Occupancy versus Dues

[Disney Adventurer]

I don't know exactly how the dues are prorated to each resort in relation to cash ressies but I am assuming that part of the resort upkeep/improvements come from cash ressies with the other part coming from DVC dues (correct me if I'm wrong). It is my understanding that dues actually went down slightly this year, but over the past few years the occupancy rates at Disney must have been very high with the booming economy, thus cash ressies helping out resort upkeep. As the economy has slowed and occupancy rates have declined at Disney, so will the money from cash ressies going into the resort upkeep. Now to the big question, do you think the low occupancy rate will force dues up at a higher rate than hotel room rates to compensate for the lack of income from cash ressies and to attempt to get occupancy up? ie, could we see a 5 -10% increase in dues with room rates only going up 1-3% or staying the same??

 

[drusba]

I do not think the economy and cash ressies will have much impact. You need to understand how cash ressies get allocated:

1. Disney (actually Disney Vacation Development Company ("DVD") retains a 4% interest in the resort and thus rents out 4% of the room space. That money is kept by DVD and does not go towards dues.

2. DVD also gets to rent units other than the 4% when members trade out from the DVC resort to elsewhere. That rental income also goes to DVD and not towards dues.

3. At the "breakage" point, 60 days before any date, DVD can rent DVC units which have not yet been reserved by members. That rental income, less costs of rental, goes towards dues. It is usually a couple of hundred thousand a year (at least it has been at BWV) or only 2% of the usual annual budget. That is the only cash ressie money that goes to dues. It will not be effected much or have a majopr impact on dues in an ecnomic slowdown.

4. At a joint resort like BWI and BWV, both contribute to the costs of running the resort in a set percentage. Thus, if cash ressies at BWI decrease it has no impact on the amount the BWI half must contribute.

As a result, I do not think cash ressies have much of an impact. Far more important are actual costs of running the resort that are paid for by dues. An economic downturn and less cash ressies at the resorts will likely not have a significant impact on those. In fact, it could possibly have a favorable impact on dues. Labor costs are the largest share of our dues. An economic downturn means there will be less pressure to raise wages; moreover if significantly fewer people are staying at the resort, they can actually let a few employees go and thus save those salaries that are paid for by dues.

If I was going to search for the most likely culprit for raising dues during an economic downturn, I would likely watch property taxes charged by the various government agencies. If regular rental income is down and the agencies have lost 8% of the rental tax money that they usually collect (which was recently reported as fact during the last three months) the agencies will go looking for other avenues to raise money and they might raise their property tax rates, thus increasing the property tax portion of our dues.