Changing DVC Sales Strategy?

[DVC Mike]

Looking at the total number of points sold by Disney Vacation Club from 2011 on, it is very apparent that there is a distinct downward trend in the number of points being sold by DVC year over year.

Over the same period, the cost per point to purchase direct from DVC has been going up and the point charts for the most recent DVC resorts show point inflation (it costs more points to book a reservation than it does at older resorts).

The inflated point charts and the falling quantity of points being sold also indicates a decline in the number of new DVC members that Disney Vacation Development is pulling in each year.

This seems to signal a shift in the sales strategy for DVC when compared to prior years. They are less focused on a volume business (more points at a lower price) and more focused on a smaller volume business at a higher price.

So, even though they are selling less points, they have a greater profit margin on every sale. Their strategy of converting existing hotel rooms into DVC units (at PVB and likely WL) reduces capital expenditures - decreasing the cost of the goods they are selling, resulting in a higher profit margin.

Perhaps their options for building more DVC units at WDW are growing smaller - at least in terms of the "low hanging fruit" where they can add DVC onto existing Deluxe resorts - and they realize their volume business is not sustainable, or at least not the best approach.

Look at the charts below and chime in with your thoughts.

Point sales fell from 2.47 million in 2011 to 1.70 million in 2014.

Data from Wil Lovato @ DVCNews.com​

Here is a more detailed breakdown of DVC Direct Sales from Jul 2010 through June 2015. I find this interesting.

Data courtesy of Wil Lovato​

For the last half of 2010, BLT dominated sales.

Data courtesy of Wil Lovato​

In 2011, while BLT was the clear leader, there was still a substantial number of points being sold at both SSR and AKV, so there was broad appeal to various people with three different themed resorts.

Data courtesy of Wil Lovato​

In 2012, AKV surprisingly takes the lead, with both BLT (supposedly "sold out" by the end of 2011) and SSR market share shrinking.

Data courtesy of Wil Lovato​

In 2013, AKV maintains it's lead, but BLT and SSR largely disappear (SSR was supposedly "sold out" in 2012). Meanwhile, VGF goes on Sale and grabs a large market share.

Data courtesy of Wil Lovato​

In 2014, AKV shrinks dramatically (as it was "sold out" in late January), and 2014 sales are largely just one resort - VGF.

Data courtesy of Wil Lovato​

So far in 2015, VGF maintains the lead, but the expectation is that since VGF is now "sold out", 2015 will look like 2014, with one resort dominating - PVB.

Data courtesy of Wil Lovato​

Including Aulani in the 2015 stats shows this:

Data courtesy of Wil Lovato​

 

[flynnibus]

Until dianey changes their pricing (and the trend has Ben up up up) I don't believe they share the same concern. Surely wl dvc should be a bit cheaper than poly so Disney will continue to have a range to offer people

 

[LuvtheGoof]

My take on the Poly sales is twofold. No 1 bedroom units, and the only 2 bedrooms are the bungalows, which are crazy expensive for the size. My wife and I prefer staying in a 1 bedroom, even if it is only the 2 of us, so buying in at the Poly doesn't interest us. Will we stay there in a studio? Eventually, but it would only be for a short stay, and just to say that, yes, we've stayed at every DVC resort. We can't see ever staying in a bungalow, even with the several hundred points we own. We would rather stay in a grand villa that would actually be less than those. I don't know what they were thinking with those units. Well, OK, they weren't thinking. At least not clearly.

I can't help but wonder if Disney raised the direct buy prices so fast to keep the resale market healthy. I mean, we own at SSR, and current resale is about $80/point. We could sell our contracts, and make pretty much what we paid for it many years ago! Just a few years ago, I believe they were going for about $65/point. It's higher only because the direct buy-in price is $130/point.

 

[DVC Mike]

I've posted this same query on four different Disney discussion forums, and it's been interesting to see the varied responses.

I agree with the opinion that DVC has changed strategies and is now focused on selling less points but at a higher price.

So yes, DVC sales are declining when you look at the total amount of points sold from year to year.

In the same way, the number of new DVC members is probably declining year over year.

I still don't know if the higher purchase price per point, the inflated point charts at the new resorts, and their tactic of converting existing hotel rooms rather than build net new buildings will result in the same revenue stream to Disney.

 

[GoofGoof]

Did @ParentsOf4 change his screen name? Nice graphs

I think Disney came to the realization that they couldn't continue to sell DVC points at the same pace indefinitely. By selling less points at a higher price they have managed to maintain profits or maybe even increase them slightly. The other interesting thing is that the points per room for both GF and Poly is higher than the older resorts so even if they sold the same number of points it would still represent less rooms. In recent times DVC has definitely shifted from a "value" proposition for frequent visitors to more of a high end luxury purchase.

