New DVC Time-shares

[Dznefreek]

<a href="http://www.orlandosentinel.com/business/tourism/orl-bizdisney14091402sep14.story?coll=orl%2Dbusiness%2Dheadlines">More time shares</a><br>They cannot build new rides or open PC but they seem to have money for DVC at 12k - 150k a week.

 

[HorizonsFan]

DVC is making money and the cost of building DVC resorts does not affect the theme park budgets in any way.
See this thread for more details...
http://www.disboards.com/showthread.php?s=&threadid=263332

 

[EUROPA]

Originally posted by HorizonsFan
DVC is making money and the cost of building DVC resorts does not affect the theme park budgets in any way.

Isn't that a bit like saying ABC and Go.com did/do not affect the theme park budget ??

 

[Werner Weiss]

Originally posted by EUROPA
Isn't that a bit like saying ABC and Go.com did/do not affect the theme park budget ??

There's a big difference between parts of The Walt Disney Compnay that lose money and parts that make money.

The DVC resorts make money for Disney. In fact, they make money for Disney's Theme Parks & Resorts segment, because Disney Vacation Development (DVD) reports to that segment (to Paul Pressler). DVC resorts drive increased park attendance. They drive on-site spending as DVC members return year after year.

Does anyone really think that if Disney did not spend money developing the Saratoga Springs Resort & Spa, then Disney would plow that money into new theme park attrations?

Yes, I'd like to see more money put into the parks. I think Disney's current policies are shortsighted and dangerous. But keeping up with the demand for new DVC resorts should be considered something positive. At least it's a case where Disney is improving Walt Disney World rather than diverting money into other ventures.

 

[EUROPA]

The DVC resorts make money for Disney.

...and the parks don’t? That is just not the way that business works. Only X amount of dollars are spent on capital investments for a company. If a large portion of that is spent on New DVC resorts then less is available for other areas...and no I don't think that if they did not build any new Hotels that money would be spent on the parks. Disney is just neglecting that part of the business at this time. Disney would take that money and throw it at some other hair-brained scheme.

 

[Werner Weiss]

Originally posted by EUROPA
...and the parks don’t?

I'm sorry if you think I implied that the parks don't make money. I meant that ABC is doing poorly, and that Disney dropped a bundle on Go.com.

On the other hand, DVC generates income, which generates capital. And DVC generates on-site WDW spending and theme park attendance, which is good for the theme parks.

The real problem is that the MBAs who manipulate Excel spreadsheets aren't able to build a business case that says, "if we spend $100 million at each of the four parks, including an outstanding 'E' Ticket attraction at each, park attendance and park spending will increase 20%, the we'll get a return on investment that justifies the $400 million. The alternative is spend as little as possible, but then the parks will stagnate, and attendance and income will actually decline."

Nor is there a leader who has the vision to proclaim, "with enough imagination and investment, we can turn the Magic Kingdom into a 20-million-visitor-per-year park, and it won't be crowded because we'll triple the size a Fantasyland to accomdate the increased guest count."

Oh, by the way, with compelling new reasons to visit the parks, the problem of low occupancy rates at the resorts (and the subsequent profit-eating discounts) will go away.

So, EUROPA, I really agree with you about the parks. But turning the unprofitable, defunct Disney Institute into a profitatable, beautiful new DVC resort is not the problem. In fact, it's one of the bright news items from WDW.

 

[EUROPA]

Glad you enjoyed City Range. We go there quite often.


It's clear that Disney is having trouble making correct decisions lately. It already seems that they have overbuilt on regular hotel rooms what make anybody think they are not going to do the same with DVC? Add to that that they are neglecting the major draw for the guest (the parks) just seems like this is not the best idea at this time. The money could be better spent elsewhere at this time.

 

[vernon]

As Werner points out, The Institute has been leaking money for years by turning it into a DVC resort Disney has a chance to stop that leak and free up $$ for other uses. The difference with DVC and building hotels is that Disney recoups the money almost immediately, each of the DVC resorts at WDW has sold out very quickly, returning not only the capital but a very healthy profit almost immediately.

With parks are opperating way below capacity, it is very arguable that making the massive investment that is required to build a new ride would bring a tangable benefit to Disney in the guise of more visitors, the vast majority of visitors will continue to come.

There are a lot of areas in the Disney empire where your arguments have some validity, DVC isn't one of them JMHO.

 

[luvindisneyworld]

disney is making money on me, i am a dvc member and plan to do an add-on just as quick as we can.
misty

 

[PKS44]

Does the growth of DVC cannibalize the market for WDW non DVC hotels, at least a little?

 

[doubletrouble_vb]

The confusion is the perception that DVC timeshares are the same as hotels.

They aren't. DVC has found a gullible group of people (such as myself by the way...a VWL owner) who are willing to commit to paying for vacations at a DVC location for up to the next 10 years.

