This is an awesome discussion, and there have been some fantastic points.
This is a well-written response with some valid points, but I have a bit of a different perspective. I just don't see how adding more Disney "owned and operated" resorts fits into the existing equation as of the present. Sure, Disney is absolutely interested in "locking guests in" via the Magical Shuttle Bus and Pixie Bands. However, there's another vehicle that does just that... AND it locks guests in for ~50 years all while capturing upfront construction costs and yearly dues to help mitigate ongoing operational expenses. From a pure dollars and cents perspective, DVC is clearly the better mousetrap (pun intended) from the bean-counter's perspective.
Sure, DVC doesn't work for everyone, and as a result, Disney will always need to have a good product mix that caters to everyone, hence there will always be a need for other options - either "owned and operated" resorts or "3rd party". However, a quick look around property (Four Seasons, Flamingo X-ing, DVC expansion), it doesn't take long to see which of these vehicles is currently preferred by management, and it's not the "owned and operated" route. Disney is currently in the mode of taking "owned and operated" resort inventory offline and converting it to DVC. I just don't see how it would make sense to add new inventory as part of an all-new resort on one hand, while simultaneously taking it away and converting it to DVC on the other. Also worth mentioning, we know that "all new" construction is the most expensive kind. Another reason why it's probably the "last resort" (no pun intended).
In looking at "near-future" hotel needs across property, I currently see 3 of 4 parks with completely flat demand YOY. MK demand has risen a handful of points consistently, but nothing that would warrant another AOA sized resort anytime soon with ~2,000 rooms that need to be 85%+ occupied for 12-months a year. If Disney took Universal's approach to construction and actually delivered something worthwhile in a reasonable amount of time, then I would agree that it wouldn't be unrealistic to potentially see another new resort in the works. However, at Disney's current rate of delivering new, innovative experiences across property, coupled with the recent 3rd party hotel / DVC additions, I just don't see a short-term need. If Avatar is a huge success and we ever hear anything definitive about Star Wars arriving before 2025, then maybe the conversation changes. Until then, I don't believe that Maelstrom 2.0 and the Great Mall of Buena Vista are enough to justify it.
Good post. I agree with a lot of what you're saying here, but I do think there's still room to justify continued hotel expansion.
1) DVC Isn't for Everyone- As you accurately stated, having a good product mix is important for WDW's health. DVC serves a very particular niche that has been an extremely popular offering. With that said, DVC serves a small audience. While DVC numbers have been expanding, they still make up a small percentage of WDW's total hotel offerings. Add in the thousands of off property hotel rooms, Disney Resorts, and other on property hotels it ends up showing the vast majority of guests staying in non DVC hotels. It requires a lot of commitment to buy into DVC. For the once in a lifetime trip families (as everyone knows Disney has been targeting them more and more) DVC is not an option. If Disney wants to keep expanding their draw to this high spending demographic they have to have available inventory.
2) DVC membership is consistent, and that's a good and bad thing- While it's true that new Villa inventory sales adds new members, it doesn't move the needle in big ways. Having the same stable group of people come year in and year out can be a great thing, just look to the recession. It also can be to the resorts detriment, suppose this DHS thing ends up being a big draw. If the majority of rooms were DVC then it wouldn't make a difference on attendance or occupancy, because guests would've come anyway. There's no reward for the investment. For the rest of the population that might come for a new ride or land, having that extra hotel inventory is critical to making sure they can vacation. That extra traditional hotel space is where that pop in attendance will sleep, if they don't have inventory they could miss the wave entirely. These hotel rooms are riskier than DVC, but the reward can be huge if they execute correctly.
3)Many point to 4 Seasons and Flamingo Crossings as examples of Disney's commitment to allowing third parties to set up shop on property, and I look at it exactly the opposite- I think we need to remember when these projects were announced, Flamingo Crossings was fast approaching a decade ago in 2007, and 4 Seasons got going in 2010 and was finally announced in 2011. First, Flamingo Crossings all the way back in 2007. The Company was just beginning to recover from years long overbuild up of hotel rooms, and a post 9/11 slump. The company had finally gotten inventory under control climbing into the safe high 80s. Still the company was cautious and worried about WDW's longterm survival. A quote from the fast company article on how WDW was viewed by management
"In the mid-2000s, however, Disney executives had reason to worry about the future of the business. Disney World, Parks’ crown jewel, seemed to be losing its luster. According to multiple sources, certain key metrics, including guests’ "intent to return," were dropping; around half of first-time attendees signaled they likely would not come back because of long lines, high ticket costs, and other park pain points... Inside the company, Disney World became known as a "burning platform." As [a] former executive explains, "If we miss out on that next generation of guests, suddenly our burning platform is fully on fire—panic mode." If anything Flamingo crossings fits perfectly into the mid 2000s mindset, limit exposure at all costs. Don't get caught investing big in Disney World unless it was to fix the fundamental problems. Then in 2010 and 2011 Disney worked out 4 Seasons, Disney at the time had seen occupancy drop 5 points from 09 to 10, and it continued to drop into 11. At the same time Disney was beginning its new attract the wealthier campaign so 4 Seasons fits well into that strategy as well. However it's not 2011 anymore. Domestic attendance rose 2 points, occupancy 3 points, and per capita room spending increased notably as well quarter over quarter. Disney has reportedly just opened up the money spigots for new additions showing a confidence in their product for the first time in years, and also paving the way for attendance growth. At the same time Flamingo Crossings has languished with only two hotels built so far. The developer had lofty goals saying he wanted to announce several new hotels within the year. Here we are three quarters of a year later with deafening silence from flamingo crossings and its developers on new offerings. This to me shows Disney backing away from the concept entirely, especially because Disney just spent boatloads updating their original shopping and dining district.
4)Flamingo Crossings does not supplement the need for new Disney hotels- In the words of its developer
"We see a role here that will serve a different segment of the market, It's obviously not the same as a full resort hotel." I couldn't have said it better myself. This is not a competitor to Disney Resorts at all, they shouldn't be viewed as such. Even if all of the developers 7 hotels were built, assuming they were the all around the same size of 250 rooms it would only create 1,750 rooms of inventory. It's a band aid to potentially thousands of rooms of shortage.
5)Building DVC doesn't mean they can't build moderates or values- Remember that much of the recent DVC buildup has actually been a conversion that resulted in lost deluxe hotel inventory. DVC in the Polynesian and Wilderness Lodge's cases will result in lost hotel inventory. Offsetting that loss with new inventory for different segments makes perfect sense.
In closing, I think adding new hotel rooms to the product mix would be a powerful tool in combating the rest of the very aggressive Orlando Market. Especially as DHS goes down for several years the temptation to head off property will be greater then ever, Disney needs all the power of their ecosystem holding guests in. Also if this DHS things pans out correctly, it can also act as a massive new growth potential for the resort.
Updated: It looked like an intimidating big block of text. It may still look like a big block of text, but at least it has breaks.
