DVC in DIS Earnings report

[gtrist4life]

Hot off the Walt Disney Earnings release


Domestic Operations

Lower operating income at the Walt Disney World Resort and Disneyland Resort was primarily due to decreased guest spending, partially offset by lower costs. Decreased guest spending at the Walt Disney World Resort was due to lower average daily hotel room rates, lower average ticket prices and decreased merchandise spending. At Disneyland Resort, decreased guest spending was primarily due to lower average ticket prices and decreased merchandise spending. Lower costs reflected savings from cost mitigation activities and lower cost of merchandise, food and beverages sold, partially offset by labor and other cost inflation. Lower operating income at Disney Vacation Club reflected unfavorable impacts associated with securitized ownership interests, higher per unit cost of sales, decreased sales of term extensions on certain existing properties and lower rentals of vacation club units.

 

[gkrykewy]

Securitized ownership interests?

 

[JimC]

I suspect they could not package and sell the DVC mortgages with the credit markets in such a fix.

 

[Ed T]

I was at WDW the weekend of April 25/26/27 and you couldn't prove to me there was a depression or economy spending issue. The parks were crowded with 40 - 50 minute waits on the popular attractions and minimum 20 minutes on the others. We eat at Portobello on Saturday night and there was a 40 minute wait at 7 pm and when we left at about 8:30 it was down to a 30 minute wait. Thanks for a reservation. T Rex restaurant must have had about 200 people gathered around outside waiting for a table. It took me 15 minutes to fine a parking spot.

 

[arthur06]

I was at WDW the weekend of April 25/26/27 and you couldn't prove to me there was a depression or economy spending issue. The parks were crowded with 40 - 50 minute waits on the popular attractions and minimum 20 minutes on the others. We eat at Portobello on Saturday night and there was a 40 minute wait at 7 pm and when we left at about 8:30 it was down to a 30 minute wait. Thanks for a reservation. T Rex restaurant must have had about 200 people gathered around outside waiting for a table. It took me 15 minutes to fine a parking spot.

I will speak a bit to the opposite. We were there the 24th to the 29th. We went to Epcot on the 26th (Sunday) and there were some waits, but nothing obserd! But, it was also Sunday. Monday at DHS, there were literally NO Waits! DW and I rode RNR 3 times and didn't wait more then 5 minutes any times! TOT we literally waled right on. TSM was our longest wait at 20 minutes!

We were at IOA on Wednesday and literally walked on to every ride we wanted. Zero waits!

 

[jlewisinsyr]

Remember attendance is only 1/10th the problem. Its the ancillary spending that makes up the 9/10 of the rest of it.

 

[CWO4DVC]

Ditto

 

[Deb & Bill]

Hot off the Walt Disney Earnings release


Domestic Operations

Lower operating income at the Walt Disney World Resort and Disneyland Resort was primarily due to decreased guest spending, partially offset by lower costs. Decreased guest spending at the Walt Disney World Resort was due to lower average daily hotel room rates, lower average ticket prices and decreased merchandise spending. At Disneyland Resort, decreased guest spending was primarily due to lower average ticket prices and decreased merchandise spending. Lower costs reflected savings from cost mitigation activities and lower cost of merchandise, food and beverages sold, partially offset by labor and other cost inflation. Lower operating income at Disney Vacation Club reflected unfavorable impacts associated with securitized ownership interests, higher per unit cost of sales, decreased sales of term extensions on certain existing properties and lower rentals of vacation club units.

This caught my eye. It looks like OKW extensions may not be going as well as they thought? Or they're all tapped out. I wonder how this will impact future extensions.

 

[disneynutz]

Anytime that Disney is offering a "deal", they are trying to increase profit. 10 families spending $4,000 = $40,000 verses 20 families spending $2,000 for the same sales. No wonder Disney is crowded.

 

[JimMIA]

I suspect they could not package and sell the DVC mortgages with the credit markets in such a fix.

I'm sure that's true, and it's a biggie. As a matter of fact, they even announced they were having to tighten their lending policies and charge much higher interest because they were no longer able to package and sell the mortgages.

 

[JimMIA]

This caught my eye. It looks like OKW extensions may not be going as well as they thought? Or they're all tapped out. I wonder how this will impact future extensions.

I don't know how extension sales are going now, but I think this was always going to be pretty much of a one-time revenue spike. They offered the extensions, some people bought them and Disney realized a bunch of revenue with virtually zero expense. But once that one-time surge passed, that level of revenue would not be there in successive years.

Fact is, whatever they made on the extensions was almost 100% profit.

