The future is cabins (or bungalows) . . . get used to it.

[Mickey of the Villages]

Images I've seen of Reflections show many (about 14) cabins - some appear larger than others. Polynesian has 20 and CCV has 26. I heard from skier-pete (and believe) that one-third of the points at CCV are for cabins (where I am an owner).

With these cabins and their high point requirements DVC puts more pressure on those buying points looking for studios who I believe are really disfavored in this new trend.

In my opinion Disney is moving up market and up profit by catering to those who will spend more on the cabins and putting added pressure on those looking for studios.

I believe this is the future of the business model for DVC.

 

[Sandisw]

These definitely up the game in terms of DVC and that those that buy for stays in studios are going to have a much harder time as we move along, not doubt.

 

[jerseyduke]

In my opinion Disney is moving up market and up profit by catering to those who will spend more on the cabins and putting added pressure on those looking for studios.

I kind of disagree with this - at least the first part. Disney does not give a **** if the Bora Bora Bungalows ever get used by DVC members. In fact, that DON'T want them used by DVC members, that way they can rent them out for cash, have the owners pay the maintenance- meaning 100% profit (well, not technically since they dont get all the breakage income) - oh, and by the way, Disney doesn't own the bungalows - Poly owners do.

Disney built the Bungalows. 20 of them. What could they have cost, a mil a piece to build? Thats 20 Million. 1,000,000 points for the bungalows at 160 per point - build them for 20 million, sell them for 160 million!!!!!!!!!!!

Oh, and then rent them out when they do not even own them!

It is a SCAM! Totally risk free lodging development.

I am not saying a law should exist or not, that is not the point here. But, if there was some law that required Disney to have sold the bungalows separately from the Studios, there would in no way be 20 of them. There might be 4. Because if they had to have sold them as their own entity, they would have never been able to sell a million points for those things alone. Never say never? I'm saying NEVER!


ETA:
You are right on when it comes to the rest, they are the future - but because they can sell the things and no one has to use them.

 

[Sandisw]

I could be wrong, but if they are part of DVC, the money from renting them comes back as breakage, unless they are pulling them to rent for cash to cover the members who trade points out to things like cruises or Adventures by Disney.

I do not think they just get to keep income however they want. Disney also retains at least 2% of the resort, so points associated with that ownership are theirs to rent,

I am not saying that there wasn’t a thought that putting these part of DVC wasn’t a good way to get them to have something higher end to offer cash paying guests, but I don’t think it’s to the degree you say. When you can pretty much book cabins and bungalows last minute, on DVC, then they havent been converted to breakage inventory or at the very least, aren’t being rented out.

 

[NoTime42]

I used to think it was a max breakage they could keep, but what has been stated lately in the past few years, DVD has a max breakage $ or % they can return to members...above max breakage is all $$$ to Disney.
And they usually report they hit that max breakage amount. The Bungalows and cabins make it really easy to hit max breakage.

 

[Sandisw]

I used to think it was a max breakage they could keep, but what has been stated lately in the past few years, DVD has a max breakage $ or % they can return to members...above max breakage is all $$$ to Disney.
And they usually report they hit that max breakage amount. The Bungalows and cabins make it really easy to hit max breakage.

Thank you. I guess I also thought it was capped, but sounds like not.

 

[Jenniebee]

What is breakage? Trying to understand from context but I can't figure it out.

Not to be a naysayer but there has to be some option for large luxury accommodations within DVC. I know the bungalows and cabins are a jump up from grand villas, but in a timeshare system, there are people looking for a "vacation home" experience and are comng with large groups or extended family, so they have to offer something at this capacity.

 

[NoTime42]

What is breakage? Trying to understand from context but I can't figure it out.

Not to be a naysayer but there has to be some option for large luxury accommodations within DVC. I know the bungalows and cabins are a jump up from grand villas, but in a timeshare system, there are people looking for a "vacation home" experience and are comng with large groups or extended family, so they have to offer something at this capacity.

Breakage is from Disney renting out DVC member inventory villas that are still available 60 days out.

Since most studio, 1BR and 2BR are booked, that means it’s the really high point cabins/bungalows that are mostly available breakage opportunities.

