Major Policy Change in DVC/DCL Trade Policy UPDATE ON POST #193

[Sammie]

Also, then the problem is not going to just be with booking DCL cruises. The problem will be no matter where Members are trading out to. Why will it be any different for points being traded out to ABD, RCI, etc., if ultimately the payback will come from CRO renting out the DVC rooms?

Does this mean DVC will have to limit the number of points that Members can trade out anywhere each year? If so, that will mean more and more Members will need to be using their points at the DVC Resorts, and hence will mean even more difficult availability booking those.

Cruises, ABD, RCI, (all the same), a member trades out, a room is lost to point usage. There has always been a limit.

Either way the inventory for point bookings will stay the same whether it is lost to trading or booked by a member.

That is why they have to keep it balanced.

 

[Dean]

I totally agree with Jim here and would definitely take his advice.



Also, then the problem is not going to just be with booking DCL cruises. The problem will be no matter where Members are trading out to. Why will it be any different for points being traded out to ABD, RCI, etc., if ultimately the payback will come from CRO renting out the DVC rooms?

Does this mean DVC will have to limit the number of points that Members can trade out anywhere each year? If so, that will mean more and more Members will need to be using their points at the DVC Resorts, and hence will mean even more difficult availability booking those.

It could potentially be an issue with ANY exchange where points are converted to cash but I doubt it will affect the rest due to numbers and % of participation. This issue has no effect on RCI or BVTC exchanges because there is not conversion to cash for those exchanges but does have potential affect on everything else. The long term solution is easy, simply build the points charts to control the number that exchange out, thus balancing the number of points they need to convert to cash. The relatively favorable points chart for next year seems to be the ultimate culprit.

It does likely mean more points used at DVC resorts though this will not affect the overall availability. It could affect high demand availability if those members are more aggressive than is DVD in securing high demand reservations. I doubt it'll have any affect on the 11 month options but could at 7 months out.

 

[TisBit]

The long term solution is easy, simply build the points charts to control the number that exchange out, thus balancing the number of points they need to convert to cash.

This is the key, if it is too easy for the membership to trade out, then they will ultimately end up increasing the points required to do so, making it less economical to do so.

Look at the recent point reallocation, weeknights were too easy and affordable with points, so they reallocated.

Now, I wonder if DVD/DCL would ever consider (or if it would be legal/possible) to make certain cabins DVC and selling them as a resort. Would you then be able to book at 7 months like any resort?? This might help the understanding fo the system and remove the pressure to convert ponts to cash. The questions would be, what is the lifespan of the ships, how do you manage that inventory with varying itinaries, etc.

 

[Dean]

Now, I wonder if DVD/DCL would ever consider (or if it would be legal/possible) to make certain cabins DVC and selling them as a resort. Would you then be able to book at 7 months like any resort?? This might help the understanding fo the system and remove the pressure to convert ponts to cash. The questions would be, what is the lifespan of the ships, how do you manage that inventory with varying itinaries, etc.

Possible but doubtful. I know there was one ship that was a timeshare and one that provided wholly cabins, not sure what's going on, if anything, with either of them at present. As you allude to, it could get pretty complicated. I also doubt they could run such a ship year round with points only. What might be feasible from both sides is a partnership on a new ship where DVC got X cabins that could be booked directly. That solves the problem of trying to convert points to cash but likely removes all other options, at least on that ship.

 

[Brian Noble]

What might be feasible from both sides is a partnership on a new ship where DVC got X cabins that could be booked directly.

Why would DCL agree to that, and take the hit on their balance sheet? DVC would have to compensate DCL in some way.

 

[kendzee94]

yes, for our 8/23/11 alaska.

Totally off topic, but we will see you on the 8/23/11 (cash paid) Alaskan cruise!

 

[danandnan]

Totally off topic, but we will see you on the 8/23/11 (cash paid) Alaskan cruise!

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[Dean]

Why would DCL agree to that, and take the hit on their balance sheet? DVC would have to compensate DCL in some way.

I'm not suggesting it'll happen, I don't think it will due to the complexity, but I think $$$ would not be the hold up. How it could feasibly happen could look something like this. DVD puts up a certain amount of money up front with the agreement of X cabins (they'd work out which/how many). DVC (ultimately the members) would pay a certain amount of operating costs yearly linked to the cabins in question. The advantage to DCL is they get money up front, guaranteed bookings and guaranteed operating capital, not that much different than say BCV or VWL currently where DVC is a smaller portion of the resort but subsidizes the infrastructure of the resort in general. The advantage to DVD is they get to not only potentially sell those points (if they decide to take that approach) but all other points with a focus on using the cruise more than they do now. Since they're not trying necessarily to convert those DCL points to cash, that takes a risk and burden off DVD and shrinks the number of villas (points) sent to CRO to convert to cash. It also would improve the return on the smaller group of villas (points) that are being converted to cash and should allow a better points schedule for the remaining cash equivalent options.

