A Spirited Valentine ...

[ParentsOf4]

Are DVC numbers part of this diagram? Or are they considered there own entity? Also hasn't Disney eliminated/converted rooms over to DVC and does this skew the occupancy numbers the last few years?

DVC is included in the occupancy reported by Disney and is counted as "two-bedroom equivalents". This means that DVC inflates the occupancy number but since DVC accounts for only about 11% of Walt Disney World rooms (because they are counted as 2-bedrooms), the effect is modest, typically 1 or 2%. Disney does this because counting DVC as 2-bedrooms helps with the important Per Room Guest Spending (PRGS) metric.

Converting hotel rooms to DVC skews the numbers to the extent that those rooms are taken out of service for extended periods of time. The current conversion at the Wilderness Lodge is skewing the numbers by roughly another 1%, since there are fewer "available room nights" during the conversion.

At any one time, Disney also has another 4% or so of rooms out of service, thus not counted as available room nights. Given the age of most Disney resorts, it's understandable that some rooms need servicing or remodeling at any one time.

Don't let these numbers mislead you. At the moment, Orlando area hotel occupancy is strong, with both Disney and Universal looking to add hotel/timeshare rooms.

The risk is that both are building during a boon. Orlando tourism is sensitive to economic downturns and another recession is sure to hit eventually. Disney's plan to open Star Wars Land will help. As Universal demonstrated when it opened the first Wizzarding World of Harry Potter, vacationers still come if you have a truly exciting product. If Disney creates an outstanding Star Wars Land, it should be a hit no matter what the economic situation, keeping hotel occupancy strong (even if Disney has to offer some discounts).

Disney's hotel costs are relatively fixed. A hotel occupancy rate of (say) 70% would be a financial disaster for Disney. Even immediately after 9/11, when tourism plummeted and Disney closed hotel rooms, occupancy bottomed out at 76%. Conversely, profits soar when occupancy hits 90%. Remember, when occupancy is low, it means there are bad things going on in the economy, meaning that Disney has to offer discounts to reach (for example) that 76%. When times are good, occupancy goes up and there are fewer discounts, meaning more rooms are occupied at a higher price, which is why it's so profitable. When you consider all the factors in evaluating hotel occupancy, there really is a narrow band between financial success and failure.

"It's such a fine line between stupid and clever. "

 

[rushtest4echo]

Occupency at 80% is profitable even with some discounting and incentivization, or at least it was in the late 00's. Disneyland hotels print $$ at 70%.

 

[ParentsOf4]

Occupency at 80% is profitable even with some discounting and incentivization, or at least it was in the late 00's. Disneyland hotels print $$ at 70%.

Right. In 2010 when hotel occupancy was 82%, domestic P&R operating margin was 14.6%.

In 2016 when hotel occupancy was 89%, domestic P&R operating margin was 24.8%.

That 7% swing in occupancy was indicative of the health of Disney's Parks & Resorts segment.

Then we look at DLP, where occupancy was 75% in 2014 and operating loss was 5.1%.

HKDL had an occupancy of 79% in 2015, with an operating loss of 3.0%.

WDW does not have the same cost/rack-rate structure as DLP or HKDL. WDW should be able to realize a profit at 75% but it most likely would be down into the single digits. At 70%, WDW is losing money.

DL and Universal are different beasts. Their operating costs are less than WDW, which has to cover the cost of an extensive transportation network (including theme parks and Disney's Magical Express) within its room rates. In addition, DL runs 3 Deluxe Resorts with rack rates that are much higher than the average at WDW.

 

[SorcererMC]

The risk is that both are building during a boon. Orlando tourism is sensitive to economic downturns and another recession is sure to hit eventually.

This is my main concern. The current market is supporting growth from domestic attendance, but if they overbuild they will be stuck with the surplus. To a certain extent it depends on how the international tourist market recovers, and that remains to be seen.

ETA: For the sake of comparison and re: potential for risk - Orlando hotel occupancy rate was 75.5% for 2016, compared with a rate of 76.7% in 2015. And it's interesting that Disney's 1QFY2017 was up, since overall Orlando December's occupancy was 71.8%, down from 75.4% in 2015.

 

[Capsin4]

We can analyze numbers and markets all we want. Disney is adding rooms (dvc or not) because they plan to make money off of them and the only way to do that is if they think people will fill them at acceptable occupancy rates. Obviously, they do think that's the case. The resorts don't really see a low season. Discounts help lower the differences between seasons and the variance in seasonal park attendance is mainly from people staying offsite.

