First Riviera ROFR

[havoc315]

I will also note that DAS restrictions plus moving from free to paid VQ is also an effective increase in capacity, because fewer people are in two places at once.

DAS was a temporary issue. Was DAS restricting capacity in 1995?

 

[Cfabar1]

I think one thing that some people are overlooking is the tax benefits that Disney achieves with new construction vs. flipping contracts. It is why I am convinced the 2042 resorts will go through complete gut rehabs or more likely tear down and rebuilds when 2042 comes. Not all at once, but staggered over several years. Disney won't pass up a chance to make a few bucks flipping contracts every now and then, but it will never be part of DVC's regular business model.

Can you explain this further for those of us who don't work in the tax/real estate space?

 

[Brianstl]

Can you explain this further for those of us who don't work in the tax/real estate space?

The construction costs can be deducted and the new buildings can be depreciated over the years to reduce the amount of income tax Disney owes.

 

[Mouseforward]

The construction costs can be deducted and the new buildings can be depreciated over the years to reduce the amount of income tax Disney owes.

Isn't it an issue that they have the additional layer of the ground lease from WDW to DVD and that is the only profit the building cost can offset?

DVD can't take the building cost off since they lease

 

[Brianstl]

Isn't it an issue that they have the additional layer of the ground lease from WDW to DVD and that is the only profit the building cost can offset?

DVD can't take the building cost off since they lease

On land you lease, but don’t own…..

You capitalize the construction costs and then depreciate those costs over 15 years for tax purposes

 

[Brian Noble]

DAS was a temporary issue. Was DAS restricting capacity in 1995?

You aren’t discussing. You are arguing to be right from a fixed position. Have fun with that.

 

[Mouseforward]

On land you lease, but don’t own…..

You capitalize the construction costs and then depreciate those costs over 15 years for tax purposes

But is DVD doing the construction or WDW? I thought only Aulani was DVD'd construction.

 

[Brianstl]

But is DVD doing the construction or WDW? I thought only Aulani was DVD'd construction.

I’m not sure what division is paying the cost of construction, but it doesn’t matter. Whatever division is paying for the new construction provides a tax benefits to the TWDC that the expense of buying contracts through ROFR doesn’t.

 

[havoc315]

You aren’t discussing. You are arguing to be right from a fixed position. Have fun with that.

Sorry if it seems that way.

I do think for purposes of this discussion, there are differences between physical capacity and simple attendance. Building new attractions will often increase attendance, but such increases are generally temporary. Similar issues like DAS.
The maximum physical capacity has not really changed in decades but, admittedly, that’s rarely relevant. Apart from a couple weeks of the year, the parks aren’t operating at full physical capacity.

Thus, there is plenty of room to keep driving up attendance. And if attendance kept increasing, then demand for hotel rooms would likely keep increasing, and there would be demand to keep building more hotels and more DVC.

Right now, attendance is still 10-15% below the pre-Covid peak.
So right now, there is lower demand for rooms than 6+ years ago.

Converting off-site to on-site? Not at the prices Disney is insisting on charging. They have been actively reducing hotel space over the last 10+ years — even when attendance was increasing.
So their model has been that it’s better to charge more for fewer rooms.

But their model absolutely has included converting regular hotel space into DVC. The question is whether that eventually hits a saturation point. Where you can’t find 10,000 new DVC buyers per year anymore.
Of course, my very rough math — DVC turns about 0.3% of visiting families into DVC buyers.

Disney may believe they can continue such a small conversion rate into perpetuity. (And thus, why they have 5 resorts in active sales now).

 

[Mouseforward]

Sorry if it seems that way.

I do think for purposes of this discussion, there are differences between physical capacity and simple attendance. Building new attractions will often increase attendance, but such increases are generally temporary. Similar issues like DAS.
The maximum physical capacity has not really changed in decades but, admittedly, that’s rarely relevant. Apart from a couple weeks of the year, the parks aren’t operating at full physical capacity.

Thus, there is plenty of room to keep driving up attendance. And if attendance kept increasing, then demand for hotel rooms would likely keep increasing, and there would be demand to keep building more hotels and more DVC.

Right now, attendance is still 10-15% below the pre-Covid peak.
So right now, there is lower demand for rooms than 6+ years ago.

Converting off-site to on-site? Not at the prices Disney is insisting on charging. They have been actively reducing hotel space over the last 10+ years — even when attendance was increasing.
So their model has been that it’s better to charge more for fewer rooms.

But their model absolutely has included converting regular hotel space into DVC. The question is whether that eventually hits a saturation point. Where you can’t find 10,000 new DVC buyers per year anymore.
Of course, my very rough math — DVC turns about 0.3% of visiting families into DVC buyers.

Disney may believe they can continue such a small conversion rate into perpetuity. (And thus, why they have 5 resorts in active sales now).

And yet, they are building a new hotel with 500 plus cash rooms. Do you think disney can not afford the best quants to analyze the data?

 

[Jimmy Geppetto]

Here is another hypothesis (and completely different perspective):

What if Disney exercised ROFR to keep the contract out of the hands of a commercial renter?

Let’s look at the facts.

1. The contract was reported to be ROFR’d via DVCRM.
2. DVCRM stated it “was likely a distressed seller”.
3. DVCRM had a RIV contract of 500 points sold at $100pp just recently.

Now let’s ask the questions:

1. How does it get agreed to at $89pp? Could it have been a seller who agreed to the “instant sale” price if they were distressed?
2. Why not advise the seller to list it at $100pp? Or $95pp?

Or maybe it was just a lucky buyer who negotiated a great deal and Disney decided this was a great contract to make money on like you’ve all suggested.

 

[PolyRob]

1. How does it get agreed to at $89pp? Could it have been a seller who agreed to the “instant sale” price if they were distressed?

Pretty spot on based on the details shared about the taken contract...