Recession Question

[sky2823]

to the veterans on the board and anyone else who has an opinion, in a recession, do you think all the DVC resort prices will get hit equally hard or are there some resorts that are more vulnerable (hit harder) and others more insulated (hit less hard) from a downturn?

(Apologies if this has already been asked)

 

[disneynutz]

We plan for our contracts to sell later for zero, anything else and we are golden. Could sell at the 50 year mark, could be tomorrow. We already sold some, bought others, selling one now.

Bill

 

[SherylLC]

https://www.disboards.com/threads/dvd-and-recession.3687580/

 

[Dean]

to the veterans on the board and anyone else who has an opinion, in a recession, do you think all the DVC resort prices will get hit equally hard or are there some resorts that are more vulnerable (hit harder) and others more insulated (hit less hard) from a downturn?

(Apologies if this has already been asked)

Dues will still be the same or higher but prices will be lower. If we had another 2008/2009 likely half what they are now.

 

[Jerry5788]

Dues will still be the same or higher but prices will be lower. If we had another 2008/2009 likely half what they are now.

Maybe from panic selling but half sounds very hard to imagine the 100 ones pull back to $75/$80 and the $130/$140 get closer to $100

Anything more significant you would need disney to cut room rates drastically and see travelers fall which I don’t see happening. Having set that might not be many buyers and many sellers needing to get out which could create a panic.

 

[MooseBucks]

I highly doubt that prices drop 50% but I’d think it be possible for a 30% drop.

 

[Ben E N]

Maybe from panic selling but half sounds very hard to imagine the 100 ones pull back to $75/$80 and the $130/$140 get closer to $100

Anything more significant you would need disney to cut room rates drastically and see travelers fall which I don’t see happening. Having set that might not be many buyers and many sellers needing to get out which could create a panic.

Total guess here, but based on the panic selling comment, my guess would be that larger resorts would be hit the hardest. There would be a bigger pool of people in the race to the bottom price, and too many contracts for Disney to ROFR, so I would guess they would go for a 10-20% greater reduction than smaller resorts.

 

[Mumof4mice]

I'm interested to see what, if any, impact the Fed rate rise would have by the end of this year.

 

[MooseBucks]

I'm interested to see what, if any, impact the Fed rate rise would have by the end of this year.

I don’t think it is going to have a material impact unless they step it up faster to cool off the economy quicker.

 

[Ben E N]

I don’t think it is going to have a material impact unless they step it up faster to cool off the economy quicker.

And even then, it wouldn't be a recession. More of a correction. Recessions are rarely caused by something like an interest increase. That can decrease some borrowing, which can slow growth, but shouldn't be enough to pull back on large businesses.

 

[Mumof4mice]

I don’t think it is going to have a material impact unless they step it up faster to cool off the economy quicker.

And even then, it wouldn't be a recession. More of a correction. Recessions are rarely caused by something like an interest increase. That can decrease some borrowing, which can slow growth, but shouldn't be enough to pull back on large businesses.

Agree. Rate hikes usually dampen discretionary spending. But I think the dvc market will cool rather than nose dive.

As much as I was doubtful about the current leadership I think the economy is in good shape and looks to be able to hold on for a while. Happy to be eating humble pie!

A soft landing would be great if they manage to pull it off.

 

[DougEMG]

Rising interest rates, massive government debts and global trade wars all have the makings of a recession. If and when that happens, I expect resale prices to drop 30-40 percent.

 

[Dean]

Maybe from panic selling but half sounds very hard to imagine the 100 ones pull back to $75/$80 and the $130/$140 get closer to $100

Anything more significant you would need disney to cut room rates drastically and see travelers fall which I don’t see happening. Having set that might not be many buyers and many sellers needing to get out which could create a panic.

That was the drop in 2008/2009 close to 50% esp for VB, HH, OKW & SSR. When you combine a major recession with no ROFR, prices will drop dramatically over time just like they did before. Consider they are likely overinflated currently anyway and it would be worse than that.

 

[Jerry5788]

That was the drop in 2008/2009 close to 50% esp for VB, HH, OKW & SSR. When you combine a major recession with no ROFR, prices will drop dramatically over time just like they did before. Consider they are likely overinflated currently anyway and it would be worse than that.

