SL6827
DIS Veteran
- Joined
- Apr 23, 2017
What is with the rumors of Disney paying down debt with DVC funds? I mean, I put absolutely nothing past Disney now, especially since they tried twice to screw members over with inflated point charts.
Disney debt on DVC?
- Thread starter SL6827
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Maistre Gracey
DIS Veteran
- Joined
- Apr 23, 2002
I don’t know the rumors of which you speak, but I’m confident I can say it’s not paid with dues.
What Disney does with their profits from sales is their prerogative.
DVD does fall under TWD Company umbrella.
SL6827
DIS Veteran
- Joined
- Apr 23, 2017
No, I read it was where DVC recently raised the prices? Nothing was said about dues being used to pay for it.
supersnoop
What time is the three o'clock parade?
- Joined
- Nov 13, 2013
DVD, not DVC, sells points. DVD pays WDC for land and then pays to build the resort, and subsequently sells points to the public. Maybe WDC is charging them more for land? Maybe they're paying more for construction? They did raise prices recently.
DVD: Disney Vacation Development
DVC: Disney Vacation Club
WDC: Walt Disney Companies
Disney raises prices all the time. I don't understand the correlation.
A 5% increase in the price of DVC points isn't going to make much of a dent in Disney's finances by itself. Especially if it results in lower sales. But combined with other increases (park tickets, Disney+, etc.) there's likely some net positive result.
Honest question: What is the source of this "rumor"?
- Joined
- Nov 15, 2008
DVC is the management company and is not involved in setting any prices other than creating the dues budget for resorts operations.
If you are taking about DVD raising the base price of some resorts, that did happen.
As the the developer, they would certainly be free to use profits they make from selling DVC points for whatever they want as a division of TWDC, and I guess that could be giving some to pay down debt.
SL6827
DIS Veteran
- Joined
- Apr 23, 2017
I read it on Inside the Magic.
supersnoop
What time is the three o'clock parade?
- Joined
- Nov 13, 2013
Can you post a link? I can't find anything that resembles what you described.
- Joined
- Aug 18, 1999
If they were, it would be illegal.
People make up things all the time. Facts and data do not matter to them.
drusba
I went to Iowa once, and it was closed.
- Joined
- Aug 19, 1999
I can find no such rumors, but it is possible that some of the "DVC Funds," other than just sales and room rental profits of DVD, could ultimately be used to pay down Disney debt, and it would be legal. An explanation:
DVCM is the designated manager of all DVC resorts and the preparer of annual budgets. It is also responsible for centralized MS personnel and computer systems relating to members reserving home resorts. BVTC is the DVC company responsible for all trade-outs and trade-ins to and from non-DVC Disney hotels and non-Disney resorts (such as through Interval International). It is also responsible for centralized MS personnel and computer systems relating to members reserving DVC resorts they do not own. (The reality is that separation of those two companies is mostly on paper because the centralized MS mangers and employees for both are mostly the same people and the computer systems are combined.)
All the actual operational and maintenance costs of the individual resorts, including the costs of designated managers at the particular resorts, are covered by specific dues items. Nevertheless, the dues also have a "Management Fee" equaling 12% of all the operational and capital reserves costs in the budget not counting transportation fees and the management fee itself (property taxes are also excluded from the calculation). A designated purpose of the management fee is to cover centralized management and the costs of centralized MS, and the reservation systems to the extent they fall within DVCM's responsibility.
The specific dues item relating to BVTC is the "Disney Reservation Component," a reference to MS personnel and computer systems to the extent used by members to reserve DVC resorts they do not own. The dues amount for that item is $1 annually per member (and it counts joint owners separately to determine the amount, e.g., husband and wife owners of a resort equal 2), BVTC also gets money from the amounts charged to do trade-ins and trade-out from and to non-DVC resorts.
Besides the management and DVC Reservation Component Fees, the financing of centralized MS and computer systems have another major source of income -- breakage income, money made for rentals of DVC rooms still open at 60 days or less from any given arrival date. All breakage income annually is divided as follows: (a) it first goes to set off up to 2.5% of annually budgeted operation and capital reserve dues to members (excluding certain items in the calculation). Income above that 2.5% next goes to BVTC to pay all of its costs plus 5% of those total costs (a built in profit) and, after doing so, also renders the amount collected for the Disney Reservation Component as profit; (c) all breakage income in excess of (a) and (b) then goes to DVCM. I was informed a number of years ago that the actual breakage income had always exceeded the amount that goes to offset dues and the amount needed to pay BVTC's costs plus 5%.
