When does DVD overbuild?

[wbl2745]

My basic question is at what point does DVD overbuild DVC resorts? How many units can they build and still find people (like me and you) willing to pay their prices?

I've noticed a couple of things. First, often DVD is adding DVC to existing hotel resorts without adding additional restaurant or other guest facilities. For example, when they added DVC to the Grand Californian, along with a lot of additional hotel rooms, they added a new pool, but they didn't add any restaurants. Similarly at BLT they added the TOWL, but no new restaurant so there are more people at the existing CR facilities. The same is true for BCV and VWL. Of course Aulani is an exception as a stand-alone, and AKV added one restaurant at Kidani Village. Isn't this practice really downgrading the quality of the hotels as there are more people sharing the same facilities?

Second, I notice that one of the problems in the timeshare industry in general is that once the builder has sold out a project, they move on without looking back. I suppose the fact that our real estate interests actually expire (doesn't that mean we're really leasing, not owning?) means that DVD is still in the game. Also, the units attached to hotels would reflect on the hotel itself if they were allowed to decay. A colleague of mine owns a timeshare where quite a few of the units can not be inhabited due to rain leakage and general decay. Want to buy a timeshare for $1?

I guess my real question is what is going to happen when DVD isn't making bundles of money on this any more? DVC, or whatever the management arm of our resorts is called, doesn't make anywhere near the profit of DVD, if they make any.

 

[chalee94]

My basic question is at what point does DVD overbuild DVC resorts? How many units can they build and still find people (like me and you) willing to pay their prices?

they will build them as long as they can sell them (and maybe a little longer.)

I've noticed a couple of things. First, often DVD is adding DVC to existing hotel resorts without adding additional restaurant or other guest facilities. Isn't this practice really downgrading the quality of the hotels as there are more people sharing the same facilities?

the theory is probably that DVCers will actually use the kitchen facilities in the 1BR+ villas. many of the wdw hotel restaurants draw non-hotel guests, including offsite and locals, so i'm not sure it's that big of a deal

Second, I notice that one of the problems in the timeshare industry in general is that once the builder has sold out a project, they move on without looking back. I suppose the fact that our real estate interests actually expire (doesn't that mean we're really leasing, not owning?) means that DVD is still in the game.

yep - i like that DVC is RTU and not a perpetual deed. wdw also rents DVC resorts on their main website to cash guests...i don't think the DVC resorts falling into disrepair is a major risk.

Want to buy a timeshare for $1?

already did. thanks.

some of the $1 timeshares are actually pretty nice. the developer is long gone from mine...as i understand it, it's run by a board full of owners who contract with an experienced timeshare management company to balance maintaining quality and keeping dues reasonable. i'm pleased so far.

it's just the economy's effect on wages driving down values (partly due to lack of demand pushing down rental prices in general).

I guess my real question is what is going to happen when DVD isn't making bundles of money on this any more? DVC, or whatever the management arm of our resorts is called, doesn't make anywhere near the profit of DVD, if they make any.

there is definitely some risk in making a long-term commitment. i wouldn't count on DVC maintaining its value long-term, certainly...probably won't drop to $1 but it's not impossible. if DVC decides to increase maintenance fees to the point where it would be cheaper to call CRO for a cash rental, DVC contracts will likely be worthless.

i don't think the risk is that high but it might be more risk than some would care to be involved with...sure.

 

[Deb & Bill]

They have already overbuilt in my opinion.

 

[Brian Noble]

How many units can they build and still find people (like me and you) willing to pay their prices?

New people visit the parks every year. They have the time of their lives. Some fraction of them will go on a tour. Some fraction of *those* will hear "Bottle the vacation magic forever at today's prices!" and bite.

So, it could be for a very long time.

it's just the economy's effect on wages driving down values

I think it is just simple supply and demand. Timeshare is not a product with organic demand. Very few people wake up and tell themselves: "Today, I'm going to obligate myself to decades, and perhaps a lifetime, of paying for the upkeep and operation of some fraction of a vacation condo." Those that do are the people who are looking to buy on the secondary market.

