Spring Direct Incentives 2/9-4/27

[AstroBlasters]

Do you think that’s a likely happening? Although I’ve taken macro and microeconomics, I don’t know much about central banks and credit. But I agree that lack of financing options would definitely reduce prices.

Do I think an event could happen that would freeze up lending for niche lenders and make it more difficult for people to get loans for new and used timeshares? Absolutely.

Remember…..most problems start in the credit markets…. not the stock market.

 

[🍀TwinsMom]

I think airfare continuing to go up with jet fuel will have an impact on DVC. Folks have to GET to WDW to learn about/experience the bubble and find DVC. Between TSA furloughs every few months and prices for a family of four to fly, I think it eventually will catch up with the DVC sales side.

I agree the K-shaped economy is real, but if every part of going on vacation to WDW is a pricey hassle, DVC may take a hit.

Next incentives, I feel like Dory with short-term memory loss, but haven't they been doing limited fire sales since VGF a couple years ago?

 

[airjay75]

I’ll add that I straddled this particular direct incentive period last year with my first RIV purchase. Last year, the current period was better than the next one. And, they moved from the $1,000 Disney Visa credit to a $1,000 AP credit for AP holders. I wouldn't be surprised to see that again given the summer VIP pass holder deals they're already promoting.

 

[Patmcpsu]

While I think the next round will be similar, I wouldn’t be surprised if they are more aggressive. Josh is new as CEO and he needs to show some results quickly. While he was leading the division before, he had to align to Iger’s expectations.

I predict the Josh D'Amaro effect will be as follows:

1. Disney lowers hotel rates (as part of a broader "make Disney more affordable" push)
2. DVC resale value decreases as hotels become a better value
3. DVC Direct eventually offers better incentives as demand wanes

The steps would happen in this order, with each steps taking years. There's also a small chance that Disney enters a new golden age and WDW demand skyrockets, increasing DVC value.

 

[Brian Noble]

Disney has generally been willing to play the long game when it comes to DVC specifically, and Parks & Experiences generally. They are hesitant to do too much discounting to non-affiliate groups, becuase discounting begets discounting.

 

[marty3d]

I predict the Josh D'Amaro effect will be as follows:

1. Disney lowers hotel rates (as part of a broader "make Disney more affordable" push)
2. DVC resale value decreases as hotels become a better value
3. DVC Direct eventually offers better incentives as demand wanes

The steps would happen in this order, with each steps taking years. There's also a small chance that Disney enters a new golden age and WDW demand skyrockets, increasing DVC value.

1 - I don't see racks rates on hotels coming down anytime soon. D'Amaro is on the record both before and after his promotion to CEO that they view offering different value tiers and targeted promotions as ways to drive demand rather than cutting the price of tickets or hotel rooms. Promotions also allow them to reduce the cost of rooms during downturns and being able to slowly draw back discounts as the economy improves. The reality is that with Disney's stock stagnating at about $100 for the last 5 years and the experiences segment driving the majority of their operating income, there's no incentive to do reduce prices.

 

[Cfabar1]

I think what we may see - which could impact Disney Parks generally is a reckoning around the fact FLorida is miserable to be in for several months out of the year…

So, I could imagine peak nightly rates going up
And non-peak rates going down somewhat (but probably less so than the peak nightly rates would go up)

I think they will also continue to emphasize this promotional playbook for cash rates…

How that impacts DVC - not sure yet… my gut tells me a few things:
1. If the off-peak nights promotions expand too much, direct incentives will need to increase. This summer we are doing an AoA family suite for about $250 a night… there is an argument to be made by many potential customers - why buy DVC if I can stay that cheaply… We have never stayed value, so I’ll let you know how I feel about that argument after we do it..
2. Points charts will need to be reexamined, and those peak times like February-March-April may need to be repriced higher.

If done carefully and correctly it will increase affordability and revenue.

Keep in mind the parks are already quite crowded… imagine if they brought back the EPCOT world showcase busses.. Where would they go? So, I don’t think Disney wants to be too affordable…

 

[AstroBlasters]

1 - I don't see racks rates on hotels coming down anytime soon. D'Amaro is on the record both before and after his promotion to CEO that they view offering different value tiers and targeted promotions as ways to drive demand rather than cutting the price of tickets or hotel rooms. Promotions also allow them to reduce the cost of rooms during downturns and being able to slowly draw back discounts as the economy improves. The reality is that with Disney's stock stagnating at about $100 for the last 5 years and the experiences segment driving the majority of their operating income, there's no incentive to do reduce prices.

Josh has stated that he wants to grow capacity at the parks and that growth in capacity will lead to higher profitability with long term ROI.

 

[gvel]

It’s impossible to isolate any single factor but I do think the entire DVC resale market really started to turn down as interest rates rose and it’s stalled out from there—so I think we all agree that the credit market can impact the DVC market.

If I was Disney, I’d probably put aggressive incentives on at least some properties to try to sell as many points as possible just in case of a credit market disruption, or greater economic chaos over the course of this quarter…maybe even a very limited time “celebratory” promo to close out the end of Disneyland’s 70th?

I don’t actually expect them to be much better overall…but I also don’t expect them to be worse and I think we could get some sort of niche incentive?