The net result is that there are four possible sources of income that can pay for centralized MS and the reservation computer systems: the management fee, the DVC Reservation Component fee, fees charged by BVTC for trade-ins and trade outs, and breakage income. There are no dues items that actually go up or down according to the total costs incurred for centralized MS and the reservation computer systems, e.g., the DVC Reservation Component is fixed at $1 per member, the 12% management fee is fixed (the actual amount can raise annually if other dues items, e,g. housekeeping , maintenance and security for the resorts, goes up annually). In other words, if DVCM and BVTC spent only $100,000 on central MS and reservation computer systems or $10,000,000, your dues would be the same (indicating that there is a built-in incentive to spend less on centralized reservation systems so more profits can be realized) . And any part of the management fee, DVC Reservation Component, trade-out fees, or breakage income in excess of the 2.5% dues set-off and total costs of BVTC and DVC centralized MS and computer systems, ends up as profit in the books of a DVC entity which can then ultimately be passed along to Disney corporate which could be used to contribute to paying Disney debt.
DVCM is the designated manager of all DVC resorts and the preparer of annual budgets. It is also responsible for centralized MS personnel and computer systems relating to members reserving home resorts. BVTC is the DVC company responsible for all trade-outs and trade-ins to and from non-DVC Disney hotels and non-Disney resorts (such as through Interval International). It is also responsible for centralized MS personnel and computer systems relating to members reserving DVC resorts they do not own. (The reality is that separation of those two companies is mostly on paper because the centralized MS mangers and employees for both are mostly the same people and the computer systems are combined.)
All the actual operational and maintenance costs of the individual resorts, including the costs of designated managers at the particular resorts, are covered by specific dues items. Nevertheless, the dues also have a "Management Fee" equaling 12% of all the operational and capital reserves costs in the budget not counting transportation fees and the management fee itself (property taxes are also excluded from the calculation). A designated purpose of the management fee is to cover centralized management and the costs of centralized MS, and the reservation systems to the extent they fall within DVCM's responsibility.
The specific dues item relating to BVTC is the "Disney Reservation Component," a reference to MS personnel and computer systems to the extent used by members to reserve DVC resorts they do not own. The dues amount for that item is $1 annually per member (and it counts joint owners separately to determine the amount, e.g., husband and wife owners of a resort equal 2), BVTC also gets money from the amounts charged to do trade-ins and trade-out from and to non-DVC resorts.
Besides the management and DVC Reservation Component Fees, the financing of centralized MS and computer systems have another major source of income -- breakage income, money made for rentals of DVC rooms still open at 60 days or less from any given arrival date. All breakage income annually is divided as follows: (a) it first goes to set off up to 2.5% of annually budgeted operation and capital reserve dues to members (excluding certain items in the calculation). Income above that 2.5% next goes to BVTC to pay all of its costs plus 5% of those total costs (a built in profit) and, after doing so, also renders the amount collected for the Disney Reservation Component as profit; (c) all breakage income in excess of (a) and (b) then goes to DVCM. I was informed a number of years ago that the actual breakage income had always exceeded the amount that goes to offset dues and the amount needed to pay BVTC's costs plus 5%.
The net result is that there are four possible sources of income that can pay for centralized MS and the reservation computer systems: the management fee, the DVC Reservation Component fee, fees charged by BVTC for trade-ins and trade outs, and breakage income. There are no dues items that actually go up or down according to the total costs incurred for centralized MS and the reservation computer systems, e.g., the DVC Reservation Component is fixed at $1 per member, the 12% management fee is fixed (the actual amount can raise annually if other dues items, e,g. housekeeping , maintenance and security for the resorts, goes up annually). In other words, if DVCM and BVTC spent only $100,000 on central MS and reservation computer systems or $10,000,000, your dues would be the same (indicating that there is a built-in incentive to spend less on centralized reservation systems so more profits can be realized) . And any part of the management fee, DVC Reservation Component, trade-out fees, or breakage income in excess of the 2.5% dues set-off and total costs of BVTC and DVC centralized MS and computer systems, ends up as profit in the books of a DVC entity which can then ultimately be passed along to Disney corporate which could be used to contribute to paying Disney debt.
