Understanding the finances of a Disney Vacation Club (DVC) is hugely important to helping you make the right decision about whether to buy, how much to buy, and how to plan for the associated expenses. Essentially, DVC ownership has three mandatory expenses and one optional expense.
Expense 1: The Points Cost
This is the basic item you're purchasing: DVC points. Every point has a dollar cost, which raises over time and differs between different resorts. This is a one-time fee you pay, and if you're smart you'll pay it in cash (more on that in a moment). You'll pay this no matter who you buy your points from - Disney, or a previous DVC owner who no longer wants their points. Points are cheaper when bought from a previous owner, but come with some strings attached - more on that in a future DVC FAQ article.
Expense 2: The Closing
This is another set of one-time fees, usually pretty nominal, that you pay to take ownership of the points. This includes closing costs, county recording fees, and so on, and is usually less than a few hundred dollars. You'll usually pay these no matter where you buy your points.
Expense 3: Maintenance
This is a per-point fee that Disney charges each year that you own your points. It differs between resorts, and is usually a few dollars per point. But since you tend to own hundreds of points, this can easily stack up. Annual maintenance fees of $1000 or more are usual. You'll pay these fees no matter where you buy your points, and you'll pay them every year. They'll go up a bit every year, too, reflecting the increased cost of labor and materials that it takes to maintain the resorts.
Expense 4: Interest (Optional)
If you buy your points for cash, you won't pay this, but you'll pay it if you take a loan. DVC point purchases aren't a mortgage, because you don't technically own real estate (even timeshares where you receive deeded real estate interests don't usually qualify for mortgages). That means these loans can often carry interest charges of 6%-12%, unless you qualify for a promotional rate. Over a typical 10-year term, interest can cause you to pay a lot of extra money for those points, so it's often wise to avoid this expense if you can.
So what's all that mean? Let's do a comparison of vacation costs. Let's say that you want to stay at Disney's Animal Kingdom Resort, one of their more expensive hotels. Your goal is to stay in a 1-bedroom standard view unit, featuring a full kitchen and living room, two bathrooms, and great savannah views. You want to go every other year, and you prefer going in mid-May for a full week (seven nights).
Now, right there is something you need to be a bit careful of. Many people who buy DVC end up getting much more than the smaller hotel room that they'd normal vacation in. On the one hand, it's definitely more luxurious. On the other, it makes you do a comparison for something you might not normally buy. So you need to think carefully about whether this is in fact how you want to vacation, and if it's not, then do your own comparison. DVC does offer "Studio" rooms, which are much closer to the standard hotel room you'd normally stay in.
The rest of this comparison will use actual numbers, and I'll reference where they came from. I'll also be making some assumptions about how much those numbers could be expected to rise over time, and where possible I'll reference my sources for those assumptions. But they're just assumptions, and market conditions mean they could end up being lower or higher than reality. This is just something you have to accept. Buying a DVC share is, in effect, taking a bit of a gamble. Remember that you're pre-paying for decades of vacation time; you're gambling that your up-front purchase will end up being cheaper than just paying for a normal hotel room over that time. Disney is gambling the opposite. Someone's going to lose.
And before I get into the comparison, know that owning a DVC interest is absolutely not a financial investment. You will never sell your points for more than you paid for them. Eventually, your points will expire and go away. This is a purchase that you make. You are buying something, just as you'd buy a car, that will not appreciate in value.
OK, here we go.
DisneyWorld.com quotes a $610/night rate, for a total stay of $4270, plus taxes. Taxes bring the total to about $4800. Doing some research on the Internet, it seems as if hotel prices tend to increase about 4% per year over a yearlong period, assuming no major economic downturns. So over 20 years, you'd be staying 10 times (every other year), bringing your 20-year total to about $65,000. Remember, this assumes that every stay is going to be 8% more expensive than the previous stay - so a big part of the assumption here is that the hotel rate-of-increase will remain relatively constant. In fact, it could be more or it could be less.
