Will a Rental Crackdown Reset DVC Resale Prices?

[tom1944]

My UY is June. I walked a 2 bedroom AKL value room from July 1 2020 to May 2021 and the next year did the same July 2021 to May 2022 ( I wasn't able to start the walk July 1st since it was not available until a week or two later . Walking works, but it sucks and isn't fair. Unfortunately until it gets "fixed" it is the only way you will ever get some of the rooms you want.

That is too much work for me.

 

[crvetter]

This is a system issue so it just needed to be corrected.

Correct, though they haven't done so yet and simply instruct you to use 2 different lead guests to avoid it.

Again system issue just need to be corrected.

I think you missed my point I meant all the way to check-in I can't keep myself on both reservations. Disney 1 doesn't allow this and 2 it limits my number of guests I could have. Even if they allow me to be lead on both I lose one space on the second room. So limiting lead guest reservations will limit my perfectly legal and legitimate reasons to change the lead guest which can occur more than 1 time every year or so. So I would have to make a case that my guest had a legitimate reason to not make it, leave that to the interpretation of the CM if that happens, which it won't get applied consistently, and hope I can offer that room to another guest of mine.

Nothing is limited they just need to update the system to correctly deal with those two scenarios.

If the 2nd example breaks some other rule than that needs to be addressed and called out so not sure if its there because its not allowed for you to have two rooms per the contract.

The issue is the system can't handle it perfectly. It needs a set of directives that will be the interpretation of the programmer. So there will be a bias that eventually gets built in and likely will be an issue. It be different if they established these rules prior to us owning, but again ownership in Real Estate has strict rules around it, which is why I suspect one reason they have gone to the trust more so because owning a right to use vs the right of the property changes gives them more leeway (or could be something to do with CFW not being permanent structures). You can't restrict any owners right to enjoyment of the property after they bought. I suppose they could make a blanket rule against renting, but they can't make a blanket rule on the owner being present. HOAs have already tried this in many states and the courts have always said there were exceptions to what counts as a renter (family, friends, etc.).

Though it will be an uphill battle to say no rentals because the contract explicitly allows it today. They just need to be more strict on commercial activity and they know who it is already. So they need to craft rules that define it that traps them then enact the rules. But remember this costs money and this rule is in our associations documents (Disney is not the owner) so DVCMC would be the one acting to force these rules and I can assure you if that becomes too costly that cost could eventually be billed out to us by a change in our management fee structure.

 

[tx911]

I think there's a flaw in your logic. If 99% of owners walk, making it impossible for the 1% to get a reservation at 8am at 11 months out, then how are the walkers going to begin their walk when they must wait until 8am at 11 months out to reserve the initial dates they are going to walk from?

According to your scenario, no one (not even the walkers) would be able to get a reservation, because nothing would be available at 8am at 11 months out. But that only happens if people CAN get a reservation at 8am at 11 months out to start walking. You get into a chicken/egg logic loop.

You got me there!

I still maintain that the more walkers there are, the worse the product gets. The fewer walkers there are, the better it gets.

 

[DougEMG]

not necessarily - the same contracts are being sold. Just that loaded ones are more likely to find their way to the resale market rather than being bought by a flipper, stripped, and put on the market as stripped until [year+1]

Commercial renter/strip and flip:
1. commercial renter buys loaded (200 pt) contract at instant sale price of P-20 ($20 pp discount to what they'd sell for on the resale market). This might be worth it to a seller who doesn't want to deal with offers, negotiations, ROFR, etc.
2. Commercial renter takes 3 years (2023 banked, 2024, 2025 borrowed) of points and makes 600 points worth of reservations charging $20pp = $12,000 to the CR. now the effective cost to the CR of this contract is P-80 because they saved $4000 at the initial purchase and netted another $12,000 in rental $$.
3. Commercial renter puts stripped contract on the market for P (price per point)
Say P = $150 (average price per point for that resort) and assume no transaction costs, time value of $:

The original seller gets = $130 x 200 = 26,000
CR pays 26,000 but:
Gets $12,000 in rental $
Puts on the market as a stripped contract at P. Even with heavy negotiating, say they sell at $140, that's $14,000 in profit! (plus we know even the stripped contracts sell for more than the "instant sale" price)

A savvy seller could strip their own contract, say renting 400 points at $18pp and get $7,200, and then sell their contract for $150pp, or even at $140 pp they'd get 28,000, for a total of $35,200.