If Disney really wanted to increase sales they could offer some very low interest (1-3%) with purchases of over 150 a for those with excellent credit. While I'm on the camp that you preferably buy resale and never finance DVC... an offer like this might make many bite when Adonitis hits.

 

[ChipTheRescueRanger]

With the slight down tick in travel will be interesting to see how DVC goes with incentives. Esp when prices keep going up. Yet Hotel discounts have returned.

When Lakeshore starts selling you would think Disney would want all other resorts "sold out" As going to be a huge amount of points to have to shift.

 

[Cfabar1]

For whatever reason, Disney has not been interested in using the interest rate lever to push sales… They’ll do other incentives like free points for example, or stakeholder discounts…

But I agree.. a 0.9% 36 month DVC finance purchase with a 200 point minimum would likely be very attractive to a large number of buyers…

 

[Cfabar1]

With the slight down tick in travel will be interesting to see how DVC goes with incentives. Esp when prices keep going up. Yet Hotel discounts have returned.

When Lakeshore starts selling you would think Disney would want all other resorts "sold out" As going to be a huge amount of points to have to shift.

I think some choice is helpful to them… but I agree trying to sell 6 resorts simultaneously gets a little complicated!

 

[Brian Noble]

If the off-peak nights promotions expand too much, direct incentives will need to increase.

The other way out of this is to continue to rebalance the point charts, lowering summer and raising other times of year.

Keep in mind the parks are already quite crowded…

This.

We fanatics keep coming up with reasons why the Mouse will have no choice but to save us money, but he is too busy weighing his cheese to pay attention.

 

[Brian Noble]

But I agree.. a 0.9% 36 month DVC finance purchase with a 200 point minimum would likely be very attractive to a large number of buyers…

In the current market, that's offering customers a discount on deferred payments---inflation is running closer to 3%. It is not going to happen.

 

[Patmcpsu]

Josh has stated that he wants to grow capacity at the parks and that growth in capacity will lead to higher profitability with long term ROI.

Rumors of a 5th WDW park have been gaining steam and New Park probably = New Hotels. Every Disney fan would prefer their growth be from increased capacity instead of increased prices, and I think that's why they're optimistic about D'Amaro.

But Disney currently has $46B in debt which is a 41% debt to equity ratio. It might be tough for Disney to take on much more debt to finance an expansion (at low interest rates at least). Their current debt rating is an A/A- which is considered "upper medium grade". If the 5th park is built on a limited budget, the chance of it being a home run is slim.

For reference Animal Kingdom cost $800 million to build in 1995, which is $1.7 billion in today's dollars.

 

[AstroBlasters]

Rumors of a 5th WDW park have been gaining steam and New Park probably = New Hotels. Every Disney fan would prefer their growth be from increased capacity instead of increased prices, and I think that's why they're optimistic about D'Amaro.

But Disney currently has $46B in debt which is a 41% debt to equity ratio. It might be tough for Disney to take on much more debt to finance an expansion (at low interest rates at least). Their current debt rating is an A/A- which is considered "upper medium grade". If the 5th park is built on a limited budget, the chance of it being a home is slim.

For reference Animal Kingdom cost $800 million to build in 1995, which is $1.7 billion in today's dollars.

Yes, much easier to expand on current park footprint.

 

[maui22]

Didn’t Disney hike base direct prices two months ago?
If so, why panic. Sales so far have still been good based on what we see from county deeds. Selling SSR deeds at the price they are is good business for them.

Additionally, I thought I saw something about 2027 WDW ticket price hike.

 

[DonkeyHoTay]

Josh is new as CEO and he needs to show some results quickly.

Probably not a coincidence he is starting with layoffs to reduce operating costs.

I don't see racks rates on hotels coming down anytime soon. D'Amaro is on the record both before and after his promotion to CEO that they view offering different value tiers and targeted promotions as ways to drive demand rather than cutting the price of tickets or hotel rooms.

I think there will always be a deluxe resort customer at WDW to rent and sell out those rooms. The promotions on moderate and value resorts with tickets/ packages etc will be enough to keep those filled too.

 

[gvel]

Rumors of a 5th WDW park have been gaining steam and New Park probably = New Hotels. Every Disney fan would prefer their growth be from increased capacity instead of increased prices, and I think that's why they're optimistic about D'Amaro.

But Disney currently has $46B in debt which is a 41% debt to equity ratio. It might be tough for Disney to take on much more debt to finance an expansion (at low interest rates at least). Their current debt rating is an A/A- which is considered "upper medium grade". If the 5th park is built on a limited budget, the chance of it being a home run is slim.

For reference Animal Kingdom cost $800 million to build in 1995, which is $1.7 billion in today's dollars.

Park building costs have far outpaced inflation. Epic Univerve supposedly had a price tag of $6+ billion. A new park in WDW would probably cost $4+ billion. It would be that "low" because they already have the land and main external infrastructure.

While a park is very expensive...Ain't it crazy that you can build a park for the cost of a modern NFL stadium? I might be biased but I would take a park over an NFL stadium any day of the week.

 

[DVC Gma]

the EPCOT world showcase busses

WOW! I never knew this!!