Why is the rate of dues increase different for various resorts?

[Granny]

Inspired by LIFERBABE's thread about whether Disney is doing a good job keeping maintenance costs down, it got me thinking about why there is such a discrepancy in dues increase percentages from resort to resort.

I understand why some resorts have a higher dues base, but once that is established then you'd think that the individual resort increases would be pretty similar unless there are extenuating circumstances (like the major work done at HH a few years ago).

So why do you all think that dues rise at different rates for the different resorts. Taken from DVC Mike's thread, here's a recap of where the 2011 dues are coming in and annual increases for the WDW DVC resorts


Resort - 2011 Dues Increase - Average Annual Increase Growth rate

BLT - 3.1% - 3.0%.

BWV - 1.8% - 2.6%.

AKV - 1.3% - 2.1%

BCV - 2.4% - 3.8%.

VWL - 2.8% - 3.9%.

OKW - 2.2% - 3.9%.

SSR - 1.1% - 2.5%



I can see where for any one year there could be a swing depending on the timing of refurbishings, etc. But to me a 2.1% to a 3.9% annual increase swing seems pretty pronounced.

Any thoughts on this? Since we own at two of the biggest dues per point resorts (VWL & BWV), it has always been something that I couldn't logically figure out.

 

[Granny]

Moderators...I just noticed that I put this on the DVC Operations board...it might be better suited for the Miscellaneous board since it involves some speculation rather than operational fact.

 

[tjkraz]

There's just no way to tell without really scrutinizing the detail.

The three major components are operating costs, capital improvements and property taxes. All three contribute to that final percent you cite.

Tax rates are set by the county assessors so those are subject to any amount of volatility.

Capital improvements may need to be ramped-up or ramped-down depending upon the long-term status of a given project. Initial estimates may have a parking lot needing to be repaved every 5 years but if they later find it needs to be done after 4 years, adjustments to that segment of the budget could be higher than other resorts.

In terms of operations, each resort needs to be staffed in a different manner depending upon services offered and just the layout of the facilities.

Insurance rates will be evaluated for each property separately.

Transportation costs will vary with fuel prices. Resorts like SSR, OKW and AKV spend a lot more on fuel due to their reliance on bus transportation. As fuel prices go up and down, it could either hurt or help the overall budget.

AKV has the savanna in its budget so those dollars could be fairly volatile depending upon things like feed costs and overall animal care expenses.

Even something like the furnishings within villa rooms could contribute to higher costs at one resort over another. Resorts like the BoardWalk and Old Key West have historically been outfitted with very light colored furniture. That furniture will display wear-and-tear much more clearly than resorts like SSR and AKV which use darker woods and tones. The lighter items are probably more prone to complaints from guests, which lead to more frequent replacement.

 

[Mtnman44]

They also don't seem to be related to the actual rate of inflation either. Even with flat inflation, we get the same, seemingly automatic, 3 to 4% hike.

 

[Granny]

There's just no way to tell without really scrutinizing the detail.

The three major components are operating costs, capital improvements and property taxes. All three contribute to that final percent you cite.

Tax rates are set by the county assessors so those are subject to any amount of volatility.

Capital improvements may need to be ramped-up or ramped-down depending upon the long-term status of a given project. Initial estimates may have a parking lot needing to be repaved every 5 years but if they later find it needs to be done after 4 years, adjustments to that segment of the budget could be higher than other resorts.

In terms of operations, each resort needs to be staffed in a different manner depending upon services offered and just the layout of the facilities.

Insurance rates will be evaluated for each property separately.

Transportation costs will vary with fuel prices. Resorts like SSR, OKW and AKV spend a lot more on fuel due to their reliance on bus transportation. As fuel prices go up and down, it could either hurt or help the overall budget.

AKV has the savanna in its budget so those dollars could be fairly volatile depending upon things like feed costs and overall animal care expenses.

Even something like the furnishings within villa rooms could contribute to higher costs at one resort over another. Resorts like the BoardWalk and Old Key West have historically been outfitted with very light colored furniture. That furniture will display wear-and-tear much more clearly than resorts like SSR and AKV which use darker woods and tones. The lighter items are probably more prone to complaints from guests, which lead to more frequent replacement.

All good points. But I would say that unless there is a change in actual service, things like fuel, taxes, and staffing should all rise very close to the same percentage for each resort each year.

Interesting point about the decor requiring more or less maintenance cost. The only thing is VWL has some of the darkest decor and highest increases.

