Even If You’re Not A Disney Fan, This Stat May Surprise You
Disney World is one of those places that most people love or hate. I happen to fall into the former category, but even if you fall into the latter, or don’t spend time focusing on Disney, a recent statistic I heard really surprises me. Amidst the COVID-19 pandemic over the past 6 months, travel is down significantly. Disneyland in California hasn’t even reopened yet, though Disney World has been open for a few months now.
For the past 20 years, Disney has had their own timeshare program, dubbed Disney Vacation Club. Our family are owners there. We have a bank of points that we can use at any Disney Vacation Club resort in the country. And, like other timeshare programs, we can transfer those points elsewhere if we don’t want to vacation at Disney. But, the reason to buy into Disney Vacation Club is because you love Disney and you intend to visit frequently. We’ve saved significant sums of money over the years on Disney vacations. During those times when we haven’t used all our points, we were able to rent them out to someone else to make sure they got used.
People Are Still Buying Timeshares During The Pandemic
I would have guessed that demand for timeshares would have plummeted during the pandemic. I just can’t imagine anyone would want to purchase a timeshare at full price right now. I’m wrong. Very wrong.
Disney Vacation Club has a number of ways to market to potential new customers. One of the biggest ways they market is through the theme parks. Right now, Disneyland is closed, so no opportunity to sell there. At Disney World, it appears all the sales centers are currently closed for meetings with potential buyers. Some model units are open, but the high-touch guided tours and sit-down meetings aren’t happening. Disney Cruise Line is also another source for new timeshare owners, but none of the ships are cruising. It appears the only way to purchase a timeshare from Disney right now is via phone, live chat on the website or e-mail.
From a source inside Disney, I’ve learned that Disney Vacation Club sold more than $10 million worth of Disney Vacation Club points last week.
These purchases generally require a significant investment. When purchasing points, new Disney Vacation Club owners will generally pay $125 per point or more, depending on which home resort they pick. The number of points purchased likely varies greatly. Some people are looking to be able to have family reunions every year and might purchase hundreds of points. Others are just looking for the ability to take the occasional vacation, and can get by on 100 points. Still others might be existing owners who are just looking to add-on to their existing timeshare ownership.
If we were to say an “average” purchase is 100 points, that’s $12,500. $150 is more likely, so let’s call it $15,000. That’s still 750-ish buyers on $10 million in sales (keep in mind the actual sales number exceeded $10 million last week). Even if the average were 200 points, or the purchase price per point was higher, it’s still safe possible there were at least 500 buyers.
These Buyers Are Paying Full Price
Disney Vacation Club traditionally offers very little in the way of discounts or incentives for purchases. They’ll knock a few bucks off here and there, but they don’t discount nearly as much as other timeshare sellers. And, there’s a very robust secondary market for DVC points contracts. You can buy points for a decent discount off of Disney’s prices. Buying points on the secondary market means you don’t get some benefits that purchasers get when buying directly from Disney Vacation Club.
However, during tough economic times, timeshare contracts are one of the assets that people in financial distress dump first. With annual dues average $5 per point or more and the need to pay for flights and park tickets, a Disney timeshare isn’t the most valuable thing in a recession. I would expect that the longer we have high unemployment the more we’ll see prices drop in the secondary timeshare market.
The Final Two Pennies
Unemployment remains high while travel is still nowhere near recovered. Disney World is at limited capacity and still doesn’t fill up on virtually any day right now. Yet hundreds of people plunked down five-figure sums of money to purchase timeshare contracts from Disney. That shows an incredible resilience of the Disney brand in very troubling economic times. I wouldn’t have expected that.
According to reports, consumers are saving more money right now. People should be less likely to complete discretionary purchases like second homes, timeshares, etc. Even in challenging times with a significantly reduced ability for marketing, Disney seems to be attracting folks to invest in the long-term.
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$10 million in one specific week: is that a significantly higher or lower run rate than normal for DVC?
A quick Google search turns up this data point generated by a source of unknown veracity (*NOT* quoting from a Disney annual report):
“Unofficial tracking performed by DVCNews reflects sales of 525,384 points in this 3-month period of 2019 compared to 471,792 points in 2018, an increase of more than 11%.”
525384 points for 13 weeks (one calendar quarter) at your $150/point price point yields an average $6 million/week.
So perhaps $10 million in one particular week does represent a noticeably strong showing.
In regards to COVID-19 impact on this country of 340 million people, though, there are enormously disparate levels of impact on different socioeconomic classes. Many white collar professionals able to continue to work from home are doing just fine financially, although even they are not doing as well as the 0.1% delighted with the Fed’s extremely expansionary monetary policies propping up many capital-intensive markets. I would not be surprised if that upper-middle/lower-upper demographic is overrepresented in the population of people purchasing shares right now, as compared to more normal economic circumstances when the Disney brand and Disney experience represent an aspirational purchase for families looking to consider themselves to be nicely up-and-coming.
PH, my risk profile is a lot more conservative. If prices tank in the secondary market, I’ll consider investing more in Disney. But, not at top dollar when I fully expect there to be more softness to come.
