Why Do So Many Hate DVC

[slappy magoo]

There is a ground lease agreement between Disney Vacation Development and other Disney entities, but members do not pay anything toward that lease. A developer (Disney Vacation Development) cannot sell ownership rights in something that they have not already secured via purchase or long-term lease agreement.



Funding for emergency and public services comes from taxes just like any other municipality. Disney may run the government, but those services are still operated as non-profits with DVC members only paying their fair share.

Some services are certainly owned and operated by Disney, but legally they cannot charge arbitrary rates and turn them into profit centers. Disney Vacation Club--the timeshare management arm--has a fiduciary responsibility to secure service contracts which are favorable to membership. The Florida Timeshare Bureau and other governmental oversight agencies exist to protect against such abuse. Budgets and other financial matters are reviewed annually by independent auditors.

Look, if someone thinks something is true, isn't that enough to MAKE it true? Does it really have to be supported by "facts?" Gut instincts come from the gut which is closer to the heart then the head is, and the heart is where your true feelings lay, so...there you go...

 

[Buried20KLeague]

Look, if someone thinks something is true, isn't that enough to MAKE it true? Does it really have to be supported by "facts?" Gut instincts come from the gut which is closer to the heart then the head is, and the heart is where your true feelings lay, so...there you go...

Way to have an intelligent conversation and not resort to belittling people.

I didn't know some of the things that tjkraz shared. Thanks, tjkraz.

I still hold though, as I said above, that they don't DIRECTLY profit from MF's, but that they INdirectly profit from them by not having to pay many of the fees out of their pocket that they do on all their other resorts.

For example: I would think that Disney pays MUCH more out of pocket to operate POR than they do to operate BLT. Certainly some of Disney's costs are built into room rental fees, but it stands to reason that they don't cover all (or close to it) of those fees like DVC can with maintenance fees.

As stated, Florida law protects timeshare holders to a certain extent... I would argue that those same exact timeshare laws ALSO allow Disney to do things they can't with their "regular" resorts.

What say you?

 

[Pioneer Hall]

Way to have an intelligent conversation and not resort to belittling people.

I didn't know some of the things that tjkraz shared. Thanks, tjkraz.

I still hold though, as I said above, that they don't DIRECTLY profit from MF's, but that they INdirectly profit from them by not having to pay many of the fees out of their pocket that they do on all their other resorts.

For example: I would think that Disney pays MUCH more out of pocket to operate POR than they do to operate BLT. Certainly some of Disney's costs are built into room rental fees, but it stands to reason that they don't cover all (or close to it) of those fees like DVC can with maintenance fees.

As stated, Florida law protects timeshare holders to a certain extent... I would argue that those same exact timeshare laws ALSO allow Disney to do things they can't with their "regular" resorts.

What say you?

I have to disagree with you here. Disney wouldn't be operating resorts if they weren't making a profit off of them, let alone just covering the costs. If you look at it as apples to apples, then the costs of the resort are all paid for in one way or another. When you stay at POR you pay for the costs to run that resort in your room fee. When I stay at my DVC resort I pay for those costs in my fees. While resort income is usually not one of the biggest profit drivers, I would be willing to guarantee that Disney covers all their operating costs at the non-DVC properties...if they didn't then they would have no reason to open new ones.

The big difference here is that Disney doesn't have to disclose those operating costs to the regular guest when they pay for their hotel room and Disney is free to profit whatever they want on a non-DVC stay. If that room costs 50 dollars a day in operating costs and you pay 200 then Disney is profiting nicely. With DVC they can't do that because all costs have to announced at the beginning of the year when members pay their dues.

 

[DVCOwner]

I will add that DVC operating out of other Disney resorts, such as my home resort of Boardwalk Villas. Disney would have to run buses between the Disney Boardwalk Inn and let's say Magic Kingdom if DVC was there or not. Now Disney can pass some of this cost off to DVC and the cost of running the Inn goes down a little. The same can be said about other services provided by the Disney company and paid by both the Inn and the Villas. Is this a lot of money; not per item, but I am sure it adds up with the serveral resorts sharing services. So indirectly Disney is making some money of annual membership fees.

