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 Homepage Updated: 10/2/07 

                                                                Disney Vacation Club (DVC) for UK Purchasers

The intention of this thread is to give interested readers an insight into the Disney Vacation Club (“DVC”), Disney's US based time-share operation, in order to help readers to decide if DVC is for them.

* This article was written by TUG member "Halo" and originally posted on "The Dibb" message board http://www.thedibb.co.uk  as well as Disboards here Disboards Thread

It is not a substitute for doing your own research – it is up to everyone to reach their own decision, and what is right for one person is not necessarily right for others. Nor is it intended to promote timeshare ownership – the decision is down to each individual.

DVC does not suit everyone but its members are generally very, very happy with their purchases. If you are thinking about DVC, I would urge you to search this forum for DVC comments.

DVC membership should not be seen as a means of making holidays to WDW cheaper – whilst I believe DVC offers good value to its members (and you will have to read below to see if this means for you too) if you are happy to stay off-site or in Disney's Value Resorts you can do so cheaper without joining DVC. What DVC does is provide good quality (deluxe) accommodation to its members.

DVC should not be seen as an investment, rather it is a means of ensuring great holiday accommodation.

DVC will not necessarily mean cheaper holidays, as the cost of the flights etc. may be more than the cost of a hotel included package holiday HOWEVER it does give you quality.

The cheapest way to get into DVC is through the secondary or resale market, but the easiest method is to buy direct from Disney.

In this thread we will be giving example calculations based on prices at June 2007. You will need to amend these to current prices at the time you are considering your purchase.

DVC is predominantly located on-resort at Walt Disney World, Florida. The resorts are Old Key West (“OKW”); BoardWalk Villas (“BWV”); Beach Club Villas (“BCV”); The Villas at Disney's Wilderness Lodge (“VWL”); Saratoga Springs Resort (“SSR”); and Animal Kingdom Villas (“AKV”). SSR and AKV are the resorts presently on sale by Disney. It is speculated that these will be followed by a DVC resort as part of the Contemporary Resort. Away from WDW there are two further DVC resorts – one at Vero Beach (“VBR”) on Florida's Gulf Coast, and one at Hilton Head Island (HHI”), South Carolina.

OKW is the cheapest of the on-site resorts to buy into. SSR (2054) and AKV (2057) have longer terms than the other resorts (2042) but IMHO this is not much of an additional benefit (based upon a cursory discounted cash flow analysis). (Plans are also currently afoot to increase the term of OKW by 15 years by payment of a fee, which if successful could be rolled out to other resorts - check out separate threads on this.)

Each resort has its own attractions:-

OKW has larger rooms than the later resorts and is well located for Down Town Disney ("DTD"), with a ferry service to DTD.
SSR has a spa and is located even closer to DTD so you can walk there.
BCV is located within walking distance of EPCOT and MGM, and has the best pool.
BWV is located opposite BCV and enjoys the same great location but not the pool of BCV.
WLV are a Magic Kingdom resort.
AKV is part of the Animal Kingdom Lodge complex.
Vero Beach and Hilton Head are beach resorts.

DVC is a points based Time Share system. This means that rather than buying a fixed or “floating” week (as at traditional time-share resorts), you purchase points (the minimum holding is 150 points) which are exchanged for accommodation on a nightly basis. DVC accommodation varies between the DVC resorts but typically covers Studios, One-Bed, Two-Bed, and Grand Villas. The number of points you need to stay at any resort depends upon the size of the accommodation; the season (Adventure / Choice / Dream / Magic / Premier); and the day of the week – Sunday to Thursday require less points than Friday and Saturday. Importantly, the number of points required does not change from year to year – the only thing which changes is the dates of the Seasons.

Points are interchangeable between resorts. This means you can, for example, book a 56 point stay at OKW with 56 points from VBR. You can book stays at your Home Resort from 11-months in advance. You can book stays at other resorts from 7-months in advance. At busy times it is possible that the resort you are looking to book in to is fully booked at the 7-month stage.

If you are limited to going at specific times you should buy into the resort you want to stay at; as owners at home resorts can book accommodation 11 months in advance – non-home resort DVC members can book 7 months in advance (which means the dates you want may already be gone).

The points have a capital cost, the price you pay up front, and an annual maintenance cost (like a service charge on a leasehold property).

How many points?
Only you can work out what our accommodation requirements are going to be - if you are looking at taking family a Studio may be too small. We assumed that we would be going every 3 years on a Yr 1 bank/ Yr 2 use/ Yr 3 borrow/ Yr 4 bank/ Yr 5 use/ Yr 6 borrow etc. cycle and got sufficient points for a 2-bed (230). Many users check-out of their DVC into other accommodation for the Friday and Saturday nights to extend their DVC usage (an ideal opportunity to stay at Universal for FOTL access perhaps?).

