Monday MouseWatch : These days, there's 'way too many rooms at WDW's inn

[orbital62]

From Jim Hill Media - interesting read.

Jim Hill takes a look at one of Disney World's most serious problems. Which is that this Central Florida resort now has 5000 more hotel rooms than it can actually fill on a regular basis

Still having trouble wrapping your head around the idea that the Walt Disney Company just awarded Four Seasons Hotels & Resorts the rights to build a luxury hotel & 18-hole golf course on WDW property? Well, think about how the folks who actually run the resorts side of things of Walt Disney World must have felt. Given that they weren't actually clued into this deal until just 48 hours prior to the official announcement.

Mind you, this would never have happened back in the late 1980s / early 1990s. Back when virtually every hotel that Mickey owned in Central Florida maintained a 90 % or higher occupancy rate. But now that the Mouse has an inventory of over 21,000 on-property rooms (Never mind about those 2487 Disney Vacation Club units that are currently available for occupancy at WDW. Or those 784 campsites & 409 cabins that you can rent at Fort Wilderness Campground) ... Disney really has to hustle these days in order to put heads in all those beds. Especially during the off-season.

http://jimhillmedia.com/blogs/jim_hill/archive/2007/04/02/monday-mousewatch.aspx

 

[ExPirateShopGirl]

Very interesting read... and confirms what I have long believed about certain promotions like free dining and 40% off. Despite what I have seen a few people post, WDW occupancy is NOT at an all-time high. It may be at its highest since 9-11, but there's a reason the rest of Pop remains unfinished.

Thanks for the link.

 

[minnie61650]

Yes, it is interesting.

When we stayed at the All Star Music Suites last September DH and I were in the in the pool and DH was counting the # of Suites he could see from the pool then he said to me-- "This resort resort must have too many vacancies if they are converting all of these rooms into Suites. How many are they building here anyway?"

(Mind you DH owns some commerical and apartment buildings and is a builder so he does pay attention to occupancy as well as,heating, cooling,etc. & construction of buildings.)

Duh! I had told him there were going to be 192 Suites at All Star Music many times but of course he never listens to my Disney triva and info.

 

[eliza61]

From Jim Hill Media - interesting read.

Jim Hill takes a look at one of Disney World's most serious problems. Which is that this Central Florida resort now has 5000 more hotel rooms than it can actually fill on a regular basis

Still having trouble wrapping your head around the idea that the Walt Disney Company just awarded Four Seasons Hotels & Resorts the rights to build a luxury hotel & 18-hole golf course on WDW property? Well, think about how the folks who actually run the resorts side of things of Walt Disney World must have felt. Given that they weren't actually clued into this deal until just 48 hours prior to the official announcement.

Mind you, this would never have happened back in the late 1980s / early 1990s. Back when virtually every hotel that Mickey owned in Central Florida maintained a 90 % or higher occupancy rate. But now that the Mouse has an inventory of over 21,000 on-property rooms (Never mind about those 2487 Disney Vacation Club units that are currently available for occupancy at WDW. Or those 784 campsites & 409 cabins that you can rent at Fort Wilderness Campground) ... Disney really has to hustle these days in order to put heads in all those beds. Especially during the off-season.

http://jimhillmedia.com/blogs/jim_hill/archive/2007/04/02/monday-mousewatch.aspx

Very interesting.
I think the off season has always been a hustle to fill. (which may be why its called the off season. ) Those parks sure do get packed though. Hey maybe if there is too much inventory, the prices will come down? Maybe? Hopefully?

 

[rie'smom]

Very interesting.
I think the off season has always been a hustle to fill. (which may be why its called the off season. ) Those parks sure do get packed though. Hey maybe if there is too much inventory, the prices will come down? Maybe? Hopefully?

It's nice to dream.

 

[raidermatt]

Lower prices = lower margins, and we just can't have that can we?


As others have said, Disney doesn't offer free food out of the goodness of their hearts. On-property food is one of those "that's how they getcha" things, so if they are literally giving it away to get people in the hotels, even at rack rates, you KNOW they are having trouble in that respect.

Unfinished hotels and conversions to DVC... the writing has been on the wall for some time. What's probably of most concern is that all of this stuff has been happening when tourism is booming. That doesn't bode well for the next downturn. As Mr. Hill notes, DLR can always put their plans on hold, but WDW already has the excess inventory.