Could DVD/Disney take the same approach for non DVC Disney resorts, certainly. They could lease cabins/buildings at any existing or future Disney resorts. The other choice then is whether to do it as a lease or as a direct DVC membership option, each has it's advantages and disadvantages.

As I noted, not very likely, but I could see it as a win-win-win for DCL, DVD & DVC.

 

[gkrykewy]

I think it will take some major weaning. If you read the resort boards, people now expect deep discounts or free dining. There's also a major tilt towards the value & moderate resorts, which has resulted in Disney offering OKW & SSR as free upgrades to have more value or moderate rooms to sell. It's very difficult for them to rent the DVC resorts, resulting in 40%-45% discounts. They just can't get the return to pay for the trades outs from DVC.

This is all true, but I would add that the non-DVC deluxe resorts are also being discounted 40% or so.

 

[JOANNEL]

Totally off topic, but we will see you on the 8/23/11 (cash paid) Alaskan cruise!

Yes we will be there.

 

[JimMIA]

They need to realize that with many more new Members buying in every day, and also with a 3rd ship next year, and eventually a 4th, these "limitations" for a fixed number of cruise slots for DVC must be increased. The new ship the Dream is larger than the Magic/Wonder and will accommodate many more passengers. That would be a good thing I would think, since therre obviously are more and more Members who want to book. If they don't up the allotment, if it is a fixed number instead of a percent as you indicate, then this meeting the quota and filling up will be something that we will deal with every year.

I am still hopeful that DVC will be able to find a solution, and as I've said before even offering another cruise line in addition (such as they did before) would help with the demand.

I should say at the outset that I have not discussed any of the following with any Disney employees.

I'd be amazed if DVC will be looking to maintain the same level of cruise availability for members unless they can easily and reliably convert cruise points into dollars. I'm sure they want to maintain the cruise perk as a viable option for members, but cruising is not guaranteed and certainly a prescribed level of cruise availability is not guaranteed.

DVC has to be able to turn those points into cash. And don't forget, cruise points are not the only points DVC/DVD needs to convert to cash. They have taken back a ton of points through foreclosure and givebacks, and they need to rent those points as well. Cruise points are effectively a source of competition to the rental of DVC-owned points.

They also have to provide a robust DVC villa availability in the points inventory at each resort. As Sammie said, DVC has to maintain an acceptable balance. In that balance equation, both the conversion of points to cash and not upsetting resort availability are probably much more important than cruising. At least they should be. If not, you have the tail wagging the dog.

I'm personally incliined to think DVC will not raise cruise points costs much going forward, because more points exchanged for cruises diminishes resort availability and creates more pressure to convert points to cash.

I actually think they might reduce cruise availability, new ships and itineraries notwithstanding. In fact, I wouldn't be surprised to learn that they reduced cruise inventory for FY 2010-2011 some time ago in response to the economic environment, and that contributed to the current situation.

I hope they wiil continue to provide cruising as an option for owners, but they don't need to provide sufficient cruise inventory for every member to take every cruise they offer each year. There should be times when there is no cruise availability; otherwise they're not managing well.

 

[lilpooh108]

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For those that were able to convert cash to points for the Alaska 8/23 (we're looking at this sailing also), was anyone able to book a cabin in someone else's name in their traveling party (as in a cabin not in the member's name, i.e. guest reservation)? We're having some issues with this right now. We'd like to book ourselves on cash and convert our reserved cabin to points and reserve that one in my parents' name in points since they're retired and their schedules are less likely to change. They're telling me no, which is understandable because they're trying to help us out and need to impose restrictions, etc. Just curious to see if anyone else was successful converting the booking for themselves and a traveling party...My understanding is that their refusal to do this for the Alaska cruise is "sailing specific."

 

[CarolAnnC]

For those that were able to convert cash to points for the Alaska 8/23 (we're looking at this sailing also), was anyone able to book a cabin in someone else's name in their traveling party (as in a cabin not in the member's name, i.e. guest reservation)? We're having some issues with this right now. We'd like to book ourselves on cash and convert our reserved cabin to points and reserve that one in points since they're retired and their schedules are less likely to change. They're telling me no, which is understandable because they're trying to help us out and need to impose restrictions, etc. Just curious to see if anyone else was successful converting the booking for themselves and a traveling party...My understanding is that their refusal to do this for the Alaska cruise is "sailing specific."

I have not heard of anyone successfully doing this with the current situation. I can understand their point, though. They are making exceptions to a rule for members for this one time. Perhaps if you put the DVC points room in your name, they may be able to accomodate you. I would not expect them to do anything other than that given the circumstances.

 

[lilpooh108]

I have not heard of anyone successfully doing this with the current situation. I can understand their point, though. They are making exceptions to a rule for members for this one time. Perhaps if you put the DVC points room in your name, they may be able to accomodate you. I would not expect them to do anything other than that given the circumstances.

