Wilderness Lodge DVC additions - Copper Creek Villas & Cabins

[GoofGoof]

You're conflating cash flow with profitability and I think you know better than that. The initial $28K needs to be amortized over the life of the contract and added to the maintenance fees, which will bring you in line with market revenue on an annual basis.

You criticize the initial $28K because it's going into the "Disney Stock Machine," but that's no different than what happens with a standard room rental. Yes, Disney has an individual P&L for every resort, but that's not how they manage their cash flow. The Poly (or the Lodge or wherever) isn't forced to pay its own expenses out of its own cash flow. Once cash is brought into The Walt Disney Company, whether it's a timeshare, box office receipts, Olaf plush sales, or Disney Infinity purchases, it all gets swept to corporate. There's a giant pot of money where all the cash lands and that's where the money is spent from as well. You're looking at the company much more fragmented and siloed than the way it actually operates.

ETA: Not to mention the fact that much of that initial cash flow is required by statute to be set aside in reserves to fund future upkeep. This is actually very important, as the timeshare obligations mandate that guest rooms and common areas be maintained reasonably in line with the condition they were in at the time of purchase. In other words, the upfront cash influx from DVC sales actually results in a pot of money that will subsidize the repairs and maintenance of common areas that are enjoyed by both DVC and non DVC guests.

DVC sales go to current year net income. They are not amortizing the sales over 50 years. It's similar to any other real estate transaction.

 

[CaptainAmerica]

DVC sales go to current year net income. They are not amortizing the sales over 50 years. It's similar to any other real estate transaction.

See my edit. I misspoke when I mentioned amortization. It's an allocation of cash flow out of an initial reserve. That money is earmarked on behalf of the owners to future projects over the life of the contract.

 

[CaptainAmerica]

DVC sales go to current year net income. They are not amortizing the sales over 50 years. It's similar to any other real estate transaction.

This is actually in front of the AICPA as we speak.

http://www.aicpa.org/interestareas/.../revenuerecognition/pages/rrtf-timeshare.aspx

Looks like Disney has a representative on the committee.

 

[ParentsOf4]

The initial $28K needs to be amortized over the life of the contract and added to the maintenance fees. That initial cash flow is required by statute to be set aside in reserves to fund future upkeep. This is actually very important, as the timeshare obligations mandate that guest rooms and common areas be maintained reasonably in line with the condition they were in at the time of purchase. In other words, the upfront cash influx from DVC sales actually results in a pot of money that will subsidize the repairs and maintenance of common areas that are enjoyed by both DVC and non DVC guests.

You're focused on physical maintenance of the facilities.

I'm talking about a reduction in hotel services. Specifically, services that make a hotel a "Deluxe Resort". For example, a reduction in the ratio of staff-to-guest, elimination of more expensive 'free' special events for hotel Guests, etc.

I'm not suggesting Disney will let the hotel fall apart. I am suggesting that the lower annual revenue stream puts pressure on the hotel manager to find ways to reduce expenses.

 

[MichWolv]

This is actually in front of the AICPA as we speak.

http://www.aicpa.org/interestareas/.../revenuerecognition/pages/rrtf-timeshare.aspx

Looks like Disney has a representative on the committee.

This AICPA group has no authority to write new standards. They identify questions and try to explain to practitioners how such questions are answered by the new revenue recognition standard published in May 2014. If the AICPA task force believes the new standard does not answer the question, they will refer it to a working group of the FASB to be addressed further.

 

[GoofGoof]

This is actually in front of the AICPA as we speak.

http://www.aicpa.org/interestareas/.../revenuerecognition/pages/rrtf-timeshare.aspx

Looks like Disney has a representative on the committee.

It's part of the bigger revenue recognition project trying to merge US GAPP with international accounting standards. There is a potential impact to timeshare accounting.

 

[CaptainAmerica]

You're focused on physical maintenance of the facilities.

I'm talking about a reduction in hotel services. Specifically, services that make a hotel a "Deluxe Resort". For example, a reduction in the ratio of staff-to-guest, elimination of more expensive 'free' special events for hotel Guests, etc.

I'm not suggesting Disney will let the hotel fall apart. I am suggesting that the lower annual revenue stream puts pressure on the hotel manager to find ways to reduce expenses.

Management books have internal allocations that are washed away for GAAP and/or Tax purposes. The numbers that the hotel manager (and his superiors) see include "payment" for DVC room nights.

This AICPA group has no authority to write new standards. They identify questions and try to explain to practitioners how such questions are answered by the new revenue recognition standard published in May 2014. If the AICPA task force believes the new standard does not answer the question, they will refer it to a working group of the FASB to be addressed further.