 

[DVC Mike]

I added sales for June 2015, where sales for the Polynesian pickup, as well as the second half of 2010, in the first post in this thread.

 

[DVC Mike]

Did @ParentsOf4 change his screen name? Nice graphs

I'm wondering what @ParentsOf4 thinks about this thread.

 

[ToTBellHop]

I'm wondering what @ParentsOf4 thinks about this thread.

Competition.

 

[GoofGoof]

DVC presents a unique dilemma to TWDC and WDW. It may have actually been too successful. I'm not talking about guest satisfaction or generating repeat visitors, just purely as a stand alone business. DVC is a profitable portion of P&R but in order to not just maintain but grow P&Rs profits year over year DVC needs to generate the super profits every year.

The problem is there is a finite demand and once you buy in you don't need to buy again for 50 years. There are also a limited number of places at WDW to put DVC. There was no way Disney could continue to sell the same volume of DVC points indefinitely. As the graphs and numbers point out the volume is declining, but the price is increasing so it keeps overall profits neutral or even up year over year.

The problem I see with this plan is they are killing the value proposition in buying DVC points. If the price gets too high it becomes less of a value and then you really end up just fleecing people in the name of profits (see things like the Wishes desert party). I think the high price lower volume solution is just a short term bridge but it's not sustainable either.

The question is what's next for DVC? There's over 25 years until 2042 when the older contracts start expiring and the whole cycle starts again. Assuming a 3 year sell cycle for DVC projects and the rest of Poly plus WL expansion in the pipeline covering the next 5 years that leaves 21 years to cover before 2042. That's roughly 7 new projects. It's hard to imagine 7 additional WDW DVC projects. Some of the rumored projects: BLT 2, EPCOT parking lot, YC/BC and converting BW inn to DVC. That still leaves them short 3 or 4 projects and it would be a lot of additional points to sell at those really high prices considering only BLT 2 would be attached to a monorail resort.

They could go off property but it would need to be a really expensive place (like Aulani in HI) to even make the economics work. DLR is the obvious choice but I haven't heard much about projects there recently. Maybe they could leverage the highly successful cruise ship business. DCL has a lot of repeat visitors and DVC owners like to trade in for cruises. Maybe they could create a first of its kind cruise timeshare. Maybe they build a DVC into the expansion of DHS. Who knows. The point is they can't just continue the current model indefinitely. Demand is going to run out at the price point they are at without unique offerings.

 

[LuvtheGoof]

I have to agree completely. We have bought all of our points direct, but that was many years ago when it was around $90, and we received incentives to get it even lower. We still need to buy 40 points at SSR, so that we have the same number for each of our kids, and we'll buy those direct, so that all of them are the same. After that, we will definitely be looking at resale at either AKL, BWV, or VGF.

 

[FutureCEO]

My parents have a DVC. Both of them from resale but the bought them for an average of $60 a point. I know I will never buy DVC for myself with Disney's prices and the resales prices getting higher.

 

[Bob and April]

As far as sustainable growth of the DVC program, I'm trying to recall the total number of points at the wdw DVC resorts, which imo is a relevant consideration. I've seen those numbers but can't find them now. I'm very roughly guesstimating that the total is in the 40-45 million range. That would make continued new wdw sales of 1.5 million points per year an increase of 3-4% of the total number of points. That sounds sustainable to me. Even if new points sold don't generate profits at the same pace, DVC has continued profit growth potential by increasing the number of regular return visitors buying tickets, eating at restaurants, etc. I haven't added up total # of rooms and occupancy capacity lately, but I believe the room count is around 4,700. Assuming the average family stays 1 week per year, those rooms are bringing in 1 million people per year (based on less than maximum occupancy assumptions). Increasing that # by 3-4% per year is also nice growth potential. Keep in mind, wdw doesn't have to spend $$ or work nearly as much to keep DVC members returning, which is another plus.

 

[flynnibus]

Future projects? How about converting some of that Paris hotel capacity?

Disneyland is obviously way underutilized - they could make a SoCal destination that wasn't 100% the parks

Disney could do something like south Florida and target dvc+cruise buyers etc

They could look to increase their exchange program in a way to generate rev...

With dlp structuring changes that have been evolving I wonder if they really have been considering that angle

 

[GoofGoof]

Paris is an

Future projects? How about converting some of that Paris hotel capacity?

Disneyland is obviously way underutilized - they could make a SoCal destination that wasn't 100% the parks

Disney could do something like south Florida and target dvc+cruise buyers etc

They could look to increase their exchange program in a way to generate rev...

With dlp structuring changes that have been evolving I wonder if they really have been considering that angle

Paris is an interesting idea. I have no clue about international laws relating to timeshares, but I know you can trade in through RCI for resorts in Europe, so there are timeshares in some form there. It definitely makes some sense. It would be an interesting perk too to offer trade-ins for DLP to other DVC owners. Japan might work too. China is probably a little too risky, but again I'm no expert on international real estate laws.

