Disney reaching plateau in its hotels' occupancy

[lockedoutlogic]

Frozen in Norway didn't add anything it's replacing something that closed. DHS has had numerous things close as well. So they aren't really adding floor space. That is what they should be doing tho.

Won't do it unless they feel like they're losing something...and the way the money is rolling in... They don't.

Unless people are willing to pay directly for rides ontop of "privilege to enter our aging masterpieces" at $100 a day...

Yep...magic band 2.0

 

[lockedoutlogic]

BigTigger,

That is a fantastic take...and I agree with you 100%.

Hell...I've lived it.

But you must know that they have made the decision to go away from that tact many years ago...like 20.
They started by taking responsibility away from experienced frontline cms.
They have artificially held entry and middle level manager salaries to below industry standards.
They allowed their hourly pay to be "caught" by minimum wage and inflation to overtake it.

They decided that it's not the way they want it to be. And that is Florida and how they've let it get twisted. When you set the bar on the ground...it's impossible to come in under it.

I have always thought...as an armchair labor studies/social theorist...that they are feeding their own beast. Their workforce has expanded without much in the way of new offerings...because they aren't paying for efficiency.

If...their frontline cms with some length of service... We're elevated into the 40+ bracket...the 80's equivalent of "middle class" in Orlando...and the managers were bumped to levels commensurate with the profitability and gross of their units...

They could eliminate provbably 20-40% of their workforce due to increased productivity and efficiency. And probably save...definitely on longterm benefit costs if not on aggregate pay and taxes alone.

But...not gonna happen

 

[DDLand]

BigTigger,

That is a fantastic take...and I agree with you 100%.

Hell...I've lived it.

But you must know that they have made the decision to go away from that tact many years ago...like 20.
They started by taking responsibility away from experienced frontline cms.
They have artificially held entry and middle level manager salaries to below industry standards.
They allowed their hourly pay to be "caught" by minimum wage and inflation to overtake it.

They decided that it's not the way they want it to be. And that is Florida and how they've let it get twisted. When you set the bar on the ground...it's impossible to come in under it.

I have always thought...as an armchair labor studies/social theorist...that they are feeding their own beast. Their workforce has expanded without much in the way of new offerings...because they aren't paying for efficiency.

If...their frontline cms with some length of service... We're elevated into the 40+ bracket...the 80's equivalent of "middle class" in Orlando...and the managers were bumped to levels commensurate with the profitability and gross of their units...

They could eliminate provbably 20-40% of their workforce due to increased productivity and efficiency. And probably save...definitely on longterm benefit costs if not on aggregate pay and taxes alone.

But...not gonna happen

Yes! Henry Ford's 5$ wage is an excellent example of these business practices. Though it's strangely been spun as some way to sell more cars, it was primarily to improve the lives of workers and the company. It worked beautifully. I don't think it was a coincidence that as competitors wages caught up that Ford began losing its edge.

I don't know why it's such a foreign concept, employees like feeling like they're getting a good deal so they work better. It just takes guts to accept short term profit loss for long term gain.

Corporate America doesn't have the guts to do it...

 

[clsteve]

Compensation. This all goes back to compensation. Not that of the workforce, but that of the Execs - how they are compensated and incented on the delta between rev and expense.

Theme Parks (and Resorts) exist on huge expense lines - with low variability. You can only optimize the hard costs like insurance, property tax, etc. and the low variables like utilities, transpo etc. so much. That leaves Headcount and it's costs and liabilities.

And, when you look at the backgrounds of these execs, they (mostly) come from relatively lower headcount intensive environments where they can break the rev/expense curve and exceed their compensation goals with their smarts - picking that next hit movie, or show, or acquisition.

Add in the quarterly and FY driven aspect of how they're measured and comp'ed, the long term investment necessary for quality in headcount (and maintenance, and investment) for P&R is outside of their management comfort zone and in direct conflict with their Compensation Model.

Optimize and optimize more until something breaks then fix it. Run it and run it some more until something breaks, then fix it. Increase rev by increasing prices and adding high priced events until it breaks, then fix it.

They've really been incredibly consistent in this management approach for quite some time. You could argue that it's the BoD that deserves more of the blame since they set the compensation of the Exec Team....

 

[lockedoutlogic]

Right...and who's on the board of directors?

A bunch of corporate schills who've benefited from the same structure somewhere else...