On the other hand, as the set of people who own timeshares grows, an ever-increasing number of people wake up and think "I have got to get rid of this thing. We never use it!" Those are the people looking to sell on the secondary market.

Unless the first group grows as fast as the second group does, prices collapse.

But, retail timeshare sales happen through *created* demand. That bottle-the-magic timeshare tour. Almost no one walks into a tour expecting to buy. But a surprising number of people leave having purchased, and some of those won't rescind in time.

 

[RachaelA]

They have already overbuilt in my opinion.

But is it technically overbuilding if people are still buying?

 

[tjkraz]

My basic question is at what point does DVD overbuild DVC resorts?

Some people believe they already have but as long as there are buyers, DVD will keep chugging along.

I've noticed a couple of things. First, often DVD is adding DVC to existing hotel resorts without adding additional restaurant or other guest facilities. For example, when they added DVC to the Grand Californian, along with a lot of additional hotel rooms, they added a new pool, but they didn't add any restaurants. Similarly at BLT they added the TOWL, but no new restaurant so there are more people at the existing CR facilities. The same is true for BCV and VWL. Of course Aulani is an exception as a stand-alone, and AKV added one restaurant at Kidani Village. Isn't this practice really downgrading the quality of the hotels as there are more people sharing the same facilities?

A couple of things:

1. In many recent cases, standard hotel rooms were eliminated to make way for DVC. One of the 250-room garden wings at CR was demolished for 300 villa BLT. AKV hotel rooms were converted to DVC. Disney Institute became SSR. So there is both addition and subtraction occurring.

2. Restaurants are profit centers for Disney, but they won't build haphazardly. In other words, we can't expect them to add more dining just because they add more rooms. The real issue is whether the added guests are forcing some tipping point in terms of restaurants being overcrowded. When/if that occurs, Disney will certainly add more dining space. Saratoga Springs is a prime example of this with The Turf Club being an addition that was driven by guest demand, as well as the month-old Paddock Grill.

Also, I believe Contempo Cafe at CR was a new addition as part of the hotel refurb / BLT construction. The Beach Club Marketplace is new within the last few years (after villas opened.)

I guess my real question is what is going to happen when DVD isn't making bundles of money on this any more? DVC, or whatever the management arm of our resorts is called, doesn't make anywhere near the profit of DVD, if they make any.

The fact that DVC is a RTU helps a lot here, IMO. Instead of seeing DVC ownership willed down for generations if ownership were perpetual, owners will start falling by the wayside in another 30 years. Like Brian said, there will always be new families discovering the Disney parks and that represents a steady stream of potential buyers.

Aulani also suggests that Disney hopes to more aggressively grow the program outside of theme parks.

Right now they are losing business from families who see the Disney parks as a preferred destination every 2-3 years, while visiting other locales in between park trips. Those people are not good candidates for DVC ownership. But, if Disney can add a few other non-park destinations like Washington DC, NYC, Colorado or Lake Tahoe to a list that already includes Hawaii, Hilton Head and Vero Beach, suddenly DVC looks a lot better to those seeking more diversity.

 

[Granny]

My basic question is at what point does DVD overbuild DVC resorts? How many units can they build and still find people (like me and you) willing to pay their prices?

I don't think it is so much that they are over building. More the question is, how much higher can they raise prices and still continue to sell at today's rate?

I've noticed a couple of things. First, often DVD is adding DVC to existing hotel resorts without adding additional restaurant or other guest facilities. For example, when they added DVC to the Grand Californian, along with a lot of additional hotel rooms, they added a new pool, but they didn't add any restaurants. Similarly at BLT they added the TOWL, but no new restaurant so there are more people at the existing CR facilities. The same is true for BCV and VWL. Of course Aulani is an exception as a stand-alone, and AKV added one restaurant at Kidani Village. Isn't this practice really downgrading the quality of the hotels as there are more people sharing the same facilities?

You've hit on my favorite theory for why Disney just LOVES DVC. When they build at an existing resort, WE as owners are now picking up a part of the cost of that resort. Bell services, front desk, guest services, etc all can now charge a portion of their costs to DVC without much of an increase in cost overall.