I know we will never get the detail to understand exactly what drives these numbers. But it is interesting to at least post theories. Thanks.

 

[Granny]

They also don't seem to be related to the actual rate of inflation either. Even with flat inflation, we get the same, seemingly automatic, 3 to 4% hike.

The Consumer Price Index is geared towards consumers, not businesses. So what consumers pay for a basket of goods over time is probably not relevant to businesses. As Tim pointed out, items such as capital expenditures would not be part of the CPI.

My guess is that taxes, energy and personnel (health care) costs are the main drivers of increases. But the point of this thread is not why dues go up but why do they go up at different rates for different resorts.

By using WDW resorts only I was trying to create a group that is easier to compare to each other since they all have the same personnel, tax and energy rate increases each year.

 

[briangib]

I would add that the percentage increase for taxes should be the same for each property, but I'm not sure how much of the dues are attributable to taxes overall.

 

[rcchello]

Some factors that may lead to different rates -

Being able to share expenses with a hotel (check-in, parking lot, pools).

Some resorts have less pools per guest.

The hotel-like DVCs do not need carts to move the cast members between buildings.

Some DVC have significantly less landscaping.

Sharing the buses with a hotel, some resorts have dedicated buses.

The larger resorts have more points to spread any increase over.

 

[jlewisinsyr]

I would add that the percentage increase for taxes should be the same for each property, but I'm not sure how much of the dues are attributable to taxes overall.

As long as all of the resorts are in the same county, yes, the tax percentage increase should be the same, the dollar amount will vary dramatically based on resort though.

 

[Granny]

As long as all of the resorts are in the same county, yes, the tax percentage increase should be the same, the dollar amount will vary dramatically based on resort though.

Right...and this discussion is about percentage of increases, not the cost differences.

 

[Granny]

Some factors that may lead to different rates -

Being able to share expenses with a hotel (check-in, parking lot, pools).

Some resorts have less pools per guest.

The hotel-like DVCs do not need carts to move the cast members between buildings.

Some DVC have significantly less landscaping.

Sharing the buses with a hotel, some resorts have dedicated buses.

The larger resorts have more points to spread any increase over.

Again, all good points in explaining why one resort's dues are higher or lower than another one. But why would they increase at different percentage rates?

 

[rcchello]

As an example: you have 3 CMs serving 100 people at resort A (because they share the cost with a hotel) and 5 CMs required at resort B for 100 people.

If each person gets a 5% raise and the avg salary is $1000 then total raise of $150 (resort A) and $250 (resort B ). So the people at resort A will need to pay $1.50 a person and resort B a the increase would be $2.50.

So the same 5% raise costs members different rates.

Now if you are the type of person who hates word problems the above is blah, blah, blah but it still works.

 

[Granny]

Bob, I'm good with using word problems. You're kind of making my point. In the example you use, both resorts would have 5% increases in dues (if wages were the only thing to go up). So the rate of increase for each would be the same...5%.

But based on the table above, dues are not going up at the same rate at each resort.

My question is why some resorts dues are going up at a higher rate than others?

I guess I'm being rather thick-headed here. Not the first time.

 

[drusba]

I don't really think you can make comparisons. Each resorts has its own issues. Size can also make a difference because you are spreading costs among more points at larger resorts and many of the particular costs at one resort are not significantly greater just because it is a lot larger than BCV or VWL; SSR has the most members and points by far and does not have hotel services . BWV at 2.6% average overall is misleading since its real average overall is likely closer to 3.8%; what happened is that there were two consecutive years in the early 2000's where dues significantly decreased thus pulling down any average and the reason for the decrease is that a major refurbishment in 2001-02 was partly paid for by the original contractors because of defects in the outside walls and balconies, i.e., members dues went down to reflect that they did not have to pay for that refurbishment as it related to outside walls and balconies. AKV likewise has size on its side and also has the fact that there are more points per room sold than other resorts except BLT, and thus costs can be spread more, and both it and BLT are really too young to start assuming that their current "average" annual rate will be maintained.

 

[White_Sox_Fan]

I think we are trying to compare apples to oranges to plums to bananas. As pointed out previously, some resorts have a hotel component, BLT is condo style, AKV has the savannahs, etc. Also the newest resorts, AKV & BLT, really don't have enough history to be compared to longstanding resorts like OKW.

