DVC Hawaii Question

[DVCGeek]

They may include developer only perks, a tool that's worked well for many other companies.

What do you mean by "developer only perks"?

 

[bwvBound]

What do you mean by "developer only perks"?

A set of privileges available only to those buying from the developer. Often these perks are transferable if the ownership is "sold" w/in specific family relationships but will NOT transfer through typical resale transactions.

 

[Dean]

What do you mean by "developer only perks"?

As noted, it's perks that come if you buy (or add on) retail that you do not get resale. DVC does not currently have any such options but they could though it's very likely that even if they did, existing members would be grandfathered. Assuming the current setup, you might see things like the discounts, ability to reserve the entire stay up to 7 days in one call, valet parking, discounts, the ability to use any or all exchange options and the like included IF they went this route. But they could also make other changes which might give other priorities, esp if they gave perks based on how many points you owned. I'm not saying I expect DVC to go this way, actually I don't, but it is one fairly easy way to force developer sales over resales.

 

[tjkraz]

Having the ceremonial ground breaking and doing a big story in the Disney Files doesn't mean anything especially in this economy.

I spoke to a couple of DVC execs last week and will be really surprised if they cancel the project at this time. They have invested a LOT of money in it already and I think they view it as a necessary destination to add to the portfolio in order to keep growing DVC into different directions.

Eagle Pines was different in many ways. Both EP and SSR were "on the table" (so to speak) at the same time. EP initially got the nod. However, when 9/11 struck and tourism went in the tank, it became a logical move to close the Disney Institute and proceed with SSR instead. It's not like Disney stopped building DVCs altogether--they simply moved resources from one project to the other.

Also, Disney didn't spend $144 million on land for Eagle Pines--but they have for Hawaii.

I looked at Costco Travel and I could book with them 1br at the Westin TS for a week plus a full size car for very competitive rates compared to what I'm seeing on Redweek for rental via owners.

We could make the same arguments about WDW and DL travel, too. We all know that there are many cheaper options available than paying $400 per night for a standard room at the Poly. And you can get better off-site accommodations for less money than with DVC.

Hawaii is different since there isn't that theme park draw, but Disney is betting that people will still pay a premium price for the product they are creating. That point is certainly open to debate but I think we know where Disney stands on the matter.

 

[twebber55]

People may buy Hawaii points with the intention of using them exclusively at that resort. But reality often intervenes. Even with the smallest of DVC resorts (VWL, BCV) there are only very short periods where the entire resort is booked solid before the 7-month window.

From what I have seen, it sounds like Disney will also be putting its unique stamp on the resort in ways that they haven't at VB or HHI. Sounds like they will have a regular slate of character meals and other unique experiences with that Disney flavor.

Oh, and from what I have seen of the pool (which goes beyond the images publicly released), it may put Stormalong Bay to shame.

Honestly I can't specifically define the person who will choose to buy into the Hawaii resort. But then again it's difficult for me to conceive of the ideal VB or HHI customer either. I know DVC made some mistakes with those two resorts (10 years to sell out at VB) but Hawaii is more highly-regarded as a vacation destination so I don't think we'll see a repeat.

Above all, I think those of us who take the time to analyze these things on-line are very much in the minority. The vast majority of DVC owners do not spend this sort of time analyzing the benefit of certain Home resorts and planning small add-on purchases to fit very specific needs.

Look at the number of people here who have little or no knowledge of other timeshare systems. Once the DVC marketing machine goes into full spin, it will be an easy add-on sell for many existing members--people who have no interest in looking at what Marriott or others have to offer.

Hawaii owners will be some combination of people who want to use points there regularly, people who want that occasional 11-month window and people who just view it as a way to get into the system. During certain periods it will be hard for non-owners to book. Most times there will be 7-month availability.

i think im that guy who defines buying into HHI...two types of vacations that i love
Disney World trips
Beach?/Golf trips

 

[DisFlan]

Back a couple of years ago, wasn't China supposed to be a market target for HI? Disney is uber-popular in China and CNBC says the HK park is doing well - and Shanghai is still on the table. I wonder if this will actually translate into DVC sales/vacations for HI down the road a bit.