 

[uncle jimmy]

We can analyze numbers and markets all we want. Disney is adding rooms (dvc or not) because they plan to make money off of them and the only way to do that is if they think people will fill them at acceptable occupancy rates. Obviously, they do think that's the case. The resorts don't really see a low season. Discounts help lower the differences between seasons and the variance in seasonal park attendance is mainly from people staying offsite.

You can certainly look at it like that. Those discounts do drive people to come visit. But with major additions coming to WDW, the demand for rooms will increase.

 

[FlaMel]

--- Mark Woodbury: while we are on the subject of UNI, Woodbury was recently elevated to the No. 2 role in their parks business. I've heard UNI fanbois crowing and all I can think is ''they really don't get THEIR company or Woodbury's role." Talk to anyone at UNI-Creative and you would think the man is Satan (that role is being occupied by Steve Bannon these days!) He is widely disliked to a Bruce Vaughn level or higher. And his decisions on too many screen-based attractions and too much repetition have kept Creative from upping Disney overall. Sure, anything Potter is among the best creative product out there ... but after that the level drops quite a bit. WDI may spend like our defense department, but overall their product is still better. Any anyone looking at the plans for UNI-Beijing and seeing what is actually happening would realize this is almost as cut and paste as TDL was in 1983.

Regarding your statements on Mark Woodbury, I don't find this to be true, at all. In any of my interactions with Uni Creative personnel, no one has said they think he is Satan (or even anything close). With regard to attraction choices, I will agree that there are a preponderance of screen based or screen inclusive attractions, however most are successful. I too would like to see some more non screen based attractions.
What have you seen of Universal Beijing? Is there a new piece of concept art that has been released?

 

[WDW1974]

Spirited Quickees (because those are the best kind):

All I have time for right now with a very busy weekend but ...

I see the discussion has moved onto occupancy and what level WDW must have to break even. I don't know the number myself, but, while @ParentsOf4 is right that 70% or below would be a disaster for Disney, I'd qualify that to mean based on their current business models. ... Again, WDW makes money on $99 rooms at the Poly and $49 rooms at the All Stars. They are profitable at those points.

I also will continually stick to the point that WDW's occupancy numbers are more fluid than solid. Some of this comes from conversations I had with George K himself over a decade ago now. Inventory isn't fixed, which makes it very tough to understand the entire tale beyond Disney hotels are an ATM.

WDW hotel operation has always been highly profitable, even in terrible times like 2001-03. Back when they simply closed Port Orleans for 18 months and took many buildings out of use at the All Stars and others. It's why whenever the topic comes up often two things that seem diametrically opposed are true like Disney Resorts being cash machines yet struggling to meet that unrealistic 90% occupancy so offering huge discounts like the current spring offers to CMs. FLA residents could book All Star rooms for $75 until a few days ago as well.

The entire point of eliminating the value, moderate and deluxe categories is to be able to do more surge type pricing based more on location on property and what is valuable. Want to see SWE when it opens? Pay $450 a night at CBR. Want to be at EPCOT for one of the multiple food festivals? Spend $700 to stay at BC. Want a discount? Stay somewhere nobody wants!

I saw on the last page a comment regarding Mark Woodbury. I will gladly return to the topic when I have more time. But the people I know have worked directly for/with him for, in some cases, many years now. He is thought of as Bruce Vaughn was at WDI. Between he, Coup and ancient (and largely clueless) Tom Williams, it is astounding that UNI is doing as well as it is. Much of that is simply due to The Boy Who Lived. The rest is due to Creatives who produce high quality product DESPITE these men. Not because of them.

 

[csmat99]

My point was that all UNI needs to do is NOT raise their prices when Disney begins its room price increase orgy in the next 12-18 months. No cutting necessary

Ok but fact remains that Universal doesn't have that many rooms compared to Disney and not even close. So yes universal will sell out and benefit from Disney increasing room rates but Disney will have more people and spread out. Like someone else mentioned on the boards if you occupancy rates are hovering around 90% it's bad for service. And with SWL coming we all know that they need as many rooms near DHS as possible. I agree with you with regards to increasing room rates it's pure greed but Disney knows you have the pixie dusters that will pay whatever. It's the same as a coke addict needing their fix.

