Disney Vacation Club Exercising ROFR After a Six-Month Lull

After an over six-month hiatus, Disney Vacation Club (DVC) has started exercising its Right of First Refusal (ROFR) again. The “ROFR monster,” as some call it, has returned from its slumber.

Understanding DVC’s Right of First Refusal (ROFR)

DVC’s Right of First Refusal or (ROFR) is a contractual clause that gives Disney the option to purchase any DVC contract before it can be sold to another buyer. When a DVC member decides to sell their membership, the offer is first presented to Disney. If the selling price is acceptable to them, Disney buys back the contract, and if not, the contract is available for resale in the market.

This system ensures that Disney has control over the pricing of the DVC contracts and can maintain the perceived value of DVC membership.

Significance of ROFR’s Return

The return of the ROFR is significant for a few reasons. For one, it signals Disney’s willingness and ability to buy back DVC contracts, which may reverberate in the market dynamics.

For sellers, this could mean that their contracts might sell quicker if Disney decides to exercise ROFR on a level we’ve been accustomed to in prior years. Earlier this year, the DVC Resale Market had over 800 active listings. Today, that number is roughly half that, at around 450 active listings. If Disney were to resume buybacks at the same volume as last year, the market inventory could rapidly deplete, indicating an abrupt turn. This could cause the number of active listings to plummet to 150-200, bringing imbalance to the resale market and boosting prices.

On the other hand, buyers might find themselves facing stiffer competition for contracts, especially for those at popular resorts or with many points. This could potentially drive up prices and make it harder for buyers to get the contracts they want. With Disney only recently electing to resume buybacks, it will be a while before we know the true intent and the effect it has on the resale market.

A Look at the Buybacks

Let’s dive into the details of the three contracts that the DVC has bought back recently:

Contract 1: This was an Animal Kingdom contract with 300 points per year, with 235 points coming in the February 2024 Use Year. The selling price was $100 per point, which is below the DVC Resale Market average of $118 per point for similar contracts.

Contract 2: Also an Animal Kingdom 300-point contract, with 300 points coming in the September 2024 Use Year. It sold for $102 per point, approximately 14% below the current average resale price for Animal Kingdom contracts.

Contract 3: Lastly, a Grand Floridian 200-point contract, with 59 points coming in the December 2023 Use Year. This contract was sold for $141 per point, lower than the DVC Resale Market average of $161 per point.

It’s intriguing that DVC would choose to intervene at this point, especially considering that multiple contracts were sold and passed below these rates earlier this year. The decision to buy back a Grand Floridian contract is also particularly interesting, as this resort is still actively selling, and Disney has historically not exercised ROFR in such cases.

These recent buybacks coincide with the news of decreased direct DVC sales, as revealed during the Q3 2023 Walt Disney Company earnings call. Is DVC feeling the pressure to boost sales? Could stabilizing the market and preserving the value of DVC contracts be part of their strategy?

The return of the ROFR is a pivotal moment for the DVC resale story in 2023. It remains to be seen how this will impact the market in the long term, but for now, both buyers and sellers should take note that the ROFR Monster is indeed awake and may be hungry!

Stay tuned to our blog for a comprehensive monthly recap of the August DVC Resale Market’s Right of First Refusal (ROFR) activity. See you in a few weeks!