Bookings soft at Disney World's moderate and deluxe resorts

[crazy4wdw]

From the Orlando Sentinel:

Analyst: Bookings soft at Disney World's moderate and deluxe resorts

By Jason Garcia, Orlando Sentinel

2:53 p.m. EDT, September 16, 2011

Citing concerns about weakness at Walt Disney World's mid- and high-priced hotels, a Wall Street analyst on Friday lowered his earnings projections for the Walt Disney Co.'s theme-park division.

"Based on our tracking of hotel occupancy at Walt Disney World, we believe the value resorts are seeing slightly better trends than moderate/deluxe resorts" for the fall and early winter, UBS Investment Research analyst John Janedis wrote in a note to investors.

Moderate and deluxe rooms together account for approximately 60 percent of Disney World's hotel inventory.

UBS said it now expects Walt Disney Parks and Resorts to generate $1.62 billion in earnings before interest and taxes during Disney's next fiscal year, which begins next month. That's about 2 percent lower than the firm's previous estimate of $1.66 billion.

Disney has been steadily raising prices at its U.S. hotels and theme parks in hopes of conditioning travelers to no longer expect the deep discounts Disney offered during the deepest part of the global recession. And checks by UBS indicate that rates are up across the board at Disney hotels — including by roughly 3 percent at the lowest-priced, value hotels, such as Disney's All-Star Resorts.

UBS said rates are up by mid-single-digit percentages at Disney's moderate hotels, such as Disney's Port Orleans Resort, and by low- to mid-single-digit percentages at its deluxe hotels, such as Disney's Grand Floridian Resort & Spa.

"However, we think occupancy levels are flat to down [year over year], particularly at the deluxe resorts and only slightly better at the value/All-Star resorts," Janedis wrote. "Given the relative price points — with deluxe-resort average rates 200 percent greater — the mix could also be having somewhat of an impact on parks margins."

Disney World has approximately 21,600 hotel rooms in its inventory, not including Disney Vacation Club time-share units, which are also rented out to travelers. Of the hotel inventory, about 8,400 rooms, or 39 percent, are value rooms.

About 7,500 rooms, or 35 percent, are moderate and about 5,600 rooms, or 26 percent, are deluxe. The share of value rooms will swell further next year with the opening of Disney's Art of Animation Resort, Disney World's first new hotel since Disney's Pop Century Resort, another value hotel, opened in 2003.

The occupancy rate in Disney's U.S. hotels — which includes roughly 2,400 rooms at Disneyland in Anaheim, Calif. — was 81 percent during the third quarter of the company's fiscal year, which ended July 2. That was down one percentage point from a year ago. But per-room spending, which includes the average nightly room rate, jumped 14 percent for the period.

Management said in August that fiscal fourth-quarter bookings were running percent behind last year's pace, while room rates were up by a mid-single-digit percentage.

jrgarcia@tribune.com or 407-420-5414

 

[norm&linda]

interesting story. thanks for posting.

 

[jlewisinsyr]

I actually see this as good news, it means they are losing some guests but gaining additional revenue, which means the weaning off the discount drug is working, slowly, but it's working.

 

[mcd2745]

I actually see this as good news, it means they are losing some guests but gaining additional revenue, which means the weaning off the discount drug is working, slowly, but it's working.

Depends. Does the decline in resort occupancy quickly level off, or does it actually accelerate ? I can certainly see it accelerating without the discounts.

 

[jlewisinsyr]

Depends. Does the decline in resort occupancy quickly level off, or does it actually accelerate ? I can certainly see it accelerating without the discounts.

I don't necessarily see it accelerating and if it does, then you return to discounting, but to a lesser extent.

Don't get me wrong, I do struggle with the Disney pricing model that they have in place. There are very few places (if any) in the world you can charge $400 a night (consistently, not just during a special event weekend/week) for 3 - 3.5 star accomodations. That said, they get away with it because people want to be part of the magic of being at Disney.

 

[daber]

There's only so many $$ that people have to spend on vacation. I was there 2 weeks ago. I called PO, where we like to stay. I'm used to paying approx. $135 a night there. The price is now $185. No AP discount, no pin event discount, nothing. So I went off property and spent $50 a night. Is staying on property worth an additional $135 a night? Not IMHO. So the newspaper article is no surprise.

 

[racefanof88]

There's only so many $$ that people have to spend on vacation. I was there 2 weeks ago. I called PO, where we like to stay. I'm used to paying approx. $135 a night there. The price is now $185. No AP discount, no pin event discount, nothing. So I went off property and spent $50 a night. Is staying on property worth an additional $135 a night? Not IMHO. So the newspaper article is no surprise.

I agree 100%. There comes a time when the consumer says "enough is enough" and I think people may have finally reached that point with Disney. While people may still want to vacation there, they are pricing it to the point that it is making it hard, to impossible, for some to do so. There are some who may think it is a good thing to stop offering discounts, but now is not the time to be raising prices. While the unemployment rate, and the poverty rate, are at some of the highest levels in this countries history, it isn't good business sense to increase prices. Not only is the economy WORSE than when Disney started offering these discounts, the world economy is in deep trouble.

 

[mcd2745]

I agree 100%. There comes a time when the consumer says "enough is enough" and I think people may have finally reached that point with Disney. While people may still want to vacation there, they are pricing it to the point that it is making it hard, to impossible, for some to do so. There are some who may think it is a good thing to stop offering discounts, but now is not the time to be raising prices. While the unemployment rate, and the poverty rate, are at some of the highest levels in this countries history, it isn't good business sense to increase prices. Not only is the economy WORSE than when Disney started offering these discounts, the world economy is in deep trouble.

That's a key factor since all those Europeans who have been flooding WDW the last few years will not be doing so as much as the exchange rate will likely not be as favorable.

 

[Galen_50]

There's only so many $$ that people have to spend on vacation. I was there 2 weeks ago. I called PO, where we like to stay. I'm used to paying approx. $135 a night there. The price is now $185. No AP discount, no pin event discount, nothing. So I went off property and spent $50 a night. Is staying on property worth an additional $135 a night? Not IMHO. So the newspaper article is no surprise.

Really, if you compare their rates to others in the industry, they are not really more than others. My home park is Cedar Point. Their main on site resort is the Hotel Breakers. The hotel is best compared to a Moderate. The cheaper rooms are the size of value rooms all the way up to suites. Some rooms themed to Peanuts, but no theming to the hotel itself. Right on Lake Erie feet from the park enterance.

Now the rates for a room this Friday night range from $169.00 to $451.00. This is at a time when the park is non-peak, only a portion of the rides are running, most of the shows are over, and they are doing their Halloweekends.

In the summer the rates jump. I have stayed their several times, and except for being right at the park and giving and an hour early entry, there is nothing special about the hotel or the rooms. Disney hotels have alot more to offer and stand out, but run the same rates.

What I think we all have to remember, it is not just Disney that charges higher rates for rooms and food. These are industry wide prices. A footlong sub at Subway at Cedar Point is $10.00. A hot dog and Pop at a Tigers game was 7.00.

 

[howardlee2]

if the economy continues on the brink of recession Disney may have a rude awakening and will be forced to resume discounting to keep their revenues and attendance up.

 

[racefanof88]

if the economy continues on the brink of recession Disney may have a rude awakening and will be forced to resume discounting to keep their revenues and attendance up.

I think you are right, and I think booking is about to get worse. With Greece on the brink of default, and the rest of Europe, except Germany, on the same course; Disney will be the last thing on anyone's list.