POLL: The OKW contract extension offer -- NOT just for OKW owners.

[JimC]

...As an aside, I find it interesting how Disney has created these 2042 through 2057 points out of thin air and at no cost to them (we all know who will be paying to keep the resorts running those years), yet they apparently expect to be able to sell them to people for real money. Amazing! It's even better than selling bottled water.

I don't understand your point. You are buying 15 years of further membership. How is this any different then if they had sold a 65 year membership in 1992 for $65 a point? That is the equivalent of the 50 year membership for $50 per point plus the extension offer now. Actually it is better because we kept some of the purchase price in our pockets for 15 years.

 

[Debi]

I'm 26 now (turn 27 in October), so by January 2042 I'll be 61. Still 'young' enough to enjoy WDW, so the extra years definately interest me. Granted, 76 is pushing my limit, but by then I hope to have kids or grandkids to pass on the points to.

 

[OneMoreTry]

WILL TOO!!!

Seriously, though...of the three changes, this is the one where it surprises me that anyone would have strong feelings. (Not questioning the sincerity of your feelings, but I just don't get those feelings.)

I don't like the $95 fee, even though I'm not affected by it. I don't like the change in the banking deadlines, because it hurts my family.

But the contract extension -- to me, at least -- is just a business decision. A lot of people have been wondering what would happen in 2042 -- now we know. Disney is making us an offer. Like it? Buy it. Not interested? (My team, incidentally) Don't buy it.

I also think the real value to Disney is not so much the revenue they will generate now, but the increased revenue they will generate later when they ROFR OKW resales at $80, make them 2057 contracts at zero cost, and then sell them for $104 per point. (to say nothing of the thousands of points they probably have in inventory already) To me, that's a bigger win for the Mouse (or Rat, if you prefer) than the $15 they'll get from the current owners who take them up on the option.

They just built a "new" DVC resort without spending a penny!

I know pixie dust works. You misquoted me: USED pixie dust doesn't.

That's what ticks me off. Disney is scraping up used pixie dust and repackaging it as new. And then they think I'm stupid enough to buy it. Yeah, anybody can buy it if they want. But it is a poor business decision and those who look at it as such will turn it down. See all the posts above of people who see it as a business decision.

I guess it's just plain insulting and I expected a little better from Disney. (I must say there is a part of me that WANTS to buy the stupid thing. It's the huge part that never grew up. I just hate having to disappoint him.)

I don't care about the $95 because I didn't buy the points to use outside of DVC. That wouldn't have been a smart "business" decision. If I do use them that way 75 vs 95 ain't much difference.

Four months would not have affected any of my past decisions or bookings. it just changes the way I plan for the future a little, but is not a biggie. if I were in a pinch I'd sell out to one of the point sharks if they're still swimming around.

 

[pilferk]

I think we are pretty much in agreement on it. However my point was that Disney's ROFR price really isn't artificial, it's real and it is set by the market. The same as their price of a DVC purchase or even the cash rental rate of any of their resort rooms. Why doesn't disney charge $130 pts for a DVC purchase? $200? Why is the ROFR price at SSR around $84 right now? If DVC has the ability to artificially set it, why not make it $95 or $104? My point is, they are limited in what they set the ROFR price at based on what they know they can resell it for while recouping the costs to resell it (both real and opportunity). In other words, the buyers in the market (the demand) have significant impact on the ROFR price.

I see your point, and don't entirely disagree, but I still say it's an artificial floor being set.

Disney sets the price they do so they can ROFR those points and resell them at a profit. They can't, obviously, do that if they "set" their floor too close to the current retail price. Any higher than their current "floor", and I'd guess they're not making "enough" profit to make using ROFR worth their while.

But any ROFR "floor" is artificial, by it's very nature, because it's not a true reflection of the market. A true reflection would be to allow the points to sell at whatever price the market wants to buy/sell those points. That floor might be INFLUENCED by the market, or by other factors (the current retail price on points, ability to realize a profit on points) but it's still an artificial floor.

We'll just have to agree to disagree on this one, I guess.

 

[pilferk]

They just built a "new" DVC resort without spending a penny!

More or less...exactly!

This gives them a "new" product to sell with a 2057 expiration...all those OKW points sitting around in their inventory will become a WHOLE lot more valuable to them. Because young families (like me) buying TODAY do value the extra 15 years when looking toward a "new" DVC purchase....because "we" may be around to use them.

