DVC Direct Sales Strategy Changing?

[supersnoop]

Using your numbers can't you just use the average selling price? The result will make us better understand why DVC management focuses on selling more than running the DVC.

Bill

You're right; it should be easy if the numbers used to create that last chart are available. The selling prices are documented in the Resources sticky.

 

[DVC Mike]

Using your numbers can't you just use the average selling price? The result will make us better understand why DVC management focuses on selling more than running the DVC.

You're right; it should be easy if the numbers used to create that last chart are available. The selling prices are documented in the Resources sticky.

Cool! Which one of you is volunteering to do that?

 

[supersnoop]

Cool! Which one of you is volunteering to do that?

I'm more than happy to volunteer. I just need the data from that one chart, and I'll plug in the sales price information.

 

[wdrl]

You're right; it should be easy if the numbers used to create that last chart are available. The selling prices are documented in the Resources sticky.

Go for it if you want! The sales data is available on the DVCNews website.

Of course, there is an easier way to estimate revenues generated for VGF: DVD has sold about 2.46 million VGF points. Take that number and multiply it by whatever price-per-point number you want to use. $155/point yields $381.3 million; $160/point yields $393.6 million.

Remember, since VGF never had any incentives offered, the advertised base price is reflective of the purchase prices for that resort. Such is not the case for AKV, BLT, SSR, or Aulani. A large percentage of the sales for these resorts involved tiered incentives.

Personally, I'm not sure what you'll accomplish be undertaking such an exercise. Once you estimate the revenue generated by sales for a resort, then what? How do you estimate costs for the planning and construction of the resort? Commissions for the sales staff? Costs of the DVD support staff? Costs for advertising and promotional material? Without some hard data to substantiate these amounts, whatever net revenue amount you end up with is just a wild guess.

We all know that Disney makes a profit from building and selling DVC resorts. Does it really matter whether it made $100,000 or $100,000,000 in profits? In my mind, the amount of profit realized by Disney doesn't diminish my use or enjoyment of my DVC membership.

 

[supersnoop]

The idea was to show that revenue continues to go up despite the amount of sales decreasing. But, now that I think about it, we can probably get better information out of the company's annual report.

 

[disneynutz]

Go for it if you want! The sales data is available on the DVCNews website.

Of course, there is an easier way to estimate revenues generated for VGF: DVD has sold about 2.46 million VGF points. Take that number and multiply it by whatever price-per-point number you want to use. $155/point yields $381.3 million; $160/point yields $393.6 million.

Remember, since VGF never had any incentives offered, the advertised base price is reflective of the purchase prices for that resort. Such is not the case for AKV, BLT, SSR, or Aulani. A large percentage of the sales for these resorts involved tiered incentives.

Personally, I'm not sure what you'll accomplish be undertaking such an exercise. Once you estimate the revenue generated by sales for a resort, then what? How do you estimate costs for the planning and construction of the resort? Commissions for the sales staff? Costs of the DVD support staff? Costs for advertising and promotional material? Without some hard data to substantiate these amounts, whatever net revenue amount you end up with is just a wild guess.

We all know that Disney makes a profit from building and selling DVC resorts. Does it really matter whether it made $100,000 or $100,000,000 in profits? In my mind, the amount of profit realized by Disney doesn't diminish my use or enjoyment of my DVC membership.

I find facts and figures interesting, number of contracts sold and for how much, number of owners, total paid for budgeted line items by resort, trends, park attendance, all of it.

Bill

 

[Dean]

It would be interesting to have the behind the scenes thoughts on this issue. I tend to think that a lower number of points at a higher profit per point is better from a DVD standpoint because it reduces the need for new developments and the sales infrastructure somewhat. Another issue that may be coming into play is that there's already a certain saturation of the market, many who would be candidates are already members. Any new specialty area will pull in certain people from the sidelines because you'll have that group of people that are more resort specific than system/savings specific. Basically they might ONLY consider DVC if it was at the GF or the Poly.

I'm sure they had their reasons for only doing studios and doing them the way they did. Given the size of the rooms it likely would have been less cost effective to take 2 rooms to make a 1BR due to the higher costs of the kitchen and the space involved. Personally I think they missed an opportunity in that the size of those rooms was the perfect setup for a studio plus. Maybe a King instead of queen and a more robust but limited kitchen or even 2 queens possibly for some. It takes relatively little more space and cost to do a fully functional mini kitchen than what they do. I'm disappointed the scrapped the original plan.