IMHO DVC points should only be used for staying at DVC if you want best value from them. Whilst you can swap elsewhere, it is IMHO an expensive means of doing this, and opinion is divided. In a recent example (on another Board), another DVC owner held up the benefits of exchanging because of a stay at a one bedroom at Marriott's Desert Springs II resort in California, which cost them "just 124" DVC points. IMHO if you want to stay at Marriott's (or indeed at any other non-DVC resort) the best thing to do would be to buy Marriott – (I am a Marriott owner). You can then use this to exchange to other Marriott resorts through Interval International ("II"), or any other II registered timeshare resort. II - which is the world's no.1 timeshare resort exchange company and is the one which provides the DVC exchanges – is owned by Marriott.

An extra benefit of owning outside DVC is that you can become an individual member of II (indeed you have to). This enables you to book unlimited "Late Getaways".

Using Marriott's Desert Springs as an example, I could book 3 weeks there in a 2-bed apartment for £149 a week. This is without touching my purchased Marriott week. This compares to exchanging 124 points for a one bed where you have paid premium price up front, and have paid say $4 a point for maintenance.

So the maths would be do I exchange 124 DVC points worth 124 x $4 = $496 say £260 or do I get a larger apartment through II on a getaway for £149? In fact to allow for the purchase premium the 124 DVC points should be priced at their rental value - $10-$11, say $10 to keep it simple. Do I pay 124 x $10 = $1,240 (£650) or do I pay £149? It's a no brainer IMHO.

Legally DVC points are a real estate interest so there are only a fixed number which can be sold per resort. Once this limit is reached the resort is sold-out and no new points can be created. At present SSR and AKV are the only resorts for which new points can be bought. Other resorts are sold-out, so points in them are best bought resale (i.e. from existing owners) although they may also be available from Disney through repossessions or exercise of its Right Of First Refusal.

Capital (or Purchase) Cost
If we assume that you want 160 points (the new minimum holding – was 150). If you buy this from Disney, SSR and AKL presently cost about $101 per point, but the process is easier and you might receive incentives, be sure to ask.

If you were to buy in the secondary market you could get points for say $70. This $70 would include the brokers commission, so it is reasonable to assume that you could sell it for $60 (allowing for say $10 per point brokers commission). Allowing for $5 per point in closing costs, you would be paying $75.00 per point for something which you could sell for $60.00 a point. In other words the "Goodwill" element or true cost of your DVC would be $15 x 160 or $2,400.00. (You would need to add on the interest cost of the total purchase price - if borrowed - or the opportunity cost, if using savings too. This will vary from person to person so is up to you to determine.)

Seen like this it looks quite reasonable If something untoward were to happen in the future and you had to sell your DVC points, that $2,400 is the "loss" you would make. You probably lose more in depreciation on your car each year.

(If you are buying direct from Disney closing costs are minimal (say $160 – or $1 per point) but the true value of the points remains what you could sell them for if you needed to – say $60.00 per point in the above example. So, the Goodwill element would be slightly higher at 160 x ($102 - $60) = $6,720.)

As new DVC points climb in price each year, the resale value of existing points should rise too - perhaps not as fast, but its simple supply and demand. So, say over 5 years new DVC points climb $20.00 - it is quite probable that existing points would climb $10-$20 also, which would mean that when new points are for sale at $121.00, you might have recouped your "Goodwill" outlay and be able to sell your points for about what you paid for them. Seen like this you could recoup your outlay in as little as 5 years but this is in no way guaranteed.

At some future point in time, when there are 25 years left to run on the initial DVC leases, you will have to start depreciating the value of your investment - but that's some time off. (Depreciation is an accounting term for reflecting the reduction in value of an asset over its expected life.) In the meantime just enjoy that quality accommodation and happy holidays.

Maintenance Fee
As well as the initial purchase price of the points, you will need to pay an annual maintenance fee. This varies between resorts and will vary from year to year. Lets assume it’s $4 per point per annum. This will increase from year to year. The maintenance fee for SSR and AKV (and other new resorts as and when they come up for sale) is subsidised by Disney whilst the resort is being sold – so is likely to increase thereafter. Maintenance fees IMHO are the real cost of DVC.

Most DVC points have a life to 2042 – 36 years time. At present prices of $4 per point on average, a holding of 160 points will cost you $4 x 160 x 36 = $23,040 in present terms over the life of your points. For this reason it is as important to consider the on-going maintenance cost, as it is the initial purchase cost.