Was the rental market as big as it was today. How much were points going for to rent

 

[chalee94]

Was the rental market as big as it was today. How much were points going for to rent

No. But if there is a recession, renting would also be impacted. Corporate job cuts would mean fewer trips to Disney for both those who were cut and those who are concerned about being cut.

But there should be plenty of travel deals for the smaller number of people who are in a position to shrug off the fear and uncertainty.

 

[Jerry5788]

No. But if there is a recession, renting would also be impacted. Corporate job cuts would mean fewer trips to Disney for both those who were cut and those who are concerned about being cut.

But there should be plenty of travel deals for the smaller number of people who are in a position to shrug off the fear and uncertainty.

Correct but say you rent for $14 a night in worst case - in slow season that is $140 for a studio weeknight which I think Disney charges $400/$500 for - you would need rental prices to pull back to $200 to really impact the demand. If prices were to fall significantly lower in rental market I would be taking as many bankable transfers as I could

 

[crisi]

Newer resorts will also get hit harder. Anything that people still have loans out on - but probably not the most recent resort - where the loans are still large enough that you need to sell for a lot of money.

For someone whose DVC has been paid off for a dozen years or longer, they are far less likely to need to sell during a recession. If they can rent to cover just dues, they can continue to hold until the market gets better - and it will take a major economic collapse for rental rates to fall below dues (in which case, we have bigger problems). But for someone who has half the loan paid off, but can no longer make the monthly payments, selling is a better deal than foreclosure.

In 2009 we got an awesome deal on an Adventures by Disney trip - about half of the list price per person.

 

[kboo]

Was the rental market as big as it was today. How much were points going for to rent

I rented BLT points in the home resort window for <$13pp back in 2016. Just 1 data point.

 

[chainkid]

As long as Disney continues to grow then I do not see major harm coming to resale prices. My contracts have almost doubled in value from 1999 and were bought with cash so I'm not concerned at all about dropping in value as I would see that as a buying opportunity . since I own most of my points at BWV my only concern is that it will be right in the middle of the action for new attractions and thus harder to book. Best darn investment I ever made. I should have bought more points when they were $60 per point. I sold a Hilton head in two days for more than I paid for it so no worries here.

 

[Bing Showei]

Correct but say you rent for $14 a night in worst case - in slow season that is $140 for a studio weeknight which I think Disney charges $400/$500 for - you would need rental prices to pull back to $200 to really impact the demand. If prices were to fall significantly lower in rental market I would be taking as many bankable transfers as I could

With the flagging economy comes a drop in attendance at the parks, and no on will be paying rack rates for rooms (I'm not convinced a lot of people pay rack rates with our booming economy today). Exactly this sort of thing happened the year immediately after 9/11, Disney (and tourism in general) was hurting badly. Construction on Pop Century stopped completely. Live shows like "Beauty and the Beast" were cancelled (yes, that was around then, and yes, that needs to be put out to pasture). Parks opened later to save money. The list goes on. Point being, Disney is not the Disney we see today when the economy ***** the bed and the Mouse is suddenly finds himself penny pinching.

If the economy takes a another hit like in 2008, (which is not inconceivable given relaxed banking regulations, zero-down lending habits re-emerging, over-inflated asset values, banks failing stress tests, society - and entire countries - over-leveraged, etc.), a lot of people will either lose their job or live in fear of losing their job. In that state of mind, Disney will be among the last things on people's to-dos. It doesn't just take DVCers to be directly affected to change prices. Simply take away a chunk of foreign travelers, or once-in-a-lifetimers who will put that trip off a few years, and you will impact hugely the ability for Disney to service those who are locked into 50 years of visits the way they're able to today. When the product changes, its value changes.

How low will resale prices drop when Disney is not artificially propping that floor up? Low-ballers will continue to test that bottom. Despite the flood of ROFRs the last two months, people are still offering ROFR ripe prices. Imagine if we learned Disney stopped ROFR (as they nearly did a couple of years post 2008) today. How many of those premium priced DVC Resale Market contracts would be confident they can wait out for a buyer to come up and meet them?

Others who are more business savvy may be able to handle it, but for me, the risks of buying into a timeshare, and relying on the viability of the rental market longterm to make it work financially, is far too great to do comfortably.

- Chicken Little