 

[DVC Mike]

I've posted this same query on four different Disney discussion forums, and it's been interesting to see the varied responses.

I agree with the opinion that DVC has changed strategies and is now focused on selling less points but at a higher price.

So yes, DVC sales are declining when you look at the total amount of points sold from year to year.

In the same way, the number of new DVC members is probably declining year over year.

I still don't know if the higher purchase price per point, the inflated point charts at the new resorts, and their tactic of converting existing hotel rooms rather than build net new buildings will result in the same revenue stream to Disney.

 

[Dean]

I still don't know if the higher purchase price per point, the inflated point charts at the new resorts, and their tactic of converting existing hotel rooms rather than build net new buildings will result in the same revenue stream to Disney.

We likely never will have that true picture. And if it does or doesn't we won't know if it's because of or in spite of these issues.

 

[tjkraz]

The idea was to show that revenue continues to go up despite the amount of sales decreasing. But, now that I think about it, we can probably get better information out of the company's annual report.

Disney doesn't offer specifics on anything DVC-related in the annual report.

 

[supersnoop]

So yes, DVC sales are declining when you look at the total amount of points sold from year to year.

I don't think it's fair to say "sales are declining." The only measure of sales that matter is revenue. If you sell 10 widgets for $100, and the next year sell 8 widgets for $120, you've increased sales. And decreased overhead. And increased margin.

 

[DVC Mike]

I don't think it's fair to say "sales are declining." The only measure of sales that matter is revenue. If you sell 10 widgets for $100, and the next year sell 8 widgets for $120, you've increased sales. And decreased overhead. And increased margin.

I think it's fair to say that the sales of points are declining, as that is what I've been focused on with every single chart in this thread. The number of points sold is a pretty objective figure and it's probably the only real number we know.

It's possible to guess/estimate the gross revenue based on the points sold, and if you'd like to present that information, we can use that as a data point. I just haven't seen anyone do that yet.

It is impossible to quantify the margin between the cost of goods and the sales price, so no one has a clue if profits are up, down or flat.

 

[VGF Ben]

I think it's humorous when I read post after post saying that Disney blew it by making Poly all studios and bungalows. Bungalows are obviously high profit for Disney and and present an attractive option at the extreme high end of the socio-economic chain. But are you really all missing why Poly is all studios? For real?

OK....question, what is the easiest room size to book at any point in time? 1 bedroom. What's the hardest to book? The Studio... So at any given snapshot in time, the DVC inventory is short of studios....and high on 1 bedrooms....

Why is that difficult to see? They may be losing out on 1BR-2BR people who want to book at Poly, but booking patterns show there are more studio people out there....and it solves a studio shortage in the DVD inventory.....

 

[tjkraz]

"VGF Ben":

This sentence pretty much says it all: "They may be losing out on 1BR-2BR people who want to book at Poly..."

I wouldn't say that Disney "blew it", but they certainly did miss an opportunity to appeal to both markets. Disney's mix of Studios has definitely been off. In recent years, most resorts were around 25-30% studios.

All we really know is that they haven't been building enough Studios to meet demand, while they have overbuilt One Bedroom villas respective to demand. A more accurate Studio / 1B / 2B mix would have had broader appeal than an all-Studio property.

 

[VGF Ben]

Tim,

Except that that would not have corrected the system-wide imbalance. This will help with a property that should remain desirable. 1BR's need to stay out of the mix until the balance system-wide starts to work....with I'm sure a number of VGF owners already upset that they can't book a studio at their own resort...opening up the studio availability, especially at higher end properties, is the answer...even if that means disappointing the minority population of 1BR dwellers....

In general, if I were a 1BR DVC'er I have the best of all worlds. I have availability at most resorts with as little as 1-3 months lead time. That doesn't work for the system. And frankly, anyone preferring 1BR is probably not buying direct from DVC as it makes more sense to purchase at the cheapest resort possible as they don't need the 11 month window. Once again, that makes no financial sense for DVC.... I'm sure 1BR's and 2BR's are in the plans at some point at PVB down the road...at least that's the rumor I heard.