So DVC makes the existing resorts more profitable by defraying some of the costs. And it ensures a loyal returning base of customers for parks, restaurants, shops, etc.

So I don't see Disney slowing down on selling DVC until demand dies off. And even then, I don't see them "abandoning" them since they are a great source of cost containment.

 

[BeesKnees]

This question gets batted around a whole lot here. As usual some have offered very good answers why the market can bear even more development.

From a personal perspective as long as I can book a vacation at 1 of my top 3 choices at 7 months, I am not sure why I should care. I think if they add resorts to other highly coveted vacation spots it might be nice to have some additional variety.

 

[ssawka]

They have already overbuilt in my opinion.

Ah yes, the "I'm in, now close the door" philosophy.

 

[Deb & Bill]

...Also, I believe Contempo Cafe at CR was a new addition as part of the hotel refurb / BLT construction. The Beach Club Marketplace is new within the last few years (after villas opened.) ....

The Contempo Cafe replaced the existing counter service that was in the location where the Wave is now located (along with the old arcade). So no additional. And they eliminated The Concourse Steakhouse.

 

[Dean]

To a degree, DVC is like a restaurant coupon. The company is gun ho to use them to get people on the premises but unhappy if they actually use them to their advantage. DVC is great for Disney during slower times and bad during busier times. Overall they provide a cushion that's predictable but not a big spending group.

 

[Brian Noble]

And they eliminated The Concourse Steakhouse.

But The Wave was added, IMO an upgrade.

 

[Deb & Bill]

But The Wave was added, IMO an upgrade.

But not in mine.

 

[smjj]

But The Wave was added, IMO an upgrade.

I'am with Deb & Bill, no this is not an upgrade....smjj

 

[chalee94]

But not in mine.

i'd agree also. i have limited experience with the wave, but i really liked the food at the concourse steakhouse (and the monorail cruising through was fun).

 

[AKLFan3]

They have already overbuilt in my opinion.

I'm curious as to why you think they have overbuilt. I don't feel like the hotels and parks are as crowded as they were pre-9/11.

 

[Brian Noble]

Concourse's food was boring, in a neat space. Wave's space is boring, with moderately better-than-average-for-Disney food.

Depends on what you want, I guess. Either way, it's not as though capacity was reduced, as D&B suggested.

 

[wbl2745]

Unless the first group [people buying] grows as fast as the second group [people selling] does, prices collapse.

But is it technically overbuilding if people are still buying?

Simple supply and demand.

But, retail timeshare sales happen through *created* demand. That bottle-the-magic timeshare tour. Almost no one walks into a tour expecting to buy. But a surprising number of people leave having purchased, and some of those won't rescind in time.

I've known a lot of people at work who have purchased timeshares and then gotten rid of them in a year or two because what they they was going to be a lot of fun turned out not so much. One of my colleagues bought a timeshare at Park City, Utah, about 40 miles from where we live, thinking it would be great fun for the kids. It turned out that by the time they packed up everything they needed to entertain their children for a week, it just wasn't worth the effort.

 

[Plutofan]

Dont forget Disney make a lot of money on the sale of points but they also have an ongoing revenue stream for management fees and breakage income. These fees can be a significant amount of money. No one has a true handle on the profit. Part of a members dues are for on going maintenance. I am sure that when the resorts revert back to Disney they will have alot of value especially since Disney has a vested interest in using members dues for up keep.

 

[Deb & Bill]

Concourse's food was boring, in a neat space. Wave's space is boring, with moderately better-than-average-for-Disney food.

Depends on what you want, I guess. Either way, it's not as though capacity was reduced, as D&B suggested.

But it wasn't expanded like Tim suggested either. Contempo Cafe is new in the old Concourse location, but it replaced the Food and Fun Center on the first floor where the Wave is located. Plus they shrunk the arcade.

And I preferred Concourse to the Wave, many times over. It's a negative to me.

The Food and Fun Center was close to the pool, so you could run in from the pool, get something to eat and drink (better selection than the pool bar) and be back at the pool. Now you have to take the escalators up to the third floor to get anything to take back to the pool.