I will say I'm glad they choose to redo the Institute rather than go with Eagle Pines first. Unless there is a huge backlog of tee times the EP plan suffers from the same problem as Pop Century...its too big.

 

[PKS44]

What I mean to say is that DVC was 20,000 members-now it is 60,000 members...of those 40,000 members presumably ALL of them used to stay in WDW resorts-therefore those people who used to be in the resorts are now in the DVC rooms...(those members are not the number of people, those are memberships, and many visit WDW more than once a year, so we are talking at least 40,000 rooms and likely more that are no longer required by these DVCers)---this has reduced demand for WDW resort rooms at the same time that demand for rooms has declined for other reasons (parks growing stale, changing demographics, economy, 9/11,etc..) While DVC brings in the cash now- but each new DVC sucks customers away from the hotels-meaning they need to close hotels unless they can grow the market for the hotels...how do they do that??? Improve the product or cut the prices.

Paul

 

[Werner Weiss]

Originally posted by PKS44
What I mean to say is that DVC was 20,000 members-now it is 60,000 members...of those 40,000 members presumably ALL of them used to stay in WDW resorts-therefore those people who used to be in the resorts are now in the DVC rooms...

I don't think it's safe to presume that all DVC members used to stay in WDW resorts.

I can speak for myself. Before buying into DVC in 1994, we spent a total of two nights staying on-site at WDW (CBR in October 1989). During other WDW visits we stayed off-site in places like Summerfield Suites and Residence Inn. DVC gave us a way to stay in multi-room suites at a great on-site Disney location (now called OKW).

Because of DVC, we visit WDW more often and we stay longer. If we hadn't bought into DVC we would probably have stayed in other off-site suites, and we would have visited Central Florida less frequently.

Originally posted by PKS44
(those members are not the number of people, those are memberships, and many visit WDW more than once a year, so we are talking at least 40,000 rooms and likely more that are no longer required by these DVCers)

The number "40,000 rooms" is way too high. If you assume that every night in a DVC resort replaces one night in a WDW resort (which is a generous assumption to begin with), then the number of displaced WDW rooms would equal the number of DVC rooms. There aren't anywhere near 40,000 DVC rooms on-site ar WDW. Somebody correct me, but there are probably fewer that 1,500 (not counting the future SSR&S).

 

[raidermatt]

I think PKS makes a good point, especially if we are taking a narrow view of hotel occupancy.

For those who stayed on-site prior to purchasing DVC, there is a shift from hotel rooms to DVC rooms.

Werner, in your case, you had little impact on hotel room demand, because you didn't stay on-site before, and presumably, would not have stayed on-site later.

So, unless I'm missing some other significant factor, DVC does result in decreased hotel demand. The question is how much. Just picking some conservative numbers out of the blue, let's say an average of 500 DVC'ers are on site at a given time, and let's say 1/2 would have otherwise stayed in an on-site hotel. That would be 250 rooms per night, which I believe is more than 1% of current on-site capacity.

Besides my wild guess numbers, there are some other unknowns as well... Such as:

-How many hotel rooms DVC'ers still purchase each year, since their DVC stays are more affordable.

-How many guests DVC'ers bring along who purchase hotel rooms when they would have otherwise not even come to WDW.

Factors like these could actually have enough of a positive effect that the 250 lost rooms could be significantly reduced.

Of course, the number might be 750 instead of 250, there could be other factors, etc, etc, etc,.... Too many unknowns, unless somebody can fill in some of the blanks.


Big picture, however, Werner is right. Just because a DVC'er switches to a DVC room instead of a hotel room, it doesn't mean that's all lost profit. If DVC gets the guest on-site more, then they spend more than they otherwise would have. And since some guests are saving money on what they would have paid in hotel rooms, they are probably spending more as well.

Then there's the whole issue of having a long-term loyal customer...

What does it all mean?

I don't know. I'm going to go watch football now.

 

[PKS44]

Originally posted by Werner Weiss
The number "40,000 rooms" is way too high. If you assume that every night in a DVC resort replaces one night in a WDW resort (which is a generous assumption to begin with), then the number of displaced WDW rooms would equal the number of DVC rooms. There aren't anywhere near 40,000 DVC rooms on-site ar WDW. Somebody correct me, but there are probably fewer that 1,500 (not counting the future SSR&S).