Add to that the fact that there was little they had to do to convert existing rooms to studios....you have a slam dunk. It's logistically the best decision and it effects the financial bottom line.

 

[tjkraz]

Except that that would not have corrected the system-wide imbalance.

Depends on which "problem" we're trying to address.

If the goal is to better balance demand across the entire system, then I agree with you.

However, if we're talking about DVC selling points, the lack of 1B and 2B at Poly can only hurt them. Buyers don't go into DVC thinking that they may have trouble booking a specific unit size. The system-wide imbalance really isn't an issue at the sales level. It's more of a member satisfaction issue.

 

[JWG]

There's just not a lot of purchasing options as there were the last few years. Aulani and Poly are really it.
That's contrary to a period where you could buy SSR, AKV, BLT, VGC... I wonder how sales are as a % of available inventory.
They're even closing down the waitlists for new purchases at several sold out resorts.

 

[KAT4DISNEY]

I think it's humorous when I read post after post saying that Disney blew it by making Poly all studios and bungalows. Bungalows are obviously high profit for Disney and and present an attractive option at the extreme high end of the socio-economic chain. But are you really all missing why Poly is all studios? For real?

OK....question, what is the easiest room size to book at any point in time? 1 bedroom. What's the hardest to book? The Studio... So at any given snapshot in time, the DVC inventory is short of studios....and high on 1 bedrooms....

Why is that difficult to see? They may be losing out on 1BR-2BR people who want to book at Poly, but booking patterns show there are more studio people out there....and it solves a studio shortage in the DVD inventory.....

All the rooms book usually book up so is it's not going to be that big of a concern to DVD. Getting that perfect mix where everything books evenly would be a terribly difficult goal to reach IMO. But by building only studios (I just tend to ignore the bungalows) they immediately eliminated the group that does want more room amenities with no way to satisfy. They may have thought they had to keep the options "cheap" in order to allow more buyers in to Poly but most buyers will be told they won't have trouble booking whatever they want anyway.

IMO - it was just the cheapest option they could do to build and figured it was the best way to get the largest margin on a resort that would sell itself. That's why they built studios only. It's not like they've had issues selling resorts with 1 and 2BR's.

 

[Dean]

I think it's humorous when I read post after post saying that Disney blew it by making Poly all studios and bungalows. Bungalows are obviously high profit for Disney and and present an attractive option at the extreme high end of the socio-economic chain. But are you really all missing why Poly is all studios? For real?

OK....question, what is the easiest room size to book at any point in time? 1 bedroom. What's the hardest to book? The Studio... So at any given snapshot in time, the DVC inventory is short of studios....and high on 1 bedrooms....

Why is that difficult to see? They may be losing out on 1BR-2BR people who want to book at Poly, but booking patterns show there are more studio people out there....and it solves a studio shortage in the DVD inventory.....

They shut out a significant portion of the membership with the current set up. The few 2 BR are double to points of VGF and the studios are the same points. You shut out almost anyone who needs more than a studio and anyone who wants laundry/kitchen options more than the extremely limited studio kitchens or community laundry. IMO they've set the resort up to have routine availability at the 7 month window but I can't believe that was the intent. It is what it is but I still think they had a golden opportunity they let slip through their fingers. They could have made the sleep 6, upgraded to King, gave them 2 queens and they could have added a fully functional but mini kitchen. Then they could have made the points roughly 50% more than the VGF studio. While they'd have likely had to go to the all in one W/D to have them in the villas, it would have been easily doable as well. So they sell more points total and make the property more appealing overall.

 

[disneynutz]

We don't know what DVD's marching orders are. Since DVC reportedly maintains a 98% occupancy rate, all rooms are booked no matter what size they are and studio lovers are forced to book a 1 bedroom which might result in their point shortage and an additional point purchase, maybe they aren't buying direct?

In the case of PVB, it seems that Disney has instructed DVD to:
Increase the number of points sold so 1 million bungalow points.
Increase the high end units that may be used for cash guests, the bungalow units.
Keep construction costs down, studios only, existing structures.
Increase the number of people in the rooms, on site and in the parks, 5 in a studio.

Remember there is only on thing driving Disney's decisions, make more profit!

Bill