DLR is the no brainer. Not sure why they haven't pursued it.

The only problem with building somewhere other than WDW in Florida is they have to compete with much more affordable alternatives. You can get a timeshare week for a 2 bedroom condo at a really nice beachfront location for significantly less than it costs for enough DVC points for a week in a studio if you buy direct from Disney. They can also market it on the ability to trade in at WDW, but I'm not sure if that would be enough to draw in buyers.

 

[Disneykidder]

I've heard a rumor that they are going to build more DVC units in DL. I'm not sure if it is converting VGF rooms or building a new resort. They could certainly convert some rooms at the other hotels there. Paradise Pier and DL Hotel. They definitely nee more there.

 

[GoofGoof]

I've heard a rumor that they are going to build more DVC units in DL. I'm not sure if it is converting VGF rooms or building a new resort. They could certainly convert some rooms at the other hotels there. Paradise Pier and DL Hotel. They definitely nee more there.

Micechat had a rumor recently that the paradise pier hotel would be knocked down and a DVC resort built in its place including a dedicated entrance into DCA. Not expected to happen until after 2018 along with changes to parking.

 

[worldfanatic]

It's my understanding they will delay any more DLR DVC as long as possible, because it's expected to cannibalize Aulani sales, for which they've still got many, many more points to sell.

It's a shame, because as a So Cal local it's become extremely difficult at the 7 month timeframe to wedge into the small # of Villas at the Grand Cal.

 

[WWWD]

I just returned from a stay at Disney Grand California and the news reported Disney buying a hotel across the street from Disneyland (on the side with the chain hotels). That would be a great site for a new DVC. There are DVC stands all over Disneyland, however not many cast members know much about it. When asked if I was a AP, I said no but DVC and had to explain it several times and most had to ask their manager if I received a discount- which I did.

 

[slappy magoo]

The problem is there is a finite demand and once you buy in you don't need to buy again for 50 years.

Tell that to everyone buying add-on points, which is probably most of us. As thorough as DVC Mike was, I'm curious as to how many sales from the past 5 years were suckers like us who went "DVC is going in (pick a Deluxe Resort where DVC previously wasn't)? NO WAY! Aw man I gotta at least get 25/50/100 points, just to say it's a home resort! Even if I only stay there every 2 or 3 years, I've gotta get points! POOOOOOIIIIINNNNNNTSSSS!" We're like the hurricane's coming "gotta get eggs and milk!" guy.

And if we're a sizable chunk of the points-buyers of the past 5 years, then I dare say that's not a sustainable model, either.

I'm starting to wonder if DVC might start taking over sections of moderate or value resorts, either at signficant;y lower points values, or with points that can't be used at the other DVC units, or if they are, they're done so with a conversion rate (like 2-to-1, 100 Art of Animation points - I pulled that out of my keister, it's purely hypothetical - only gets you 50 points in any other resort).

 

[GoofGoof]

Tell that to everyone buying add-on points, which is probably most of us. As thorough as DVC Mike was, I'm curious as to how many sales from the past 5 years were suckers like us who went "DVC is going in (pick a Deluxe Resort where DVC previously wasn't)? NO WAY! Aw man I gotta at least get 25/50/100 points, just to say it's a home resort! Even if I only stay there every 2 or 3 years, I've gotta get points! POOOOOOIIIIINNNNNNTSSSS!" We're like the hurricane's coming "gotta get eggs and milk!" guy.

And if we're a sizable chunk of the points-buyers of the past 5 years, then I dare say that's not a sustainable model, either.

I'm starting to wonder if DVC might start taking over sections of moderate or value resorts, either at signficant;y lower points values, or with points that can't be used at the other DVC units, or if they are, they're done so with a conversion rate (like 2-to-1, 100 Art of Animation points - I pulled that out of my keister, it's purely hypothetical - only gets you 50 points in any other resort).

It's true that there are a lot of owners buying additional points, but in the context of the discussion they are still the same as "new" buyers. The new points bought are additive as opposed to replacement. The original and add-on points still don't need to be replaced for up to 50 years. I do agree that DVC is likely getting a material portion of sales from existing owners. I also agree that this won't be sustainable either.

I have heard a lot of talk of Disney moving DVC to a moderate resort. The problem with that is it goes completely against the trend Mike was describing. If the new DVC business model is lower volume at a higher price that's the exact opposite of the way the moderate/value resorts work. They have a huge quantity of rooms at lower prices. To make a moderate DVC work you would have to sell it for less than the deluxe ones. That then makes marketing the current and future deluxe DVC resorts as a high end luxury item more difficult. You also lose the "value" buyers who right now might be talked into buying at Poly since it's still cheaper than paying rack rates at the hotel. They will just buy at the moderate for a much lower price.