Or the seller could sell their fully loaded contract at $160 even though it could sell for more and is worth more (because the market undervalues loaded contracts), they'd get $32,000. The new buyer has a choice of renting out the banked points because they can't use them - on this board, $15 pp would go super fast, and the seller will now have paid $145 pp ($3000) for those points (but easily passed ROFR at $160 pp)

As individual owners, I don't see how/why we are squabbling over the "morality" and ethics of walking reservations when individual owners on both sides of a resale transaction would benefit from stripping/flipping being reduced.

More loaded contracts for sale, more options for buyers and sellers. More variety to choose from.

I know of individual owners that were doing this. Even after paying commissions to the brokers this worked out for them. Sadly, being in Canada, this was too much of a hassle for me and Uncle Sam kept too much of the selling price that this was never something worthwhile for me to do.

 

[smileyanna]

Can we ask the board sponsor if they
1. Use bots to book confirmed reservations for rentals (or similar types of automation)
2. Target high demand travel periods for their confirmed reservations
3. Buy and strip contracts for rental points
4. Have heard from DVC that enforcement of commercial activity is about to change

I’m not trying to single out the world of DVC - I’m a satisfied former renter. If these activities are above board and allowed under the terms of ownership, then more power to them. This might impact resale prices in the near future. So I’ll be naive and ask: any insight from the board sponsor?

 

[Ruttangel]

Can we ask the board sponsor

Unlikely they would confirm that but I salute you for asking

 

[CarolynFH]

Interesting sentence, as written it suggests that if they impose special season protocols I can request to be put on the list at 12 months +11 months = 23 months before my desired vacation, I’m a planner, but almost 2 years ahead of time .

LOL, this comment reminded me that when planning our first WDW visit in 1994, I found out that the Hoop Dee Doo Revue could be booked 24 months in advance. So maybe that is what the special season protocol did indeed mean!

 

[hilltopper152]

Can we ask the board sponsor if they
1. Use bots to book confirmed reservations for rentals (or similar types of automation)
2. Target high demand travel periods for their confirmed reservations
3. Buy and strip contracts for rental points
4. Have heard from DVC that enforcement of commercial activity is about to change

I’m not trying to single out the world of DVC - I’m a satisfied former renter. If these activities are above board and allowed under the terms of ownership, then more power to them. This might impact resale prices in the near future. So I’ll be naive and ask: any insight from the board sponsor?

I believe they buy contracts because they do. I believe they do not allow low offers it to be made to the seller because they will buy it first at that rate. Do I think this is wrong... no? They make money their way. Hard to believe they would also not offer points for rent when they have the points in hand from previously bought reservations ("quick sell" product). Once again not saying they did something wrong so please do not spank me for saying it. oh... disclosure: also this is my opinion/observation and not fully confirmed fact by a reliable source internally.

