Trying to wrap my head around dues increases

[Rush]

I bought BWV in 1999, dues were $4.02, 2023 is $8.53, 24 years. So $10 to $60 in 25 years doesn’t seem right.

It may not sound right, but it’s what compounding interest does. As the base number gets bigger, the inflation number gets bigger, and the total grows somewhat exponentially. It’s great when it’s growth in a retirement account, not so much when it’s DVC dues. It’s hard to wrap your head around it, but $10 at 7.5% over 25 years is $60, $60.98 to be exact. I agree with others though, assuming a 7.5% annual inflation average for the next 25 years seems pretty draconian.

 

[RoseGold]

OK, so if dues at OKW would to from $10 up to $60 at the end of the contract (just over 25 years) that x6. So a $200/nt room right now would be $1200 in 25 years? All-Stars or Pop for $1200/nt? There's no way.

That's pretty much what happened to cash Disney rates. I found my math from 2018, and I actually underestimated how much they would go up. And, BTW, there is no $200 room now. If there is, you should stay there instead of buying DVC.

 

[pianomanzano]

That's pretty much what happened to cash Disney rates. I found my math from 2018, and I actually underestimated how much they would go up. And, BTW, there is no $200 room now. If there is, you should stay there instead of buying DVC.

The all-stars go for 170s-220s most nights of the year.

 

[NEW-B]

That's pretty much what happened to cash Disney rates. I found my math from 2018, and I actually underestimated how much they would go up. And, BTW, there is no $200 room now. If there is, you should stay there instead of buying DVC.

Apples and Oranges comparing an All-Star room to DVC. It never makes sense if you compare it that way.

 

[RoseGold]

My comparison room was the AoA family suite, which I booked for less than $300 in 2019. That room is now over $500 even mid-week and with whatever discount they are offering here and there, three years later.

I do see some Pop/AoA around $250, which I agree is better than DVC, mathematically. If you are planning to go midweek in July, of course.

The rogue room that wasn't in my calculations was Swolphin. They swing wildly, and can be quite cheap. A couple stays ago, it would have been $150. There's no DVC calculation that can keep up with that. But I haven't been able to match that since.

 

[SkampyOne]

Trying to predict future dues has been part of my decision-making for choosing a home resort, and what complicates things is that the rate of increase seems to have been fairly steady but then took a BIG jump this year. Math is NOT my strong suit and this might not be the right way to calculate things, but I did lifetime CAGR as well as 10, 5, 3 and 1 year calculations. To balance things out, I decided to average those and then forward think to 2042 and then a separate guestimate based on the more steep recent % increase to provide a range. Took Riviera out of the mix because obviously those fees are going to go up by more than they have so far, but my numbers are nowhere near as scary as some of what I've seen on here! Average dues PP came out between $13.95 on the low side to $16.54 on the high side with AKV and OKW at the higher range (just over $20PP), and GFV, BLT and CCV coming in under $15PP. Wishful thinking and poor math skills? Maybe, but since rental points & hotel rates will also go up, still seems to make more sense to buy in. Again, math not my strong suit but taking upfront & ongoing dues into account, if you fully leverage your points, you even come out ahead vs. staying offsite at the Fairfield or Holiday Inn! I just have to talk myself off the ledge (I contemplate this every year and have always been too chicken to jump), figure out my home resort (head vs. heart battle), and find the right contract...

 

[AnnaKristoff2013]

It may not sound right, but it’s what compounding interest does. As the base number gets bigger, the inflation number gets bigger, and the total grows somewhat exponentially. It’s great when it’s growth in a retirement account, not so much when it’s DVC dues. It’s hard to wrap your head around it, but $10 at 7.5% over 25 years is $60, $60.98 to be exact. I agree with others though, assuming a 7.5% annual inflation average for the next 25 years seems pretty draconian.

No, it's not right because DVC dues have not historically grown at 7.5 percent annually. BWV in that example grew at an average rate of 3 percent if it really only went from $4 to $8.17 in 24 years (didn't check those numbers).

The Op's question I believe is about Old Key West. OKW stated at $2.51 in 1991. In 2023 (32 years later) it is $9.36. That is an average rate of 4.2 percent, which is a big difference from 7.5 percent. If OKW averaged 4.2 percent compounding going forward over the next 33 years then in 2057 it would cap out at $36.38, not $60.