That same room will "cost" you 200 points. Because you only want to stay every other year, you only need to purchase 100 points - you can use the bank/borrow trick to "combine" two years' worth of points. Assuming you buy from Disney, you'll pay $155/point, or $15,500, for your 100 points. There are some closing costs involved, but they're pretty small. Let's just round the number to $16,000.
Your 100 points are going to cost you maintenance. Right now, that's $6.2989 per point, or about $630 per year. Because you're staying every other year, that's about $1260 per "stay." Animal Kingdom's maintenance has increased at about 5% per year, so over 20 years, maintenance will cost a total of about $21,000, again assuming a steady rate of increase over time. So your "total cost of ownership" is about $37,000. That's about half of what the hotel would cost if you just paid cash.
Now, that's the same kind of fairly straightforward comparison your DVC salesperson will walk you through. It does miss a couple of items, which is that you might be able to invest your money instead of spending it, and generate a 5-8% return. That'd negate the rise in hotel costs, and if you could do it consistently, your 20-year total for just renting a hotel room would only be about $48,000. That's still more than buying the DVC.
You can, of course, do even better by buying from a previous DVC owner. Your maintenance will be the same, but you could probably spend around 20% less on that $16,000 initial point purchase.
All of this assumes that you really, really do go every other year and use your points. And most DVC owners do, by all accounts. So the point is, for regular visitors of a certain type, DVC can make financial sense. By pre-paying for your vacation, you're more or less "locking in" today's pricing (less maintenance fees), and gambling that hotel prices will rise over time.
Theme Park Insider's Disney Vacation Club FAQ:
My wife and I are DVC members, with 80 points. We have a plan on going 2 out of every 3 years. In year 1 of a 3 year cycle, we would use our full allotment of points and maybe borrow some, same for year 2. On the third year, since we are going someplace else, we bank the points. For example:
2016: Use 100 points (our allotment of 80, plus borrowing 20 from 2017)
2017: Use 100 points (the 60 points we still had left, plus 40 from 2018)
2018: Bank the remaining 40 points
2019: Use 120 points (our yearly allotment, plus the 40 we banked from 2018)
and so on...
We think, at least for now, this is the best course. We don't have kids, so we can go during the slower times, which means we save some points there, and 80'ish points should be able to get a week where we like to stay. For instance, our last trip we stayed at the Concierge Level of the Animal Kingdom Lodge.
One other note about this plan is that, since you have access to 3 years worth of points at any one time (previous year, current year, and next year), we also look at this as a way to get the more expensive options should we desire, we would just skip going for a bit. So, if we wanted to use our points to help pay for a cruise, we could.
This will also be nice because, honestly, while we both love Disney, I don't think we love Disney enough to do it for 40 years straight. So, we will be down there a ton, but not every single year.
You said
"you're gambling that your up-front purchase will end up being cheaper than just paying for a normal hotel room over that time. Disney is gambling the opposite. Someone's going to lose"
I don't think that's quite accurate. Ultimately DVC is probably cheaper than a hotel room at Disney (other sites have looked into it and suggest maybe the opposite - http://www.disneytouristblog.com/disney-vacation-club-reviews/). I think the value is in the fact that you have a nicer, more spacious room with kitchen and laundry facilities (which appeals strongly to me).
Disney might make a loss in term of the value of these rooms, they probably do. Where they win though, particularly in comparing these rooms to a hotel room, is that once you own those points, they now have a guaranteed customer. You have to use those points within every 3 year time frame, or you can sell them on, or you can forfeit them. Either way, Disney wins, because they have a guaranteed customer for 20-30 years. This is not something that you can compare to staying in a hotel room, because for most people, even the theme park and Disney fans here, returning every 1-3 years for 30 years is a difficult commitment to make and something that Disney would not bank on.
When I can afford it, I will probably buy some DVC points, enough so that every 2 years I could spend a week. The opening of the Hawaiian resort makes it a lot more attractive because it means there is not the commitment to have to be attending a theme park every holiday (I live in Australia, so that makes it tougher).
Now if only they'd open a resort at a ski resort....
The worst thing this does is making Disney lazy.