 

[crvetter]

not necessarily - the same contracts are being sold. Just that loaded ones are more likely to find their way to the resale market rather than being bought by a flipper, stripped, and put on the market as stripped until [year+1]

Commercial renter/strip and flip:
1. commercial renter buys loaded (200 pt) contract at instant sale price of P-20 ($20 pp discount to what they'd sell for on the resale market). This might be worth it to a seller who doesn't want to deal with offers, negotiations, ROFR, etc.
2. Commercial renter takes 3 years (2023 banked, 2024, 2025 borrowed) of points and makes 600 points worth of reservations charging $20pp = $12,000 to the CR. now the effective cost to the CR of this contract is P-80 because they saved $4000 at the initial purchase and netted another $12,000 in rental $$.
3. Commercial renter puts stripped contract on the market for P (price per point)
Say P = $150 (average price per point for that resort) and assume no transaction costs, time value of $:

The original seller gets = $130 x 200 = 26,000
CR pays 26,000 but:
Gets $12,000 in rental $
Puts on the market as a stripped contract at P. Even with heavy negotiating, say they sell at $140, that's $14,000 in profit! (plus we know even the stripped contracts sell for more than the "instant sale" price)

A savvy seller could strip their own contract, say renting 400 points at $18pp and get $7,200, and then sell their contract for $150pp, or even at $140 pp they'd get 28,000, for a total of $35,200.

Or the seller could sell their fully loaded contract at $160 even though it could sell for more and is worth more (because the market undervalues loaded contracts), they'd get $32,000. The new buyer has a choice of renting out the banked points because they can't use them - on this board, $15 pp would go super fast, and the seller will now have paid $145 pp ($3000) for those points (but easily passed ROFR at $160 pp)

As individual owners, I don't see how/why we are squabbling over the "morality" and ethics of walking reservations when individual owners on both sides of a resale transaction would benefit from stripping/flipping being reduced.

More loaded contracts for sale, more options for buyers and sellers. More variety to choose from.

I've almost done this myself for a contract that was fully loaded and wouldn't have had to pay the dues on the banked points (It was an AUL contract very cheap). I was then going to close, settle then immediately transfer the banked points to cover a reservation I made at 7 months, then transfer the current and next use years to me to cover some future trips. Then I would have sold the AUL contract after all that was done. The advantage having the other contract and DVC not limiting transfers between contracts of the same owner is the key to doing this (no limitation on number and can transfer banked points even). And the best part is I would have sold for a "loss" so no tax on the sale, though if I rented the points the ethical thing to do is declare the income. My goal was it be a way to get massive amount of points for the 7 month usage for a 1 time large family gathering. The amount of loss I could take on the purchase price dropping and broker fees were quite high if I compared to discounted rack rates or rental rates with DVC.

The only thing your analysis (which is great) is missing is they would still have to pay the Dues on the 24 and 25 points which reduces the profit by $3,000-4,000 but still $10,000 on a $26,000 investment is quite high. Then you add in taxes, which assuming these are LLC they would be passed through to the owners so guess 25-35% effective tax rate dropping it to $6,500-7,500, but again still a ~25% return. Something I wonder is truly how much of this happens on a massive scale, but I suspect quite a bit since a few brokers do the instant sale, which I immediately assumed was the reason why.

Anecdotally one broker offered be 110 for a CCV with full points and insisted I couldn't do better. So I so stripped 1 year of points, transferring to my to my new contract and sold for $160 through another broker. Knowing stripped contracts really didn't take the fully rental value cost of the points (though I just used them for a trip to AUL instead, but why give up "money" when I didn't need the cash).

 

[crvetter]

Can we ask the board sponsor if they
1. Use bots to book confirmed reservations for rentals (or similar types of automation)
2. Target high demand travel periods for their confirmed reservations
3. Buy and strip contracts for rental points
4. Have heard from DVC that enforcement of commercial activity is about to change

I’m not trying to single out the world of DVC - I’m a satisfied former renter. If these activities are above board and allowed under the terms of ownership, then more power to them. This might impact resale prices in the near future. So I’ll be naive and ask: any insight from the board sponsor?

I mean checking their website (and the co-sponsor of dvcrentalstore.com) I don't really see these high valued confirmed reservations on their sites. Most of the ones on dvcrentalstore.com seem pretty sporadic and not many Value or Standard rooms. Also their confirmed reservations are extremely limited in number in my opinion so I do believe it could truly be individual owners listing there (as dvcrentalstore.com truly feels that way), plus they have a huge list anyone wanting to rent points can look at to fill so they can't be doing it enough if they are to meet demand.

