I just don't understand how they are making money with this...

[bicker]

It is better to offer a reduced rate and fill the room.

Yes, though only to a point. If you reduce your rates too much, or too reliably, then it devalues the product, and you cannot hope to get full price from anyone. That's why you'll see Disney still leaving some rooms empty, rather than renting them out for even-lower rates.

 

[goofie4goofy]

An empty room makes no money....even at a reduced rate, there is a profit.

There is no De-valuing involved, it is a matter of seasons. WDW is a family place, most families in Aug-Sept have kids going back to school or going back shortly and it is peak hurricane season and it very hot and rainy. From speaking to a CM the day before a hurricane hit WDW loses 65 million dollars for every day the park has to close for a storm. So if they reduce rates during a crappy time to visit to get people to stay, they are still coming out on top. The variable is hurricanes...that is an unknown, so better make your money, even if it's less than usual. They still make money and it is averaged out in quarters..Jan-Mar Apr-June July-Sept Oct-Dec. Without reducing rates for the 3rd Quarter, profits would be way down. That is why they seperate into "seasons"...it is costed down so the profit margin retains the same percentage. There is also a reason why the "special" is only for selected resorts. Some resorts require more maintainence than others. For instance rooms at the GF are cleaned 2x per day, the sheets are changed every morning...they could not afford to have a sale on this resort...it costs them too much.

Food costs costs WDW very little, it is bought in high volume so the actual cost is pennies. The cost for food is the people that cook and serve it.

 

[juligrl]

I think they view you as a revenue unit. Think about it like this, you'll get the room and park tickets at a reasonable rate, but they're depending on you to buy some overpriced items while you're in the park and they will end up ahead of where they would have been had you not come at all. I think that's something I vaugely remember from a marketing class long ago (okay not that long). Give away the razor but charge $20 fo the blades.

 

[bicker]

It is indeed very possible to over-discount and therefore devalue the offering. This is pretty-well established in the industry.

 

[Shagley]

Also, they are getting a bit (not much, but some) of their money back by requiring people to pay rack rate for the rooms.

 

[Nancyg56]

It is indeed very possible to over-discount and therefore devalue the offering. This is pretty-well established in the industry.

I don't know if this applies here, but not too long after 9-11, some friends decided to go to Hawaii. Noone was flying and they had no problem renting a hotel room. The price was next to nothing. When they got there, they were given an executive suite. They were told that it was better to practically give the room away in order to entice guests than not to rent at all.

I know that this is not the same thing, but Disney needs to staff for guests whether they are at capacity or not. If the hotels are empty there is no possibility to make a profit. Lower the price and fill the rooms, and then encourage guests to spend the money that was saved in the first place. The price is discounted enough to attract people and to ensure that there is enough of a savings and still allow the perception of a great bargain. I'm sure that DIsney employs some heavy duty numbers crunchers who can determine where the line between profit and loss occurs. I don't see that the product is devalued because of the lower prices.

 

[goofie4goofy]

If you notice, it is not resort wide...."selected" resorts. There is no de-valuing involved...it is just a value. If you notice the GF is never part of any specials or packages, since ther are so many resorts in WDW, they try to keep the resort Flagship. Four Seasons and Ritz Carlton even have specials and special package rates all the time, it is not considered a de-value. Actually there are times you can stay at a Four Seasons for less than WDW. A hotel or resort of any kind cannot be de-valued, it is not a tangible item that depreciates.

WDW also appeals to all and all budgets...Mass appeal. There are people that specifically wait for the Aug-Sept specials it is not de-valuing to them or to WDW either, it is good business and very smart. The value and moderate resorts actually cost WDW less to maintain, and those are the resorts involved in the special.

WDW is not a marque like Mercedes, which has a "snob" appeal. You will never see a Benz on sale...that is a devalue. WDW is a family resort they are looking to appeal to all and all budgets. WDW does not want to be the place that a select few can visit. It's prices reflect the seasons and crowd levels.

 

[Mickey1122]

Well, I think there are a lot of clowns who have never heard of the dining plan. We have always thought of food as one of their biggest profits. A lot of people just don't look for deals.

 

[DISUNC]

Just for S&Gs I decided to figure out the price per day per person of our upcoming vaction.

There are 3 adults and 1 chlid in our party.
We'll be staying at ASMo for 7 nights.
We'll have park access for 6 days (no extra options).
And we be able to eat two meals a day and a snack for 7 days.

That comes out to $57.14 a day per person. That's less than a one day ticket to one of the parks.

Really, I just don't get it. But we're going!

I wouldn't be suprised if WDW was making at least 50.00 a day pure profit on each member of your party. Plus any extra $$$ you spend while there.

 

[goofie4goofy]

Actually, I have known of the dining plan and have not taken it on our past (and present) trips. For us it just does not make any sense. If we had children it would be more cost effective.

There is a huge profit in food. Even with the DP. If you also notice the CS and TS which are included are all the same type of restaurants and the food (cost to WDW) is very inexpensive. The food is bought in huge volume and most of it prepared that way. Same as the resorts included in the special package. Restaurants such as Citricos, CG and the like need double credits, so you wind up paying for something! The restaurants included are cost averages and pretty much cost WDW the same money. That's why you can have steak at Le Cellier but not at YSH...The cost to WDW is much higher at YSH in both product and service that they cannot cost it into a plan.

There is also a higher profit in alcohol

 

[Sleeping Jedi Beauty]

I'm sure that Disney has already crunched the numbers to make sure that offering free dining helps them turn a profit. While their profit isn't going to be as big as it would be during peak season, increasing their numbers over the usual slow season number means higher attendance and likely also means higher merchandise sales. Because the dining plan, free or otherwise, is only available to onsite guests, Disney increases the chances of those guests never leaving Disney property, especially since Magical Express has made it possible to go straight to and from Disney without incurring the cost of a rental car/transportation service. You never have to leave Disney property, thus increasing the likelihood of you spending your money at Disney. The exclusion of alcohol on the DDP also helps them to turn a profit if people want alcohol with their meal.