 

[DenLo]

I think for BLT and the VGC they must have under estimated some figures because BLT and VCG both have doubled the cost of items especially ones related to housekeeping and the front desk. I think that the operating costs are higher because there are more check in and check outs than an average DVC. Many DVC members only stay at BLT for 2 to 4 nights because the points are so high. Whereas the average stay at the other DVC resorts are often 1 week or longer.

I just hope the big increases are temporary and not an annual event for BLT.

 

[Chuck S]

It also depends upon what percentage of the overall budget each line item is.

If labor is 10% of OKW budget and 5% of BWV budget, then a 5% increase in labor will yield a different overall percentage of dues increase.

For instance, say each resort starts with $100K in employee cost, and it increased to $105K.

But say the overall budget for OKW was 5,000,000 and the overall budget for BWV was 2,500,000.

This would meant that the OKW percentage increase would be 5,000/5,000,000 or 1%, the increase for BWV would be 5,000/2,500,000 or 2%. The increase percentage would be double at BWV over OKW. Now considering how many different line items there are in the budget, this is why percentages of increase vary at the resorts.

 

[drusba]

I think for BLT and the VGC they must have under estimated some figures because BLT and VCG both have doubled the cost of items especially ones related to housekeeping and the front desk. I think that the operating costs are higher because there are more check in and check outs than an average DVC. Many DVC members only stay at BLT for 2 to 4 nights because the points are so high. Whereas the average stay at the other DVC resorts are often 1 week or longer.

I just hope the big increases are temporary and not an annual event for BLT.

Doubling or other substantial increase of actual total costs in a year for such things as housekeeping and administration/front desk while a resort is being sold does not mean costs have doubled. It simply reflects that during the relevant year much more of the resort was sold and thus costs applicable to the previously unsold portion, which were not part of last year's dues, are now part of the DVC portion and included in next year's dues. What you should look at is actual increase in dues per point which for BLT has not been large.

 

[DisDaydreamer]

I don't really think you can make comparisons. Each resorts has its own issues. Size can also make a difference because you are spreading costs among more points at larger resorts and many of the particular costs at one resort are not significantly greater just because it is a lot larger than BCV or VWL; SSR has the most members and points by far and does not have hotel services . BWV at 2.6% average overall is misleading since its real average overall is likely closer to 3.8%; what happened is that there were two consecutive years in the early 2000's where dues significantly decreased thus pulling down any average and the reason for the decrease is that a major refurbishment in 2001-02 was partly paid for by the original contractors because of defects in the outside walls and balconies, i.e., members dues went down to reflect that they did not have to pay for that refurbishment as it related to outside walls and balconies. AKV likewise has size on its side and also has the fact that there are more points per room sold than other resorts except BLT, and thus costs can be spread more, and both it and BLT are really too young to start assuming that their current "average" annual rate will be maintained.

I tend to subscribe to this line of thinking most. The resorts are very different, some new, some older, some have guests that tend to stay longer and some have a tendency of shorter stays (much turn-over). You can't really compare them. There are some obvious reasons for differences, but then there are some behind the scenes operational differences that make a difference in expenses. I don't think the joint registration areas and staff have that much of an impact on the whole picture though.

 

[Granny]

It also depends upon what percentage of the overall budget each line item is.

If labor is 10% of OKW budget and 5% of BWV budget, then a 5% increase in labor will yield a different overall percentage of dues increase.

For instance, say each resort starts with $100K in employee cost, and it increased to $105K.

But say the overall budget for OKW was 5,000,000 and the overall budget for BWV was 2,500,000.

This would meant that the OKW percentage increase would be 5,000/5,000,000 or 1%, the increase for BWV would be 5,000/2,500,000 or 2%. The increase percentage would be double at BWV over OKW. Now considering how many different line items there are in the budget, this is why percentages of increase vary at the resorts.

Chuck...what you say makes a lot of sense, and would explain some of the differences in rate increases.

And drusba and Rob...you make a lot of sense as well. I had forgotten about the BWV warranty repairs.

I appreciate everyone's input and responses. Overall cost mix as well as ages of resorts. Decor, resort style and other factors will weigh in to make resorts' dues increase at different rates.

Still seems like a wide disparity from top to bottom, but all the responses make a lot of sense. Thanks.

The resorts are very different, some new, some older, some have guests that tend to stay longer and some have a tendency of shorter stays (much turn-over).

Not to go , but which resorts do you think have guests typically staying longer than other resorts? Interesting notion.