Anyone know how DVC makes $$$...?

[kiingor]

I'm curious to find out how DVC makes money after each resorts are sold out ?
How many total points or membership does each resort sell and total $$$ disney makes from it ?
Our mf pays for the up keep of the resorts and we get to stay there for the next 50 years or so. So how much does disney make from the sale and then that's it for each resort. Once they stop building new resorts, then what...?

 

[RobDoc]

DVD is the development company that builds and sells the resorts.
DVC is the management company the members pay to maintain and run the properties - including making reservations for members.

DVD makes a profit by building the resorts and then selling the units to members. From the proceeds, they pay all marketing fees, sales incentives and sales staff.

DVC is paid a flat 12% of the non-tax operating expenses of the resort. The non-tax expenses include housekeeping, landscaping and maintenance at each resort. Also included are the Disney transportation costs for the resort among other things.

We don't really know what DVD will do once they stop building new resorts since that has not yet happened and currently have announced plans into 2012 for opening new resorts.

Both DVD and DVC are owned subsidiaries of the Walt Disney Company. They are certainly intertwined, but we frequently mistake DVC as the entity that builds the resorts.

 

[kiingor]

DVD is the development company that builds and sells the resorts.
DVC is the management company the members pay to maintain and run the properties - including making reservations for members.

DVD makes a profit by building the resorts and then selling the units to members. From the proceeds, they pay all marketing fees, sales incentives and sales staff.

DVC is paid a flat 12% of the non-tax operating expenses of the resort. The non-tax expenses include housekeeping, landscaping and maintenance at each resort. Also included are the Disney transportation costs for the resort among other things.

We don't really know what DVD will do once they stop building new resorts since that has not yet happened and currently have announced plans into 2012 for opening new resorts.

Both DVD and DVC are owned subsidiaries of the Walt Disney Company. They are certainly intertwined, but we frequently mistake DVC as the entity that builds the resorts.

cool.. thanks for clarifying this. I've always wonder what happens after everything is sold.

How many membership or points do they have to sell to be considered sold out ?

 

[RobDoc]

cool.. thanks for clarifying this. I've always wonder what happens after everything is sold.

How many membership or points do they have to sell to be considered sold out ?

DVD maintains ownership of 2-4% at each resort. This is used to replace member inventory when rooms are out-of-service for rehab/renovation. Otherwise, the resort is "sold out" when they have no more inventory available for sale. There have been times when DVD announced that a resort was "sold out" when they continued to sell contracts at those resorts (this has probably been true for every DVC resort) - so a true % may be an elusive figure to define. In some cases, "sold out" resorts have even reopened sales when more villas were added - OKW was "sold out" and then added three more buildings where the original sales office had been located- so they reopened sales for a little over a year. BWV had "sold out" and then more villas were added when the sales office was moved to it's present location at SSR - so they reopened sales for about a year. In June, SSR will increase be another 60 villas when the THVs open. No announcement has been made yet about new sales, but I expect it will we forthcoming and likely has already started without the fanfare.

You can roughly compute the total number of point at each resort by multiplying the seasonal point costs by each room type and adding everything together. I know some have done this - Caskbill's DVC Planner (www.caskbill.com) can assist with that calculation. Of course, the total number of points available varies by resort.

 

[Tara]

I'm curious to find out how DVC makes money after each resorts are sold out ?
How many total points or membership does each resort sell and total $$$ disney makes from it ?
Our mf pays for the up keep of the resorts and we get to stay there for the next 50 years or so. So how much does disney make from the sale and then that's it for each resort. Once they stop building new resorts, then what...?

DVC resorts are never truly sold out. Not only does DVD retain a small percentage of rooms, but they also still sell points for all the resorts, even the "sold out" ones. They are able to offer member add-ons and even new sales by buying contracts from members who are selling (by exercising their right of first refusal) or by regaining control of points when people default on their loan. So a resort will keep providing sales opportunities long after the initial selling period.

 

[WilsonFlyer]

DVC resorts are never truly sold out. Not only does DVD retain a small percentage of rooms, but they also still sell points for all the resorts, even the "sold out" ones. They are able to offer member add-ons and even new sales by buying contracts from members who are selling (by exercising their right of first refusal) or by regaining control of points when people default on their loan. So a resort will keep providing sales opportunities long after the initial selling period.

While I understand what you're trying to say, I have to philosophically disagree.

A DVC resort is sold out once all the points are sold, that are going to be sold, on the first pass.