I'm also going to point out that the folks on the Dis podcast have been mentioning WDW's obvious problems in getting its rooms filled for awhile now.


All of this is one of the reasons why so many people have questioned the Western Beltway and Four Seasons projects. Disney can't fill its own rooms and now its letting more third parties in the door? Something has to give.

 

[DisOrBust]

It explains also why they are slaughtering the AKL on the alter of the DVC. I wonder if they considered what it will do to their repeat AKL business. I know I'm not the only one who won't return after the DVC is built.

 

[*Robin*]

It explains also why they are slaughtering the AKL on the alter of the DVC. I wonder if they considered what it will do to their repeat AKL business. I know I'm not the only one who won't return after the DVC is built.

Can you explain why this is a problem? (Because I really don't know what happens when something becomes a DVC, other than it's available to DVC members)

Thanks!!

 

[YoHo]

So AV's been talking about this for over a year, I've been talking about it. The podcast has been talking about it.

Where are the people around to discredit Jim Hill?


In the words of our old friend Landbaron:

VINDICATION

 

[eliza61]

It explains also why they are slaughtering the AKL on the alter of the DVC. I wonder if they considered what it will do to their repeat AKL business. I know I'm not the only one who won't return after the DVC is built.

Why?

 

[pilferk]

So AV's been talking about this for over a year, I've been talking about it. The podcast has been talking about it.

Where are the people around to discredit Jim Hill?


In the words of our old friend Landbaron:

VINDICATION

They're (meaning me) are posting on Jim's website.

Jim's playing a bit fast and loose with some of his facts, he's not making any real world comparisons on occupancy rates, and he's basically shoving square pegs into round holes, IMHO to simply support a conclusion he'd come to when he decided to write the article.

There's an awful lot of "evidence" that Jim is relying on that simply has little to do, if anything with a mandate for reducing inventory on property.

 

[KS Jeff]

From Jim Hill Media

This is the point at which I usually stop reading a post.

 

[raidermatt]

This is the point at which I usually stop reading a post.

Fair enough. His rumors are all over the place.

But in this case, he's hardly the first to come to the conclusion that WDW is having trouble dealing with the excess room inventory.

 

[Lewisc]

During the holiday season, every single hotel room on property is occupied. But maintaining that 21,000-plus unit inventory during the other 50 weeks of the year actually eats away at WDW's earnings

Almost every single hotel room is booked during spring break, Independence Day, Memorial Day weekend, Columbus Day weekend etc. A lot more than just 2 weeks a year.

There may be enough fully booked weeks, at rack rate, to justify having to discount rooms during the slower months. Disney is doing a good job, DME and MYW Dining, of giving guests new reasons to stay on site.

The All-Star Suites cost more than 2 rooms and are blacked out of many of the discount codes. It doesn't sound like a bad deal from Disney's side.

I guess Disney may have overbuilt but Disney already owns the land. Filling POP at rack rate 20% of the year and discounting rooms the rest of the year is probably profitable. Not very expensive construction.

Jim talks about Shades of Green like it's something new.

The Four Seasons Resort isn't popular with a lot of posters on DIS but Hilton is putting a Waldorf in the Bonnet Creek development. It makes sense to accomodate those guests look for a real 4-5* hotel. Disney isn't really set up to have a hotel that discourages non-guests from looking around.

 

[G8r4evr]

Very interesting read. However, if they are really struggling to fill the rooms, why dont they just come down on the prices (even slightly)? I have yet to find a room at any of the deluxes for under $300 a night (exacept AKL on occasion is around $250).

When we stayed at CBR in 8/06, I remember the parking lot looked like a ghost town (but I blew that off, assuming most people used the Magical Express), but the pools were empty and I can honestly say that in our 3 night stay...we only saw 3 0r 4 other guests the entire time. Granted, we didnt venture into the food court. LOL

 

[Another Voice]

However, if they are really struggling to fill the rooms, why dont they just come down on the prices (even slightly)?

Because every room that they open also requires costs - housekeeping and maintenance services, baggage handling, guest services staff, utilities, laundry, etc.

Sometimes you can make more money by closing lots of rooms (and saving those costs) and selling the open rooms for higher amounts. Disney has some very nice math that let's them know how many rooms to open to maximize the profit. That's why you can get the situation where hotels are "sold out" yet there's few people around. Disney has been running this way since mid-2000 when it's attendance started to fall.

