Does Disney continue to "make money" after a resort sells out?

[todd222222]

Does Disney continue to "make money" after a resort sales out?

I've heard that DVC brings in a lot of money, but is it just the sales? Do they make any money on dues? Do they get a "management" fee that brings profit to the bottom line?

Will DVC only continue to make Disney money only if they continue to build more resorts?

Or is the only profit after a resort sells out outside of the resort? (Theme park tickets, food, etc.)

I understand that DVC members own the resort, so my guess is that Disney gets the vast majority of their profit from the sale of the interest.

 

[ADP]

I would say absolutely. The money made may not be directly related to the resort, but between APs, souveniers, dining, entertainment, etc, etc, etc...Yes they are making money. If the resort rooms are full they are making money.

I know they are making money off of me and I'm fine with it.

 

[RoyalCanadian]

We are told there is no profit made on the annual fees. Call me gullible, but I actually do believe that one.

 

[jarestel]

The vast majority of DVC members patronize Disney theme-parks, dine at Disney restaurants, and buy Disney merchandise. So Disney does have a financial interest in making sure the DVC rooms are occupied. Additionally, Disney does retain a percentage of DVC rooms for their own purposes which have earnings potential as well.

DVC, the managing entity for the timeshare program, doesn't operate to make a profit, but their paychecks come from member dues. In that respect, I don't see a lot of motivation for DVC to keep administrative/labor costs down since that directly impacts their take home pay and can easily be passed along to the membership in the form of higher dues.

 

[Plutofan]

Disney receives a management fee. I believe that it is fixed at 12% of the budget excluding certain expenses. I would assume that Disney makes a lot of money off of the management fee as more resorts are added since I would figure that some of their costs are fixed. I also would believe that they probably mark up the contracts that have with the resorts for cleaining, transportantion etc unless that is included under the management fee. Disney also owns a portion of the points that they rent off and use for maintenance. When people trade outside of DVC Disney takes the points and rents off a DVC reservation to pay for the trade out. I would assume that Disney makes money off these trades since when we went on a cruise in July the trade out was around $6.5 per point and Disney usually gets a lot higher price when they rent off the room. Especially since if you take the rack rate and divide by the point cost the value is usually in the high teens to twenties. Someone else may have more details and can better explan the different ways Disney makes money. The one thing for sure Disney makes a lot of money even after the resorts are sold out.

 

[Plutofan]

The vast majority of DVC members patronize Disney theme-parks, dine at Disney restaurants, and buy Disney merchandise. So Disney does have a financial interest in making sure the DVC rooms are occupied. Additionally, Disney does retain a percentage of DVC rooms for their own purposes which have earnings potential as well.

DVC, the managing entity for the timeshare program, doesn't operate to make a profit, but their paychecks come from member dues. In that respect, I don't see a lot of motivation for DVC to keep administrative/labor costs down since that directly impacts their take home pay and can easily be passed along to the membership in the form of higher dues.

I would think that there costs are well below the 12% fee that they receive yearly to manage the properties. I would be surprised if they do not make a profit since 12% is a lot when you factor how many points are outstanding.

 

[Plutofan]

We are told there is no profit made on the annual fees. Call me gullible, but I actually do believe that one.

There is no profit over expenses of which the management fee is a fixed expense at 12%. So yes, there is no profit but Disney is still making a good amount of money off the management fee I would assume.

 

[jarestel]

I would think that there costs are well below the 12% fee that they receive yearly to manage the properties. I would be surprised if they do not make a profit since 12% is a lot when you factor how many points are outstanding.

That's a good point. Another source of "profit" from a non-profit entity.

 

[Plutofan]

What you have to understand is that Disney is very smart when structuring agreements. For example since the management fee is a fixed percentage they will always get an increase each year as the non exludable expenses rise with inflation. So as costs grow so does the management fee. Not the best incentive for keeping costs low. Also they do not pay dues on points held in inventory. Because Disney guarantees that they will pick up costs that exceed the budget they get a concession of annual dues for points in inventory. Since Disney controls the check book I would think that it would be very difficult for costs to exceed the annual budget. You will find this information in the annual budget. There is not much detail so my interpretation may not be 100% correct. I would love to see full disclosure on all the related party contracts but you know that will never happen.

 

[sjdisneywedding]

What you have to understand is that Disney is very smart when structuring agreements. For example since the management fee is a fixed amount they will always get an increase each year as the non exludable expenses rise with inflation. So as costs grow so does the management fee. .

do you mean the management fee is a fixed PERCENTAGE rather than amount?

if its a fixed amount it would never change

 

[Granny]

Does Disney continue to "make money" after a resort sales out?