DisFlan

 

[phyllisnnj]

In Recent News...

From http://www.bizjournals.com/pacific/stories/2009/02/23/daily14.html
The Japanese market is Hawaii’s third-largest, after the U.S. West and U.S. East market

From http://pacific.bizjournals.com/pacific/stories/2009/02/23/story2.html?b=1235365200^1782212
In Hawaii, visitor arrivals from China grew 105 percent between 1997 and 2007. As a Hawaii Tourism Asia official said last August, “No other major outbound travel market in the world offers this kind of growth potential for Hawaii during the coming three to five years.”

Now, tourism officials are reassessing. They hope Chinese arrivals to Hawaii reach 250,000 annually by 2014, a big jump from the 55,000 who visited in 2008 but far less than many had expected.

By comparison, 1.1 million Japanese traveled to the Islands last year.

From http://www.starbulletin.com/news/bulletin/40303398.html
Despite deep discounting and value-added offers on everything from packages to hotel rooms to activities and food and beverage from Hawaii's struggling visitor industry, the islands started 2009 with across-the-board decreases in arrivals from every source market and spending decreases from all major markets.

In January, Hawaii's visitor arrivals fell to 522,241, a 12.5 percent decrease from the same period in the prior year, according to data released today by the Department of Business, Economic Development and Tourism. And, those that came by air spent 13.6 percent less than travelers who visited the islands in January 2008.

"Average daily room rates are down to the level of two to four years ago," said Keith Vieira, senior vice president of operations for Starwood Hotels & Resorts-Hawaii & French Polynesia. "Going forward, that will be our challenge. We need to grow back rates."

Among the top four visitor markets, air arrivals from the U.S. West decreased 14.3 percent while U.S. East arrivals were 14.9 percent less compared to January 2008. Japanese arrivals declined 12.7 percent while arrivals by air from Canada were 4.7 percent lower than last January.

 

[tjkraz]

In January, Hawaii's visitor arrivals fell to 522,241, a 12.5 percent decrease from the same period in the prior year, according to data released today by the Department of Business, Economic Development and Tourism. And, those that came by air spent 13.6 percent less than travelers who visited the islands in January 2008.

That's a popular theme in this and other Hawaii threads but here's the way I look at it: Disney isn't trying to attract 500,000 people per month. Regardless of where tourism levels may settle in the next couple of years, Hawaii will remain a high-demand vacation destination.

Disney is going to have about 800 rooms to fill. Figure an average of 4 guests per party (with some DVC villas holding more, some less) and an average stay of about 6 nights. That's 800 x 4 x 5.17 (stays per month) = 16533 guests per month. Even in a shrinking market, Disney needs to capture only 3% of Hawaii vacation guests to be successful.

Sure they would prefer to see tourism growing. But when the market is shrinking, it's going to be the lesser resorts that suffer. Disney can easily take away from others' market share and not only survive but thrive! And I'm sure Hawaii tourism officials view Disney as a way to grow the market even in down times. Disney fans will certainly consider Hawaii vacations when they had previously not done so.

 

[phyllisnnj]

Regardless of where tourism levels may settle in the next couple of years, Hawaii will remain a high-demand vacation destination.

Totally agree that Hawaii will always remain a top destination

... But when the market is shrinking, it's going to be the lesser resorts that suffer.

Not totally true. Not only are the lesser resorts suffering, all of the major hotel brands are feeling the pain in Hawaii. Disney will be competing with all of the other major hotel brands that are looking to fill their rooms.

Find Full Story here- http://www.sfgate.com/cgi-bin/blogs/hawaii/detail?blogid=53&entry_id=35285
Nearly all the major hotel chains in Hawaii have lowered their rates, or (like the Four Seasons) are offering promotions such as a fourth night free or packages that essentially amount to discounted rooms.