sndral
DIS Veteran
- Joined
- Feb 3, 2008
I’m no expert, but The Walt Disney Company (DIS) is an international multi billion dollar publicly traded company, one of the 30 companies in the Dow Jones Industrial Average https://www.fool.com/investing/stock-market/indexes/dow-jones/companies-in-the-dow/. As such in accordance w/ the SEC’s requirements they release financial data each quarter & annually- see 2022’s results here https://thewaltdisneycompany.com/app/uploads/2022/11/q4-fy22-earnings.pdf
The company structure is currently broadly divided into 2 segments:
Disney Media & Entertainment Distribution which includes movies, streaming, etc. & which is not presently profitable - eg losing money
Disney Parks, Experiences & Products which includes the parks, the cruise line, hotels, & DVD (sales)/DVC (management). This segment is profitable. The lions share of profits from DVD/DVC comes from the sales of new ownerships & yes whenever the price on direct points goes up profit may go up as well.
Since Disney wholly owns both segments of their business they are free to take the profits from the profitable segment - Parks et al, to meet the debts/losses of the unprofitable segment - media. DVC which is responsible for managing the timeshares is strictly bound by the terms of it’s publicly filed documents & accounting requirements see Drusba’s post above.
None of this is underhanded or even secret, it’s all right there in the financial documents Disney is legally required to file. I realize those documents are far less entertaining than the wild rumors/conspiracy theories made up by bloggers/vloggers chasing clicks/views & the funds those generate.
Disney has bet big that streaming is the future & they’ve made the decision to take their profits (including their profits from selling DVC points) & invest in trying to capture a big share of the streaming market. They’ve also not paid dividends to owners of their stock lately as they chase streaming. Basically they are investing money now hoping that they will see big profits in the future. They think the Disney Media etc. segment will turn profitable in 2024.
miTnosnhoJ
DIS Veteran
- Joined
- May 7, 2015
It is very simple. Disney finances its resort operations through equity and bonds. They pay back the shareholders and the bond holders from the proceeds of revenue from guests at the resorts and parks. So what if you take one of these resort buildings and convert it into a timeshare? You get all the income you are ever going to get from the sale of timeshare units. You forego the room charge income over the next 50 years in exchange for getting a lump sum noW.
So one use for the lump sum they get for selling the timeshare units would be to pay off any debt associated with the buildings they converted.
So one use for the lump sum they get for selling the timeshare units would be to pay off any debt associated with the buildings they converted.
SL6827
DIS Veteran
- Joined
- Apr 23, 2017
I apologize. It was DVCnews.com. my bad.
SL6827
DIS Veteran
- Joined
- Apr 23, 2017
This is probably right.
sndral
DIS Veteran
- Joined
- Feb 3, 2008
The only thing I see at DVC news is that someone from the audience asked a question about it at the 12/8 condo association meeting - is there more elsewhere?
SL6827
DIS Veteran
- Joined
- Apr 23, 2017
Ya. It was with the condo association meeting comment.
sndral
DIS Veteran
- Joined
- Feb 3, 2008
Ah, then I take back my swipe at sensationalist bloggers/vloggers, I appreciate the content of & the work DVC.news does to report about all things DVC
_auroraborealis_
I like marshmallows. And adult beverages.
- Joined
- Oct 18, 2015
Yeah, DVCnews is not spreading rumors about DVC cap reserves being used to pay WDC debt. DVCN was just live-reporting member questions from the meeting.
Similarly, DVCnews isn't breathlessly discussing non-members at MM events, or that points charts can NEVER change it's in thee CONTRACT omg. Those were also audience questions.
Similarly, DVCnews isn't breathlessly discussing non-members at MM events, or that points charts can NEVER change it's in thee CONTRACT omg. Those were also audience questions.
- Joined
- Nov 15, 2008
That’s not how it works. The contract requires owners to give DVC a straight 12% fee for management of the program. Along with fees for BVTC.
Because it’s a set %, they are not required to itemize how that is spent because it doesn’t matter.
In addition ,when setting the yearly budget DVD guarantees owners they can not be charged more if the estimate for dues to run the resort proves to be to low. In exchange, they don’t pay operational fees on the points they own..
In terms of dues, if the actual expenses for taxes and operations of the resorts end up being less, those are rolled into the capital reserves fund..
In 2020, because of the closure and the amount of credit, they did give it back to owners..which by contract they didn’t have to and could have added to the capital reserves.
DVD is a developer and sell the product. And any profit they get has nothing to do with DVC owners or dues.
DVC owners are responsible to pay for the running of the resort and in no way entitled to have any profits from DVC, DVD or even Disney in general.
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