There are easily tens of thousands of Americans for whom buying in even at top dollar full price could represent a hedge position against the exotic international trips that perhaps they otherwise would have been happy to drop tens of thousands of dollars on, but which they realize may not be in their future for the next 12-18 months.
Note for example that 0.01% of 340 million people = 34,000 people.
I’m not in that 0.01%, and I’m somewhere in the middle when it comes to Disney. But if I look at $15,000, your guess as to average purchase transaction last week, my brokerage accounts have fluctuated by 10x that amount in the last 6 months, sometimes dropping or rising by 2x or 3x that amount in a single day.
PH, you’ve always been smart about such things. I wouldn’t contest your math. But, I would imagine DVC is of interest to a pretty small percentage of people with cash to burn right now. Lot of factors have to come together to make DVC the right choice for someone. Anyway, appreciate your perspective.
I’m actually not surprised. DVC hits for a much higher end market which has been more likely to not be financially impacted by COVID-19. Contrasting that with my owners update at HGVC where they were basically willing to take 2 2BR Silver season units for 1 1BR Platinum contract($7000 cost as standard buy in) because they were so desperate for sales.
mowogo, I would expect some folks to keep buying, but not at that sort of pace. That pace seems incredible to me.
I go to Disney World at least twice a year , including this year – went in August and going again in November. I go to Aulani once every 18 months or so- I find it must cheaper to use 3rd Party DVC rental companies and pay about 14-16 dollar per point for a DVC rental – currently because of COVID – the points have been going for 11 dollars a share with is an instance deal. I booked Aulani for July 2021- 6 nights for roughly 1300 total
Allen, you’re a smart guy to look at the rental market. Some specific date rentals are as cheap as $10 a point for folks who are desperate to get rid of them. I do rent out points occasionally and I still see strong demand at $19 or $20 per point for rentals. Where are you staying in November when you go?
Is it just me or is DVC a rotten investment? A buyer is forking out say, fifteen grand as a base, more if you finance. That’ll get you what, a week in a condo? You could keep the fifteen grand and use the income it generates to stay in a condo instead. That would avoid the annual fees, offer greater flexibility (cash is king), and not stick you with a perpetual contract. All this seems plain as day in showing how bad an investment this is. Since you’re a really bright guy, I’m obviously missing something. Can you tell me where I’m miscalculating or flat out wrong?
I was very skeptical of dvc. Rented in the early 2000s. Realized I loved the resorts and would be coming multiple times per year with our young children. Bought a small contract in 2007. I love to learn/work the system. I have bought distressed points many times over the years. We stayed at a grand villa at aulani for $200 a night. That was $1 per point. I gave a guy $600 for about 600 points (3 nights) that we’re going to expire in a week. Used miles for last minute trip and loved it. We would have never been able to do that unless we were owners and could search availability. The company that we bought the contract from sent us an email last year and offered us more money than I paid in 2007. I’ve never heard of any other timeshare that does that. We have rented out our points every other year and have made quite a bit of money. It has been an amazing investment for us but again…i like to learn and work the system.
Thanks for the insight. While I’m still stumped on why a normal person would see DVC as a good value, in your case it sure worked out well.
Christian,
If a normal person wanted to put in the work, contracts on the secondary market can be profitable. If you’re just going to rent the points out and not use them yourself, the perks of buying direct from Disney are worth less to you.
Hawaii,
We’re in the same boat. Our points are worth more now than when we bought them. That’s the power of Disney. The rental market remains strong, which is a nice plus we weren’t expecting. We haven’t rented from others as much as you have, but it sounds like you’ve really made the best of the rental market. Good for you! When’s your next Disney trip?
Christian, it’s actually a pretty fabulous investment under the right circumstances. If you visit Disney on a regular basis, DVC can save a ton of cash off the regular Disney hotel prices. You can also use hotel points to stay further away, but that really complicates a Disney vacation and frequently misses out on key benefits. Also, for the 15 years or so that I’ve been a member, there’s always been strong demand in the rental market. So, any time we might not want to use all our points we’d be able to find someone to rent them from us without losing any money. The last 6 months have made me very nervous about that demand continuing. But, if this sales pace continues it gives me a lot more comfort.
Resale values for DVC have consistently exceeded what I’ve seen for other timeshares. I could sell my contract now for considerably more than what I paid for it.
That makes a lot of sense. Thanks.
We were one of the original owners at Old Key West; they even threw in theme park tickets as part of the deal. We took an Alaskan cruise on Holland America through DVC, then sailed on the Disney Magic. Many great vacations but then soccer and schoolwork got in the way, so we sold it AT A PROFIT! Unheard of.
For this reason, as a single Grandma who loves Disney, I am thinking of buying in again. We toured Aulani a few years ago and it is magical. The programs on the ships can’t compete with Carnival etc.
After being locked in this long, I am ready to blow some bucks on some fun!
Candace, awesome to hear about your great experience with DVC! I’ve had the same good experience. It’s brought us lots of joy and I imagine if we sold we could do so at a profit. For the reasons you’re thinking about buying back in, we’re standing pat with our membership.