First, a word in favor of Hawaii's Starwoods, Marriotts, Hiltons et al: Besides their general quality and premium locations, they're more likely to have a variety of rooms that allow for cut rates (or free upgrades), their loyalty programs can subsidize future Hawaii trips and their lodging is often attractively bundled with air/car packages available online or with the aid of travel agents.

Find Full Story here -http://www.sfgate.com/cgi-bin/blogs/hawaii/detail?blogid=53&entry_id=36137
Add Marriott to the list of Hawaii hotelier offering lower rates and greater incentives to get guests in its rooms.

Marriott has been offering some special packages, but new deals for Marriott Rewards members -- which anyone can become -- cut even more costs. That's not to say they're dirt cheap; Marriott's hotels and resorts set a high standard in the state, which its prices reflect. But the special offers do help.

Find Full Story here - http://www.sfgate.com/cgi-bin/blogs/hawaii/detail?blogid=53&entry_id=36408
Staying for free at a top hotel in Hawaii just got a little easier.

Saving up hotel points is a time-honored way to subsidize a trip to the islands -- and offering enough free rooms for people to take advantage of them is one way large hoteliers compete with each other for top travelers' business

Two of Marriott's Hawaii properties are also offering 33 percent off "PointSavers" this spring: the Kauai Marriott Resort & Beach Club has third-off redemption rates for stays April 1-May 15, while the Waikiki Beach Marriott Resort & Spa is offering PointSavers stays now through May 31.

Starwood's SPG members can also take advantage of fifth-night-free point redemptions -- and use fewer points for some of its Hawaiian properties in 2009.

 

[Starr W.]

Totally agree that Hawaii will always remain a top destination



Not totally true. Not only are the lesser resorts suffering, all of the major hotel brands are feeling the pain in Hawaii. Disney will be competing with all of the other major hotel brands that are looking to fill their rooms.

everyone is suffering in HI, big and small. Also I think some of the TS owners trying to rent units out this summer are not going to get their usual 2x MF's for their units.

Plus I've see pictures from recent Marriott Ko Olina visitors(within the last 3 months) of the DVC site. Not much activity going on.

 

[phyllisnnj]

The timeshare industry in general is suffering.

From Starwood's Reports Fourth Quarter 2008 Results - http://media.corporate-ir.net/media_files/irol/78/78669/4Q_2008_Earnings_Release_combined.pdf
Under "Vacation Ownership"
Total vacation ownership reported revenues decreased 48.3% to $134 million when compared to 2007.
As a result of the current economic climate and business conditions, the Company has undertaken a comprehensive review of its vacation ownership business. The Company has significantly scaled back its overhead to match reduced revenue expectations. This included closing five sales centers and terminating over 500 employees during the fourth quarter. In 2008 and early 2009, the Company closed nine sales centers and three call centers and terminated approximately 900 employees. Additionally, the Company has reset capital plans for this business. No new projects are being initiated and the Company has decided to discontinue further development of some projects that were in their early stages. As a result, development costs and land values at certain projects have been written down to their fair value, resulting in an impairment charge during the fourth quarter of 2008 of approximately $72 million.

From Marriott's Fourth Quarter 2008 Results - http://investor.shareholder.com/mar/releasedetail.cfm?ReleaseID=364837
Fourth quarter Timeshare segment contract sales declined to $103 million reflecting weak demand. Contract sales were also reduced by allowances totaling $115 million for previously signed contracts now expected to cancel.

FULL YEAR 2008 RESULTS
Timeshare segment contract sales in 2008 declined 23 percent to $1,076 million reflecting significantly lower demand, the impact of projects approaching sellout and anticipated contract cancellations. The allowance for anticipated contract cancellations reduced contract sales by $115 million for the year.

OUTLOOK
In the first quarter, the company expects Timeshare sales and services revenue, net of direct expenses, to total a loss of about $10 million. First quarter Timeshare contract sales are expected to total $150 million to $160 million.

