Analysis of DVC Resale Price Changes (2014-2016)2 Comments
In recent years, some Disney Vacation Club resorts in resale have experienced significant price changes while others have had relatively small to moderate gains. For example, resorts such as Saratoga Springs, Animal Kingdom and Hilton Head have increased less than $10/pt. since September 2014 while other resorts such as Beach Club, Boardwalk, Grand Floridian and Grand Californian have increased nearly $20/pt. or more in that same time. Below is a chart summarizing the DVC resale prices every 6 months from September 2014 to March 2016:
|Resort||Average Cost Per Point|
|Sep. ’14||Mar. ’15||Sep. ’15||Mar. ’16|
|Bay Lake Tower||$104||$112||$123||$121|
|Old Key West||$71||$73||$81||$84|
|* Average cost per point based on average asking price across resale market from Sep. ’14, Mar. ’15, Sep. ’15 and Mar. ’16 according to listings on disneydvcresale.com|
What are the reasons for the increases, and why the disparity among the resorts?
- Disney raising the prices of sold-out resorts sold directly from the developer over time can impact DVC resale prices.
Unlike prices with the developer, on the resale market, prices will not change overnight based on a decision to raise prices. However, the market can be influenced over time by these pricing decisions from the developer. For example, in January 2015 Disney raised the prices of Beach Club, Boardwalk and Wilderness Lodge each $25/pt., and since September 2014 Beach Club has increased $22/pt., Boardwalk $22/pt. and Wilderness Lodge $16/pt. And recently, we have just seen another increase on all sold-out properties outside of Vero Beach and Hilton Head anywhere from $5/pt. to $10/pt. The price changes of Beach Club, Boardwalk and Wilderness Lodge can also be seen in the graph below:
- Right of first refusal (ROFR) also impacts price changes.
Right of First Refusal is the option Disney Vacation Club has to purchase any resale package after a sales price has been agreed upon and a contract has been executed. When Disney becomes more aggressive at buying back at higher prices the prices in the market rise as buyers want to avoid losing their purchase to Disney.
Two great examples of an ROFR impact are with Boardwalk and Old Key West. For example, in the Summer of 2015 Disney began exercising their right of first refusal on Boardwalk contracts that were selling as high as in the 90’s per point, which at the time was a higher price than the average Boardwalk contract was listed. This aggressive buying back of Boardwalk soon led to an average listing price of over $100/pt. In all likelihood, the ROFR strategy can probably be linked to the Disney direct price increases as well. If Disney raises the price of Boardwalk in January by $25/pt. and still has demand for it, they can raise the buy-back price by as much as still keep the same margin. Another example of ROFR impacting a resort’s resale price is with Old Key West. The resale price of Old Key West has risen $13/pt. over the past year, which has out-paced the DVC direct price increases for Old Key West of $10/pt. in that same time. Likely influencing the resale price increase of Old Key West is that it tends to be one of the most aggressive resorts bought back, and one of the contributing reasons is probably the additional 15 years Disney adds to the deed automatically (2042 to 2057) when it’s resold by them.
- In May of 2015, Disney Vacation Club stopped wait listing Members and Prospects for Grand Floridian, Grand Californian and Beach Club.
Part of the reason can probably be attributed to very long wait lists to purchase any of those three resorts directly from Disney Vacation Club. This move makes sense in that for any developer the main objective is to sell the newest resorts at the highest margin possible, and carrying long wait list for a lower margin resale doesn’t make as much financial sense. With this change in policy nearly all potential buyers had to focus on the resale market for purchases of these resorts. Since the change in policy all 3 resorts have seen a steady increase in demand and as a result a rise in price.
- Lack of inventory in the resale market can significantly contribute to prices rising fast.
Many factors can contribute to a reduction in inventory. Internal DVC factors can influence changes in inventory such as direct prices being raised, aggressive ROFR purchasing and not wait listing for particular resorts. Also, external factors can influence inventory as well such as a good economy and continued strength of the Disney brand.
Furthermore, you can correlate many of the resorts whose resale prices sharply rose to a shortage of resale inventory at some point. Bay Lake Tower, Beach Club, Wilderness Lodge, Boardwalk and Grand Californian all had a shortage of inventory (less than 10 listings from the major DVC Resale brokers combined) on the resale market at some point in 2015, and all had a significant price adjustment as a result. Meanwhile, resorts such as Saratoga Springs and Animal Kingdom never experienced any type of inventory shortage and their resale price increases have remained fairly moderate, increasing less than $10/pt. over the last year and a half.
- Disney hotel room inflation has continued to strengthen the value DVC.
Some would argue why do prices of sold out properties (all properties other than what the Developer is actively selling such as Aulani and Polynesian) ever go up considering they have less and less years on them. This is a valid point, but I believe the inflation of the Disney hotel rooms have historically more than offset the loss of years. For example, when considering DVC from a financial perspective many consumers are going to make the comparison of paying for Disney hotel rooms vs. buying into the Disney Vacation Club.
Even with less years the value of DVC can still hold strong if the room rates continue to rise. Obviously, at expiration date of the deed the value of the DVC contract goes to zero, but in the meantime if someone is buying a contract for Boardwalk in the year 2032 (so 10 years left on the deed) that has enough points to stay for a week in a studio and the cost to stay a week in that studio is hypothetically $8,000 a week, there should still be value in that Boardwalk contract with 10 years left on the deed. While $8,000 a week may sound far-fetched, consider that the Contemporary rented for $29/night in 1971 and routinely commands over $500/night in 2016. That represents an approximate increase of 6.5% per year. Taking a Boardwalk studio in 2016 that rents for $3,000 week would be $8,000 a week in 2032 given the same 6.5% increase per year.
The ability to command these types of room rental rates will likely be dependent on a continued strong Disney brand, which in recent years continues to be a powerhouse with Marvel, Star Wars and continued attendance growth at the theme parks. The continued value of DVC contracts would also be dependent on the cost of annual dues as well, but you can easily make the argument Disney does an excellent job of keeping the annual dues increases moderate considering the longest running example, Old Key West (the original DVC property) has gone up a modest average of 3.7% per year since inception.
This article was originally published on DVCinfo.com on March 2, 2016, and written by Nick Cotton, a guest blogger for DVCinfo.com and owner of DVC Resale Market.