 

[slappy magoo]

I have to disagree with you here. Disney wouldn't be operating resorts if they weren't making a profit off of them, let alone just covering the costs. If you look at it as apples to apples, then the costs of the resort are all paid for in one way or another. When you stay at POR you pay for the costs to run that resort in your room fee. When I stay at my DVC resort I pay for those costs in my fees. While resort income is usually not one of the biggest profit drivers, I would be willing to guarantee that Disney covers all their operating costs at the non-DVC properties...if they didn't then they would have no reason to open new ones.

The big difference here is that Disney doesn't have to disclose those operating costs to the regular guest when they pay for their hotel room and Disney is free to profit whatever they want on a non-DVC stay. If that room costs 50 dollars a day in operating costs and you pay 200 then Disney is profiting nicely. With DVC they can't do that because all costs have to announced at the beginning of the year when members pay their dues.

And to add to that, if you were looking to enhance profits one way or the other, and you have one group of clients who don't need to see your books, and one where the books have to be open as required by law, where would you try to pad?

 

[Buried20KLeague]

I will add that DVC operating out of other Disney resorts, such as my home resort of Boardwalk Villas. Disney would have to run buses between the Disney Boardwalk Inn and let's say Magic Kingdom if DVC was there or not. Now Disney can pass some of this cost off to DVC and the cost of running the Inn goes down a little. The same can be said about other services provided by the Disney company and paid by both the Inn and the Villas. Is this a lot of money; not per item, but I am sure it adds up with the serveral resorts sharing services. So indirectly Disney is making some money of annual membership fees.

I would bet you're right.

 

[Buried20KLeague]

And to add to that, if you were looking to enhance profits one way or the other, and you have one group of clients who don't need to see your books, and one where the books have to be open as required by law, where would you try to pad?

Depends. You pad too much with the group of clients that don't see the books, and they can stop coming.

The group that DOES see the books is a bit more captive, although there are obviously ways out.

But I don't think they're "padding", per se. I see it more as cutting costs.

 

[tjkraz]

I still hold though, as I said above, that they don't DIRECTLY profit from MF's, but that they INdirectly profit from them by not having to pay many of the fees out of their pocket that they do on all their other resorts.

For example: I would think that Disney pays MUCH more out of pocket to operate POR than they do to operate BLT. Certainly some of Disney's costs are built into room rental fees, but it stands to reason that they don't cover all (or close to it) of those fees like DVC can with maintenance fees.

Disney only pays minimal operating costs for DVC resorts but they also don't earn any steady revenue from those locations either. To a developer, the vast majority of their revenue comes from the initial sales. After the points are sold, operating a resort like Old Key West or the Bay Lake Tower is a virtual non-profit.

Sure Disney has to pay the operating costs on a cash resort, but they are also charging hundreds of dollars per night to guests staying there.

Consider the Beach Club. DVC member dues are currently $5.28 per point at the villas. In value season you can get a Studio for 16 points per night. So the effective operating cost of that room for one night is about $84.

That's for the villas but the figure is certainly comparable for cash rooms. Bump it up to $90-100 per night if you wish to account for daily housekeeping and so on.

Now consider what Disney charges. Rates for a standard guest room at the Beach Club in January run from $335 to $485 per night depending upon view, day of the week, holidays, etc. With operating costs of less than $100, you've got a profit margin of 60-80%!!!

Apply those figures to the 25,000 cash rooms they have on property and you'll get an idea of just how profitable the hotel business is for Disney.

DVC certainly has its place, too. Via DVC, they are getting 7-8 times as much money up front. They also earn revenues off of the financing of those purchases, and can invest the capital received from those who pay cash. But as a whole, the cash resorts are far more profitable. That's why there still aren't any DVC rooms at the Poly or Grand Floridian despite the timeshare program being 20 years old. Those hotel rooms generate too much revenue.