Assuming $4 per point maintenance costs, with 160 points you will be paying $640.00 per year on top of your initial outlay. To work out the true value of this you need to look at how much it would cost you to stay in that (or similar) deluxe accommodation otherwise.

Be careful of using holiday brochure prices for comparison. More realistic is the market price of renting DVC points from/to other users which is $10-$11 a point. If we say $10, and assume a night in a studio is 10 points; the value of that night is $100 (10 x $10) – even if the rack rate is $250.

So…. assume 160 points would get you 16 nights in a studio at 10 points per night. You would be paying $640 in maintenance fees for those nights. $600 would be sufficient to stay 6 nights by renting DVC points from existing owners, so the true benefit of ownership and of your initial outlay is the extra 10 nights which you have effectively paid for in your initial purchase.

That's a simple example – many people calculate that they need, say, 420 points to stay where and when they want, and are put off by the large maintenance fee of, say, $1,680 which would pay for a villa etc., but the principle is the same – just do the maths.

Renting DVC Points
As well as renting points from other owners for your use, you can as an owner rent your points to others to use. DVC points presently rent for $10-11 per point. This too is IMHO likely to increase over time. Assuming $4 per point maintenance charge, and $10 per point rental income, you could rent your 160 points for $960 profit per annum should you wish. For many this could IMHO be a better option than exchanging to non-DVC accommodation..

Comparing the cost of DVC with staying in a Villa.
As I said above, DVC is not intended to be a way of doing Florida on the cheap. Many people prefer to stay offsite in villas. The following compares the cost of DVC versus a villa.

DVC = from $75* per point (say $71 per point + closing costs $500). Say 160 points = $12,000. @ £1= $1.98 = say £6,000.

Maintenance fee = say $4 per point = 160 x $4 = $640.00 pa.

(*Based on resale costs – amend depending upon resort and whether buying from Disney).

Whilst there is no guarantee that they will continue to do so, DVC points have historically increased in value each year. (Aided by Disney managing the market by exercising its Right Of First Refusal (“ROFR”)). If you assume by $2 per annum. After 10 years your DVC points will be worth $85 per point. You could therefore sell them for 160 x $85 = $13,600 – a paper profit of $1,600.00.

Assume maintenance costs increase at the same rate as inflation on villa costs. So, you can regard 1 week of villa hire as equalling maintenance fee, so just disregard both and look at the cost of the 2nd week.

Assuming 3% inflation, in 10 years time that same week will cost you $782 per week.

Yr…. Rental cost
1…….. 640
2…….. 659
3 ……..679
4 ……..699
5 ……..720
6 ……..742
7 ……..764
8 ……..787
9 ……..811
10 ……835
…….. 7,337

Over those 10 years you will have spent you will have spent $7,337 on that week. That money will be gone.

Whereas with DVC you will have paid $12,000 up front, however, you could then sell those points for $13,600.

So, the true cost of DVC would be the interest cost of borrowing the $12,000 originally, or the opportunity cost of not investing it if you didn't need to borrow the money.

Another significant factor, which could go either way, is changes in foreign exchange rates. When you buy in to DVC you know how much £ you are spending. If £1 falls to say $1.50 by year 10 your week in the vi11a is costing you $835 = £557 versus $640 @1.98 = £323 per week now HOWEVER your DVC was still set at your original rate, so your original DVC cost of $12,000 cost you £6,060 HOWEVER after 10 years the points are worth $13,600 which at $1.50/£ = £9,066 so you would have made over £3,000.

DVC is a premium product, so before buying DVC I would recommend that you look into off-site alternatives which might meet your needs for less - notably Marriott, and Hilton. IMHO its worth joining the Timeshare Users Group (www.tug2.net) for general unbiased opinions on timeshare.

US Tax on Sale
The above explanation does not take into consideration the impact of US witholding tax upon US Non-Residents. Under federal legislation called "FIRPTA" (the Foreign Investment in Real Property Tax Act) non-US resident sellers of US Real Estate interests (which DVC and other timeshares falls into) have to pay 10% of the sale price to the US tax authorities as a form of witholding tax. I believe that this is reclaimable but it involves some form filling and procedural issues (e.g. swearing an affidavit before a US Notary which seems in practice to require a visit to the US Embassy). I do not wish to go into detail on it here but just to raise awareness of it. Timeshare Resale Agents should be able to advise appropriately should it be necessary. In the meantime you can find out more info here, here, and here.

The best reason to buy into DVC is because of the positive experience of everyone on these boards who has bought into DVC. The financial calculations rely on assumptions which can be blown away by exchange rate movements. The only regrets DVC owners seem to have is that (a) they didn't do it sooner; and (b) that they didn't buy more points up front. It is that which sells DVC to me. Whilst DVC isn't for everyone, its members love it.



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