From Wyndham's Fourth Quarter 2008 Results - http://www.wyndhamworldwide.com/media_center/pr/show_release.cfm?id=478
FOURTH QUARTER 2008 OPERATING RESULTS
Revenues for the fourth quarter of 2008 were $911 million, down 12% over the same period in 2007, primarily reflecting the reduction of the vacation ownership business and increased loan loss provision, as well as the unfavorable foreign currency impact due to the strengthening dollar in the vacation exchange and rentals business.
FULL YEAR 2008 OPERATING RESULTS
Vacation Ownership full year 2008 net revenues decreased 6%, reflecting a higher provision for loan losses, an increase in deferred revenue and the deliberate slowdown in the sales pace which was partially offset by increased property management fees and higher consumer finance income.

 

[phyllisnnj]

On TripAdvisor, folks are complaining about construction noise while staying at the JW Marriott. The new DVC resort is next to the JW Marriott Ihilani Resort and Spa at Ko Olina (see this old thread http://www.disboards.com/showthread.php?t=1847620)

Review Dated Mar 1, 2009
"The hotel itself is very nice but the construction noise next door was horrible. They are building a new Disney resort right next door. All you hear all day long is the beep of the dozer trucks backing up. So if you don't get an ocean view room it probably will be extremely noisy. They also have added a couple more beach condo towers to the development since my 2007 trip so there are a lot more people at the resort than before. The pool area seemed crowded with kids and it was difficult to find a lounger. It isn't the sleepy Hawaii hotel that I had experienced a couple of years ago. Overall, the hotel is very nice and comfortable. Just be prepared for lots of kids, noise and expensive parking. On the plus side: a great lagoon experience, beautiful views, a wonderful walking trail, away from downtown, nice rooms, great bedding, good food (but expensive), awesome customer service, and only about 1/2 hour to the airport"

Review Dated Feb 28, 2009
"Note: The side of the hotel we stayed on - with only ocean views, faces private property where some nights, there are parties and lauaus. They can be quite loud, starting after dusk and finishing around 10. However, only 1 event over the 11 days was really too loud. Mountain view rooms might hear the construction from the disney resort next door."

Review Dated Feb 13, 2009
"CONSTRUCTION WARNING - There is construction going on right beside this hotel in 2009. In a "mountain view" room all you see is trucks and dirt and there in constant noise from the work. I assure you, this will ruin your vacation. As of now, you don't hear the construction on the ocean side, so if you are going to stay here, make sure you get a room facing the water. I would call first to see what the status is."

Review Dated Jan 6, 2009
"There is a new Disney hotel about to be constructed about 50 yards away. Watch for this, because when construction begins you don't want to be anywhere near the Ihilani."

Review Dated Jan 3, 2009
"One other note is to be aware that they're just starting construction of a Disney hotel next-door to the Marriott. For now, it's not an issue and you wouldn't notice it unless you're using the beach. However, I can envision a different story once they break ground on a large high-rise structure. Might be worth calling ahead to check teh status in the future. I would definitely recommend this place as a pleasant alternative to the noise and congestion of Waikiki."

 

[tjkraz]

Not only are the lesser resorts suffering, all of the major hotel brands are feeling the pain in Hawaii. Disney will be competing with all of the other major hotel brands that are looking to fill their rooms.

I agree with that.

What I meant to say is simply that Disney shouldn't have much trouble filling its resort when they are only looking to capture 3% of the market for a prime destination. Sure they will have to discount when things get tough. We see that happening now around the globe. I'm not trying to pretend that Disney will somehow be immune to all of the market forces at work.

But the need to occasionally discount rooms doesn't completely torpedo the viability of the project.

The timeshare industry in general is suffering.

True, but DVC is no ordinary timeshare.

IIRC, in fiscal '07 (ended 9/30/08) DVC had an 18% increase in sales. The first quarter of '08 saw a slight increase over Q1 2007. And the raw sales figures I've seen for the second quarter suggest that DVC is still purring right along.