 

[Buried20KLeague]

Disney only pays minimal operating costs for DVC resorts but they also don't earn any steady revenue from those locations either. To a developer, the vast majority of their revenue comes from the initial sales. After the points are sold, operating a resort like Old Key West or the Bay Lake Tower is a virtual non-profit.

Sure Disney has to pay the operating costs on a cash resort, but they are also charging hundreds of dollars per night to guests staying there.

Consider the Beach Club. DVC member dues are currently $5.28 per point at the villas. In value season you can get a Studio for 16 points per night. So the effective operating cost of that room for one night is about $84.

That's for the villas but the figure is certainly comparable for cash rooms. Bump it up to $90-100 per night if you wish to account for daily housekeeping and so on.

Now consider what Disney charges. Rates for a standard guest room at the Beach Club in January run from $335 to $485 per night depending upon view, day of the week, holidays, etc. With operating costs of less than $100, you've got a profit margin of 60-80%!!!

Apply those figures to the 25,000 cash rooms they have on property and you'll get an idea of just how profitable the hotel business is for Disney.

DVC certainly has its place, too. Via DVC, they are getting 7-8 times as much money up front. They also earn revenues off of the financing of those purchases, and can invest the capital received from those who pay cash. But as a whole, the cash resorts are far more profitable. That's why there still aren't any DVC rooms at the Poly or Grand Floridian despite the timeshare program being 20 years old. Those hotel rooms generate too much revenue.

All good points.

I wonder, though, if the hotels are "far more profitable". Resort building has been focused almost solely on DVC for the past number of years. Is that solely because they're bringing up DVC to meet the demand, or because they want a faster profit than the hotels provide, or they want to increase the captive audience, or some combination in between.

I bet we see DVC at the GF soon. There was a drawing running around of removing the spa/tennis area and adding a wing of DVC a la the Grand Californian, then rebuilding the spa elsewhere. This would add DVC without cutting into cash rooms, and would allow sharing of services and facilities between the two, which would benefit Disney as posted above. Bet we see something similar with the Poly after that.

 

[toolsnspools]

Not to mention that after 50 years, all the contaracts expire, and Disney owns the whole hotel again. The Contemporary is now almost 40 years old, and it's not in too bad of shape. I can't imagine it will be a dump in another 10 years, so a 50 year old hotel has some value. Or as in the case of OKW, you just sell contract extensions to the existing owners nad get them to hand you another pile of money.

There is contract language about how the additional capacity of the hotels are used. If I get a chance I'll look it up and share the details.

 

[tjkraz]

I wonder, though, if the hotels are "far more profitable". Resort building has been focused almost solely on DVC for the past number of years. Is that solely because they're bringing up DVC to meet the demand, or because they want a faster profit than the hotels provide, or they want to increase the captive audience, or some combination in between.

I'd say all of the above.

Given that DVC takes guests out of the hotels, you could actually argue that DVC helps increase hotel capacity. It's safe to say that most DVC members were already fans of the on-site resorts. And when you take someone who was previously paying cash to stay at the Contemporary one week per year and sell them BLT points, that opens up capacity for another guest.

I bet we see DVC at the GF soon. There was a drawing running around of removing the spa/tennis area and adding a wing of DVC a la the Grand Californian, then rebuilding the spa elsewhere. This would add DVC without cutting into cash rooms, and would allow sharing of services and facilities between the two, which would benefit Disney as posted above. Bet we see something similar with the Poly after that.

I'm not saying they won't build at the GF or Poly...just that they aren't in any hurry. It's no coincidence that after 20 years they still have not built at those resorts, nor that it took 18 years for DVC to get into the Contemporary.

 

[tjkraz]

Not to mention that after 50 years, all the contaracts expire, and Disney owns the whole hotel again. The Contemporary is now almost 40 years old, and it's not in too bad of shape. I can't imagine it will be a dump in another 10 years, so a 50 year old hotel has some value.

The question isn't what the hotels will look like in 50 years--it's what they will look like in 100 years when the second round of ownership would finally expire. Impossible to tell exactly what they will do but it's hard to imagine that buyers won't think twice before investing in a building that's already 50 years old.