I think the people saying "the real benefit to Disney is their ability to resell their ROFR points at a 2057 price" are hitting the nail right on the head.

They simply have to make the same offer to current owners before they (Disney) can do the same thing.

 

[pilferk]

Even if it DID sell for $15 more it wouldn't be worth it, because the money would not be liquid. It would be tied up and unavailable to you unless you chose to sell your points.

I don't want to sell my points and I DO want that $7500 available should I need it.

There is NO GOOD REASON to buy the extra time unless you want to dream about those 15 years when you're drifting off to sleep at night. That's not worth $7500 to me.

Again, I think it depends on your intended use for your contract:

1) If you're a young family, those "extra" 15 years might be of value for USE. Ditto if you're looking for your first DVC purchase.

2) If you're planning on using and selling (say 10 years of use, then sell), those extra 15 years of use may very well make a difference when you go to sell in 10 years.

3) If you're simply planning to use your contract until it ends, and figure you'll be too "old" to travel after 2042-ish....then there's no value for you. In that case, don't take Disney up on their offer.

I certainly see the point people are making that the extension will have little to no value for them...or that they question the value it will have at resale in the immediate future (I don't think you can question that, down the road, as OKW gets closer to it's end date, it will have MORE value). But I can't see the justification that the extension has NO value for ANYONE.

 

[pilferk]

I'm 26 now (turn 27 in October), so by January 2042 I'll be 61. Still 'young' enough to enjoy WDW, so the extra years definately interest me. Granted, 76 is pushing my limit, but by then I hope to have kids or grandkids to pass on the points to.

Just to add some perspective for you: My wife's grandmother is 77. She travels to Florida at least once per year (not Disney, Miami) and travels extensively to other places (Maine, California, etc) to visit family and friends. She's already talking about tagging along for an upcoming trip to visit the Mouse (along with DW's mom and sister).

 

[OneMoreTry]

....I certainly see the point people are making that the extension will have little to no value for them...or that they question the value it will have at resale in the immediate future (I don't think you can question that, down the road, as OKW gets closer to it's end date, it will have MORE value). But I can't see the justification that the extension has NO value for ANYONE.

I agree that the extension will increase the value of the points especially in the future. BUT my argument is that the value of the investment, which for me would be $4500, will increase more if invested in other ways. My invested $4500 will be worth more in 2042 than the resale price of the last 15 years of an OKW contract will be worth. PLUS I will have access to the money until then if needed without having to sell my OKW contract. (AKA Having cake and eating it.)

Then in 2042 I can buy another resale contract through 2057 and pocket the extra money. Or I can spend the money vacationing in other ways or just give it to my kids and let them decide what to do with it.

I will admit I might be looking at this differently if I were younger. I am being a little inflammatory on purpose to get people to think about what they're doing before they shell out bucks to DVC.

 

[pilferk]

I agree that the extension will increase the value of the points especially in the future. BUT my argument is that the value of the investment, which for me would be $4500, will increase more if invested in other ways. My invested $4500 will be worth more in 2042 than the resale price of the last 15 years of an OKW contract will be worth. PLUS I will have access to the money until then if needed without having to sell my OKW contract. (AKA Having cake and eating it.)

You'd be buying in with 2008 dollars, at 2008 prices, and assuming the 10 dollar discount is REALLY a one time thing, at a substantial discount.. So the question is: Would your invested 4500 outpace BOTH inflation AND the increase in DVC prices (which have, themselves, outpaced inflation) AND offset the discount being offered. The liquidity question is valid, certainly. But you can also choose to liquidate your DVC interest, albeit with more difficultly.

Let me break down what I get for the number you use, above. I'm assuming you're using the $15 per point break down, for 300 points. If you're assuming $25 per point for 180 points...the numbers will be different, obviously.

You invest 4500. In 2042, assuming a conservative rate of return of 7%, you'd have about 48044.62 (I'm compounding annually, not daily or monthly, so compounding daily or monthly will have some positive effect on that number). To replace your 300 points with points that expire in 2057 (which, really, right now are AKV points) for 160.14 per point to "break even". Less and you show a profit, more and you take a loss. That's only $56 above current retail price (without incentive). In comparison, OKW has seen an approximate 50% increase in 10 years...about $25...on the resale side. Granted, there's no telling what will happen over the next 35 years, or as it approaches expiration.

Obviously, varying your rate of return will change that number greatly.

