On April 4, 2016, The Walt Disney Company accepted that the Disney Vacation Club had lost some momentum due to competition. Resales services and points rental companies had siphoned off too much money, so the company acted to limit the competition. Disney restricted the rights of resales members moving forward, requiring proof of a DVC membership card to attain what they call Membership Extras.
The end result of this dramatic change is that direct DVC purchase is no longer equal to resales purchase, at least theoretically. Do customers care about Membership Extras and the other changes, though? Rather than speculate on my own, I went to the source. I’ve interviewed a series of professionals employed in the cottage industries involving the Disney Vacation Club. They’ve been kind enough to offer their thoughts on a series of pressing issues involving the changes.
The roundtable of contributors includes (in alphabetical order): Nick Cotton of DVC Resale Market, Scott Ferraioli of DVC-Rental, Paul Little from DVC Rental Store, and Kinn Tutas from Resales DVC. For clarity, Mr. Cotton and Mr. Tutas sell used DVC contracts, the way I’ve historically recommended potential DVC members purchase contracts. Mr. Ferraioli and Mr. Little rent DVC points as I suggested Disney vacationers should consider in this article. I want to add that I also offered Disney a chance to comment, but Rebecca Peddie, the company’s Manager of Public Affairs, politely declined to participate.
What was your reaction to the announced changes to the DVC program?
Image: Disney
Kinn Tutas: My reaction to the DVC removal of member benefits and perks was “not surprised at all” except for the many years it took DVC to finally announce and implement the changes.
Paul Little: I can’t say that it was unexpected. With earlier changes to the DVC member’s benefits in mind, I was in a way expecting Disney to further degrade those benefits and amenities that members who purchase via resale are able to enjoy.
Scott Ferraioli: We had heard that there were some changes coming but were surprised with how suddenly they took effect. In the past when DVC made a change, they gave [members] a chance to grandfather in by a certain date. The new changes were already set in stone by the day that they were announced. That was the biggest surprise.
As someone whose business depends on DVC’s public perception, did you take the news as positive or negative for your company?
Image: Disney
Nick Cotton: As a company that welcomes new Members to the club every day, you always want to be able to provide those new Members with as many benefits as possible. So, as a reseller you certainly don’t want to see additional restrictions, but at the same time there is an understanding that anything that is defined as “incidental” and “removable” is just that.
Scott Ferraioli: DVC has already made changes to Resale contracts in the past (removing the ability to book cruises and the Concierge Collection to name a few). Due to the lower price to buy into DVC through Resale, it makes sense that they would have to limit some items to try to even the playing field. Any time you lose benefits it’s not a good thing, but the stuff they took away still doesn’t negate the huge savings from purchasing Resale.
Paul Little: I did not really view the changes as a negative for a member purchasing via resale. The greatest benefit to a resale buyer is the money savings when compared to purchasing directly from Disney. This savings far outweighs the benefits that were taken away. In a way, I did view it as a negative for Disney from a PR and program standpoint. The benefits change was no doubt instituted in order to deter a potential member from purchasing via resale and instead to purchase direct. I personally don’t see this as accomplishing that goal. I think a better approach would have been for Disney to exercise their Right of First Refusal more broadly. While it would not put an end to resale purchases, it would send a message to buyers that the contract that they have put an offer on will more than likely get claimed by Disney instead.
Kinn Tutas: I agree that public perception for DVC is extremely important for the entire industry. I also know that the public’s passion for Disney is very forgiving. There was neither a positive nor negative affect on our company, as this is not the first time DVC has made changes. At that time, most owners reacted negatively, but DVC’s announcement forced owners to examine the true value for becoming a member. The majority understood more clearly and remembered they purchased based on the incredible savings at the “deluxe” resorts compared to renting from Disney.
What’s the general response you’ve received from customers? Have you lost/gained business over this?
Image: Disney
Kinn Tutas: As to be expected, the initial response was quite negative. Once the consumers started to understand that the difference in resale prices compared to DVC direct greatly outweighs the incidentals being removed, including the annual pass discounts, it settled down very quickly. We did not have a single purchaser cancel based on the changes.
Nick Cotton: Initially, the very first week there was a spike in business, as I believe all the discussion made more people aware that there was a resale market. Since then, there has been very little, if any, measurable business lost or gained. I think the vast majority of people that join Disney Vacation Club fully understand that they are buying DVC to save thousands of dollars on accommodations, and through buying resale they can greatly increase those savings even more. People generally understand they are not buying DVC because of something that is “incidental” to the Membership such as a 10% savings on t-shirts.
Moreover, you don’t want to purchase something for a benefit that may or not be there tomorrow. My team sometimes uses the example that when you purchase a home, your primary reason for purchase shouldn’t be because you really like the neighbor down the street, as they could move away at any time. If the neighbor stays there for life, great, but if not, you are still happy with the home you purchased.
Paul Little: If anything, these changes have increased our business slightly. Some members whose intent to purchase resale are now choosing to rent DVC points instead of making the choice between a resale contract with fewer benefits or paying much more to purchase directly from Disney.
Scott Ferraioli: The market seemed to pause for a few weeks while everyone started to worry. Then, like any unpopular change Disney makes (to the ticket prices, dining plan changes, etc.), within a month everything had blown over and went back to business as usual.
