Poly DVC affect on hotel

[Brian Noble]

One difference between Anaheim and Orlando is that the Disney-owned resorts at the former have much less of a "home court advantage," and so they just can't command the same kind of price premium. Rack rates at the WDW Values are pushing $200 a night for preferred rooms in high season. There is no way you could pull that off in Anaheim for a cinderblock motel with four-story icons.

 

[KAT4DISNEY]

IF Disney was not filling hotel rooms it wouldn't be strange to assume that they were over pricing them. But then again the rack rates at the hotels really are not the whole story - Disney seems to have take the route on the hotels that they haven't with much else. Price the rack rate high and then discount. Really they would never have any issues filling the hotels if priced correctly so then it's a question of do you want to run at capacity and charge less or run at less than capacity and charge more. As the hotels are priced though it helps to show the rack rates to make the point of why buying PVB is a good idea for someone that goes and stays there all the time.

Only access to the history will tell the truth but I'm extremely doubtful of the information some proclaim that all the Deluxe hotels had such low occupancy. I can't say that I've noticed a huge trend like that when looking at CRO availability at different times of the year. Even if they were always packed full it doesn't preclude turning them over for timeshare conversion. Lots more money up front and they'll do fine down the road as well.

 

[Brian Noble]

Price the rack rate high and then discount.

If you read the Resorts board, you'll see a lot of anecdotal evidence that the discounted inventory isn't nearly as large as it once was. That's not surprising, though, as travel continues to recover from the recessionary slump.

 

[Shamus]

I think we all agree that each new DVC resort that opens temporarily pulls some demand from all cash rooms on property and likely hurts the Deluxe resorts at a higher percentage. The net effect however has been an overall increase in the number of Deluxe guests property-wide whether they be Cash or DVC. What is interesting is that PVB is the first DVC Deluxe Resort "Conversion/Add-on" that is not significantly increasing the total number of rooms at the resort.

Consider the previous Deluxe Resort additions:
VWL - Add-on of 136-181 DVC rooms
BCV - Add on of 208-282 DVC rooms
AKV - Conversion of 134 rooms plus add on for 458-708 DVC rooms
BLT - Conversion of 250 rooms for 295-428 DVC rooms
VGF - Add on of 100-147 DVC rooms
PVB - Conversion of 360 rooms plus add on for 380 DVC Rooms
* Note Number of DVC Rooms are Min-Max based on lock-off usage.

I agree with the earlier comment that the DVC money being "pumped" into the Poly Resort refurbishment will help increase demand. Remember also that not all new PVB owners will be drawn from the current Poly Fan pool. That is two sources that is going to increase overall resort demand while the number of rooms is basically staying flat.

My guess is that Poly rooms are going to become very hard to secure whether they be cash or points.

Will Disney then increase the Cash Rate to capitalize on this demand?

 

[keishashadow]

There is an unnamed agency that has had cheap Poly rooms (under $200), I can't imagine that will continue with the decreased inventory and upgraded amenities.

I booked heavily discounted res for standard room at poly via unnamed agency for a pre Labor Day stay this year. Spoke to them this week as to switching dates and told there was lots of inventory available

Some TAs block out rooms far in advance. Booked PORR last oct since I was missing a few nights in dvc arrangements. Used one of the big online agencies that has been offering an additional 15% on whatever promo wdw has for room only. Was surprised to see their rates drop even lower less than a week out. I asked and was told they needed to move 'their' rooms.
Wound up with a mod less than what wdw was asking for value.

Imo wdw is inclined to move potential unsold
inventory thusly vs pin codes or general public codes. I don't see this model drying up. If anything, think wdw will raise their rack rates at the poly to see what market will bear then dump the inventory as needed to TAs

 

[DebbieB]

Here is the thread about the unnamed agency:

http://www.disboards.com/showthread.php?t=3340695

Their rooms area really cheap plus I assume they get a commission too? I would be kind of ticked if I had paid $300 or $400 for Poly thinking I got a good deal and then read this.

 

[Brian Noble]

It's a fairly straightforward strategy: group bookings are often at a significant discount, even if you don't have an actual group...

 

[keishashadow]

Here is the thread about the unnamed agency:

http://www.disboards.com/showthread.php?t=3340695

Their rooms area really cheap plus I assume they get a commission too? I would be kind of ticked if I had paid $300 or $400 for Poly thinking I got a good deal and then read this.

true, but many feel slighted when they read posts of people indicating they get repetitive pin codes too.

I look at it the same way as buying seats on a plane, wherein the person next to you may have much lower/higher priced seat.

There are always travel deals to be found with a bit of research & the ability to be flexible, sprinkled with a bit of luck as to timing. Many don't want to forego the convenience of a package, especially when it comes to losing the ability to add the DP.

Glad most don't book with the discounters (or the deals would vanish).

 

[jerseyduke]

]IF Disney was not filling hotel rooms it wouldn't be strange to assume that they were over pricing them. But then again the rack rates at the hotels really are not the whole story - Disney seems to have take the route on the hotels that they haven't with much else. Price the rack rate high and then discount. Really they would never have any issues filling the hotels if priced correctly so then it's a question of do you want to run at capacity and charge less or run at less than capacity and charge more. As the hotels are priced though it helps to show the rack rates to make the point of why buying PVB is a good idea for someone that goes and stays there all the time.

