How DVC Works Internally

[Longhairbear]

We've belonged to DVC since 2003. When we first joined, we had many questions, but mainly were astounded at what we got for the price. We couldn't believe how DVC made any profit. I still don't understand how DVC makes a profit beyond the initial sale.
Would someone who knows please explain how the inner workings, work?
My first question is about compensation to hotels, DCL, other DVC resorts etc.
For example, my home resort is VWL. I use my points at OKW. How is OKW compensated?
I use my points at VGC, what does DVC do to compensate VGC ?
I use my points for DCL, DLH, how is the money shifted around?
I use my points at my home resort, where is the profit coming from?
Thanks for any insight.

 

[com_op_2000]

We've belonged to DVC since 2003. When we first joined, we had many questions, but mainly were astounded at what we got for the price. We couldn't believe how DVC made any profit. I still don't understand how DVC makes a profit beyond the initial sale.
Would someone who knows please explain how the inner workings, work?
My first question is about compensation to hotels, DCL, other DVC resorts etc.
For example, my home resort is VWL.
I use my points for DCL, DLH, how is the money shifted around?
Thanks for any insight.

I can only help with this question. When you book DCL, DVC gives those "points/reservation" to CRO, and then CRO sales your "points/reservation" stay to pay DCL.

 

[rlovew]

If you use your points at a different resort then that opens up points at your home resort for someone else to use. If people from a resort only stayed there then there would be few if any points available at 7 months out for use of other members.

 

[Chuck S]

Between DVC resorts, there is simply a reciprocal usage agreement allowing for use by members at other DVC resorts. Really nothing financial involved as in theory another member, from a different resort is also using your home resort.

For trades outside the DVC System to cruises and other Disney Destinations, as Com_op_2000 said, a reservation representing the points involved is turned over to cash reservations to offset the payment.

A reciprocal agreement similar to the one between DVC resorts covers RCI system trades.

As far as profit, Disney/DVC collects an annual management fee, 12% of our dues. This isn't pure profit, but there is some ongoing profit built into that figure.

But you are correct, for timeshares, the initial sale is the lion's share of the profit income, supplemented by the annual management fee.

 

[Dean]

We've belonged to DVC since 2003. When we first joined, we had many questions, but mainly were astounded at what we got for the price. We couldn't believe how DVC made any profit. I still don't understand how DVC makes a profit beyond the initial sale.
Would someone who knows please explain how the inner workings, work?
My first question is about compensation to hotels, DCL, other DVC resorts etc.
For example, my home resort is VWL. I use my points at OKW. How is OKW compensated?
I use my points at VGC, what does DVC do to compensate VGC ?
I use my points for DCL, DLH, how is the money shifted around?
I use my points at my home resort, where is the profit coming from?
Thanks for any insight.

DVD makes a ton on the upfront sale and get a profit from the ongoing management fee. DVC does not make a profit otherwise nor should it. It seems you think their underpaid, trust me, that's not the case. As for as what happens if you stay somewhere else, someone has paid for that and you are "exchanging" within the system in a reciprocal manner. For the DC, CC, DCL and the like they take the points you give up, reserve rooms and rent those out. CRO take a big cut of that and not all such rooms are rented which is why those options are so expensive.

 

[hakepb]

There is 2 sides of DVC, the Developer and the ongoing rental manager.
The developer builds new units and generally sells them for something like 4x the construction cost. (That's not all profit because the developer has to pays a lot for marketing, and they no longer get mortgage $ upfront)

Then there is the rental manager that runs the booking system and provides maintaince. As mentioned they get some profit in the annual dues.

There are about 7,670,000 total points sold in OKW.
With 2013 dues of $5.34/point they collect $40,857,000/year to run OKW
There are 531 units at OKW (230 kickoff 2BR that can be seperated into 1BR and studio) so they get $77,133 a unit per year for maintaince. That is $6,428/ month per unit.... And OKW has favorable dues and low points/unit.