They are sure a lot of guests will come no mater what and their income is steady without investing frequently in mayor rides or shows like for instance Universal does.
Remember Disney did that once but because of their timeshare scam they stopped it to a very slow trickle.
Also life can step in the way. Your mariage breaks up or your significant one dies or you loose your job or just get bored going to Disney. Selling your points is at a big loss.
If you love Disney and are positive that you will want to visit many times, this could save you a lot of money if you were planning on staying in the larger hotel rooms. I think the real problem with this is if your circumstances change. What if you loose your job or develop a chronic health condition or disability that makes traveling difficult? You could sell your points, but then you have to deal with that when you may have other serious problems. If you just pay for vacations when you take them, and your life takes an unexpected turn you can always space out your vacations more or choose lower cost hotels to reduce your costs depending on how difficult your situation is.
I agree with your math - except that you don't take any discounting into effect (which happens frequently). You also don't note that the "cheaper" DVC rooms don't come with the same level of service as a regular room. They don't include daily Mousekeeping (which we discovered is more important to us that we originally thought, especially with young children), for example.
In addition, your potential room choice makes a significant difference. A Studio at BLT, for example, is 100sqft SMALLER than a standard room at the Contemporary. And that's not even counting the additional reduction in "livable" spaces as a result of the kitchenette.
I also note that you only ran out the numbers for 20 years. Even at the oldest resorts, the length of the leasehold is more than 40 years as of today - a full 50 for the newest. That is a LONG time. And if you don't use/rent your points every two years, you lose them even though you paid for them.
Lastly, and perhaps most importantly, park tickets are the real killer. Doing the math, even with APs (for 5 people) based on Disney's current history of price increases, will cost you close to $500,000 over the next 50 years (computed for five people, as that's the maximum available space in many of the 1-bed rooms). This sounds insane when seen as a cumulative number, and admittedly, is based on a very key (and not at all definitive) assumption. But it has to be considered in any calculation as to whether you can "afford" a DVC membership.
These numbers illustrate exactly why I'm not a DVC person. We are in the target market, well funded fans of the parks living on the East Coast that spend 5-10 days at WDW every 2 years or so. However, the costs of DVC are simply insane for us even though we could pay cash for the points up front. The thought of spending over $2,000 for a week's worth of lodging is borderline absurd to us, particularly when a hotel is nothing more than a bed and a shower for us when we're spending 12+ hours every day touring parks or simply out and about. Our most recent 5-day stay at Pop Century, which is a perfectly adequate on-site hotel, including 5-day park hopper passes for myself, my wife, and our then 4-year old son cost $1,793.88, which included the Disney Dining Plan as a free promotional add-on. Would it have been nice to be in slightly nicer accommodations? Sure, but we wouldn't have spent much time in them, so those costs would have been wasted. Also, as Disney has slowed the rate of park improvements, we find ourselves not needing to go even every 2 years, and after going 3 times in 5 years (2010, 2012, and 2014 including a trip to California in 2013), we probably won't be going back again (at least to WDW) until 2017 or even 2018 after Avatar opens. That's another reason why we would probably not invest in DVC, because the parks have historically gone through ebbs and flows of development, and committing to 20-40 years of vacations means that there will probably be at least a quarter to a third of those trips where there might not be a single new significant attraction.
From Disney's perspective, DVC is a great system. They get payment up front from guests for accommodations that helps to fund the initial building cost. They get the flexibility to increase the maintenance fees as labor and other costs increase to maintain the facility. They then get those guests on property buying everything else while they're on vacation, from food to souvenirs to theme park tickets. DVC owners may not spend 100% of their time in the parks, but they're still spending money, guaranteeing a steady source of revenue and nearly 100% occupancy in the DVC resorts year-round. Disney is not rolling any dice, they're rolling in the dough. They control the on-site hotel market, and are already in the black before even considering those DVC owners who are unable to use all of their points or trade them in for RCI or an already overpriced Disney cruise.