 

[Brian Noble]

what complicates things is that the rate of increase seems to have been fairly steady but then took a BIG jump this year.

That's largely because wages took a big jump this year.

The key thing about Dues is that they are legally required to recover the actual costs of operating the resort. When the actual costs don't change much, dues don't change much. When the actual costs change a lot, dues change a lot. And those costs tend to be dominated by what Disney is paying their Cast. Looking at, say, the OKW budget, Housekeeping is the #1 cost, followed by Transportation, then the Front Desk. Some of those costs are materials (cleaning supplies, fuel) or maintenance (keeping the buses running), but most of it is paying the people who do those jobs. Last year, Disney had to up their pay rates to be able to staff the resorts, and those costs are passed along to the owners.

There are other components that matter: Maintenance costs may go up as a property ages. Utility prices can be volatile. But, the basic idea is that Dues grow with the costs of paying the staff.

That's very different than the price of direct points, or the rate at which Disney rents hotel rooms. Those are things Disney gets to choose, and are going to be much more driven by how much demand there is on the part of customers to stay at Disney resorts--either "in bulk" as DVC Members, or a la carte by just renting rooms as they go.

 

[Johtull12]

No, it's not right because DVC dues have not historically grown at 7.5 percent annually. BWV in that example grew at an average rate of 3 percent if it really only went from $4 to $8.17 in 24 years (didn't check those numbers).

The Op's question I believe is about Old Key West. OKW stated at $2.51 in 1991. In 2023 (32 years later) it is $9.36. That is an average rate of 4.2 percent, which is a big difference from 7.5 percent. If OKW averaged 4.2 percent compounding going forward over the next 33 years then in 2057 it would cap out at $36.38, not $60.

BWV went from $3.70 to $8.53 or 130% increase from 1996 to 2023. OKW $2.56 1992 to $9.36 in 2023 or a 265% increase. It certainly seems to accelerate as the resort grows older and need more upkeep.

 

[Johtull12]

That's largely because wages took a big jump this year.

The key thing about Dues is that they are legally required to recover the actual costs of operating the resort. When the actual costs don't change much, dues don't change much. When the actual costs change a lot, dues change a lot. And those costs tend to be dominated by what Disney is paying their Cast. Looking at, say, the OKW budget, Housekeeping is the #1 cost, followed by Transportation, then the Front Desk. Some of those costs are materials (cleaning supplies, fuel) or maintenance (keeping the buses running), but most of it is paying the people who do those jobs. Last year, Disney had to up their pay rates to be able to staff the resorts, and those costs are passed along to the owners.

There are other components that matter: Maintenance costs may go up as a property ages. Utility prices can be volatile. But, the basic idea is that Dues grow with the costs of paying the staff.

That's very different than the price of direct points, or the rate at which Disney rents hotel rooms. Those are things Disney gets to choose, and are going to be much more driven by how much demand there is on the part of customers to stay at Disney resorts--either "in bulk" as DVC Members, or a la carte by just renting rooms as they go.

Disney could certainly add more margin to the costs of operation as well though, correct?

OK, so if dues at OKW would to from $10 up to $60 at the end of the contract (just over 25 years) that x6. So a $200/nt room right now would be $1200 in 25 years? All-Stars or Pop for $1200/nt? There's no way. I know people compare cash stays at the same resort to find "savings", but I'm looking at DVC as being priced just a bit more than rack rate Value Resorts for per night costlkn

 

[Johtull12]

Approx 4.65% a year since 1996 which started at $2.56 a point. So many variables but if it stayed consistent 2042 dues would be $20.71 per point and 2052 would be $32.63.

 

[sethschroeder]

I'm in the midst of massive information gathering in here

So this is about being possibly a new owner correct?

This is an easy way to understand DVC pricing.

Every hotel has two parts:

• Operating Cost
• Profit

Profit is normally a % of operating costs. Lets say 10% and this year $100/night I make $10 in 5 years I charge $150/night so I make $15/night

DVC has two parts:

• Operating Cost
• Prepaid Profit based on todays cost

Profit is now a fixed cost for every stay I have. So while it might be 12% this year in year 1 its going to be possibly 5% or 3% or 1% in the decades to come.