DVC is fortunate in that it has such a highly sought-after lineup of resorts available now. BLT, Grand Californian, AKV, Treehouses...many destinations with unique appeal. In a stable market, DVC would probably be looking to eclipse the 18% sales increase from '07. But even with the way things are, DVC is still looking at a slight increase in sales over fy 2008.

 

[Dean]

True, but DVC is no ordinary timeshare.

Actually for off site I think it really is an ordinary timeshare, that is part of the issue being discussed, how do they compete without the draw of the Parks to back them up. Certainly there's still an indirect effect from the parks but not nearly as much as the on property options.

 

[tjkraz]

Actually for off site I think it really is an ordinary timeshare, that is part of the issue being discussed, how do they compete without the draw of the Parks to back them up. Certainly there's still an indirect effect from the parks but not nearly as much as the on property options.

Hard to respond to that without even knowing what Disney will bring to the table and how they decide to market it.

My sense is that, right now, many other timeshares are suffering largely due to the manner in which they market their product. As you've often said, other developers are much more aggressive in their sales tactics. This approach has historically lead to sales volumes several times those of DVC.

However in our tough economy, my suspicion is that other developers are losing the lower-end sale. The folks who previously could be badgered and cajoled into buying are now walking away with greater frequency. Either that or their financial situation prevents them from ever entering the room in the first place.

With DVC largely allowing business come to them, their sales numbers appear to be more stable. As was the case in 2001/02, DVC is gaining new business from people who see it as a way to reduce their long-term OOP expenses while locking-in those annual trips to DL or WDW.

The Disney name will carry some clout in terms of Hawaii sales, but it's hard to tell how far that will go. With them building nearly 500 DVC villas, someone seems to think the resort will hold appeal. One thing is certain--if Hawaii sells at a similar pace to Vero, you and I will both be in the ground before the place sells-out.

 

[Starr W.]

Actually for off site I think it really is an ordinary timeshare, that is part of the issue being discussed, how do they compete without the draw of the Parks to back them up. Certainly there's still an indirect effect from the parks but not nearly as much as the on property options.

. After a few Marriott stays, my kids, especially the 12 yr old find the Marriott activities better. Especially like the movie nights for the 6-teenage. The activity staffs at both Summit Watch and Manor Club were just as good as any I have encountered at any DVC(including Tim's fave VB).

DVC will really have to up the decor in the villas(they have made progress with AKV and BLT) but I don't think they are anywhere near Westin or Marriott levels. Hopefully the layout of the rooms will be better.

I really don't know how much "clout" Disney's name will carry in HI. They are really going to have to market, because I think most people think of the major hotel chains in HI not Disney. And while the Ko Olina area is nice(I'm researching for a 2010 trip) I think I would rather be on Kauai, Maui or the BI.

 

[phyllisnnj]

What I meant to say is simply that Disney shouldn't have much trouble filling its resort when they are only looking to capture 3% of the market for a prime destination. Sure they will have to discount when things get tough. We see that happening now around the globe. I'm not trying to pretend that Disney will somehow be immune to all of the market forces at work.

But the need to occasionally discount rooms doesn't completely torpedo the viability of the project.

I guess I see the current Hawaii tourism situation as more than a simple discount room impact.

From http://www.starbulletin.com/news/20090205_Travel_experts_predict_long_slump_for_Hawaii.html

Gangnes, who is an associate professor of economics and the director of the University of Hawaii's Economic Research Organization's Hawaii Economy Group, said that he expects Hawaii's economy to experience a deep downturn by historical measures that will be fairly long-lived.

The Hawaii visitor industry's dependence on California, where approximately one-quarter of the visitor arrivals come from, is problematic, he said.
"They've been doing particularly poorly," Gangnes said, citing the region's high levels of job layoffs, declining home values, bankruptcies and foreclosures.
A significant portion of homeowners in California are now underwater on their mortgages, he said.
"It's not hard to imagine what that does to a household's ability to spend," he said.
Since the U.S. market makes up 60 percent of Hawaii's visitor market, the state is greatly dependent on the nation's economy, said Daniel Nahoopi'i, tourism research branch chief for the state Department of Business, Economic Development & Tourism.
"We are likely to see a retreat in consumer spending in 2009," Nahoopi'i said, adding that this pullback likely will translate into less long-haul travel.
And, while President Obama's stimulus package could have a positive impact on Hawaii tourism, it could take several years to effect change, he said.
"We may see some stabilization in 2009, but we aren't likely to see recovery until 2010," Nahoopi'i said.