DVC is a huge investment and commitment, and while it may be a great option for some, it doesn't work for us. If I want to stay at a nicer hotel when we visit WDW, I'll splurge every 5-8 years or simply get a nice suite or vacation rental off-site and I'll still end up far ahead on the costs of DVC.
My husband and I live in the SF Bay Area and own points at Animal Kindom Villas and at the Villas at the Grand Californian. We use our VGC points every year because we go to Disneyland 2-3 weekends every year, and we enjoy staying at the Grand Californian which we probably wouldn't have paid cash for. Being able to stay at closest onsite hotel definitely enhances our vacation experience.
We purchased our AKV points with the intent that we would go to WDW every year for a week (we bought enough points for a one-week stay in a 1-bedroom savannah view room during Food & Wine). Instead, we have only gone to WDW once since buying the points and instead have spent 2 week-long vacations in a 1-bedroom at Aulani every other year and just booked our 3rd stay for this October. Aulani is a gorgeous resort (The new Poly is beautiful too but it doesn't compare to the real thing!). After we went the first time, we knew we wanted to return again and again. Going every other year with our AKV points (and banking during the off-years) means we can stay in a pool view or ocean view 1-bedroom with full kitchen and washer and dryer which is super useful for a Hawaiian vacation!
We are very happy with our DVC purchase! :
Just bought into the Villas at the Grand Floridian 2 years ago. Since that purchase I've booked 4 WDW trips for this year alone. Brought the in-laws Feb to The Boardwalk for 2 nights after a cruise. Just got back from a trip with 2 other couples and got both their rooms. 4 nights in a 2 bedroom coming up in Oct and then another 4 nights in a 2 bedroom next Jan. When I added up what that would've cost if I was paying cash it was almost $17.000. I would never being going this often if I hadn't bought in which is obviously a personal choice but for us it's amazing! We love the place and my boy is 3 and we'll be making memories for years. Big fans of the club!
Great article. Thanks!
I believe that the decision to buy DVC truly depends on what your family’s needs are. As a family of five it was easy to book us all into one room, as my children got older we outgrew that space and started to book two connecting rooms adding to the overall cost. My children love Florida, WDW and all the water sports Disney (Sammy Duvall) has to offer, so when BLT opened, it was a no brainer for us. A two bedroom villa will sleep up to 8 comfortably which comes in handy when grandparents, boyfriends or girlfriends join us and who can complain about having three bathrooms! The washer and dryer are an added bonus especially when the airlines keep charging more and more for baggage and frees me up to enjoy family time instead of going back and forth to the laundry room. We were lucky enough to be able to buy outright so we only have the dues at this point. A few years ago we stayed at BLT using points (but without WDW park passes) in order to visit other attractions/places in Florida, we then returned each evening to view an amazing fireworks show!
Is it a prepaid vacation? Yes, and the above writer is correct, life can and does change, as an ER RN I see this happen too often. So if I’m going to Florida (or one of the many other options available through this timeshare) at least every two years to spend uninterrupted time with my husband and children, well that’s money well spent in my book. In fact it’s priceless!
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The write up is missing a discussion of the points value. Does that 100 points cover an one week vacation (7 nights)? People typically buy an one week timeshare agreement. When you say you only want to visit every other year, this suggests you want to visit every other year for 2 weeks. If DVC works differently, this means something else. A one week maintenance cost of $630 is cheap, but $1260 is expensive and (unfortunately) typical for most timeshare properties.
Also, what do you get with the 100 points? Not all points costs the same. If you buy into the new Bay Tower at the Contemporary, owners get first rights to book there with 11 months in advance (I read this). The privilege costs big bucks. Newer resorts at good locations costs more. If you wish to stay somewhere else, you can wait 7 months prior to book another resort. Its a loss in value if you step down to stay at Animal Kingdom even if you book the same size room that you might have booked if you owned the Bay Tower.
Most timeshares specify the size of the suite whether studio size, 1, 2, or 3 bedroom suites. The new DVC suites at the Polynesian Resort will cost extra points to stay and may be difficult to book due to popularity. Also, the time of year such as the high or low season and weekend rates may cost additional points.