And unlike your typical apartment rental, or hotel where they have to maintain and pay for the building cost... You already bought the building and land at the initial purchase. You are "just" paying for maintaince, cleaning , taxes and service with your $214/day

 

[disneynutz]

We've belonged to DVC since 2003. When we first joined, we had many questions, but mainly were astounded at what we got for the price. We couldn't believe how DVC made any profit. I still don't understand how DVC makes a profit beyond the initial sale.
Would someone who knows please explain how the inner workings, work?
My first question is about compensation to hotels, DCL, other DVC resorts etc.
For example, my home resort is VWL. I use my points at OKW. How is OKW compensated?
I use my points at VGC, what does DVC do to compensate VGC ?
I use my points for DCL, DLH, how is the money shifted around?
I use my points at my home resort, where is the profit coming from?
Thanks for any insight.

Gross profit on BLT sales will be in the neighborhood of $610 million when sales are completed. That's a pretty good profit and a couple of years ago, DVC was making record profits which boosted Disney's bottom line while other business units were slowing down.

Bill

 

[crisi]

DVD makes a ton on the upfront sale and get a profit from the ongoing management fee. DVC does not make a profit otherwise nor should it. It seems you think their underpaid, trust me, that's not the case. As for as what happens if you stay somewhere else, someone has paid for that and you are "exchanging" within the system in a reciprocal manner. For the DC, CC, DCL and the like they take the points you give up, reserve rooms and rent those out. CRO take a big cut of that and not all such rooms are rented which is why those options are so expensive.

And because they get that profit upfront (or over the few years of initial sales) its worth a lot more. $1 today is worth more than $1 tomorrow. Disney then has a huge influx of capital with which to invest.

 

[thepops]

And at the end of the contract, you ( or someone else) gets to buy it all over again.

 

[Longhairbear]

DVD makes a ton on the upfront sale and get a profit from the ongoing management fee. DVC does not make a profit otherwise nor should it. It seems you think their underpaid, trust me, that's not the case. As for as what happens if you stay somewhere else, someone has paid for that and you are "exchanging" within the system in a reciprocal manner. For the DC, CC, DCL and the like they take the points you give up, reserve rooms and rent those out. CRO take a big cut of that and not all such rooms are rented which is why those options are so expensive.

Thanks, so in the case of a room not rented the points go up, or that option of staying at a non DVC goes away.

 

[Mickey'sApprentice]

There is 2 sides of DVC, the Developer and the ongoing rental manager.
The developer builds new units and generally sells them for something like 4x the construction cost. (That's not all profit because the developer has to pays a lot for marketing, and they no longer get mortgage $ upfront)

Then there is the rental manager that runs the booking system and provides maintaince. As mentioned they get some profit in the annual dues.

There are about 7,670,000 total points sold in OKW.
With 2013 dues of $5.34/point they collect $40,857,000/year to run OKW
There are 531 units at OKW (230 kickoff 2BR that can be seperated into 1BR and studio) so they get $77,133 a unit per year for maintaince. That is $6,428/ month per unit.... And OKW has favorable dues and low points/unit.

And unlike your typical apartment rental, or hotel where they have to maintain and pay for the building cost... You already bought the building and land at the initial purchase. You are "just" paying for maintaince, cleaning , taxes and service with your $214/day

I don't mean to question...but jeepers that's a lot of cash!

 

[Longhairbear]

In my case, personally, we have not been to FLA in 3 years, and have no current plans to visit FLA. We use our points in CA, at VGC, and at the DLR hotels. We did do a DCL California Coast cruise for 7 nights.
Our home base is VWL that we bought in 2003.
We are reading that occupancy at WDW is down. I assume that includes DVC rentals by those using our points to recoup costs from our non DVC stays ie: DCL, and DLR hotels. So, if the non DVC entities who we gave our points to DCL/ Disney hotels via booking non DVC, to Disney resorts, and cruise ships have trouble filling our villa at VWL, they are losing money?
I'm sorry if I haven't explained my thought process well. I am thinking that my using points everywhere, except in a FLA DVC is costing DVC a profit loss. A profit loss equals less perks in the future.

