What percentage of DVC owners don't pay their dues?

[pixi509]

I heard Paul Krieger mention in a recent DVC Fan episode that there's a number of DVC owners who avoid paying their annual dues, which obviously eats into Disney's profits.

In honor of Annual Dues payment day, what percentage of DVC owners do you all think avoid paying their dues? What effect does this have on other DVC owners?

 

[DonMacGregor]

I heard Paul Krieger mention in a recent DVC Fan episode that there's a number of DVC owners who avoid paying their annual dues, which obviously eats into Disney's profits.

In honor of Annual Dues payment day, what percentage of DVC owners do you all think avoid paying their dues? What effect does this have on other DVC owners?

A few, but not too many. Once you get three months in arrears, they freeze your accounts, cancel your existing reservations, and you can't make any future reservations.

If you are financed through Disney, they will foreclose on your loan. If you are financed through someone else, I'm guessing you aren't making your mortgage payments either, and that lender would likely foreclose as well.

 

[Chili327]

How or why would you not make your payments? Are we talking people that are abandoning their contracts, or some sort of way to avoid paying, renting the points to pay, or i'm confused.? lol

 

[KAT4DISNEY]

Sure, one could not pay but the account would end up frozen and eventually foreclosed on. I'm not understanding - they implied that one can do that with no ramifications?

 

[Littlelulu01]

I heard Paul Krieger mention in a recent DVC Fan episode that there's a number of DVC owners who avoid paying their annual dues, which obviously eats into Disney's profits.

In honor of Annual Dues payment day, what percentage of DVC owners do you all think avoid paying their dues? What effect does this have on other DVC owners?

Please explain how charging owners maintenance fees is profitable for Disney. I’m pretty sure our dues are paid to maintain the resorts we own and not a profit maker for Disney.

 

[KAT4DISNEY]

Payment of maintenance fees are how we as members pay to keep the resorts we own running and maintained. The profit for DVD is made from sales of contracts.

When your fellow owners don’t pay their dues it hurts us all. Imagine owning a condo and the tenants stop paying their association fees. Those scenarios played out after the 2008 financial crisis. At least with DVD they’ll step in and take the contract back when owners refuse to pay.

DVC is a profit center also. They earn a fixed base fee that is a calculated part of the MF's plus receive breakage income above a certain percentage that goes back to the association.

 

[Chili327]

Please explain how charging owners maintenance fees is profitable for Disney. I’m pretty sure our dues are paid to maintain the resorts we own and not a profit maker for Disney.

I would assume they make something on them, even if just earmarked for future repairs or emergency fund, etc, they can't possible predict it down to the dime each year.

 

[pixi509]

Please explain how charging owners maintenance fees is profitable for Disney. I’m pretty sure our dues are paid to maintain the resorts we own and not a profit maker for Disney.

In the sense that if owners don't pay, Disney is forced to make up the difference?

 

[bakerworld]

I would think that an anticipated % of unpaid dues/abandoned contracts are built into the maintenance fee structure. Between 1992 and now DVC must have a pretty good idea of the % of unpaid/abandoned memberships arise annually.

 

[Floridian From Afar]

I can't imagine Disney would just let people not pay their dues. They're probably given an extended time frame to pay. Failure to do so probably results in Disney taking back the contract. At that point, Disney can sell those points again. Big win for Disney, essentially selling those points twice without having to buy them back.

I'd imagine most people, if they can't pay, would sell the contract. Even at a discount it's better than just giving it back for free.

So I can't imagine people not paying their dues negatively impacts the rest of us. If anything, I think it is potentially a way for Disney to make even more money.

 

[Sandisw]

In the sense that if owners don't pay, Disney is forced to make up the difference?

They cover the shortfall in dues so in that sense, yes, they would be responsible.

But, the POS gives them the authority to also lock out owner and pretty sure to also rent to recoup money owed.

 

[Brian Noble]

Please explain how charging owners maintenance fees is profitable for Disney.

The management contract includes a fee to DVCMC, the management company. IIRC, this is a percentage of direct expenses. That's probably not a hugely profitable rental stream, as there are likely non-trivial indirect costs that DVCMC incurs as the management company. The real money is in selling new points.

I would think that an anticipated % of unpaid dues/abandoned contracts are built into the maintenance fee structure.

I would think so too, but I don't see a line item in the resort budgets for it. For most timeshares, it is listed under "bad debt." This is usually a bigger problem at independent resorts that are no longer in active sales, because there is no way to "recycle" non-performing ownerships. DVC (and most other branded timeshares) can and do recycle such ownerships by foreclosing, and then selling them again.

There are a couple of ways this happens. An owner might get into financial difficulty, and doesn't know how (or doesn't want) to sell it. The other big way is that the owner dies, and either there are no heirs or the heirs disclaim it. Both of these are relatively unlikely for DVC, because there is a liquid market for it---at least so far. When we get near the end of the '42 resorts, that balance might tip.

One of my resorts, on Kauai, was managed by Grand Pacific for a short while, and their strategy for recovering non-performing ownerships was to rent out the time. Unfortunately, that's a precarious situation for this particular resort, as at the time it did not have a brand name to fall back on, and it was not smack dab in one of the two big tourist areas of Princeville or Koloa/south shore. When the time came, I was in favor of moving back to a branded management company (Wyndham), becuase as part of the management agreement Wyndham would recycle non-performing deeds into their trust product and get the bad debt off the books.

 

[The Jackal]

Please explain how charging owners maintenance fees is profitable for Disney. I’m pretty sure our dues are paid to maintain the resorts we own and not a profit maker for Disney.

We pay DVC to run and maintain the resorts. Most of the expenses paid cover workers, I’m sure that DVC does make some money. No one knows how much.

 

[RoseGold]

I heard Paul Krieger mention in a recent DVC Fan episode that there's a number of DVC owners who avoid paying their annual dues, which obviously eats into Disney's profits.

That's not "obvious" at all. DVC forecloses and sells them, and makes a ton of money. This is ideal for DVC.

This is public information. You can see this happens quite a bit, generally with people who have recently died. Maybe their estates didn't know about it, or just didn't want to mess with probate in Florida.

Depending on how the end of DVC goes, it might be smarter to use the points and then not pay the last year. I would expect policies in place to prevent this pretty obvious arbitrage.

 

[DonMacGregor]

That's not "obvious" at all. DVC forecloses and sells them, and makes a ton of money. This is ideal for DVC.

I'd be curious to see how many of those foreclosures are for unpaid mortgages versus unpaid dues. Foreclosing on a property owned by a financial lender or owned outright by the member seems a bit more involved than if you simply stopped making your mortgage payments to Disney, as they hold title.