I personally think the Board Sponsors make money on the financing side of things with that arm. Though I'd imagine with rates going higher and higher their margins are probably shrinking some.

Edit: Regarding the bots, I've noticed in the source code for the site that Disney has changed some things (it was a year or two ago). Basically you could click the search button before 8:00 AM, then get ready on the room you want and click reserve right at 8:00 AM. They site would then validate the period being open to you on the second click. However, now the site requires you to wait to click search right at or after 8:00 AM, because if you do before the second click on Reserve under the selected room will say you aren't eligible because it does the validation check at search. Not sure if it was to combat bots but when they changed that I lost out on a room at 7 Months because I searched before 8AM, then curious why it didn't work I dug into the code and noticed that.

Also they have sent cease and desist letters to some websites that were scrapping the availability directly via the website. Though I know dvchelp.com is doing this (and related to the board) but at a much less frequency than the other site. But I know the initial site was specifically shut down by Disney. It didn't book a room it just alerted you. Then another site opened up that did the same thing, but they recently shut down because Disney told them they would ban their online account for abusing the API.

 

[kboo]

Knowing stripped contracts really didn't take the fully rental value cost of the points (though I just used them for a trip to AUL instead, but why give up "money" when I didn't need the cash).

LOL There's disney math for you! Yes, the resale market overvalues stripped contracts and undervalues loaded contracts. That ought to be good for buyers, but maybe not everyone agrees, or is willing to wait and pick and choose to save a few $ per point. But I love loaded contracts. I cannot lie.

 

[smileyanna]

I mean checking their website (and the co-sponsor of dvcrentalstore.com) I don't really see these high valued confirmed reservations on their sites. Most of the ones on dvcrentalstore.com seem pretty sporadic

Yeah this is my sense too. But I’m not going to go searching for more problematic sites.

 

[kboo]

Also they have sent cease and desist letters to some websites that were scrapping the availability directly via the website. Though I know dvchelp.com is doing this (and related to the board) but at a much less frequency than the other site. But I know the initial site was specifically shut down by Disney. It didn't book a room it just alerted you. Then another site opened up that did the same thing, but they recently shut down because Disney told them they would ban their online account for abusing the API.

yes! Sometime pre-pandemic I used one of those sites to get alerts if a room I was looking for came available. It was also helpful to set an alert to see how often a room came available in under 7 or 11 months. I may have used it to stalk for availability because it was easier to see availability across resorts and room types, but around the same time it was shut down, the dvc site was updated and made a little more user friendly for all of that, too. That other site was helpful to see if maybe I could piece together a weeklong stay in different room categories at a single resort without having to click into which days were/weren't available. But it went away, and now I just stalk on the dvc site when I'm looking.

 

[Bearval]

I believe you are 100% correct! We bought in 1996 and I don't even think we had a PC at home back then. I had my big OKW binder (still have it) and I would look through all the pages with floor plans etc and decide what I wanted. I then looked at my checkbook-like register to see what we had for points and called. After reserving points I would make a note of resort, villa and points and deduct on my register. Very antiquated but I don't ever remember NOT getting what I wanted LOL!

I had my 1st PC in 1993 and used " Prodigy" for access.

 

[Grumpy by Birth]

In that scenario you should also advocate for only being able to book one day at a time in the name of having equal shot at exactly 11 months. If myself and four others book all four rooms for the week of spring break at exactly 11 months out starting the Saturday before, that doesn’t leave any room for the people who wanted to start their stay on Sunday, or Monday because all of the rooms had already been filled.

I don’t love walking either but I don’t see how placing limits which may or may not be fair to all members solves the problem. It may make it more equal, more fair to some, but not fair to all.

I think the first step is to limit those who may or may not be taking advantage of the renting/ buy strip flip philosophy.