I think you misunderstand my numbers...I did not mean 40,000 rooms per day..of course there are only 20,000+ rooms total on WDW or something like that...and not all 60,000 DVC folks are staying on site at the same time, as you point out, they are limited to the 1500 DVC rooms (unless they trade out)--but look at it as a room-day...with 1500 rooms and 365 days a year that is over 500,000 room days, or look at it from the 1500 DVC rooms some of which are 2 and 3 bedrooms so the parties staying there would otherwise take more than one hotel room -and the total rooms on property is 22,000 or something like that, maybe a little lower without Pop Century...that is a 7% drain from you hotel occupancy at least...even if Werner would not have stayed on site the way DVC is generally sold as a reasonable deal is to people who go to Disney at least every other year and would stay ON SITE and at moderates or higher...you can read thread after thread on the DVC boards about how this is the thinking that most people apply and is the sales pitch, too....there has to be some movement of hotel occupancy from resorts to DVC, even if it is not all 60,000- it has to be more than half...I would guess 80% or more of owners would otherwise be staying on site if DVC did not exist...in fact I will post a poll on the DVC board just to get a sense (obviously not a scientific survey)

http://www.disboards.com/showthread.php?s=&threadid=264720

Paul

 

[Werner Weiss]

Originally posted by PKS44
that is a 7% drain from you hotel occupancy at least...

Why the concern that DVC is draining WDW resort hotel occupancy? The DVC resorts are Disney-managed resorts, and DVC members are occupying Disney-managed resorts whan they stay at DVC resorts -- just resorts that are more profitable than regular resorts

Unlike regular WDW resort hotels where the developer (Disney) ties up lots of capital, the developer of the DVC timeshare resorts (DVD, which is owned by Disney) recovers -- in fact, over-recovers -- the capital during the sales phase of each resort.

Then DVCMC (which is owned by Disney) makes a guaranteed management fee every year.

Timeshare is a very profitable business, as long as your finances are straight up front and you can sell out each resort in a reasonable amount of time. Just ask Marriott.

Sure, Disney has developed more hotel capacity than demand in recent years, but I don't see the point of pointing fingers at DVC.

Why not point fingers at too much capacity in value resorts, which fail to provide a real Disney experience while not providing a particularly good value compared to better off-site accomodations? (Yet value resorts siphon business from moderate resorts.)

Why not point fingers at the drop in theme park attendance (and the resulting drop in demand for lodging) caused by multiple factors, including the perception that the parks no longer provide the value that they once did, nor enough compelling new reasons to visit?

OK, I'll grant you that if DVC resorts had never been built at WDW, then some percentage of the nights occupied by DVC members on points whould be spent in regular WDW resorts instead. And some percentage would be spent off-site (especially by families like mine that don't live in a single 340 sq. ft. space at home and don't want to vacation in a single 340 sq. ft. room on vacation either). And a significant percentage wouldn't be anywhere near WDW because they wouldn't have the need or the opportunity to use their DVC points each year. I don't know what the percentages are. My guess would be 25%, 25%, and 50%, respectively, but I could be completely wrong in this regard.

 

[EUROPA]

Originally posted by Werner Weiss
DVC resorts -- just resorts that are more profitable than regular resorts

You mean in the short term right? Or are you talking about the life of a resort. I'd be intrested in hearing how you came up with this information.

 

[paulh]

Lets look at it another way i have 200 points cost me $10,000 annual dues at about $750 per year ( and it will always rise) so for the next 42 years ( that is how long the contract for dvc is)i will be handing over to disney $42,500 over the term of the contract ( it will be more as the dues will go up) so as the average amount of points bought is around 200 the income from 60,000 members over that period would be $2,550 million plus any spend on site i can see that the more rooms that are built for dvc the more income it generates. We have to go or we lose our points so we end up going to disney insted of elswhere this is one the bean counters have come up with a good idea
Regards paulh

 

[PKS44]

I am not pointing fingers...I just think the success of DVC now which no doubt increases cash flow to Disney is not all positive...it is partly cannibalizing the market for the resorts---on balance the DVC is a money maker for now...the problem is that unless they do something to grow the market for the resorts, value and otherwise, they have overbuilt the total resort capacity-this leaves them with hotels that are staffed and running up bills with nobody but Disney to pay the maintenance...thus the recent shut downs of PO and CBR....DVC is not the ONLY reason for the decrease in resort bookings, but it is a factor that seems to have been largely ignored in the euphoria over DVC's success. With each new DVC sold they whittle away at the market for other resorts...

my poll on the DVC boards so far suggests that the 80% or more of DVC members would otherwise be staying in on site resorts if DVC did not exist.

Paul

 

[vernon]

You're poll also shows that almost everyone would spend less time at WDW if they didn't belong to DVC. In some cases the hotels benefit because those longer staying guests use the bars and restaurants at the other Disney hotels. WDW overall benefits because people , in general, spend a lot more money at WDW because DVC allows them longer visits.

As Paul points out, Disney benefitted and continues to benefit from a massive influx of cash as people prepaid for their vacations and continue to prepay ( buy more points) and pay their dues.

Granted attendance figures were lower before Sept 11th, but much of that could be viewed as a result of the heavy attendance due to the Y2K celebrations and the fact many people were saving up for this years celebration of Walt's birthday. IMHO Sept 11th, there have been no new parks opening in the last couple of years, and the fact from 2001 to the early part of 2002 was sandwiched in between two major "happenings " at WDW have been the biggest causes of the slow down. I have a feeling that Xmas and next year is going to see an upturn in those figures.