Like A. Lewis...whose bold leadership will end up contributing greatly to Sears bankruptcy announcement anyday now...

And of course Taco Bell

 

[Josh Hendy]

Henry Ford gave his workers a big raise because he had to compete very hard to get and keep employees in Detroit. The absenteeism and turnover rates were sky-high but as soon as he gave them a big raise, absenteeism and turnover slowed down dramatically.

The difference now is that the economy is so incredibly bad that apparently Disney has no trouble fully staffing the parks and hotels at fairly miserable wages. That really sucks for the employees but it would be a moral breach for the company to raise their compensation without a resulting increase in profits for shareholders.

It could be that low wages now will result in high turnover and poor corporate profits in the long run. But shareholders are probably uninterested in long term profitability and instead are focused on the current quarter and the current fiscal year. The lousy economy has turned most investors into speculative riverboat gamblers.

 

[DDLand]

Henry Ford gave his workers a big raise because he had to compete very hard to get and keep employees in Detroit. The absenteeism and turnover rates were sky-high but as soon as he gave them a big raise, absenteeism and turnover slowed down dramatically.

The difference now is that the economy is so incredibly bad that apparently Disney has no trouble fully staffing the parks and hotels at fairly miserable wages. That really sucks for the employees but it would be a moral breach for the company to raise their compensation without a resulting increase in profits for shareholders.

It could be that low wages now will result in high turnover and poor corporate profits in the long run. But shareholders are probably uninterested in long term profitability and instead are focused on the current quarter and the current fiscal year. The lousy economy has turned most investors into speculative riverboat gamblers.

See that's what I would've guessed myself, but clsteve has written several posts that would suggest that's not the case. High turnover rate and a constrained labor pool seem to be two real problems Disney is facing. In fact, you further articulated just my point. Henry Ford also took the moral argument seriously as well. Not really big a deal with Disney necessarily.

Agree with what you're saying on the longtern prospects and profits.

 

[Yellowstonetim]

Yet Disney rates as one of the best places to work. ??

And there is no way Disney would let go of their hotels. They will partner to expand in some areas, but hotels were part of the plan ever since Walt was irritated by what was outside Disneyland. It is a major part of the profits - not just from the hotel itself, but from keeping people on property and in the "zone." DVC doesn't mean they want less hotel rooms. Can't unused DVC rooms be rented by other customers? Win-win.

 

[lockedoutlogic]

Yet Disney rates as one of the best places to work. ??

And there is no way Disney would let go of their hotels. They will partner to expand in some areas, but hotels were part of the plan ever since Walt was irritated by what was outside Disneyland. It is a major part of the profits - not just from the hotel itself, but from keeping people on property and in the "zone." DVC doesn't mean they want less hotel rooms. Can't unused DVC rooms be rented by other customers? Win-win.

"Best place to work" in a country that declares war on the mass of its workers more than it does on Iraq isn't that huge of an award.

Who said anything about Walt?
The current management and event the previous would take a cupcake outsourcing deal in a New York stock exchange minute. Because hotel operations itself doesn't produce the gravy. Eliminating high overhead would not "chase people off property"... If the property is properly maintained.

But you might need to know that from behind the wall... Or where the numbers are crunched...or both.

And they build/ convert DVC to fill the rooms with DVC... They don't want any empty rooms and after 20 years of schlepping points...that's pretty much what they do. Rentals of DVC is such a minor thing.

They want DVC in DVC... Because they like the wallet of who they sell DVC to.

 

[lockedoutlogic]

See that's what I would've guessed myself, but clsteve has written some post that would suggest that's not the case. High turnover rate and a constrained labor pool seem to be two real problems Disney is facing. In fact, you further articulated just my point. Henry Ford also took the moral argument seriously as well. Not really big a deal with Disney necessarily.

Agree with what you're saying on the longtern prospects and profits.

The truth is...like 99% of the time...somewhere in the middle here.

All valid points though

 

[rteetz]

Yet Disney rates as one of the best places to work. ??

And there is no way Disney would let go of their hotels. They will partner to expand in some areas, but hotels were part of the plan ever since Walt was irritated by what was outside Disneyland. It is a major part of the profits - not just from the hotel itself, but from keeping people on property and in the "zone." DVC doesn't mean they want less hotel rooms. Can't unused DVC rooms be rented by other customers? Win-win.