Of course there is a trade off - you may have a few people paying top dollar to stay in a hotel, but there are now fewer people going to the theme parks. Occupancy is a constant struggle between the profitability of the hotels and the profitability of WDW overall. The whole free food giveaway was a novel attempt to solve two problems at once - get lots of people to pay top dollar for the hotel. It didn't really work (people still think Disney is way too expensive) and caused massive problems all over property (too many people eating high cost food - notice how short all the restaurant menus have gotten and how similar they all are now).

Disney's known it way overbuilt hotel rooms for a while know. That's why Pop was never completed and why they're rushing to expand the convention facilities at Coronado Springs and why both the Animal Kingdom Lodge and Contemporary Resorts are going condo. Disney also knows its "Deluxe - Moderate - Value" strategy has really backfired in terms of who's staying on property (another reason why WDW is sprouting my chessy time shares than the Jersey shore). Short of a major economic downturn, occupancy is WDW's biggest problem for this decade.

 

[TiggerFreak]

Since WDW does not release the data, can we assume that all these numbers being thrown around are pure conjecture?
Sometimes I think that the execs at WDW are rolling their eyes and chuckling when they see the fan sites whipping themselves into a frenzy over some isuue. And thats assuming the excs even care enough to read them.
Maybe when they need a good laugh!

 

[Another Voice]

One doesn't need inside numbers to see what's going on, you only have to look at the rotten hulk of the Pop Century to know something is going on.

The Animal Kingdom Lodge - the one so spiffy that regular guests weren't going to be allowed on site - is now the lowest priced "deluxes" and is having a huge chunk of its rooms turned into condos. Free Food giveaways to fill up rooms, discounts every where you turn. Comments by people at "booked full" resorts that there are actually few people staying there.

The only thing WDW management is laughing at are the fans still living in the "Disney is perfect" mental state.

 

[raidermatt]

From Disney's 10k filings, occupancy for the East Coast resorts:
86% of 8,834,000 available room nights for fiscal 2006.
83% of 8,777,000 nights in 2005.
77% of 8,540,000 nights in 2004.

A positive trend. Both occupancy and available nights on the rise, so apparently Disney's efforts are bearing fruit. In fact, per room spending is rising as well:

$198 per room in '04
$199 per room in '05
$211 per room in '06

That spending covers room rate as well as food/merchandise at the hotel. Again a positive trend. It does make for some interesting points when you think about the dining plan and all that money some guests claim to be saving. But I digress...


So, 86% of available nights, with Pop Century 1/2 finished, and parts of the Contemporary and AKL being taken out of the inventory. Doesn't seem too bad, but it does indicate they are still having a tough time filling rooms during slower periods, and one also has to wonder about the wisdom of finishing Pop, as well as building 4000-5000 3rd party budget rooms in the Western Beltway development.


Also, from Disney's 10q for its fiscal Q1 in '07 (Sept through Dec 2006):

85% of 2,143,000 available room nights in '07 (really '06, but its Disney's fiscal '07).
83% of 2,198,000 available room nights in '06.

So, at first glance, occupancy was up, from 83% to 85%. But in this case, available room nights dropped, and when you do the calculations, you find that there were actually slightly fewer occupied nights. Only a .15% decrease (that's "point" 15%), so essentially it was flat. Perhaps the dining plan efforts have leveled off.


I'd say at the very least, Disney seems to have reached its saturation point on room construction, and that's with Pop as is, and the Western Beltway and Four Seasons rooms not yet built.


All that said, though, I think Disney could fill rooms far more easily by focusing on improving the entertainment offerings around the resort. Free dining and creative ticket pricing are neat little moves to try to shift demand around and pick up slow periods. But fully developing AK, MGM and World Showcase, among other things, could boost overall hotel demand for years to come.

 

[DancingBear]

From Disney's 10k filings, occupancy for the East Coast resorts:
86% of 8,834,000 available room nights for fiscal 2006.
83% of 8,777,000 nights in 2005.
77% of 8,540,000 nights in 2004.

A positive trend. Both occupancy and available nights on the rise, so apparently Disney's efforts are bearing fruit. In fact, per room spending is rising as well:

$198 per room in '04
$199 per room in '05
$211 per room in '06

And yet operating income from the parks division is down. I wish they provided that info for the East Coast Resorts separately.