Again, I'm not saying it's for everyone. Like you, I think it bears a lot more examination. But I can certainly see scenarios where it makes sense for people.

Then in 2042 I can buy another resale contract through 2057 and pocket the extra money. Or I can spend the money vacationing in other ways or just give it to my kids and let them decide what to do with it.

We addressed the first, above. The second...again, you're depending on resort rates and inflation to NOT outpace spending today's dollars at today's prices. Using the above example, your 48044 would get you 3202 per year (assuming 15 years) of vacation money. 300 points gets you, approximatetly, 2 weeks in a studio-ish. So lets go further and say you'd get about 1602 per week to spend on accomodations, or 228.85 per night. That's lower than what people pay NOW for many rooms at WDW.

If you leave the money invested, and simply draw off the vacation expense, you could start off at about $4300 per year, in 2042 Assuming a 3% room rate increase, over the next 15 years, and you'd be left with 430.21. Again, if we break down the $4300 over 14 nights, you'd be looking at 307.14 per night for 2042, going up by the 3% per year I mentioned.

Leaving the cash to the kids...well, that's the intangible and why personal situation comes into play when making this judgement.

I will admit I might be looking at this differently if I were younger. I am being a little inflammatory on purpose to get people to think about what they're doing before they shell out bucks to DVC.

I have no issue with you having a strong opinion, or using a bit of hyperbole to get your point across. But it might be contrary to your goal (getting people to take a strong look at the offering). What I'd hate to see is anyone dismiss this out of turn simply because they don't want to do the analysis themselves, and cursorily look at this offering, and the posts here, and say: It's a rip off. It MIGHT not have value. It MIGHT not be a good business decision. I think everyone needs to look at that themselves, though.

I have no horse in this race, FYI. We own at AKV and only AKV.....though if CRV does NOT happen, I'd strongly consider an OKW add on instead.

Please, all you financial guru's (and I'm not one...just a data analyst geek) PLEASE pick apart my numbers and show if/where I've gone wrong. I think that's probably the most useful thing we can do in this thread: Provide a thorough discussion of this issue for those reading the thread.

 

[ransom]

I don't understand your point. You are buying 15 years of further membership. How is this any different then if they had sold a 65 year membership in 1992 for $65 a point? That is the equivalent of the 50 year membership for $50 per point plus the extension offer now. Actually it is better because we kept some of the purchase price in our pockets for 15 years.

The difference is that when Disney was selling the original contracts, they had to first build the units before they could subdivide them and sell fractional interests. This time around, they didn't have to do anything at all. Given that members will be paying to maintain the units for those years if they choose to extend their contracts, the $25/point to Disney is pure profit.

So my only point was that I admire their chutzpah.

 

[tfc3rid]

Here's the thing, they say this is a 'one time' thing... How do you know that this offer will or will not be offered in the future... Likely if it is, the cost will increase... However, given the state of world affairs and the fluidity of security/terrorism, I would rather hold onto my money at the present time rather than add another large purchase that can have an impact on my overall financial state of affairs at the present time...

It's not as if we don't own our current deeds until 2042, which is eons away...

 

[pilferk]

Here's the thing, they say this is a 'one time' thing... How do you know that this offer will or will not be offered in the future... Likely if it is, the cost will increase... However, given the state of world affairs and the fluidity of security/terrorism, I would rather hold onto my money at the present time rather than add another large purchase that can have an impact on my overall financial state of affairs at the present time...

It's not as if we don't own our current deeds until 2042, which is eons away...

The way they're structuring it (as an "automatic" deed extension requiring action on the part of the owner to deed the "extra" 15 years to Disney) would suggest it will, indeed, be a one time offer per owner (not per contract). Maybe that will change going forward...who knows.

On being a bit fiscally conservative when making the decison....absolutely a valid perspective and a great viewpoint. That's why I feel it IS an individual situation type decision. The best we can do, here in this thread, is lay out everything and hope others take benefit from what the though processes are.

 

[tfc3rid]

Agreed... It's just too much of a risk right now... Given the worldwide issues with subprime mortgages, the fact this is a large continud investment in one of the largest terrorist threat locales in the United States... For now, it's a tough sell...

 

[Galahad]

We won't do it. We'll be 87 in 2042. If we make it to 102 we probably won't be doing much vacationing. Like WDWworld2003 said, if our kids/grandkids really a drawn to it, there will be something there for them. It seems to me a way to make a $62 a point purchase into a $87 a point purchase.