Actually Disney originally didn't want to be in the hotel business. Roy when building WDW took control of the hotels because he wanted them complete in time. They were originally supposed to owned by the company that built them. At the time only being Polynesian and the contemporary. They were behind schedule and Disney wanted them to open with the park so they took control of them and got things done.

 

[lockedoutlogic]

Actually Disney originally didn't want to be in the hotel business. Roy when building WDW took control of the hotels because he wanted them complete in time. They were originally supposed to owned by the company that built them. At the time only being Polynesian and the contemporary. They were behind schedule and Disney wanted them to open with the park so they took control of them and got things done.

Correct...and that company was US Steel (my neck of the woods)...shortly before its buyout of marathon oil that lead to the disaster known as USX...

And now... Where it's basically an "Ex" Company

 

[rteetz]

Correct...and that company was US Steel (my neck of the woods)...shortly before its buyout of marathon oil that lead to the disaster known as USX...

And now... Where it's basically an "Ex" Company

Yep thanks the name was slipping my mind at the moment

 

[DDLand]

Actually Disney originally didn't want to be in the hotel business. Roy when building WDW took control of the hotels because he wanted them complete in time. They were originally supposed to owned by the company that built them. At the time only being Polynesian and the contemporary. They were behind schedule and Disney wanted them to open with the park so they took control of them and got things done.

Once again we cross into the realm of which Disney are we talking about? Walt? Roy? Managment at a certain time period?

If we're looking at Walt, then I'd hazard a guess that he would have been happy with hotels accompanying his properties. This is based off:
1) Disneyland Hotel. While it was Wrather who owned the hotel from the beginning, it was nothing more then a compromise. Walt tried to build it, but due to costs of Disneyland it couldn't happen. He reached an agreement with him and allowed the Tycoon to own DLH. Afterwards WDP consistently tried to buy the hotel during Walt's lifetime. (Failed each time because of it's lucrative nature) It wouldn't be until Eisner that Disney finally bought the one that got away.
2) In the concepts for Epcot City, there was a towering icon at the center. Instead of an attraction or show inside, Disney's team had placed a futuristic hotel in this prime real estate. Built directly on top of the transportation hub, this hotel would have had amazing location easily accessible to the town, Resort District, and Office tours. Not only would this have been well placed, this could've been one of the faces of Epcot.
3) He was a control freak.

So based off his continual interest with operating hotels and his behavior it's a good idea to avoid saying "Disney (Walt) never wanted to be in the hotel business." What he wanted to do in that business is a mystery; if anything at all. He did have interest though...

Now Roy and managment afterwards are totally different animals...

 

[DDLand]

Yet Disney rates as one of the best places to work. ??

And there is no way Disney would let go of their hotels. They will partner to expand in some areas, but hotels were part of the plan ever since Walt was irritated by what was outside Disneyland. It is a major part of the profits - not just from the hotel itself, but from keeping people on property and in the "zone." DVC doesn't mean they want less hotel rooms. Can't unused DVC rooms be rented by other customers? Win-win.

If everyone is right about High turnover rates that would seem to be increasingly not the case.

Remember, The Walt Disney Company is way more diverse then the Cast Members at Walt Disney World. With the movie studio, television networks, consumer products, interactive, etc. The satisfaction that these highly paid white collars return in surveys may be different then asking a minimum wage CM.

 

[rteetz]

Once again we cross into the realm of which Disney are we talking about? Walt? Roy? Managment at a certain time period?

If we're looking at Walt, then I'd hazard a guess that he would have been happy with hotels accompanying his properties. This is based off:
1) Disneyland Hotel. While it was Wrather who owned the hotel from the beginning, it was nothing more then a compromise. Walt tried to build it, but due to costs of Disneyland it couldn't happen. He reached an agreement with him and allowed the Tycoon to own DLH. Afterwards WDP consistently tried to buy the hotel during Walt's lifetime. (Failed each time because of it's lucrative nature) It wouldn't be until Eisner that Disney finally bought the one that got away.
2) In the concepts for Epcot City, there was a towering icon at the center. Instead of an attraction or show inside, Disney's team had placed a futuristic hotel in this prime real estate. Built directly on top of the transportation hub, this hotel would have had amazing location easily accessible to the town, Resort District, and Office tours. Not only would this have been well placed, this could've been one of the faces of Epcot.
3) He was a control freak.