The bolded is a great point that I think we all overlooked. Even without walking, everyone may not get a shot at the room they want if their desired check-in date occurs after other people's check-in dates that were booked days prior.

Even though some might consider it more "fair" to give everyone an equal shot at a room each day, it would be a nightmare for all owners if we had to go day by day. Just because someone else was faster on the 2nd, 3rd, 4th day, etc. of your desired week, we could all be left individual scattered days and NO ONE has a continuous stay.

You got me there!

I still maintain that the more walkers there are, the worse the product gets. The fewer walkers there are, the better it gets.

It would be better with fewer walkers and I remain confident that if the commercial renters are curtailed, it will mean better availability and the need to walk will be reduced in more instances.

 

[GoingSince1990]

I had my 1st PC in 1993 and used " Prodigy" for access.

Prodigy? “You gotta get this thing!” (I know I’m showing my age here!)

 

[CarolynFH]

I had my 1st PC in 1993 and used " Prodigy" for access.

LOL, yes, we used Prodigy Bill Pay for years, I think!

 

[HyperspaceMountainPilot]

But that revenue loss is very small compared to the room going unoccupied and no one buying park tickets, food merch, etc.

This analysis has it backwards— the commercial renters snag popular dates and rooms that DVC members always want and sell out (a member has already paid points for it and will use it at the same rate)—and in turn the person renting is far more likely to leave a paid hotel room empty, or (at scale) force them to discount rooms and/or throw in perks to avoid empty hotel rooms.

That’s why Disney didn’t real care about owners when the WDW hotel demand was through the roof and they could sell out all WDW deluxe resorts without much of a discount, but now that revenge travel is slowing down and they are bringing back discounts and perks, suddenly they do care about commercial rentals.

 

[KimMcGowan]

Except my contract says I have an equal chance at 11 months.

I should not have to prepare and decide on my trip at 15 months and devote time and energy to play DVC Olympics.

It’s DVC’s responsibility to uphold the contract.

Why do you assume that the walkers have a better chance than you do? If you are both trying to get x day at 7am you both have the exact same chance of landing it.

 

[Mirabell Rose]

Bought many years ago. For the first 7 years or so always got a 2 br value in January at AKV. Booked about 11 months out give or take a couple days. Took a year or two break from that, Covid hit, and since then 2BR value is non existent even 11 month 8 am. When we bought, the online system wasn’t something you could change on (correct me if wrong but don’t even think we could book online) Thus, WALKING was effectively impossible. Yes, you could call every morning for months to change, but no big contract renting companies could walk the volume they are currently doing. Disney created this problem when they changed internet booking. This was not fair to the average AKV contract holder as walking materially changes the access for value rooms from what it was when we bought the contract. Big point owners have advantages over the average contract. They created walking and I believe they need to change their system to eliminate something that wasn’t there originally and was not the intent of equal access for all owners 11 months out.

Some posts say, people just want what’s cheap. The two sell out categories at AKV at 11 months are value and concierge lowest and highest point costs. So no, people don’t want just what’s cheap. Values are also not as a rule ‘smaller’ than non-value. But values are only at Jambo, which has smaller size villas than Kindani.

When we bought, again many years ago, our salesperson had a lot of years selling for Disney and was a very high seller. (Retired several years ago). We were clearly told any exchange of money for points was strictly prohibited as it was considered commercial use. Yes, told that, I understand that isn’t exactly the contract wording. We were shocked when after owning for quite a few years, we found online forums listing points for ‘rent’. Have never rented out or rented from. IMO Disney should stick to what they said and eliminate renting. I’m sure some average contracts doing a few points here and there would be hard to catch, but there’s no excuse for Disney’s ignoring the large commercial renters.

Simply asking that the product represented is what we have to use, non walkable or rentable. For most average contract holders, DVC was a major investment and an exercise in trust that Disney would keep the product true to their representation.