 

[_auroraborealis_]

Reflections is not 100% DVC. So we have to wait and see what is actually Villa vs. hotel.

 

[Jenniebee]

Breakage is from Disney renting out DVC member inventory villas that are still available 60 days out.

OK thanks - so it's income or revenue from renting out unbooked DVC Units? And this revenue gets credited to who? The resort or DVC? I would assume they are different budgets...

 

[SL6827]

If these big units are more profitable for Disney than the studios then yes, that is the direction DVC will want to go.

 

[jerseyduke]

It used to be capped at 2.5 percent of the operating budget. Not sure anymore.

During the high demand times, The poly bungalows do actually get booked a good amount (although I am not so sure by poly owners, SAPs will work just fine). Otherwise you can get a bungalow 1 day out. Why would Disney continue with such low demand accommodation types? Hmmmmm.........

 

[mmmikey]

Reflections is not 100% DVC. So we have to wait and see what is actually Villa vs. hotel.

This is a good point. It's going to be an all new resort like Riviera and they seem to favor a range of room types and sizes when given an opportunity.

 

[jerseyduke]

Reflections is not 100% DVC. So we have to wait and see what is actually Villa vs. hotel.

And this will be a tell tale sign. Some rooms at reflection will be for cash reservations others will be for DVC members. Anyone want to bet on how many of the cabins are reserved for cash reservations(not part of dvc)? I'll take 0 and you can have the field!

 

[_auroraborealis_]

And this will be a tell tale sign. Some rooms at reflection will be for cash reservations others will be for DVC members. Anyone want to bet on how many of the cabins are reserved for cash reservations(not part of dvc)? I'll take 0 and you can have the field!

I'll go on a limb and suggest there is potential that while they love selling all the points, they have seen that they CAN let $uites and bungalow$ and similar for fat ca$h and might in fact build some as a cash unit.

 

[CarolMN]

Just FYI, this is the definition of breakage income from the resort budgets sent to members each year:

Breakage Income - As stated in the Condominium Documents, Disney Vacation Club Management Corp. ("DVCMC) rents, during the Breakage Period, certain accommodations that have not been reserved by Members. The Association is entitled to receive, as breakage income, the proceeds of such rentals not to exceed 2.5 percent of the aggregate of the Condominium Operating Budget (total operating expenses less the sum of interest income and Member late fees and interest) and Capital Reserve Budget in each calendar year.

As far back as I can remember, each resort has received the maximum amount of breakage income every year. (Amounts over the cap go to Disney).

We do not know how much the excess totals, but IMO, it's safe to assume it is a substantial amount. Thus, Disney profits from breakage. It's a big part of the reason so many of us objected to the increased lock-off premiums DVCMC tried to implement with the first release of the 2020 point charts.

 

[jerseyduke]

I'll go on a limb and suggest there is potential that while they love selling all the points, they have seen that they CAN let $uites and bungalow$ and similar for fat ca$h and might in fact build some as a cash unit.

You are on, for 1$!
They may. Did they have to include all the bungalows and CCV cabins as part of their respective DVC entities? They may have, but I do not see why they would have HAD to do this, and they clearly chose not to. Of course it is possible and I have been wrong before.

They big thing I see is this. Taking the Poly, I put what I think is a high price tag on construction cost at a million a piece. Basically sold for about 8 million. Now there are other costs, such as the cost of selling the points, etc. But that is 7 Million $ in profit per bungalow. How many nights would they have to rent that out to make that in profit? Not to mention, when its part of the DVC entity, the members pay the upkeep. If Disney keeps them, they pay for the upkeep.

1$ AB.....1$ You can get some marshmallows if you win

 

[_auroraborealis_]

They may. Did they have to include all the bungalows and CCV cabins as part of their respective DVC entities?

In theory, I would expect not. Nothing prevents them from expanding a resort and capitalizing the expense on that side. Because of what was happening at existing resorts with DVC conversion, it wouldn't have been likely, though.