Only access to the history will tell the truth but I'm extremely doubtful of the information some proclaim that all the Deluxe hotels had such low occupancy. I can't say that I've noticed a huge trend like that when looking at CRO availability at different times of the year. Even if they were always packed full it doesn't preclude turning them over for timeshare conversion. Lots more money up front and they'll do fine down the road as well.

Not entirely true. Sometimes more money can be made at a lower occupancy rate with a higher price than the other way around.

Higher Occupancy does not always mean higher profit.
Disney would make more with 65% occupancy at 600 a night than 90% at 400. (at least as far as the hotels division is concerned)

 

[KAT4DISNEY]

Not entirely true. Sometimes more money can be made at a lower occupancy rate with a higher price than the other way around.

Higher Occupancy does not always mean higher profit.
Disney would make more with 65% occupancy at 600 a night than 90% at 400. (at least as far as the hotels division is concerned)

I did not state anything different. I think you're interpreting my lower price/higher occupancy statement as one that meant it needs to be dropped so far as to fill every room however I didn't say anything about 100% occupancy. It's a fixed number of rooms and you'd play with a sliding scale on the variable (price) to figure out where it is best to be.

In the end I'd argue that a hotel that is there because of a theme park should run as close to full occupancy as possible and so the scale should tip towards high occupancy vs making the same profit with lower occupancy and higher price. I'm not saying that it should be pricing for a loss but of course it's also been stated that is exactly what is happening. Show me the numbers and I'll believe the loss and the low occupancy and until then I just doubt it. The margin per room could be less when keeping it full but there are no discounts so great at Disney that the cost for maintenance on rooms in use would cause a loss or else they are paying their staff far more than I'd ever guess. In the end, at a hotel, any room that is not occupied is a revenue opportunity lost that can never be regained but that doesn't mean that a hotel cannot make a profit when not renting out the majority or all rooms either.

 

[jerseyduke]

I did not state anything different. I think you're interpreting my lower price/higher occupancy statement as one that meant it needs to be dropped so far as to fill every room however I didn't say anything about 100% occupancy. It's a fixed number of rooms and you'd play with a sliding scale on the variable (price) to figure out where it is best to be.

In the end I'd argue that a hotel that is there because of a theme park should run as close to full occupancy as possible and so the scale should tip towards high occupancy vs making the same profit with lower occupancy and higher price. I'm not saying that it should be pricing for a loss but of course it's also been stated that is exactly what is happening. Show me the numbers and I'll believe the loss and the low occupancy and until then I just doubt it. The margin per room could be less when keeping it full but there are no discounts so great at Disney that the cost for maintenance on rooms in use would cause a loss or else they are paying their staff far more than I'd ever guess. In the end, at a hotel, any room that is not occupied is a revenue opportunity lost that can never be regained but that doesn't mean that a hotel cannot make a profit when not renting out the majority or all rooms either.

Maybe I did misread. I do not know Disney's internal structure, but I would be willing to bet that Parks has a totally different Profit and Loss Statement than the resorts do. And if that is the case, the resorts do not care directly about putting people in the parks, they care about the resorts profitability.

That being said they are not selling the rooms for a loss at any discount. The management of the resorts division is not putting in a PnL of a loss and being given credit for park attendance figures.

My only point was that low occupancy may not be a concern, if they are getting more for the rooms they are renting.

If it were a totally cooperative relationship, then they would want to maximize occupancy, but that is almost certainly not the case. (What is to stop Resorts from saying occupancy and profit are down because of Parks, and the prices they charge?)

 

[Brian Noble]

I do not know Disney's internal structure, but I would be willing to bet that Parks has a totally different Profit and Loss Statement than the resorts do.

This is my understanding as well. For example, we know from various reports that DVD had to pay Parks for the fastpasses they used to give out for tours.

 

[disneynutz]

This is my understanding as well. For example, we know from various reports that DVD had to pay Parks for the fastpasses they used to give out for tours.

Parks & Resorts is one business unit I am told. Even though they are on one balance sheet, they still charge each other for services.

Bill

 

[Brian Noble]

One business unit is not the same thing as "Does not have independent P&L targets." Indeed, there's no point in WDW Resorts paying Parks for FPs if they don't.

 

[jerseyduke]

Parks & Resorts is one business unit I am told. Even though they are on one balance sheet, they still charge each other for services.

Bill

They are listed on the annual report as Parks and Resorts. However, I have to think they have separate P&Ls. How else could you gauge management performance? And why would you pay each other for things? (That would be pointless paper work). I am sure each resort has its own P&L as well.

Also, occupancy by year: (From the annual reports)
2014: 83%
2013: 79%
2012: 81%
2011: 82%

Operating Income for Parks&Resorts (In millions)
2014: 2663
2013: 2220
2012: 1902
2011: 1553

I wish they were separate!
FYI...The media companies provide over 50% of the companies profit. 56% in 2014