Local economists said that Hawaii's international tourism markets are also grappling with financial concerns.

Hawaii's declining Japan market has been particularly hard hit by economic concerns, Gangnes said.
"In December their exports were down by more than a third," he said.
Yujiro Kuwabara, the director and general manager of JTB Hawaii, said that he is worried about summer travel to Hawaii from Japan.
"If they don't get their summer bonus, they won't take the family to Hawaii, maybe. They'll go to Tokyo Disneyland or a nearby hot spring instead," Kuwabara said, adding that he does not expect to see recovery in the Japan market until at least 2011.
While Japan's yen rate is favorable to the U.S. dollar, the exchange rate is not driving travel demand, Nahoopi'i said.
"The Japanese have a tendency to save during harder times," he said.

Europe, South Korea, China, Oceania, New Zealand and Australia are all grappling with the global financial crisis, the panel said.

And while the Canadian economy had been booming, weak U.S. growth is likely to have a negative impact moderating travel from this group, Nahoopi'i said.

"We could see the first decline in world GDP since the 1930s," Gangnes said. "There's nowhere to hide. It doesn't matter where you are getting your tourists from, you are bound to be in bad shape today."

As the global recession plays out, Gangnes said, long-haul destinations like Hawaii are likely to see a protracted tourism slump.
Unlike the period after Sept. 11, 2001, when Hawaii recovered quickly, during this tourism downturn, "we get steep drop in occupancy with no snapback and a period of recovery that takes a lot longer to get out of," he said.

 

[Starr W.]

I guess I see the current Hawaii tourism situation as more than a simple discount room impact.

The hotel cost is just a small part of the total $$ you need to spend on an HI trip. People right now just don't want to part with the cash it takes to do an HI trip.

 

[tjkraz]

I guess I see the current Hawaii tourism situation as more than a simple discount room impact.

I'm not really challenging what they future may or may not hold. My only point is that Disney only needs a small portion of the market to succeed. Whether Hawaii is attracting 800,000 tourists per month or 500k or 300k, Disney only needs to convince a small portion to stay ins 800 rooms.

It's easy to generalize about what "people" may or may not want to do with their money, but the information here indicated over 500k tourists visited in January. That may be down from prior periods but it's still a very real number.

Regardless of what we outsiders may think, it appears a certainty that the resort is moving forward. In addition to the TripAdvisor comments copied here, a call to the Marriott confirmed that work has begun on the Disney site. Good economy or bad, Disney appears committed to the project.

 

[CarolA]

Actually for off site I think it really is an ordinary timeshare, that is part of the issue being discussed, how do they compete without the draw of the Parks to back them up. Certainly there's still an indirect effect from the parks but not nearly as much as the on property options.

I agree.

This is the same as those other off propertly timeshares.

And the "DVC advantage" is LOCATION. They don't have that with this resort. There are other timeshares with the same location (RIGHT NEXT DOOR LOL!)

Remember Disney is not just competing with those "hig pressure" bait and switch timeshares. The competetion is Marriott, Hilton, etc... They don't play the bait and switch. They, like Disney, charge a lot. They do give some advantages to buying direct as opposed to resale something Disney has not yet done, but.....things can always change. Do Hawaii vacation goers value the Disney location or would they rather have a Marriott with more world wide units? I think that's the big question. If you aren't going to Hawaii every year where do you want to go when you aren't there. Are there enough buyers who think "Disney" or will those buyers think "Aruba" , "Europe" etc....

Vero was never an outstanding success. HH seems marginal. We will see what this one holds!