 

[MisterPenguin]

The entire point of eliminating the value, moderate and deluxe categories is to be able to do more surge type pricing based more on location on property and what is valuable. Want to see SWE when it opens? Pay $450 a night at CBR. Want to be at EPCOT for one of the multiple food festivals? Spend $700 to stay at BC. Want a discount? Stay somewhere nobody wants!

Disney is the king of surge pricing on Broadway and has been for years. You can pay four times the regular price for prime seats on prime days. As seats for a show start selling out, the price goes up due to demand. If there is trouble selling, only then do prices go down.

When it comes to filling rooms, an empty room brings in no revenue. If Disney was having occupancy trouble, even temporarily, they could certainly lower prices to half rack just to generate something over nothing regardless if it was at the profit margin or not.

And if there was no trouble filling rooms at peak time, then they could reduce incentives and discounts.

And no one should weep for Disney if they have to deeply discount a room to get it occupied. Those occupants also pay for tickets and food and merch in the parks. Disney wants full parks as much as they want full resort occupancy.

 

[PorterRedkey]

Why has the majority of opening night videos of Rivers Of Light ending up being blocked? At first I thought it was only for the soft opening (Since they mentioned no videos allowed) but some videos of the first public showing had to change the audio a bit to avoid them from getting blocked.

It is for the music, I believe. Go over to Vimeo where their policy is not as strict. I know that the Blog Mickey has their video up on that site.

 

[Lets Respect]

As someone who stays offsite, I just have a really bad feeling about all of these new onsite hotels and transportation systems. I feel like they will use the new attractions to fill the rooms (obviously!) and it will become harder and harder as an offsite guest to get my money's worth out of regular tix (not APs)

 

[JoeCamel]

As someone who stays offsite, I just have a really bad feeling about all of these new onsite hotels and transportation systems. I feel like they will use the new attractions to fill the rooms (obviously!) and it will become harder and harder as an offsite guest to get my money's worth out of regular tix (not APs)

You have deduced their dastardly plan!

I got the message years ago that I and my top tier AP were not wanted in their parks. OK I will live with that and spend elsewhere, I am not paying for the overpriced rooms.

 

[ford91exploder]

You have deduced their dastardly plan!

I got the message years ago that I and my top tier AP were not wanted in their parks. OK I will live with that and spend elsewhere, I am not paying for the overpriced rooms.

You too I had a premier passport (AP for WDW and DL) which I let expire in 2015 after a distinctly unmagical stay and DVC which becomes harder to book every year because I THINK games are being played with breakage because each resort has a fixed number of points and so at 11 to 8 months I should be able to make a booking with relative ease and I'm going for 1-2BR units or GV not the much more popular studio units because points assigned to property are theoretically invariant but there seems to be less and less inventory every year

In short Disney wants the Money for DVC and AP's but they dont want you to USE them

 

[The real rescueranger]

I predict with all these new hotels being built that Fastpass + becomes onsite resort guest only. Just another way to fill the ever increasing supply of rooms.

 

[culturenthrills]

I believe it's been known/rumored for a while that the Garden View wing at CR will become the new addition to BLT. Didn't realize they're also considering tearing down the convention center. But that makes sense - if they build another tower, they need more parking...and good views.

They are gonna need more restaurants.

 

[HauntedMansionFLA]

I predict with all these new hotels being built that Fastpass + becomes onsite resort guest only. Just another way to fill the ever increasing supply of rooms.

I'm surprised they haven't gone this route yet. But if they do really build all of these new resorts around property, it would make perfect sense on making FastPass+ an exclusive on site only perk. Full the rooms up.

 

[Phil12]

When it comes to filling rooms, an empty room brings in no revenue.

That is not true for WDW. They sell blocks of rooms to the various travel agencies at a discount and those same rooms are taken out of the Disney CRO inventory. Not all of those rooms are sold. That is why you can often find WDW rooms (if you know where to look) when Disney CRO is "sold out" or "booked solid".

I have personally had the experience of standing at the check-in desk of a Disney resort and been told that they have no vacancies. I then called a travel agency with my cell phone and found a room at the same resort and got a confirmation number. I returned to the check-in desk and checked in.

 

[Nmoody1]

I'd be more excited for more attractions!

 

[WildcatDen]

No they are not. The UNI ones are fresher and actually have NEW STUFF every year!

I agree that Uni has newer stuff and has impressed as of late but in my opinion Uni does not have a park to park comparison. Does Uni compare to DHS, yes, quite favorably I might add but neither Uni park compares to EPCOT, AK or MK. Not by a long shot.