So based off his continual interest with operating hotels and his behavior it's a good idea to avoid saying "Disney (Walt) never wanted to be in the hotel business." What he wanted to do in that business is a mystery; if anything at all. He did have interest though...

Now Roy and managment afterwards are totally different animals...

I'm referring to Roy and WDW.

I'd also like to add that just because Walt had a hotel at Epcot doesn't mean it would've been Disney owned and not outsourced. No one knows the answer to that.

Yes Walt was a control freak.

Exactly it's a mystery we won't ever know unfortunately.

 

[lockedoutlogic]

If everyone is right about High turnover rates that would seem to be increasingly not the case.

Remember, The Walt Disney Company is way more diverse then the Cast Members at Walt Disney World. With the movie studio, television networks, consumer products, interactive, etc. The satisfaction that these highly paid white collars return in surveys may be different then asking a minimum wage CM.

Indeed...and they have a huge turn and have had to basically eliminate hiring standards in central Florida.

Do they run background checks?
I bet they don't in the "Im smarter than any damn government!" Haze known as Florida...

Talk about a scary concept.

But as you brilliantly pointed out...TWDC has tons of happy employees...who were well paid.

But even if you limit just to parks...
One park/resort is BY FAR the worst as far as mandatory rights and pay than the others for all workers...

Not even close. Until shanghai opens...or maybe not.

And that's the way it was...

 

[lockedoutlogic]

Once again we cross into the realm of which Disney are we talking about? Walt? Roy? Managment at a certain time period?

If we're looking at Walt, then I'd hazard a guess that he would have been happy with hotels accompanying his properties. This is based off:
1) Disneyland Hotel. While it was Wrather who owned the hotel from the beginning, it was nothing more then a compromise. Walt tried to build it, but due to costs of Disneyland it couldn't happen. He reached an agreement with him and allowed the Tycoon to own DLH. Afterwards WDP consistently tried to buy the hotel during Walt's lifetime. (Failed each time because of it's lucrative nature) It wouldn't be until Eisner that Disney finally bought the one that got away.
2) In the concepts for Epcot City, there was a towering icon at the center. Instead of an attraction or show inside, Disney's team had placed a futuristic hotel in this prime real estate. Built directly on top of the transportation hub, this hotel would have had amazing location easily accessible to the town, Resort District, and Office tours. Not only would this have been well placed, this could've been one of the faces of Epcot.
3) He was a control freak.

So based off his continual interest with operating hotels and his behavior it's a good idea to avoid saying "Disney (Walt) never wanted to be in the hotel business." What he wanted to do in that business is a mystery; if anything at all. He did have interest though...

Now Roy and managment afterwards are totally different animals...

Yeah... But Walt was well established as wanting "everything"

On one hand...the boldness built the foundation for what we have now...
On the other hand...
If Walt Disney had lived...he more than likely would have bankrupted his company by 1975.

After spending 5 years or so researching this cat...there is little doubt.

 

[DDLand]

Yeah... But Walt was well established as wanting "everything"

On one hand...the boldness built the foundation for what we have now...
On the other hand...
If Walt Disney had lived...he more than likely would have bankrupted his company by 1975.

After spending 5 years or so researching this cat...there is little doubt.

It's sad to say but you're probably right. Extremely capital intensive and complex. Lining up companies to have (very expensive) offices there would have been a challenge. Couple that with the impending oil crisis...


Of course people said the same thing about Disneyland...

 

[Yellowstonetim]

US Steel was building the resorts, they were not going to manage them from what I read. US Steel isn't in the hotel management business. While US Steel was building the resorts in collaboration with Disney, Disney leased another hotel to practice on and develop training manuals. Doesn't sound like they weren't going to manage them.

And every year Walt Disney Parks & Resorts is in the Top 50 best companies to work for in the US based on various highly respected surveys. And these surveys look at any type of business in the US above a certain size. The survey thousands. In 2012 Disney Parks and Resorts by itself was 33, in 2014 all of Disney was 45 (I think) in another survey.

I couldn't disagree with you more LockedoutLogic! "...in a country that declares war on the mass of its workers more than it does on Iraq isn't that huge of an award." Wow, you really seem to hate this country! Disney actually pays reasonably well for untrained labor. And high turnover does not indicated a bad work environment. Some jobs are not meant for people to be in for years and years. Workers move up or move on.