 

[backyardponder]

I don't know how extension sales are going now, but I think this was always going to be pretty much of a one-time revenue spike. They offered the extensions, some people bought them and Disney realized a bunch of revenue with virtually zero expense. But once that one-time surge passed, that level of revenue would not be there in successive years.

Fact is, whatever they made on the extensions was almost 100% profit.

That's why I'm thinking they will do extensions at some of the other 2042 resorts. I'd consider it if my kids want me to. I don't think I'll be going there much after I'm 93

 

[JimMIA]

That's why I'm thinking they will do extensions at some of the other 2042 resorts. I'd consider it if my kids want me to. I don't think I'll be going there much after I'm 93

I'm sure they will, but probably not until the economy picks up.

Personally, we passed on the offer. My reasoning was that if I wanted to put more money into DVC - which I don't - I'd rather spend it on points I can use NOW rather than points that I won't get for 33 more years.

But from Disney's perspective, it's like found money. I think they'll offer other extensions, starting in a couple of years and probably one or two extensions per year if they can sell them.

 

[doconeill]

Fact is, whatever they made on the extensions was almost 100% profit.

Depending what is done at the end of the original term, they may have simply "borrowed" from future income of being able to resell those units that have been extended.

Anytime that Disney is offering a "deal", they are trying to increase profit.

Or reduce loss. In either case it is an attempt to increase revenue.

I will speak a bit to the opposite. We were there the 24th to the 29th. We went to Epcot on the 26th (Sunday) and there were some waits, but nothing obserd! But, it was also Sunday. Monday at DHS, there were literally NO Waits! DW and I rode RNR 3 times and didn't wait more then 5 minutes any times! TOT we literally waled right on. TSM was our longest wait at 20 minutes!

We were at IOA on Wednesday and literally walked on to every ride we wanted. Zero waits!

We were there from April 19th-27th. Up until the 27th, the wait times in general were longer than we were used to at the major attractions. At MK that is exacerbated by Space Mountain being closed. DW and I slipped over to USO on the 22nd, and it was DEAD. Walked on everything except maybe 10 minute waits for Simpsons.

On the 27th, we went to AK for the morning until we had to leave for the airport. It was an EMH, but it was DEAD. DW and DD8 went ahead to get FPs for Everest while I lagged behind with DD4. We caught up with them - they got FPs for 9am (which the clock started at that morning), walked on it twice in a row, took a break with two of us walking on PW and the other two on Dinosaur, went back and used our FPs and turned around and walked on it AGAIN. FPs weren't even going at a real-time rate - by then the FP time was only about 30 minutes ahead of the current time. It later broke down though...

 

[Tink-n-Belle]

We were there April 15-22nd and it was busy. The week of the 19th it did start to slow, but TSM at DS was a 80-100 minute wait!!

The AK on Tuesday the 21st was very crowded, but the wait times for the safari and EE was only 40-50 minutes. But KAli was 90 minutes.

 

[whitfamily]

You allalso went during peak time. We went non-peak and January and other than To Story and Aerosmith at HS and Space Mountain at MK we walked on to every ride.

I think in general you will still see people at peak times and Disney is offering HUGE discounts for many of the non-peak times. I think we saw one where kids can go free with meal plan if adults get a resort package. So, people will be there, but I doubt they are spending like they once did.

 

[disneynutz]

Even with the bad economy and all the deals that Disney is offering, they still had a net income of 1.5 billion dollars for their current year. Things could be worse.

 

[tjkraz]

There weren't any details on DVC other than to say that profitability was down in year-to-year comparison. Could be down 1%, 50% or somewhere in between.

The OKW extensions were not mentioned because DVC booked noteworthy dollars from that project in the 2nd Quarter 2008 and much less in 2nd Quarter 2009. It was one contributing factor to the decline year-to-year.

As for the Disney Parks as a whole, the biggest issues (IMO) are loss of revenue from incentives and lower guest spending. I believe attendance is only down 1% for the quarter, and that's with Easter falling outside of the 2nd Quarter this year. (Remember all of this is year-to-year comparisons--2Q 2008 had Easter while 2Q 2009 did not.)

I'm sure guests are spending less on souvenir junk and other non-essentials. But the biggest chunk is the 3 free room nights they are giving away with each 7-night stay. A year ago Disney was charging for those nights (even if not full rack rate.) That's tens-of-millions of revenue lost--most of which is pure profit since Disney is still paying the operating costs for those rooms.

Iger said that bookings were back on track for the rest of the year, which is a good sign. I don't believe they have announced any late-year discounts other than the usual "free dining" in the fall.

If Disney starts easing off of the discounts, it should be the first sign that profitability is on its way back up.