DVC profits

[ShellyLynn3630]

Are'nt DVC properties much more profitable to Disney that regular resorts and if so, why?

 

[hakepb]

I believe a fact to consider is Disney has not started construction on a non-DVC hotel since 9/11, and since that tims has actually converted parts of 2 Deluxe hotels to DVC (5th floor of AKV Jambo and Contemporary North wing into BLT)

In addition, Disney has sold land to outside parties for hotels (i.e. 4 Seasons)

If Disney believed they could make more money building and operating more hotels, I'm sure they would. The mouse is very good at making money. It appears that Disney mostly "just" owns hotels, not to make huge margins on the rooms, but to get people on property and spend more money in the parks.

DVC is a great way to get people on property, and because owners need to use it or loose it, it is a regular, consistant stream of guests for the parks. (unlike what happened immediately after 9/11 when hotels had very few guests)

 

[crisi]

DVC is great for short term profits - Disney makes their capital back quickly when they sell the points.

DVC also contributes to attendence stability - timeshare owners become a captive audience that go even when the economy is sluggish.

But the margins for operations in the hotel business are huge. When the economy is good and Disney is filling the Beach Club at $400 a night, DVC can't compete with those profits operationally. And you buy DVC once, it hits their books as profit really once (plus some management fees for dues), but hotels hit over and over and over again - in smaller amounts, for decades.

So each is a different type of investment in their portfolio and contributes to their bottom line in different ways.

I'd guess that hotels are still more profitable overall (otherwise, we wouldn't be getting ROI as owners and DVC would be a poor deal for us), but that Disney has realized that they've saturated their own hotel market.

 

[TisBit]

Good points from everyone, but another thing to consider is that there is much more supply and demand issues for hotels. Disney can only build so many resorts before they just run out of demand and begin competing with themselves.

DVC is great, because it does get guests on property and doesn't compete with on-site hotels.

 

[Chuck S]

Current economy aside, both DVC and the cash hotels are important contributors to Disney profits. I think Hawaii may be the last DVC we see for a while, unless they build somewhere with lower initial building costs, like Mexico. DVC in California, even with only 50 units, hasn't been selling like gangbusters. And since they have to basically absord the financing now, rather than packaging and selling the mortgages, DVC/Disney has to wait longer to realize those profits.