Moving forward, how do you anticipate the changes to impact your business as well as DVC as a whole?
Image: Disney
Paul Little: I see a 2-3% increase in sales. Many new DVC members are previous renters. Renting DVC points is the best way to test the waters without committing to a large financial outlay. This change allows us to keep a portion of those guests as return renters while also gaining new clients that had not rented before.
Kinn Tutas: Going to Disney is an experience many families cherish and remember their entire lives. I’m finding second generation purchasers now popping in to purchase DVC because they want their children to have the same magical childhood they remember. Staying in a DVC resort as a DVC owner is “the only way to go to Disney” regardless of discounts not being offered through incidentals. Disney and DVC are very resilient, and this is already becoming something in the past.
Scott Ferraioli: Disney always has the right to remove any perks from Resale or Direct members. As long as you know that going in, the large savings on the Resale Market outweighs anything Disney has taken away. The main point of Disney Vacation Club is to pre-pay for your Disney vacations, and that is where the real savings will be. While perks are nice, locking in your family’s vacations for years at a discounted rate is the real reason to purchase a Disney Vacation Club membership.
Nick Cotton: I do not anticipate a lot of changes to our business. I think this additional restriction has caused a very slight decrease on prices as sellers understand they are conveying one less thing, but the loss of the incidental benefits for the most part is quite insignificant compared to the savings of resale.
I do think Members should all understand that when restrictions happen we are all in this together. For example, whether you bought direct, resale prior to 4/4/16 or resale after 4/4/16, if and when the day comes that you want to sell your contract, everyone’s resale value will be susceptible to the same resale restrictions.
Additionally, DVC may have a few more Members adding on 25 points from those new Members who are buying resale for the savings, but also really want the “incidental benefits.” It is important to note that many of the “incidental benefits” can also be received by having a Disney Visa Card.
Do you believe Disney behaved appropriately with these changes? And do you have any concerns that they’ll add even stronger restrictions in the future?
Image: Disney
Paul Little: Obviously, Disney sees the resale market as being a hindrance or threat to the program as a whole. I see it in a different light. The resale market, along with the ability to rent DVC points, only strengthens the perceived value of the product in a potential buyer’s mind. DVC is the leader in the timeshare industry and can demand higher pricing because of the value of the product.
Did they behave appropriately? My answer would be that it is well within their rights. Will it have the effect that they are looking for? I see this is a small and diminishing blip on how it will affect the resale market both from the potential buyer’s perspective and Disney’s goals to stem resale purchases.
I don’t think that there is too much more that Disney can take away as far as member benefits. Their next move, should they decide to take one, would have to be something more grand. First, because there a few small tweaks to be made, but secondly, and more important, because only a large change would make a difference. If I were consulting Disney, I would suggest that they be very careful before making any grand institutional changes. These types of modifications have the potential to harm the brand itself instead of accomplishing their short term goals.
Image: Disney
Nick Cotton: I believe Disney certainly had a right to remove the “incidental benefits,” as they are defined as something that can go away at any time. DVC’s message regarding the change was that their intention was to provide more of a premium benefit to those Members joining directly. Given the price gap that can exist with direct and resale, you can understand part of their motivation.
I don’t really have any concerns about future restrictions, as every restriction that has taken place was something that was clearly defined as “incidental” and “removable.” Keep in mind that if Disney was to restrict something that was a core part of the Membership (assuming they legally could), and this restriction significantly adversely affected resale value, that change would make it much harder for them to continue to sell direct as well. It would be like a car manufacturer selling new cars, and having the customers agreeing to let the car manufacturer remove the engine when the customers went to resell the cars. This would likely make it impossible for that car manufacturer to continue to sell.
Also, removing incidental benefits is not just found with buying resale. Over the years, many things have come and gone regardless of whether someone purchased direct or resale. For example, there was a time when valet parking was complimentary to all DVC Members, and now it is not complimentary for any Members. There was also an 18 month block for all DVC Members booking Disney cruises in 2011 and 2012 with the launches of the Dream and Fantasy ships. I think it is important that regardless of how anyone purchases DVC, they need to make sure they are purchasing for the right reasons, and not for something that is incidental to the Membership.
Kinn Tutas: Although I understand DVC’s dissemination of the news was very confusing to customers due to the conflicting information being given, I do feel they acted appropriately with the decision to make the changes. As the gap between resale and developer pricing continues to widen, DVC has to have an incentive for buyers to purchase at the higher rates. I do not feel there are any additional restrictions to put into place. The ability to use the DVC resorts with the seven and 11 month booking windows as well as the option to exchange into RCI are the mainstay of the ownerships. The only features left to remove would be the little used Club Cordial and Club Intrawest.
Scott Ferraioli: I believe that Disney really can’t remove too many additional benefits, and the only way they can try to compete with the Resale Market would be to make additional offerings to Direct purchasers (like the addition of the EPCOT Lounge and the DVC Member Parties). I don’t personally believe that they can offer enough to make buying direct a feasible option in many people’s minds, but we’re looking forward to seeing if Disney has any additional perks for the grandfathered in members. Disney’s a fantastic company and knows what they’re doing, so we’ll just see what the future brings.