In the case of DVC, there is little doubt that, under the new standard (and existing, for that matter), the accounting would be as you have described, with the amount paid recognized over the 50 year service period. Under the new standard, there is also little doubt that the recipient of an upfront time-share payment would need to recognize the time-value of money by recognizing interest expense over the 50 years, resulting in revenue of higher than the amount actually paid.

All if this is GAAP books and largely irrelevant. As I mentioned above, the resort is "made whole" on the management books to adjust for the impact of rooms booked with points.

 

[MichWolv]

Management books have internal allocations that are washed away for GAAP and/or Tax purposes. The numbers that the hotel manager (and his superiors) see include "payment" for DVC room nights.


All if this is GAAP books and largely irrelevant. As I mentioned above, the resort is "made whole" on the management books to adjust for the impact of rooms booked with points.

Indeed. This only affects the way the resort runs if Disney wants it to.

@ParentsOf4 has long argued the evils of Disney's stock buyback program, and attributes the negative impacts of those evils in many areas. I don't agree with him on the evils, nor on the attribution of the effects of stock buybacks (of which there are some, just not as many as he suggests) to as many places as he attributes them to.

 

[GoofGoof]

This AICPA group has no authority to write new standards. They identify questions and try to explain to practitioners how such questions are answered by the new revenue recognition standard published in May 2014. If the AICPA task force believes the new standard does not answer the question, they will refer it to a working group of the FASB to be addressed further.

Just a point of clarity: under current guidance does Disney recognize revenue from the sale of DVC when the points are sold or spread over the 50 year contract? Real estate accounting isn't my area of expertise, but I thought a timeshare or condo sale typically would qualify as a real estate transaction and so revenues would be recognized at the time of sale or the completion of construction if the sale occurs before the entire project is finsisted. Am I thinking of this wrong? I defer to your expertise.

 

[ToTBellHop]

Based on what? Didn't happen at Bay Lake. Didn't happen at VWL. Hasn't happened at GFC. Hasn't happened at GFV. So you're basing this on.... paranoia?
Let's take Animal Kingdom- one that started with DVC in mind and only increased its DVC stake as the popularity grew. Is there a WDW or DL resort that has more activities and special events than that one? Face painting, cultural tours for free, restaurant tours for free, nighttime safari viewing, etc. etc. etc. In fact- Animal Kingdom might not be near the resort it is without DVC.

Have you been to Aulani? Have you been to Vero Beach? Have you been to Hilton Head? Are those lacking in activities?

I would imagine the insane increases in room rates at the deluxes over the past ten years more than cover the costs of CMs from Africa playing drums. If I had the guess, the DVC actually raises Disney's profits long term. The deluxes do not book at 100% capacity, so if they can entice loyal fans to pay $30k next year for rooms that would otherwise be vacant, they make money. And now they only have to clean those rooms twice a week on average. And now they can provide fewer discounts for the traditional rooms (which we have noticed). I haven't personally seen a decrease in services at deluxes with DVC properties. My only complaints deal with aesthetics.

 

[CaptainAmerica]

I would imagine the insane increases in room rates at the deluxes over the past ten years more than cover the costs of CMs from Africa playing drums. If I had the guess, the DVC actually raises Disney's profits long term. The deluxes do not book at 100% capacity, so if they can entice loyal fans to pay $30k next year for rooms that would otherwise be vacant, they make money. And now they only have to clean those rooms twice a week on average. And now they can provide fewer discounts for the traditional rooms (which we have noticed). I haven't personally seen a decrease in services at deluxes with DVC properties. My only complaints deal with aesthetics.

Aesthetics how? DVC people are ugly?

 

[GoofGoof]

Aesthetics how? DVC people are ugly?

Hey now. Mom always said I was a handsome young man so that can't be true

Edit: I know the look of GFV and BLT is not popular with some people. The Poly bungalows even less popular.

 

[GoofGoof]

Based on what? Didn't happen at Bay Lake. Didn't happen at VWL. Hasn't happened at GFC. Hasn't happened at GFV. So you're basing this on.... paranoia?
Let's take Animal Kingdom- one that started with DVC in mind and only increased its DVC stake as the popularity grew. Is there a WDW or DL resort that has more activities and special events than that one? Face painting, cultural tours for free, restaurant tours for free, nighttime safari viewing, etc. etc. etc. In fact- Animal Kingdom might not be near the resort it is without DVC.

Have you been to Aulani? Have you been to Vero Beach? Have you been to Hilton Head? Are those lacking in activities?

