy DVC, but actually just decided to buy because we were afraid of what new restrictions might be announced in the coming months. I figured perhaps it was better to buy now and be "grandfathered in" in case any new resale restrictions came down the pike.

 

[KAT4DISNEY]

Just curious - does anyone know if the new Riviera resale restrictions are hurting Disney's direct sales at the resort? Is there any way to have an indication of that?

I feel like it may be, although I suppose a lot of people who buy direct from Disney do so on impulse and may not be aware of the resale market, restrictions, and the potential for reduced demand when they go to sell their contracts. I would think if Disney is having a hard time selling Riviera, though, perhaps they would rethink the restrictions.

The only real way to tell if it is accomplishing what they wanted to accomplish is if they knew the reason that every prospect either decided to not purchase at all or purchased resale instead of Riviera.

The word though was that they are not completely pleased with the sales at Riviera. The records show it's selling at a similar pace as other resorts however my guess is that they expected it to sell better because of the resale restrictions placed on the original 14, the decent economy with lots of cash flowing, the quality of the resort and since it's been the main promotion almost since it opened. Similar to PVB where they expected it to sell itself but issues were turning off more buyers than they thought would happen. (That's just my guess with Riviera but there's been quite a few reports of not buying because of the restrictions. PVB drew a statement that DVC would not make that mistake (no 1BR/2BR's) again.

I expect the opening of the resort should give a bump but so far it seems like business as usual with no immediate gain and they've created some negative impressions with the restrictions. Not to mention the still questioned legality of them including Riviera to trade with the other resorts just as if it was exactly the same as the original 14.

 

[Bing Showei]

The word though was that they are not completely pleased with the sales at Riviera. The records show it's selling at a similar pace as other resorts however my guess is that they expected it to sell better because of the resale restrictions placed on the original 14, the decent economy with lots of cash flowing, the quality of the resort and since it's been the main promotion almost since it opened.

As you mentioned, despite the steady sales pace consistent with past resorts, I also suspect Disney is disappointed with the numbers given the strong economy, beautiful facilities, and exciting new transit system.

Even more so, there was (is?) a huge pent up demand from current owners for a non-2042 Epcot resort, and with many willing to overlook geographic shortcomings and reliance on mass transit, Riviera should’ve addressed that pent up demand nicely. But I suspect the restrictions have curbed those numbers among current owners.

I’d be interested to see how the number of current-owner purchased contracts at Riviera compares to CCV, PVB, VGF when they started selling. It could be that the numbers we are observing are propped up largely by new owners or impulse buyers riding high on a strong economy and that absent the restrictions, those numbers could be even higher.

And with an economic downturn, sales could take a large turn downward with a greater percentage of foreclosures from first time owners than resorts sold in the past where more current owners knew what they were buying into.

 

[Grumpy6264]

Their end game is to continue to sell point to new and existing members for as much per point at they possibly can get. If this isn't their end game it should be. They are a business and businesses need to make money.

Now, my take on the restrictions may be different than most, but here it goes.

If DVC had continued to grow without any restrictions, each resort being built would add to the pool of points, and if they continued to build high point requirement accomodations like the bungalows and cabins 7 month booking will get increasingly harder and harder. So, you draw a line in the sand and say that for new resorts built you cannot use resale points to book the legacy resorts, unless it is important enough to you to pay DVC for the privilege to do so.

People have been complaining about 7 month availability for a while, complaining about studio availability and rightly so. The underlying issue is that with a flexible system like DVC, the larger it gets, the more issues people are going to run into with availability. Sure there is probably a room available at 7 months for me, but it is getting harder and harder to secure that room. We complain about the restrictions put on the newer resorts and for those of us with contracts at legacy resorts, it seems like a huge negative, and it is.

The big dilemma is how do you keep member frustration and dissatisfaction down to a minimum? Everything that they do is going to cause frustration and dissatisfaction because other than the savings on the rooms, the flexibility and variety is one of the main selling points of DVC. Everything from growing larger or restrictions infringe on the flexibility and variety that DVC sells. There just isn't an easy solution.

I don't know whether they want to kill resale or not, but they certainly making it more difficult.

But ultimately, they are in the business to sell points and to keep selling points.

 

[AvidDisReader]

Like Gaston I was thinking (a dangerous thing to do) about fixed week contracts. If someone was really really worried about the devaluation of their points, would a fixed week contract be a hedge. Buying resale where you can only stay a RIV, this would be a guarantee the resale buyer would have their room available and not make the restriction as terrible. What do others thinks, is this just a silly thought?

 

[BWV Dreamin]

Like Gaston I was thinking (a dangerous thing to do) about fixed week contracts. If someone was really really worried about the devaluation of their points, would a fixed week contract be a hedge. Buying resale where you can only stay a RIV, this would be a guarantee the resale buyer would have their room available and not make the restriction as terrible. What do others thinks, is this just a silly thought?

Yes, fixed weeks are a great hedge against point chart changes AND availability. You are guaranteed. Period.

 

[Mickey of the Villages]

The RIV resale restrictions represent Disney beginning to change behavior within DVC. As each new resort is built with the resale restriction the DVC community will get more used to it and it won't stick out anymore. This may not seem ordinary now but after a time it will.

The goal of the resale restriction is to restrict speculation. Disney wants to be the only party to financially benefit from the sale of these timeshares. With the resale restriction folks will not buy DVC with the hope of selling them later. And if they do sell them later, say 10 or 20 years later the resale restriction will so limit the price that Disney will always have a ready inventory to sell to others at bargain prices.

Disney is like a rock star with sold out shows that wants to cut out the scalpers. They do so by making their tickets unmarketable except to the original purchaser.

 

[Goofy DVC]

Besides making money I don’t think Disney knows definitively what their endgame is.
You could have asked the same question in 1991 when the vacation club started. What’s the end game? We joined in 1993 and back then the preview center was across the street near the Hospitality House. We got to know one of the managers there and would chat with him on occasion. Some time in the 90s I remember him sharing the following:
He thought Disney realized they made mistakes such as
They never really needed to offer free passes
The size of the villas did not need to be that big
The point cost per night was too small and as a result, Disney left money on the table
He predicted:
Free passes would go away. (I thought no way, members will revolt and new buyers will dry up)
Points needed per night would rise (I thought no way, that will price people out)
Smaller villas would be the norm ( I thought no way, people are buying in for the space which really makes it a home away from home)
Rapid increase in cost per point ( I thought that will price out potential buyers)
I’m not saying he was in the know but history proves he was right.
How does it relate to the original question of endgame of resale and Riviera? It shows that in the beginning of DVC, they had an endgame and obviously got some things wrong as it relates to increasing profits. I also know you could argue that was by design to insure success. Personally, I don’t buy that. Could that also be the case with this significant change of course regarding Riviera and resales? That some of their assumptions of how members and buyers will respond are wrong? Absolutely!!!
My take, beside the profit component, the endgame will be fluid and subject to change. Stay tuned.

 

[sleepydog25]

I would repeat that Disney does know their endgame, their long-term strategy. What they don't know, as succinctly pointed out by Goofy DVC, is just what elements will work within their program(s) to get to said endgame. They want to restrict resale; they want an even bigger piece of the DVC profit pie; they want world domination. . .wait, maybe not the last one. The endgame is obvious--more control thus more profit. How they get there could be tedious, onerous, ominous, and a bunch of other -ouses. Time will tell which intermediate strategies actually work.