2020 DVC Annual Dues

[sky2823]

Can someone explain to me more about breakage? Are you saying that any cabin at CCV not rented at 60 days can be rented out for cash and nothing goes back to DVC? Sorry if I am misunderstanding...

 

[CanadaDisney05]

Can someone explain to me more about breakage? Are you saying that any cabin at CCV not rented at 60 days can be rented out for cash and nothing goes back to DVC? Sorry if I am misunderstanding...

I'm not 100% of all the details, but in general ya. Any DVC inventory room not rented at 60 days automatically becomes available to book for cash to the general public. All or a portion (not really sure) of the revenue for this goes back to the owners (in the way of reduced maintenance fees). However, there is an annual cap. Once the cap gets exceeded, all the revenue goes to Disney. From my understanding, they basically hit the cap every year.

 

[crvetter]

Can someone explain to me more about breakage? Are you saying that any cabin at CCV not rented at 60 days can be rented out for cash and nothing goes back to DVC? Sorry if I am misunderstanding...

I'm not 100% of all the details, but in general ya. Any DVC inventory room not rented at 60 days automatically becomes available to book for cash to the general public. All or a portion (not really sure) of the revenue for this goes back to the owners (in the way of reduced maintenance fees). However, there is an annual cap. Once the cap gets exceeded, all the revenue goes to Disney. From my understanding, they basically hit the cap every year.

To expand further @CanadaDisney05 is correct on all points. Unreserved units at 60 days (DVC also has the ability to "predict" the rooms that will be unreserved at 60 days) are sent to CRO to be booked. That cash then gets returned back to the association, which the unit belonged, to offset/lower the dues. However, it is capped at 2.5% of the associations budget (as referenced above). Next the breakage goes to BVTC, the entity responsible for trading at 7 months, up until a X multiplier of their realized costs, this is essentially how DVC funds BVTC (outside the nominal fees each resort pays). Any money that exceeds X of the realized costs of BVTC and 2.5% of the dues is then given to DVD.

I forget the X multiplier but it is easily found in the DVC Resort Agreement Addendum to your POS.

 

[sethschroeder]

I'm an OKW owner and I have serious concerns about these annual dues increases. Not just OKW but all DVC dues. I ran some numbers based on OKW. If you were to take the dues and give them a modest 7% (modest compared to the proposed 8.4% increase for 2020) annual increase each year until 2057, when my contract expires. My 2057 rate shows $95.79/point. That obviously is to the extreme. If you were to make it a 4% (which seems very possible) increase annually it would be $33.44/point. Which is still an insane amount of money.

So before buying in to DVC as I researched this year this is what somewhat held me back. Basically in the end my thought was that if maintenance rates were $75/point then the hotel side of the business would be that much more expensive. Since maintenance is really only for covering true costs of operations (within reason). Thus on the hotel side they would have those costs plus they would be gouging their guests for even more money which we prepaid/locked-in when buying in.

 

[sethschroeder]

I have heard, read what ever that there are some timeshares that people own that they could not give away if they tried. Could it be because the dues are so high and just not worth it?

I mean its basically the concept that most timeshares are a dime a dozen. There is zero value in them because there are 100 other places to stay with the exact same benefits. With Disney you have locked in value of people wanting to visit and pay the premium for Disney World.

 

[sethschroeder]

Unreserved units at 60 days (DVC also has the ability to "predict" the rooms that will be unreserved at 60 days) are sent to CRO to be booked.

When does that prediction happen? Not before 7 months right? So your home resort if booking prior to that you won't have Disney essentially stealing rooms.

 

[Sandisw]

When does that prediction happen? Not before 7 months right? So your home resort if booking prior to that you won't have Disney essentially stealing rooms.

From what I understand, they do it based on previous usage and that is one way they can grab them. The hard part is that Disney also gets to take inventory for people trading out for things for cruises, etc. We have no idea how they determine that either.

I have seen posts that say that within 60 days, some have heard there is a way for MS to get a room pulled back, but I have no idea how true that is.

 

[sky2823]

To expand further @CanadaDisney05 is correct on all points. Unreserved units at 60 days (DVC also has the ability to "predict" the rooms that will be unreserved at 60 days) are sent to CRO to be booked. That cash then gets returned back to the association, which the unit belonged, to offset/lower the dues. However, it is capped at 2.5% of the associations budget (as referenced above). Next the breakage goes to BVTC, the entity responsible for trading at 7 months, up until a X multiplier of their realized costs, this is essentially how DVC funds BVTC (outside the nominal fees each resort pays). Any money that exceeds X of the realized costs of BVTC and 2.5% of the dues is then given to DVD.

I forget the X multiplier but it is easily found in the DVC Resort Agreement Addendum to your POS.

