Changing DVC Sales Strategy?

[slappy magoo]

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.

My overall point was this - if a large, perhaps disproportionate amount of points are being purchased by people who are already DVC members, then there will come a point where those people are maxed out, they either have all the points they want/need or they just can't afford more (especially when also factoring in maintenance). Will that be indicative of Disney just flat-out pricing themselves out of the market they spent so much time cultivating and, some would say, exploiting?

At that point, DVC, as a company, might decide to experiment with scaling down, moving to mods or Values, perhaps even building a downscale resort comparable to a moderate or the Value suites at AoA, specifically as a DVC resort, but with limited amenities in the rooms and throughout the resort itself. They would also make it clear that those memberships don't have the same "worth" as current DVC points do. It's a way of getting around the arrogant perception of devaluing DVC, while opening up ownership to a whole section of consumers who never pulled the trigger because they couldn't afford or couldn't justtfy the outlay of cash. In fact I remember talk of opening a timeshare (without mentioning DVC by name) within the Flamingo Crossing development when that was still a thing (it isn't a thing anymore, is it? I'm out of the loop).

In any event, I wholly acknowledge I could be incredibly wrong. As unsurprised as I would be if they went this route, I'd also be this unsurprised if they built some sort of DVC resort actually in one of the parks, or so close that it would have its own entrance to that park...

OK, if they built something like that in the Magic Kingdom, then I'd be surprised. But not any of the other parks.

Or how about this? They split the difference and build a moderate DVC resort so close to one of the water parks, it's considered to be on the property of that water park. It would be keeping with the theme of that park, with little to no pools of its own (maybe a single smallish pool, or a few quiet pools throughout). The grounds would be kept simple and the resort wouldn't be too spread out, perhaps built up instead of spread out, so there's less of a "footprint" and fewer grounds to maintain which could, in theory, keep the maintenance fees low. But since it's considered to be on the grounds of that water park, your maintenance fees also cover admission to that water park.

Probably a pipe dream; WDW would probably worry such a plan would cut into Water Park & More add-ons. But then again, such a strategy might resort in people spending more time on-site, spending more money elsewhere on-site.

As I wrote, it's all pipe dreaming.

 

[GoofGoof]

My overall point was this - if a large, perhaps disproportionate amount of points are being purchased by people who are already DVC members, then there will come a point where those people are maxed out, they either have all the points they want/need or they just can't afford more (especially when also factoring in maintenance). Will that be indicative of Disney just flat-out pricing themselves out of the market they spent so much time cultivating and, some would say, exploiting?

At that point, DVC, as a company, might decide to experiment with scaling down, moving to mods or Values, perhaps even building a downscale resort comparable to a moderate or the Value suites at AoA, specifically as a DVC resort, but with limited amenities in the rooms and throughout the resort itself. They would also make it clear that those memberships don't have the same "worth" as current DVC points do. It's a way of getting around the arrogant perception of devaluing DVC, while opening up ownership to a whole section of consumers who never pulled the trigger because they couldn't afford or couldn't justtfy the outlay of cash. In fact I remember talk of opening a timeshare (without mentioning DVC by name) within the Flamingo Crossing development when that was still a thing (it isn't a thing anymore, is it? I'm out of the loop).

In any event, I wholly acknowledge I could be incredibly wrong. As unsurprised as I would be if they went this route, I'd also be this unsurprised if they built some sort of DVC resort actually in one of the parks, or so close that it would have its own entrance to that park...

OK, if they built something like that in the Magic Kingdom, then I'd be surprised. But not any of the other parks.

Or how about this? They split the difference and build a moderate DVC resort so close to one of the water parks, it's considered to be on the property of that water park. It would be keeping with the theme of that park, with little to no pools of its own (maybe a single smallish pool, or a few quiet pools throughout). The grounds would be kept simple and the resort wouldn't be too spread out, perhaps built up instead of spread out, so there's less of a "footprint" and fewer grounds to maintain which could, in theory, keep the maintenance fees low. But since it's considered to be on the grounds of that water park, your maintenance fees also cover admission to that water park.

Probably a pipe dream; WDW would probably worry such a plan would cut into Water Park & More add-ons. But then again, such a strategy might resort in people spending more time on-site, spending more money elsewhere on-site.

As I wrote, it's all pipe dreaming.

I agree that the add-on craze is not sustainable. There's only so many points that one person can use. I think the recent projects at the monorail resorts also lends to this trend. Someone who already owns at another resort but wants to be sure to get in at one of the big 3 monorail resorts without risking waiting for the 7 month mark buys add-on points. That won't be the case for the next project at Wilderness Lodge. It will be interesting to see how sales go there.