I actually think upfront the resorts make out better when DVC gets added. Half the bill for the work at Poly on the pool and lobby is being footed by DVC sales. Going forward the common expenses are partially absorbed by DVC maintenance fees. It also helps to have 95% occupancy for half the resort. Things like lounges, snack bars, restaurants and shops are more profitable due to more foot traffic. It should allow things to stay open longer and offer more not less.

 

[LuvtheGoof]

Aesthetics how? DVC people are ugly?

You simply cannot argue with the DVC haters around here. We DVC people are evil incarnate, dontcha know.

 

[LuvtheGoof]

I actually think upfront the resorts make out better when DVC gets added. Half the bill for the work at Poly on the pool and lobby is being footed by DVC sales. Going forward the common expenses are partially absorbed by DVC maintenance fees. It also helps to have 95% occupancy for half the resort. Things like lounges, snack bars, restaurants and shops are more profitable due to more foot traffic. It should allow things to stay open longer and offer more not less.

That's the one thing they seem to forget. Our dues pay for an awful lot of upkeep for the entire resort, not just the DVC units. As far as daily mousekeeping, we have never wanted it (or missed it), even when staying with cash. We usually put the Do Not Disturb sign up for the majority of our vacation.

 

[GoofGoof]

I don't get this point. Shouldn't less discounts for traditional rooms be Disney's goal? Isn't full occupancy the goal? If @ParentsOf4 's point is that by adding DVC- then hotel occupancy rates are higher, which devalues the experience because theres more people in the lobby and busses, then ok- I agree with him.
While we're on that subject- I'd also love for them to not have running events the first week of January when I often went because it was dead and no one was in the park. And for that matter- stop the free dining promotions- it devalues my experience because reservations are harder to come by and the parks have higher attendance during what used to be a ghost town.

See the insanity of that argument? Disney has a way to fill the rooms without needing to offer discounts for cash stays- please tell me how that hurts the quality of any experience.

I actually don't see the insanity. I wish we could go back to having off times.

 

[LuvtheGoof]

I don't get this point. Shouldn't the decreased need for discounts of rooms be Disney's goal? Isn't full occupancy the goal? If @ParentsOf4 's point is that by adding DVC- then hotel occupancy rates are higher, which devalues the experience because theres more people in the lobby and busses, then ok- I agree with him.
While we're on that subject- I'd also love for them to not have running events the first week of January when I often went because it was dead and no one was in the park. And for that matter- stop the free dining promotions- it devalues my experience because reservations are harder to come by and the parks have higher attendance during what used to be a ghost town.

See the insanity of that argument? Disney has a way to fill the rooms without needing to offer discounts for cash stays- please tell me how that hurts the quality of any experience.

I think all of the room and free dining discounts should go away. Parks and restaurants are not as crowded. Better for all of us!

 

[COProgressFan]

You simply cannot argue with the DVC haters around here. We DVC people are evil incarnate, dontcha know.

Can't tell if you're being sarcastic, but I believe @ParentsOf4 and @WDW1974 are self-professed DVC owners. So I'm not sure "hater" is the right word.

I don't think anyone has any animosity to DVC members. Just animosity toward the ways that DVC affects the individual resorts to where its added, as well as the entire WDW business-model really. It really all comes down to Parks and Resorts executives, and their management of WDW, and ultimately, how their decisions affect the experiences at WDW for all of us.

 

[MichWolv]

Just a point of clarity: under current guidance does Disney recognize revenue from the sale of DVC when the points are sold or spread over the 50 year contract? Real estate accounting isn't my area of expertise, but I thought a timeshare or condo sale typically would qualify as a real estate transaction and so revenues would be recognized at the time of sale or the completion of construction if the sale occurs before the entire project is finsisted. Am I thinking of this wrong? I defer to your expertise.

I actually wrote about that and then deleted it, as I realized that I don't know how Disney's DVC stuff actually works. If it qualifies as a real estate sale, the revenue could be recognized up-front. But that typically requires a deeded and specific property interest, which I don't know that DVC actually provides. If it doesn't qualify as a real estate sale, then its a prepayment for future services, which would be recognized over time.

 

[LuvtheGoof]

Hey now. Mom always said I was a handsome young man so that can't be true

Edit: I know the look of GFV and BLT is not popular with some people. The Poly bungalows even less popular.

We have no problem with any of them. Of course, we have never stayed at the Poly, so it didn't ruin anything for us, but may have for some. We also like the new Poly lobby better than the old one. Much better for meeting people and relaxing. Some people will never like change. It's a pity.