Operating costs which is the MFs in the end will always go up. So when you do the math and see MFs might be $20/point you need to realize the cost to staying at the hotel will have also went up a ton but also have profit added on top of it.

 

[RamblinWreck]

OK, so if dues at OKW would to from $10 up to $60 at the end of the contract (just over 25 years) that x6. So a $200/nt room right now would be $1200 in 25 years? All-Stars or Pop for $1200/nt? There's no way. I know people compare cash stays at the same resort to find "savings", but I'm looking at DVC as being priced just a bit more than rack rate Value Resorts for per night costs.

Instead of theorizing about this, you could look at what's actually happened with dues vs the cost of rooms over the last 30 years.

 

[RamblinWreck]

Disney could certainly add more margin to the costs of operation as well though, correct?

As in, profit off of the maintenance fees they are charging?

Not legally, IIRC.

 

[Sandisw]

Disney could certainly add more margin to the costs of operation as well though, correct?

The operating costs at the resort at audited and any surplus against the actual cost is returned to owners via the capital reserve budget.

So, no, Disney is not going to charge owners for costs that do not happen and then pocket the difference. There are plenty of other ways they can increase their profit margin as a company. No need to mess with the dues for the timeshare...that is how the issue came about with Aulani and they all got caught, fired, and now we have subsidized contracts.

 

[Clemsondisfan]

I considered this when purchasing. Due increases look like they could become overwhelming, BUT I would also expect rental rates to increase at about the same inflation percentage. You can currently rent them out to others at $18/point, and assuming 4% inflation per year, that would be approximately $86/point in 40 years. 50 points would rent out for $4,300 in that case. A quick way to earn your money back for dues if needed.

 

[Leight19]

The operating costs at the resort at audited and any surplus against the actual cost is returned to owners via the capital reserve budget.

So, no, Disney is not going to charge owners for costs that do not happen and then pocket the difference. There are plenty of other ways they can increase their profit margin as a company. No need to mess with the dues for the timeshare...that is how the issue came about with Aulani and they all got caught, fired, and now we have subsidized contracts.

I understand this idea but with the issues with increasing lock off premium, point chart shenanigans, and as you said the actual fraud with aulani they have done things you would assume aren’t worth the risk in the past.

With respect to increased margins im not sure how the different parts interact but I would hope Disney itself isn’t in charge of running the dvc budgets. The reason I say this is dvc has to have some sort of negotiation for how cost of shared resources is split (e.g. how much do dvc poly owners pay for monorail). Id like to hope we have a voice that truly represents us during negotiations but suspect disney has more pull in deciding the splits. While these splits should be relatively fixed I would think there’s some flexibility/negotiation as prices go up or unseen maintenance occurs where these splits could be updated and Disney could push more to dvc without breaking any laws.

 

[Sandisw]

I understand this idea but with the issues with increasing lock off premium, point chart shenanigans, and as you said the actual fraud with aulani they have done things you would assume aren’t worth the risk in the past.

With respect to increased margins im not sure how the different parts interact but I would hope Disney itself isn’t in charge of running the dvc budgets. The reason I say this is dvc has to have some sort of negotiation for how cost of shared resources is split (e.g. how much do dvc poly owners pay for monorail). Id like to hope we have a voice that truly represents us during negotiations but suspect disney has more pull in deciding the splits. While these splits should be relatively fixed I would think there’s some flexibility/negotiation as prices go up or unseen maintenance occurs where these splits could be updated and Disney could push more to dvc without breaking any laws.

DVCMC has a contract with Disney as property manager and that is what determines things, As an owner, you have the right to ask for a copy of that.

Now, Disney certainly sets the prices for what they charge us to provide those services, but it is spelled out and there is a lot there that does give Disney the ability to determine certain things.

My understanding is that occupancy plays some role in things so if a resort is 60% DVC, then certain expense…ie. Monorail…would be split 60/40.

I am sure it’s more detailed than that, but you get the idea. But, with audits, etc., DVC can’t charge owners dues for things that Don’t match the actual expenses that occur.

And, Disney has to account for what is is billing DVC as well in its own budgets, so again, it is well monitored.