Disney's contract with owners includes a ROFR clause that allows DVD to buy back contracts that it decides make economic sense to DVD (likely for resale). I think it is important to note, though, that there is no guarantee that this revenue stream will ever be there, For example, expect to see FAR fewer resales with BLT once the initial "buyers' remorse mistakes" clear in a year or two than, for example, than we have seen recently for SSR. BLT owners are just far more likely to love BLT than SSR owners are to love SSR simply because BLT is going to seem more "Disney" (Just my magic 8-ball prediction, obvously.).

DVD can never depend on revenues from ROFR as a means of predictable income. I guess that's what I'm trying to say. It is what it is on any given day but tomorrow, there may be nothing.

I'm sure DVD makes money on ROFR resales they do or they wouldn't do it. The real question is whether it is as profitable or more profitable than the initial sales. Way too much information would be required to draw that conclusion than DVD would ever be willing to share with the membership. That is, after all, exactly how they do make money.

 

[oakmanner]

How about the 10 or 14% interest DVC makes on those members that finance some or all of thier purchase.

 

[WilsonFlyer]

How about the 10 or 14% interest DVC makes on those members that finance some or all of thier purchase.

And the chance to do it all over again from scratch when someone defaults...

 

[drusba]

Disney's income:

1. Selling the resorts. How much is that? Think billions total all resorts. They set the number of points needed to reserve per night per room for the resort and then basically sell the total number that is reached by the addition of what it would take to fill every room per night for a 51 week year. For each resort that number of points is in the millions. Expect the new BLT will be somewhere in the neighborhood of 8,000,000 points. At the currently discounted price of $105 per point, the sales revenue will be in the $840 million range. Of course the profit is determined after subtracting all costs of sale including the building cost, advertsing, salesmen, etc.

2. Loan financing. A lot of those persons who buy will get a loan from Disney's lending company. You can likely add several hundred more in interest inclome as a result (again you have the loan company's cost to deduct to get any profit).

3. Rentals at a resort while sales are occurring. Assume BLT opens. However, it all won't be all sold by day 1. They will have a certain proportion of sold inventory and unsold inventory, the latter of which will decrease as more sales are done. While owners are occuppying the sold inventory, Disney will be renting the leftover inventory. Revenue amount -- anyone's guess.

4. Rentals after resort sold out. DVD retains 2% to 4% interest in the resort which can be rented out, although portions may be set aside for shut-downs of some rooms. Also, it can rent any room that no DVC member has reserved by 60 days before any date. A portion of that rental income (after costs), equal to 2 1/2% of the annual operating budget (for which you pay dues) goes back to the membership in a form a set-off of future dues. Everything over that 2 1/2% goes to Disney, first to set-off costs of operating Member Services (also known as the Buena Vista Trading Company, a DVD subsidiary), and then anything left goes to DVD's management subsidiary, essentially as profit.

5. Management Fee. Each resort has an annual operating budget. It is what determines your dues. In the budget are the costs of running and maintaining the resorts, including transportation, pools, employees, insurance, many others. In other words, those employees you see working at a resort, you pay for through dues, the maintenance and repair of the pool you pay for through dues, etc., not Disney. That annual budget is in the millions for each resort, e.g., think $8 to $14 million range per resort, higher for some lower for others. As part of that budget there is a set "Management Fee" that equals 12% of all your other budgeted costs. The 12% does not change but total amount goes up as total costs in the budget go up annually. That money also can go to fund part of MS costs but likely most of it is just profit, i.e, it is essentially perpetual income for Disney as long as it runs the resorts. Total annual amount all resorts is likely in the $10 million range.

6. Trade-out fees. DVD charges any member $95 per trade-out from DVC resorts. Some but definitely not all of that is absorbed by costs to DVD of doing a trade-out, rest is profit.

7. New Deals. OKW had an expiration date of 2042. Last year Disney offerred and sold extensions of that date to 2057, thus basically starting a another sales process for the same resort. possible it will do that for others in the future. If it does not do, it eventually gets all that property back that it sold and does not have pay anything to get it back. Also, people default on loans and Disney gets back points, and it also gets points if it exercises right of first refusal in any resale by an owner, and thus Disney is perpetually getting points to sell again.

In other words, Disney has several sources for profit which continue as long as the program continues. Meanwhile, members cover all the major costs of maintaining and operating the resort. On top of that, Disney has the assurance of a captive audience. There are now about 120,000 owners (that is really about 400,000 or more people because a husband and wife owner is counted as only one owner in that figure and the number does not account for all the kids). Those are people Disney knows, for the most part, will keep coming back year after year, and spend large amounts on parks, recreation, food, and merchandise.

This is definitely a business model that works.

 

[kiingor]

wow... cool.. thanks for all the answers,
Nice to know more than just owning a timeshare....