There is another aspect to the maintenance fees that I don't think has been brought up. When Disney builds a DVC resort in addition to an existing WDW resort (VWL, BCV, AKV), they help defray the fixed costs of the existing resort. Front desk, bell services, pool maintenance, etc all become a shared cost that was previously borne by the main resort alone.

Does the addition of a DVC resort increase some of those costs? I'm sure it does, but my guess is that overall the DVC dues make the overall main resort more profitable. DVC acts like a cash cow for the main resort with incoming revenues regardless of occupancy rates of the DVC resort.

So not only does Disney make some money off of the maintenance fees, my opinion is they also make their companion resorts more profitable as well. Just my opinion...I don't have any audited results to prove my point.

 

[drusba]

How Disney makes money after selling out a resort:

1. Most costs like transportation, housekeeping, insurance, taxes etc. are charged at actual (estmated at beginning of year) cost. If Disney tried to build profits into those it could face legal difficulties. It doesn't really make money there unless you order daily housekeeping for which they charge more than actual cost.

2. There is an approximately 12% management fee in the budget; that is 12% of the operating (not reserve or property taxes) budget. The percent does not change but obviously the actual amount goes up as dues go up. A substantial part of that is likely profit though it also goes to pay for Member Services operations. Note that amount is not for administrative or other personnel who work at a particular resort because those costs are budgeted in the operating costs.

3. In the budget there is a $1 per member reservation charge per year, which also goes to Member Services.

4. During the last 60 days before any date, it can rent any unreserved rooms. Under the official documents, part of that (after some allowed costs) goes back into the budget as revenue for benefit of members to offset costs but only that amount up to 2 1/2% of the operating budget. Any amount gained over 2 1/2% of the budget goes partly to Member Services reservation component (which also has another name -- Buena Vista Trading Company) and the rest to the Disney Vacation Club Management Co. You can assume there is some substrantial profit there.


5. They charge a $90 fee for transfering out to non-DVC resorts. Obviously, not all of that is costs.

 

[Plutofan]

do you mean the management fee is a fixed PERCENTAGE rather than amount?

if its a fixed amount it would never change

Sorry. Fixed percentage

 

[3DisneyKids]

According to our own Pete Werner (owner and operator of the DIS), Disney makes 1 million per month per DVC resort. I have no idea where that revenue is coming from (management fees or CRO guests, etc.)....but it is well known that DVC is a cash cow for the Disney company--that's why they are building so many more of 'em!

 

[Demosthenes]

According to our own Pete Werner (owner and operator of the DIS), Disney makes 1 million per month per DVC resort. I have no idea where that revenue is coming from (management fees or CRO guests, etc.)....but it is well known that DVC is a cash cow for the Disney company--that's why they are building so many more of 'em!

I wondered about that. He said a million dollars in revenue, which is not net income. My small business does $500k in monthly revenue, but we don't net that much (obviously). Did Pete mean net income, or is it really gross revenue? I don't see how that could be; wouldn't monthly expenses for SSR approach a million dollars? Am I way off here?

 

[wildernessDad]

Don't forget that Disney has ROFR and can gobble points up 'on the cheap' and offer them as add-ons to poor suckers, I mean, unfortunate souls such as myself.

 

[jjk1107]

This is just a small part of it (very small), but I think they make money off of the extra housekeeping that is ordered as well as the coffee. I am sorry, but there is no way that Disney pays $3 for the little coffee pack. I would guess they pay $.25 - $.50 (if that much), so they are making a pretty good profit when people pay $3. And it does not cost Disney $8 for extra towels in the room when someone orders them.

 

[todd222222]

This is just a small part of it (very small), but I think they make money off of the extra housekeeping that is ordered as well as the coffee. I am sorry, but there is no way that Disney pays $3 for the little coffee pack. I would guess they pay $.25 - $.50 (if that much), so they are making a pretty good profit when people pay $3. And it does not cost Disney $8 for extra towels in the room when someone orders them.

But wouldn't this go into the general fund of DVC operations and not into Disney's (corporate) pockets?

Would these cost help bring down dues, at least in theory? I guess the question is who actually buys the coffee? Does Disney proper buy the coffee and then sales it to DVC for $3 who then resales it to it's owners? Or does DVC pay the actual cost (plus some shipping and handling cost)? Or does DVC have it's own contract from the coffee suppliers?

so many questions....that I guess don't really matter.

 

[Evil Princess]

Disney makes more money off of things like food and merchandise than they do off of the rooms.

You have to figure that because of DVC, the average owner is traveling more than they would have if they didn't own. More trips = more merchandise purchases, more food purchases, and more money spent in the parks.