Prices are a moving target for everything at Disney theme parks. Since the parks are eternal and inflation is real, every price you see when you visit Disney is the cheapest that you’ll see it from now on. That’s a scary but accurate evaluation. Prices go up over time. That’s just the reality of the situation.
For Disney Vacation Club members and potential buyers into the program, the current cost for an ownership interest is a divisive issue. The Walt Disney Company recently announced wholesale pricing changes to the membership program, ones that dramatically increase the cost to buy into the program. Today, we’ll discuss what has changed and how it impacts you as an owner/possible member.
What’s DVC?
Image:DisneyThe Disney Vacation Club (DVC) is an ownership interest program akin to a timeshare. It’s better, though. The Disney brand makes it much more reliable. Program participants receive a certain amount of points and thereby gain the ability to visit Walt Disney World on an annual basis. When you own more points, you can stay more often or in better accommodations (like one- or two-bedroom suites).
DVC is also available at one Disneyland Resort hotel, Disney’s Grand Californian Hotel & Spa. Plus, there are three other locations near beaches. Those are at Vero Beach in Florida, Hilton Head in South Carolina, and the island of Oahu in Hawaii. By joining DVC, members vastly increase their vacation options in exchange for a significant upfront cost.
Image:DisneyProponents and detractors of the DVC are plentiful. Fans of the program (like me) love knowing we can spend a week or two at a Disney resort each year for a set fee. Once you’ve purchased points, the only recurring character is the maintenance fee, which costs roughly $6-$8 per point. It’s a modest charge that guarantees the upkeep of the various resort facilities. These same rooms cost $400+ per night most of the time, making DVC a strong value proposition for frequent Disney vacationers.
What just happened to DVC?
Image:DisneyThe simple answer is that prices went up. The longer answer is that the Disney Vacation Club has done so well in recent years that Disney faced a new set of challenges in running the program. Their DVC resorts have a limited amount of inventory that they can sell. Once a resort “sells out”, no more points are available. Disney has to repurchase points from customers through a complicated process that falls under real estate law. And sold out properties are happening more rapidly than ever before.
The most recent example is Disney’s Polynesian Village Resort. This DVC property first became available for purchase in 2015. By the start of 2018, it had sold out. Guests had a window of only a couple of years to buy points directly from Disney. To be clear, you still can become an owner at Poly, but you may have to wait an extended period until the company repurchases points from other DVC members. Alternately, you’ll have to buy via resales, something I’ll discuss in a moment.
Image:DisneyDisney’s Polynesian Village Resort isn’t just a relatively new DVC participant. It’s also a perfect demonstration of how much DVC prices have risen in recent years. Disney’s Polynesian Village Resort started at a cost of $160 per point in 2015, and new members had to purchase at least 100 points. That’s an investment of $16,000. As of January 17, 2018, the price to own at Disney’s Polynesian Village Resort is $220 per point. The same number of points now costs $22,000 or $6,000 more than it did in 2015. That’s an increase of 37.5 percent in only a couple of years.
I want to point out that the price increase at Disney’s Polynesian Village Resort is one of the highest for 2018. The only DVC resort that increased by a larger amount is Disney’s Grand Californian Resort & Spa, which went up by $50 a point. Several resorts only went up by $6 per point, and one, the Vero Beach location, actually decreased by $15.
Why is Disney doing this?
Image:DisneyAs a business in the travel industry, Disney faces a precarious tightrope walk in finding the proper price point for its products. DVC membership isn’t a luxury per se, but it’s certainly not something that the average consumer needs. For Disney fans, it’s an invaluable way to save money on visits, though.
In setting various price points, Disney must find that sweet spot where they’re not pricing out potential customers. They need to maximize profit at the same time. It’s a struggle every company faces in selling a product. Corporate executives in the vacation industry have an even tougher challenge, as those expenses are ones that people are first to cut when the economy isn’t good.
Image:DisneyThe DVC program saw a downturn after the stock market crash of 1999 and against from 2004-2009. To a certain extent, membership pricing remained deflated for more than a decade. Disney’s finally correcting their prices to reflect current market conditions, and let’s be clear on the point. This is a gamble. If the economy tanked again, DVC’s prices would border on obscene. As it is, the upfront cost of joining is off-putting to many.
Given the sticker shock involved, you’re reasonable to wonder why Disney’s raised prices so much. The simple answer is because they can. Poly started at one of the highest prices ever for a new DVC participant, and people still paid it. And that happened before the true game-change Disney will unveil in 2019. The introduction of Star Wars: Galaxy’s Edge is projected to lead to an unparalleled surge in park traffic. Park planners reasonably expect a Star Wars themed land to do for Disney’s Hollywood Studios what The Wizarding World of Harry Potter did for Universal Studios Resort.
The changes aren’t all bad news!
Image:DisneyWith projected traffic increases for all parks, the rack rates for resorts should rise at a corresponding rate. The DVC program is a part of that system, even if it’s a bit different in practice. Those rooms should go up in price to reflect the increase in demand.
Disney’s valuing the three monorail resorts at a cost of $190 – $220 per point, and it’s not unreasonable. They have the best logistics of Walt Disney World participants. Similarly, Disney’s Grand Californian is the only current option for the Disneyland version of Star Wars Land. In 2019, Disney Riviera Resort will open close to Disney’s Caribbean Beach Resort, and it will be right beside the Disney Skyliner, the new transportation system. Guests here will ride a gondola straight to Disney’s Hollywood Studios. Given the above, you can expect this DVC property to start at the highest price ever for a participant. Why does that matter?
Image:DisneyCurrent DVC owners benefit each time the prices go up. The value of DVC ownership goes up in tandem with these per-point cost increases. Thanks to the resales market, DVC members always have the ability to drop out of the program. Selling points works generally the same as any other real estate transaction. You list your ownership interest with a resales company (i.e. a specialized real estate agent), they find a buyer for your points, and you sign a transfer of ownership contract. Disney has Right of First Refusal, which means they have the right to buy your points for the same amount for which you agreed to sell to the buyer. That’s how they repurchase points. But you’ll get the amount you expect no matter who the buyer is.
What’s impressive about DVC is how consistently ownership has beaten the rate of inflation. Just over the past several years, Disney’s Old Key West has gone up in resale value from $71 in 2014 to the $90 range in 2018. That’s a 26.8 percent increase over four years, more than five times faster than the rate of inflation for that time. Literally every DVC property has seen improvement over the past few years.
Image:DisneyDVC members benefit from this increase in a specific way. If the constantly increasing costs of a Disney vacation bother you at any time, you can sell your ownership interest and exit the program. You’ll make out like a bandit in the transaction as well, at least if you’ve been a member for a while. The value of your DVC contract is likely to exceed what you paid for it unless you bought direct from Disney less than five years ago.
That’s the beauty of DVC versus a regular timeshare. In addition to the value of the Disney brand name, this is the rare annual vacation program that has consistently beaten the cost of inflation over the years. Its value has increased proportionally over time.
Guests who aren’t currently members are understandably worried about the increase in price. These vacationers still have a backup plan, though. The contracts on the resale market are cheaper. You have a narrow window between now and the debut of Star Wars Land to buy a DVC ownership interest before prices spike there, too. DVC isn’t for everyone, of course, but the recent price changes demonstrate just how much Disney believes that the program has been undervalued in the 2000s.
Image:Disney