Because Reflections is a mixed project, there is already capitalization that is occurring outside of DVC, so it changes the accounting a bit. They aren't having to create capitalization to an existing resort, or a cash unit build account that didn't exist. Because Reflections is new, and will go both ways (country AND western!) the accounting is already in place.

So I'm thinking of it a little in the sense of how you finance and account for things.

 

[jerseyduke]

What is breakage? Trying to understand from context but I can't figure it out.

Not to be a naysayer but there has to be some option for large luxury accommodations within DVC. I know the bungalows and cabins are a jump up from grand villas, but in a timeshare system, there are people looking for a "vacation home" experience and are comng with large groups or extended family, so they have to offer something at this capacity.

There is nothing wrong with creating luxury accommodations, but I will point out that both the CCV cabins, and the Poly Bungalows sleep LESS than Grand Villas, so the large group argument is specious. But more to your point, Based on the Bungalow availability, Polynesian owners are not generating enough demand for the bungalows to justify 20 of them. DVC is not required to try to balance things out, so they don't. Exaggerate the problem for the sake of illustration, and say they had built 100 of the Bora Bora Bungalows. The Bungalows would have been a total of 5 Million points, and the studios 3 million. You would literally end up with 2 people competing for 1 studio at the Polynesian every day of the year. Of course this is not what happened, but it points out the problem of an imbalance.

Disney can build them as their own hotels, where they own them but they have not done so to date. Doing so would introduce some risk for Disney. Building them for DVC introduces no new risk for Disney, outside of selling the points, which is the same risk as building all the other room types)

When the poly went on sale, I looked at the Bungalows. For the first week of December, it would have cost like 145,000$ for enough points for 1 week a year there - during the lowest cost time.

OK thanks - so it's income or revenue from renting out unbooked DVC Units? And this revenue gets credited to who? The resort or DVC? I would assume they are different budgets...

Yes. Disney has to give it to the association up to 2.5% of the annual operating budget, they keep the rest. as @CarolMN pointed out, it gets maxed every year, so Disney is profiting ever year from it, we just don't know how much, but its probably a nice amount

 

[drusba]

Breakage income is what is generated by DVC's renting unreserved rooms to the general public beginning 60 days out from arrival date. Part of the annual net breakage income becomes a set-off of dues. However, the maximum set-off is 2.5% of the annual dues budget for a DVC resort (without counting toward the total annual dues a number of things in the budget). The amount above that 2.5% then goes to cover the annual costs, plus a 5% amount above such costs (i.e., a profit), of the Buena Vista Trading Co, the DVC entity responsible for trade-out reservations, including members reserving non-owned DVC resorts at 7 months out and trading out to Disney hotels and RCI. BVTC's only other income is the fees charged for trade-outs and a $1 per member annual dues charge called the DVC Reservation Component in the dues. After covering BVTC's costs plus 5%, any remaining breakage income goes to DVCM Ltd. (the designated management company for each resort, and is basically just additional profit. I was informed many years ago, even before the existence of the bungalows at Poly, that the annual breakage income usually exceeds that 2.5% that goes to offset dues and that amount that goes to BVTC.

What you will see today is that for many times of the year. particularly times between mid-Jan and late Sep, that there are openings at the bungalows and cabins at 60-days out, which often then disappear during that 60-day breakage period.

Nothing, except profit economics, required Disney to include the bungalows or cabins as part of DVC. Disney could have just made those hotel rental units. However, from a profit vantage making them DVC units made far more sense: (a) as hotel units all the costs of construction could be recovered only by renting the bungalows and cabins; as DVC Units all the costs of construction are recovered by sales of the units, and sales also result in many profits above the costs of building the units; (b) as hotel units, all the costs of annual maintenance and repair and long-term refurbishments would be Disney's responsibility, recoverable only from rentals; as DVC Units almost all of the costs of maintenance and repair of the bungalows and cabins are paid by the members, through annual dues, even though they are not using the units; (c) having those units as DVC adds hugely to the potential of profits from breakage income after selling most of the points for those units to purchasers who were buying only enough points to be able to get studios, e.g., it was highly likely when sold that Disney knew that not many members would buy to get the bungalows for a week every year, which had an average purchase cost of points needed per week of about $200,000.