So could this be a big factor in CCV dues not increasing as much as other resorts?

both poly and CCVs dues don’t seem to be going up...

is there anyway to audit? (Are we entitled?).

maybe it’s been covered but is that a motivating factor for DVD doing the cabins and bungalows? They know the cabins will go not be booked...

 

[drusba]

So could this be a big factor in CCV dues not increasing as much as other resorts?

is there anyway to audit? (Are we entitled?).

maybe it’s been covered but is that a motivating factor for DVD doing the cabins and bungalows? They know the cabins will go not be booked...

both poly and CCVs dues don’t seem to be going up?

Not a factor that relates to comparing dues increases among resorts. Since beginning of DVC time, every resort for every year has gotten that 2,5% set off due to breakage income so no resort has benefited more than others. As I was informed by a DVC person at an annual meeting some years ago, the annual breakage income has typically exceeded the 2.5% plus the amount that goes to BVTC, leaving an excess amount that is just Disney profit.

The bungalows and cabins gave DVC not just a lot more breakage income, but a huge number of extra points it could sell to all those members purchasing only enough points to get studios, which at CCV has resulted in the continuing development of an issue of being able to get studios at 11 months out. Poly has thus far avoided that issue simply because of the huge number of studios.

 

[sky2823]

Not a factor that relates to comparing dues increases among resorts. Since beginning of DVC time, every resort for every year has gotten that 2,5% set off due to breakage income so no resort has benefited more than others. As I was informed by a DVC person at an annual meeting some years ago, the annual breakage income has typically exceeded the 2.5% plus the amount that goes to BVTC, leaving an excess amount that is just Disney profit. The bungalows and cabins gave DVC not just a lot more breakage income, but a huge number of extra points it could sell to all those members purchasing only enough points to get studios.

if Disney is intentionally creating the bungalows and cabins just to create to increase profits for themselves via a back door (breakage) that seems so unethical to me.

I have no problem with Disney being totally profit hungry, but that seems fraudulent to me and against the spirit of the agreement if it is premeditated.

 

[DougEMG]

if Disney is intentionally creating the bungalows and cabins just to create to increase profits for themselves via a back door (breakage) that seems so unethical to me.

I have no problem with Disney being totally profit hungry, but that seems fraudulent to me and against the spirit of the agreement if it is premeditated.

Personally I believe that being able to sell so many more points and the breakage income are the two reasons that cabins and bungalows exist. Big benefit for DVC, big problem for DVC owners.

 

[Wakey]

My view is bungalows exist for the following reasons:
1. Massive profits on sale when initially sold. We’ve seen speculation as to how much they cost v points sale revenue. It would not surprise me if they were the most profitable real estate build in the USA in terms of margin.
2. They give breakage income.
3. They sell the resort. Average joe buying on impulse with no research is told- ‘Look you can stay in a full cabin, on the water, watching the fireworks from your hot tub ‘. They think wow, this looks amazing. It also looks great on videos, in promo materials etc. It’s only when they are sat in front of their computer working out where to stay that they realise they could not see a stay in the bungalows with a telescope, and are left fighting for studios.

 

[zavandor]

if Disney is intentionally creating the bungalows and cabins just to create to increase profits for themselves via a back door (breakage) that seems so unethical to me.

I have no problem with Disney being totally profit hungry, but that seems fraudulent to me and against the spirit of the agreement if it is premeditated.

There is general consensus here that the bungalows were created for this reason. A few DIS members (Drusba and SkierPete in particular) predicted what would happen right when the point chats were published and their predictions proved true.
However, calling it fraudulent may be a step too far. It wouldn't be difficult for DVD to say in court they were genuinely thinking about a different target for the bungalows as a more exclusive accommodation. How would someone prove the contrary?
However we'll see what will happen with the Reflections treehouses. I think DVCMC created a problem with the rolled back 2020 points reallocation. They tried to lower the cost per night of bungalows and cabins increasing other unit sizes. They certified that at that point cost they're not popular enough and that a reallocation is necessary. Now, how could DVD justify to create more treehouses at the same price point in a new resort. If they do, it'd be easier to claim they're doing for profit at the expense of members.

 

[sky2823]

So, with the unused points from the bungalows and cabins, does that create a bubble or overhang of unused points that keeps getting banked forward? People obviously book other resorts, but I assume that pushes other resorts points into the bubble and so on? People can’t use their points so they bank to the next year. Correct?

the more resorts they continue to build that creates breakage the bigger the bubble and the resulting consequences to the system?

 

[Sandisw]

So, with the unused points from the bungalows and cabins, does that create a bubble or overhang of unused points that keeps getting banked forward? People obviously book other resorts, but I assume that pushes other resorts points into the bubble and so on? People can’t use their points so they bank to the next year. Correct?

the more resorts they continue to build that creates breakage the bigger the bubble and the resulting consequences to the system?