Or as in the case of OKW, you just sell contract extensions to the existing owners nad get them to hand you another pile of money.

Possible but OKW was largely considered a failure.

I think DVC was willing to take a risk on OKW because the timing suited their needs. The OKW extension happened during a period when construction timelines left them with very little points inventory for about 9-12 months. SSR was winding down (pre-Treehouses), Kidani was still more than a year from opening and BLT wasn't even official yet. The OKW extensions gave them the ability to market 50-year contracts when the only other option would have been to sell points at locations that were still 18 months away from opening. Hard to get someone to invest $20K when they can't use the points for a year and a half.

In the end, the percent of owners who took the extension was pretty low. DVC will pay the price for that in about 30 more years when they have a bunch of 15-year OKW contracts on their hands.

 

[disneyeater]

Not to drag up an old thread (which is exactly what I am doing), but read this post on DVC expansion today that reminded me of some of the things talked about in this thread.

http://4parks1blog.com/2011/06/dvc-expansion-good-or-bad-for-the-parks/

 

[kapeman]

Not to drag up an old thread (which is exactly what I am doing), but read this post on DVC expansion today that reminded me of some of the things talked about in this thread.

http://4parks1blog.com/2011/06/dvc-expansion-good-or-bad-for-the-parks/

Good link.

The author makes some good points.

I knew that DVC resorts made an incredible amount of money (and rather quickly at that), but I didn't think of the "profits from the previous resorts pay for the new construction" angle.

 

[611williamsj]

like disney is not doing anything there doing loads in fantasy land with bell and little mermaid and they just done star tours maybe it is a bit slow since nothing major has changed for years but who cares I love disney and stuff the people who think my annual dues goes on the parks lol i think i would be angry if i found out it went on light bulbs at main street and not light bulbs for the light house at old key west

 

[disneyeater]

Part 2 of the article. A totally different angle from a DVC member perspective.

Interesting stuff. I am not sure how I feel about it.

 

[etpinge]

Part 2 of the article. A totally different angle from a DVC member perspective.

Interesting stuff. I am not sure how I feel about it.

I think the poster is just confused and maybe not thinking large enough, and maybe there are limits, but think about these possibilities

WDW - maybe the addition of a few smaller resorts for DVC would help, but Grand Floridian and Polynesian are the 2 that make the most sense... The Values will not see a DVC.

DLR - I believe here is opportunity for growth, if the surrounding areas can handle the construction needs.

Non-US based parks could seriously use something more than a points swap out. The laws would need to be stretched, but I would enjoy a DVC option in France, China, or Japan.

Non-parks: Everyone has unique seasons and challenges to balance. Snow in the mountains (heard it is beautiful in the summers), hurricanes in the Caribbean (only 4-5 months a year and some never hit), and destinations (DC, NYC, SanFran) could be options.

The people with DVC are doing their research, something will come up and it will work out. Its just us with the guessing game.

As for over saturation, the parks at WDW only hit capacity for a few days a year. It is frustrating for those of us wanting to get in, but until capacity is met more often, the Disney corporation will try to find more ways to increase revenue.

 

[tjkraz]

Not to drag up an old thread (which is exactly what I am doing), but read this post on DVC expansion today that reminded me of some of the things talked about in this thread.

http://4parks1blog.com/2011/06/dvc-expansion-good-or-bad-for-the-parks/

That's not really representative of how companies like Disney treat such projects. Each construction project is evaluated on its own merits. They don't look at it from the standpoint of "selling 'A' will give us enough money to create 'B'."

If 'B' is a solid concept, it is approved regardless of what happens with 'A'.

Those theories also ignore the lack of liquidity in most DVC sales. At least 75% of all contracts are financed for up to 10 years. Even if DVC "earns" $800 million from the sales of one resort, that money doesn't fully materialize for up to a decade. (Of course, the good news is that a lot of interest follows over that timeframe.)

Plus The Walt Disney Company doesn't have unlimited cash reserves. My understanding is that Disney Vacation Development borrows money to fund the construction of each resort project, and then gradually pays off that debt as sales progress.