I totally agree. The supervisor I spoke to was very very nice and actually very accomodating on other issues we were having. I didn't really expect them to be able to convert the Alaska sailing, but was curious to know if they had made any exceptions at all. With all that was going on, I was happy just to get a call back after I sent an email to member satisfaction.

 

[tjkraz]

DVC has to be able to turn those points into cash. And don't forget, cruise points are not the only points DVC/DVD needs to convert to cash. They have taken back a ton of points through foreclosure and givebacks, and they need to rent those points as well. Cruise points are effectively a source of competition to the rental of DVC-owned points.

While DVD is holding a supply of unsold points, I wouldn't say that they "need" to rent those points in the say way that they need to rent points used toward cruises.

When it comes to cruises, DVC needs to keep those exchange programs solvent. That batch of CRO rooms needs to cover the cost of the cruises and other exchange destinations.

Comparatively speaking, there isn't as much urgency when it comes to unsold points. DVD is on the hook for dues represented by those points but that's a small amount in relation to CRO rates. Even if 80% of the unsold rooms given to CRO go unbooked, the other 20% will cover dues on all. DVD probably gets more for its money by using those points for cash upgrades and convincing many of those upgraded to buy into DVC.

I'm personally incliined to think DVC will not raise cruise points costs much going forward, because more points exchanged for cruises diminishes resort availability and creates more pressure to convert points to cash.

I don't necessarily agree with your logic here.

If a cruise costs 300 points and I own 400, that means 300 points worth of rooms will be given to CRO and I use the other 100 for DVC villas. If they raise the cruise price to 400 points, all 400 points' worth are going to CRO. The net result is still the same--400 points' worth of rooms taken out of commission. From an availability standpoint, the only difference is that I get some villa access when costs are lower. Inventory for the rest of the membership is unchanged.

And giving more rooms to CRO means they have more opportunities to recover the cost of the cruise.

Either approach would work for balancing demand--simply limiting cruise inventory so that members aren't redeeming too many points or charging higher rates to hold down demand. That said, keeping cruise point rates low and limiting inventory looks better on paper to members and prospective members.

 

[cindy18]

Just a further update that I did hear from a DVC manager this afternoon and I converted over 2 of the 8 cabins we have booked on the 2/20 Dream from cash to points. That used up all of our current use year points and some of next year's points. It took awhile, but they were very nice about it. So it did happen.

 

[Brian Noble]

How it could feasibly happen could look something like this.

So you are suggesting that "points" be created with a home "resort" of DCL? Is that the premise?

If so, I *suppose* I can imagine that. But, the few attempts I know of of trying to do fractional/whole ownership of cruise cabins have not gone well.

I wouldn't say that they "need" to rent those points in the say way that they need to rent points used toward cruises.

I'm sure they would like to recover (at least) the Dues costs on those points.

 

[Dean]

So you are suggesting that "points" be created with a home "resort" of DCL? Is that the premise?

If so, I *suppose* I can imagine that. But, the few attempts I know of of trying to do fractional/whole ownership of cruise cabins have not gone well.


I'm sure they would like to recover (at least) the Dues costs on those points.

That's one possibility, the other I alluded to is simply leasing cabins (or non DVC resorts) for an extended period and using those as essentially an overflow. The problem with the latter is it really doesn't handle the issue of the points used and cash unless they either sell it as a timeshare OR figure out some other way to dispose of the exchanged points rather than trying to rent them for cash through CRO/RCI etc. I guess they could sell a larger % of current resorts keeping only the bare minimum points for maint. The bare min would be around 0.5-1% from my other timeshare experience. 0.5% if they run essentially 100% occupancy year round, 1% if they're not quite there but close. Then they could take additional units using the exchanged points for further maint and above that, for rental much as they do now.

They could also tie it to any retail purchase or VIP incentives i f they were to go that route. As I said, I don't think it'll happen due to the complexity, not the $$$, however, I think DVC/Disney is uniquely placed to make it happen successfully if they so chose.

I'm personally incliined to think DVC will not raise cruise points costs much going forward, because more points exchanged for cruises diminishes resort availability and creates more pressure to convert points to cash.

Raising the points is the best, easiest way to balance the number of points that come in for such exchange options. Raising points does 2 things, it decreases the number of people that will exchange while still preserving the options as a sales tool and it increases the return per cruise cabin. If raised enough, the higher per cabins points will be offset by the lower number choosing the option in such a way that the total points they need to dispose of for cash is the same or less and the pp return is the same or higher.

 

[JOANNEL]

Just a further update that I did hear from a DVC manager this afternoon and I converted over 2 of the 8 cabins we have booked on the 2/20 Dream from cash to points. That used up all of our current use year points and some of next year's points. It took awhile, but they were very nice about it. So it did happen.

Glad it worked out.

 

[Brian Noble]

Dean: Maybe. But, right now DCL is literally rolling in money. Any negotiated long-term lease deal this year is not likely to be favorable to DVC.