I think what it means is that those that own at Poly and CCV are using points from those home resorts for accommodations other than cabins/bungalows. This, in turn, floods the system with points competing for other room sizes.

 

[sky2823]

I think what it means is that those that own at Poly and CCV are using points from those home resorts for accommodations other than cabins/bungalows. This, in turn, floods the system with points competing for other room sizes.

But the resorts whose CCV/Poly points are being used on, have points allocated to it and so on...

it seems systemically the breakage in general creates a bubble of points that can not be used at the end of the year. When you have multiple resorts with a large amount of breakage then you end up with a large bubble of points that have no home that need to be pushed forward....

is there anywhere that DVC discloses breakage by resort?

 

[CanadaDisney05]

But the resorts whose CCV/Poly points are being used on, have points allocated to it and so on...

it seems systemically the breakage in general creates a bubble of points that can not be used at the end of the year. When you have multiple resorts with a large amount of breakage then you end up with a large bubble of points that have no home that need to be pushed forward....

is there anywhere that DVC discloses breakage by resort?

Some of that breakage is owners using their points for cruises, concierge collection, RCI, etc.....

 

[Sandisw]

But the resorts whose CCV/Poly points are being used on, have points allocated to it and so on...

it seems systemically the breakage in general creates a bubble of points that can not be used at the end of the year. When you have multiple resorts with a large amount of breakage then you end up with a large bubble of points that have no home that need to be pushed forward....

is there anywhere that DVC discloses breakage by resort?

From my understanding, the resorts all get the maximum from breakage that is allowed, I dont believe that, there is anything else required that Disney provides above and beyond that.

 

[tjkraz]

it seems systemically the breakage in general creates a bubble of points that can not be used at the end of the year.

Breakage should only come into play on units that members are not using. Either in practice or via historical trends. While it's inevitable that some members cannot get their first choice of accommodation--particularly if they wait too long to book--we're far from a situation where members are unable to use points because literally everything is booked 11-months out and there's no availability at 7 months.

I will agree that pricing on the bungalows looks a bit sketchy. However, I'd also question how many are being rented to cash guests paying $1200+ per night.

The bungalows and cabins are probably a little more popular with owners than we give them credit for. Meanwhile there are thousands of points which owners collectively fail to use each year--perhaps hundreds-of-thousands.

The hope is that Disney is actively tracking these trends and will alter their future construction projects to prevent the problem from worsening. If we need more Studios, build more Studios.

 

[drusba]

I too doubt one can call it fraud. Fraud would require Disney's actually lying about something material or purposefully concealing something material affecting the decision to buy. Disney does nothing to hide the fact that the bungalows are there and there are a lot of them, that they cost a fortune and thus few can actually afford to buy enough points to usually get them (e.g., you need on average about $200,000 to buy enough points for a week), that the new purchaser point requirements are very low and thus large numbers are going to buy only enough points too get smaller rooms, that the points related to the bungalows can be sold to any purchaser not just those who want bungalows, that it can rent rooms including bungalows not reserved at 60 days out and gets to keep anything above the 2.5% dues set-off, that the members via dues will pay for almost all the maintenance, upkeep, repair, and refurbishment of the rooms including bungalows, and that reservations for all rooms are on a first come first served basis, and you may not therefore be able to get the reservation you want.

Maybe not all of the above is said when selling points to new purchasers but DVD does nothing to prohibit any purchaser from reading all the official documents, point charts , and other information from which one could conclude that those bungalow points are going to be a real problem in relation to reserving studios and that Disney will be able to profit not just on the sale but on rentals of the bungalows during breakage.

So the defense to an assertion of fraud is that Disney did not hide anything. It is just that the purchaser did not make the needed effort to figure out that the bungalows would provide DVC/DVD huge profits on sales and rentals, while almost all the maintenance, upkeep, repair and refurbishment of the bungalows would be paid by the members, who are mostly not using them, via their dues. One may ultimately wonder how many rooms actually get rented at that $1200 a night charge, but that matters little, because Disney loses nothing in the form of maintenance, upkeep, repair and refurbishment costs and thus any rentals at all are just essentially pure profit.

One might assert the resort make-up and sales methodology is unfair and shows that DVD is not the "model" timeshare company many believe it is, but it is not fraud.

As to what DVD should build in the future if it is going to continue to have many rooms like the point-ridiculous bungalows (and cabins), raise prices on a regular basis well-beyond any rate of inflation, and require new purchasers to buy only a minimum of 50 to 100 points, the answer is actually simple: every new resort should be like Poly, where all rooms, except those point-ridiculous bungalows, are studios, and there are a huge number of studios, because that is likely the only way to avoid severe availability issues for studios.