 

[Sonno]

One thing that really eats me up every time I think about it... All that Coca-Cola in the parks and stuff, all the syrup is given to Disney FOR FREE. It's pretty much just an advertising expense for Coca-Cola. The reason Coke does it? To keep Pepsi out. So 0 cost for Disney and they still charge me $3 for a large soda... gah!

 

[hockeymomoftwo]

The promo got us there. We had no plans for several years to go but this came along and was such a deal.

We are pretty much tightwads and don't think they'll get much extra from us. We did book a pirate cruise for the boys and plan on letting them each spend about 25.00. I'll be purchasing everything else before I leave pins, lanyards, etc so we probably won't spend much in the park. We'll grocery shop before we arrive for water. Oh they will be making refridge money on us forgot that. I haven't yet decided on getting a cup at the resort depends on how much they are will probably just buy some soda and keep it in the fridge along with the milk.

 

[BlindTyldak]

A long time back, I asked our extra-special-omg-I'll-never-forget-him-incredible waiter at CR about how Disney made money with dining plans. at the time it was still "Magical Wishes" that you spent, but he said something that I think is pretty fitting here. We'd asked because we'd done what most people here do, figured out ahead of time where we could eat and what, to get the most bang for our buck, and we couldn't figure out how, even though we payed for the wishes, Disney made money.

He explained that even people who get dining plans still spend an average of $25 per person per day at the parks on food items, between bottles of water, a quick ice cream, a cereal breakfast that they didn't want to waste points on, an appetizer at a bar, etc. Many of these people also never use all their points by the end of the vacation, so that is "free money" to Disney. Also, many people get the dining plan but don't take full advantage of it, so they do not always order the most expensive thing on the menu, or they spend points on smaller items because they are not very hungry (then he proceeded to thank us for ordering expensive because of course his huge tip was included in the gratuities section of the bill, paid of course! ) . Though there are people like me (and probably many people here!) who know how to get a huge bill at a restaurant and check it all off to a dining plan, it accounts for about 15% I think he said of diners; most eat "average".

But it was just one thing that he said as he explained it all that fits: "I bet Disney could give these Magical Wishes away and they'd still make money." with the free dining, it looks like he was right!

 

[bicker]

Disney needs to staff for guests whether they are at capacity or not.

However, not at the same levels. Even the hotels can reduce staff a bit during the off-season to account for forecasted load-levels.

If the hotels are empty there is no possibility to make a profit.

No question, but there is a "sweet spot" which protects the value of the product while providing some profit. This is a case where a business isn't smart going after the short-term buck -- there are long-term considerations to factor in.

I don't see that the product is devalued because of the lower prices.

We saw a little of this many years ago at WDW. They would discount so much and so consistently that guests can to expect it and therefore they had no chance of getting full value. Disney's gotten a lot smarter since then, and that's why you'll see some rooms empty during off-peak times.

 

[bicker]

One thing that really eats me up every time I think about it... All that Coca-Cola in the parks and stuff, all the syrup is given to Disney FOR FREE. It's pretty much just an advertising expense for Coca-Cola. The reason Coke does it? To keep Pepsi out. So 0 cost for Disney and they still charge me $3 for a large soda... gah!

Think about it this way: Up at the top of the page, you'll see an advertisement for the forum sponsor, Tour Guide Mike. Pete gets some considerations (probably money) from Mike for this. Why would Mike give Pete money? Because Pete has a venue where the people Mike wants to reach flock to. The only difference between Mike and Pete and Coke and Disney is that the currency is syrup instead of cash, but a commodity is a commodity.

 

[Nancyg56]

However, not at the same levels. Even the hotels can reduce staff a bit during the off-season to account for forecasted load-levels.

No question, but there is a "sweet spot" which protects the value of the product while providing some profit. This is a case where a business isn't smart going after the short-term buck -- there are long-term considerations to factor in.

We saw a little of this many years ago at WDW. They would discount so much and so consistently that guests can to expect it and therefore they had no chance of getting full value. Disney's gotten a lot smarter since then, and that's why you'll see some rooms empty during off-peak times.

ITA that there is a line that a smart company will not cross. I have always believed that the specials prices Disney allows do not hurt the bottom line and in place to generate revenue, like a loss loser in the grocery store. There are always customers who will shop only sales, but if any extras ae purchased, it is a profit for the company.

The DDP free or not is a for profit product. They may not "make money" on every customer, especially when the plan is free, but certainly they see the big picture by using it to increase business during a time frame where sales slump. It got me back when I had no plans for a summer trip, and I have already commited to more money than I was gong to spend.

I think that while there are those who will find ways to "maximize" the DDP, refillable mugs, or any of the other products that Disney offers, the majority of people use them as Disney planned. That loss is built into the price. It is a very savvy company that empowers their employees to make magic by providing free upgrades and towel animals, and extras on the DDP thereby creating an atmosphere that draws families back to spend their money. Really long range planners in the Disney marketing machine in my opinion.

 

[bicker]

the majority of people use them as Disney planned

Absolutely. The whole system is predicated on that assumption, and as long as it remains true, things are relatively predictable and therefore relatively reliable.

 

[k5thbeatle]

In regards to OP.

Basic tenant of business: When you have a piece of equipment or a facility it will not generate income if it is not being used. Rest assured even the Disney bean-counters are aware of this.

I can absolutely 100% no doubt guarantee you that Disney has a $ value estimated worth average for each visitor.