Q4 earnings explain resort room prices and availability

[JasonMouse]

As many of us have experienced in the last year (or more), WDW rooms have been more challenging to find availability for and at the discounts we're used to. Yet, there's no way these resorts are at capacity. What the earnings report confirms is that in fact occupancy is down and prices are high. It's unclear why they don't just sell all their capacity, but it probably has something to do with staffing and controlling costs, which might be the case if you had to bring in a full cleaning crew to accommodate a whole block discounted rooms. Not sure. And while they blame some of the low occupancy on Irma, they also include refurbishments and "conversions to vacation club units."

Maybe someone here can explain how DVC impacts this, as we know they must maintain a legal requirement of something like 80% or so occupancy.

Here's the snippet from the Q4 earnings report:

"Lower results at Walt Disney World Resort were driven by higher costs and fewer occupied room nights, partially offset by growth in guest spending and attendance, although both were negatively impacted by Hurricane Irma. Higher costs were primarily due to increases in labor and employee benefits, depreciation and marketing. Guest spending growth was due to increased food and beverage spending and higher average daily hotel room rates. Available hotel room nights were lower due to refurbishments and conversions to vacation club units."

 

[_auroraborealis_]

Maybe someone here can explain how DVC impacts this, as we know they must maintain a legal requirement of something like 80% or so occupancy.

There's no legal requirement for DVC occupancy, although the reality is that DVC occupancy is consistently higher than 80%.

Available hotel room nights being lower simply means they've reduced supply. They took out two villages at CBR to build Riviera, and converted a wing of Wilderness Lodge to DVC. That means those are no longer hotel units.

So when looking at occupancy rate, it's Occupancy divided by Rooms Available. Rooms Available used to be X. It is now X-Y, where Y are those villages at CBR, and the wing of WL that is no longer hotel.

 

[DisneyWishes14]

There's no legal requirement for DVC occupancy, although the reality is that DVC occupancy is consistently higher than 80%.

Available hotel room nights being lower simply means they've reduced supply. They took out two villages at CBR to build Riviera, and converted a wing of Wilderness Lodge to DVC. That means those are no longer hotel units.

So when looking at occupancy rate, it's Occupancy divided by Rooms Available. Rooms Available used to be X. It is now X-Y, where Y are those villages at CBR, and the wing of WL that is no longer hotel.

Yes, this. They've simply stated room supply is down due to refurbishments (of which there are many right now!) and the DVC conversions. So, fewer occupied room nights because they have more rooms out of commission than they did in previous quarters. That number will most likely go up once the refurbishments are done because supply will go up at that time.

 

[_auroraborealis_]

Yeah - I neglected to add in the destruction of CSR 9B, and the fact that at least one building at CSR past that has been out of commission for the last 6 months on a rotating basis. And the Pop refurb. And probably one I've forgotten.

 

[BridgetBordeaux]

The Pop refurb alone has removed many, many room nights from the inventory. I would love to know how much just the short term Pop revenue loss adds up to!

 

[dansdad]

There are over 1500 less rooms in the inventory compared to last year.

 

[BridgetBordeaux]

There are over 1500 less rooms in the inventory compared to last year.

Let's have a little fun everyone................shall we?

1500 rooms at an average price of 150 dollars out of inventory for just 30 days equals a revenue loss of 6.75 million dollars.
No matter how you slice it......that is a lot!

 

[JasonMouse]

Where is the 1500 number coming from? I'm skeptical that 1500 rooms out of inventory is the main reason room nights are down. DVC still rents them as hotel rooms (aka "villas") so JUST conversion alone is not reducing supply. Renovations are probably a constant. They are always renovating; I hear Poly is next. The new inventory is what, at least 2 years away? The last time they expanded inventory was Art of Animation and I think that actually cannibalized sales of their more expensive rooms.

 

[HopperFan]

They also said Irma overall cost them $100 million, nothing to sneeze at.

 

[DisneyWishes14]

Where is the 1500 number coming from? I'm skeptical that 1500 rooms out of inventory is the main reason room nights are down. DVC still rents them as hotel rooms (aka "villas") so JUST conversion alone is not reducing supply. Renovations are probably a constant. They are always renovating; I hear Poly is next. The new inventory is what, at least 2 years away? The last time they expanded inventory was Art of Animation and I think that actually cannibalized sales of their more expensive rooms.

I don't really understand what point you are trying to make. Are you ssying Disney isn't telling the full truth in the quarterly report?

Renovations are a constant, but it's usually resorts doing short, soft-goods refurbs. It's nothing like we've seen recently with large parts of CSR and CBR going out of inventory. Pop, Yacht Club. Half of WL taken out of resort inventory, etc. There are a ton of rooms out of inventory right now.

 

[HopperFan]

Renovations are a constant, but it's usually resorts doing short, soft-goods refurbs. It's nothing like we've seen recently with large parts of CSR and CBR going out of inventory. Pop, Yacht Club. Half of WL taken out of resort inventory, etc. There are a ton of rooms out of inventory right now.

And that is just our known rooms due to refurbs. They may have taken blocks of rooms out of inventory to reduce supply. It would allow them to justify higher prices while carrying lower staff, laundry etc costs.

 

[dansdad]

Where is the 1500 number coming from? I'm skeptical that 1500 rooms out of inventory is the main reason room nights are down.

Caribbean Beach - Removed 576 rooms to make room for new DVC building
Coronado - Removed 72 rooms when 9B was demolished. Currently 125 rooms out of inventory due to renovation.
Wilderness Lodge - Converted 400 rooms to DVC.
Poly - Converted 222 rooms to DVC
Pop - Currently 125 rooms out of inventory due to renovations

1520 rooms total.

 

[_auroraborealis_]

DVC still rents them as hotel rooms (aka "villas") so JUST conversion alone is not reducing supply.

Yes, it does. Disney does not rent all of DVC as hotel units. Disney own 2-4% at most resorts, and get an unspecified percentage due to member point trades. CCV, which is a recent conversion, took a whole wing out of inventory (400 units) and was not open for business until July; while Disney still "own" 76% of it, that is 6+ months of those units being out of inventory. Even booked via CRO, I think the revenue goes to DVC, not Resorts.

The two villages at CBR that were destroyed to start building Riviera took out several hundred rooms (someone can give a better number). Riviera won't be online for points or cash until 2019. CSR took out roughly 100 rooms for good by destroying 9B; while the new tower will add capacity, I do not know its end date (prob 2019 again).

Most of the removed inventory is really, actually removed, for a while.

 

[hakepb]

Where is the 1500 number coming from? I'm skeptical that 1500 rooms out of inventory is the main reason room nights are down. DVC still rents them as hotel rooms (aka "villas") so JUST conversion alone is not reducing supply. Renovations are probably a constant. They are always renovating; I hear Poly is next. The new inventory is what, at least 2 years away? The last time they expanded inventory was Art of Animation and I think that actually cannibalized sales of their more expensive rooms.

The DVC conversion meant that the entire wing of WL was unavailable to anybody due to construction. They also had to issue a bunch of credits as compensation for construction.

Going forward, the villas are owned by DVD (Disney Vacations development) until they sell those leases to DVC owners. Either way, the Villas revenue his different books.