 

[WebmasterDoc]

...There are about 7,670,000 total points sold in OKW.
With 2013 dues of $5.34/point they collect $40,857,000/year to run OKW
There are 531 units at OKW (230 kickoff 2BR that can be seperated into 1BR and studio) so they get $77,133 a unit per year for maintaince. That is $6,428/ month per unit.... And OKW has favorable dues and low points/unit. ...

The $5.34 per point includes a LOT more than maintenance. The county collects Property Tax from that amount - landscaping, transportation (bus, boat), Front Desk, Bell Staff, Recreation, Housekeeping, Utilities, Security, Member Services, etc. are all paid from the same fees plus DVC's management fee of 12% of the portion not including Property Taxes is also included in the annual fees. Maintenance is certainly one component, but there are many, many other expenses covered by the annual fees.

 

[hakepb]

The $5.34 per point includes a LOT more than maintenance. The county collects Property Tax from that amount - landscaping, transportation (bus, boat), Front Desk, Bell Staff, Recreation, Housekeeping, Utilities, Security, Member Services, etc. are all paid from the same fees plus DVC's management fee of 12% of the portion not including Property Taxes is also included in the annual fees. Maintenance is certainly one component, but there are many, many other expenses covered by the annual fees.

Yes, at the end I also mentioned the taxes, cleaning and service.
I did fail to mention Utilities (which includes TV and Internet)

But still, for about $730/mo on top of your 2BR Miami condo purchase you can get:
Emerald condo Brickell Condominium amenities:
Social Room - 24-hr Security - Valet Parking - Covered Parking - Concierge - Roof top Pool and Spa - Gym - Dog Park & Walk path

http://www.kafka-franz.com/Emerald-Brickell.htm
(Just the first thing I pulled up in Google. Another article suggests you normally see around $.50/sq FT)

 

[Mickey'sApprentice]

I suppose its the $40 Million / year to run OKW... I just don't think so.

Let me do a little more thinking about those taxes.

 

[Dean]

Thanks, so in the case of a room not rented the points go up, or that option of staying at a non DVC goes away.

That's the reality now. CRO takes a reported 50% of the actual rental price and I was told a number of years ago by one of the VP's, that they only had a 75% rental rate but I'm sure it has varied over time. So yes, if there are any changes in the variables, the points will go up (or down potentially). I'm told this is supposed to be a zero sum situation where the program pays for itself but there's no profit margin to DVD (CRO different ball game of course). The variables include rental rate, rental % and the cash cost of the item. CRO should be fixed. There are ways to control the number they haven't employed. They haven't been aggressive on the pricing within the company and they haven't limited the number of people that could exchange other than enforcing the limits on cruising the last couple of years. If they were willing to play hardball with DCL and the DC components, they could likely get a better price. However, that approach means they'd have to be willing to leave off components that didn't ante up and that might be your favorite.

 

[mlayton14]

$41 million annually to operate OKW W/ taxes???? Something just doesn't pass the smell test here, I have a feeling disney is doing better than we think

 

[disneynutz]

If they were willing to play hardball with DCL and the DC components, they could likely get a better price.

Since DVC and DCL are in the same business unit, New Vacation Operations and Disney Cruise Line, how hard do you think that they should have to play to get a better price?

Bill

 

[hakepb]

$41 million annually to operate OKW W/ taxes???? Something just doesn't pass the smell test here, I have a feeling disney is doing better than we think

I don't have OKW's exact numbers, but based on SSR's numbers x1.1 (because OKW uses less points per room) and 1.1 equal uses total dues

All amounts in millions:
Front desk $4
Housekeeping $6.3
Maint. $3.6
Management fee $3
Mbr Activities $1
Security $0.5
Transportation $4.7
Utilities. $2.2
Roof replacement $.2
Interior refurb $3
Common area refurb $2.2
Paving $.3
Exterior Painting. $2.3
Property taxes $8.4

There are some smaller fees and small income like breakage.
DVC sends the full breakdown to owners every year.

 

[hakepb]

Since DVC and DCL are in the same business unit, New Vacation Operations and Disney Cruise Line, how hard do you think that they should have to play to get a better price?

Bill

You would think that DCL could offer some special cruise + villa packages that would benefit both parties.....at the expense of CRO