Flamingo Crossing is back on. The first 2 hotels are under construction. A Spring Hill Suites and a TownPlace suites by Marriott which is one of their extended stay brands. The long term plan is to have 7 hotels there. I haven't heard if any of them would be non-Disney timeshares. They are expected to be the more discount brands of large hotel chains that will be used for things like Pop Warner football and other special events at WDW. I think these hotels would compete mostly with the value resorts since they are supposed to be lower cost.

A waterpark based hotel/DVC would be interesting. I could also see the rumors about something "attached" to EPCOT being true. The parking lot rumor seems more likely than the older rumor about building behind/within world showcase. With DVC being completely re-imagined anything is possible there.

 

[Disneykidder]

If DVC did create/add to a moderate resort, I think many members would be angry, and rightfully so. With so few amenities, they couldn't offer it at rates of $165 and higher (if they did, who would purchase when you could have Poly for that price point). So, if they did offer the price point lower, that would make it very affordable to become a member. Why would anyone purchase DVC at $165 per point when they can get in at a much lower rate and still stay at all of the resorts? So, I really hope that DVC does not go in to a moderate. If they did, I would sell my first contract that I use for 7 month bookings anyway and buy into a moderate and make a profit.

 

[Disneykidder]

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.

Hmmm...a dedicated entrance to DCA like VGC would be cool. I'm trying to picture where this would be...the highway is there and so is the parking lot. They'd really need to revamp that whole area. I'm not so sure they'd knock down PP...it's pretty popular. But more villas are DEF needed there. I was lucky I got in at 7 months.

 

[slappy magoo]

If DVC did create/add to a moderate resort, I think many members would be angry, and rightfully so. With so few amenities, they couldn't offer it at rates of $165 and higher (if they did, who would purchase when you could have Poly for that price point). So, if they did offer the price point lower, that would make it very affordable to become a member. Why would anyone purchase DVC at $165 per point when they can get in at a much lower rate and still stay at all of the resorts? So, I really hope that DVC does not go in to a moderate. If they did, I would sell my first contract that I use for 7 month bookings anyway and buy into a moderate and make a profit.

But what if the points for a moderate DVC were less than the price of the current DVC, but only had half the VALUE if you wanted to use them anywhere else? And conversely, current DVC owners' points would be worth twice as much at the moderate?

Let's say the points for a stay at a Port Orleans DVC were comparable in number to a studio in Wilderness Lodge, even though those Port Orleans DVC points cost half as much. But in return, your PO points would convert to fewer points if you wanted to stay at WLV. Your 150 PO points would equal 75 points at WLV. On the flip side, your 150 WLV would be worth 300 at PO.

You could also impose other limitations on moderate DVC points. Maybe you could only book out of your home resort at a 3 or 4 month window (making it even more unlikely that people would be able to use them outside of their home resort unless they're staying at Vero Beach or Hilton head off-season). Maybe you can't use them at all for RCI or Disney Cruise vacations, they can only be used within DVC resorts. It's all admittedly not well-thought-out, so I'm not going to defend it with any particular amount of vigor. I'm just suggesting that a mod DVC can be done in a way that it would not impact the value of current DVC owners' points.

Of course, they could forgo the idea of moderate DVC points being cheaper, just make the points value less, and the minimum buy-in smaller for new contracts. Studios for a week at OKW run between 76-152 depending on the season. What if the moderate points were still $165/point, but a week in a mod resort would only run 40-100 points, and you only needed a 50 point minimum buy-in, but with some of the other limitations still in place (shorter window for outside the home resort and can only use them within DVC resorts) in exchange for that low minimum buy-in? Not only would it open the DVC market to people who found the cost prohibitive, but it gives current members a chance to maximize their points instead of banking unused points, they can add a night or two at the mod resort with what they have leftover for a year, if they wanted.

 

[Disneykidder]

Totally understandable if they did do all or some of that. I know I will be agitated if they didn't make it more equitable for current members.

 

[GoofGoof]

But what if the points for a moderate DVC were less than the price of the current DVC, but only had half the VALUE if you wanted to use them anywhere else? And conversely, current DVC owners' points would be worth twice as much at the moderate?

Let's say the points for a stay at a Port Orleans DVC were comparable in number to a studio in Wilderness Lodge, even though those Port Orleans DVC points cost half as much. But in return, your PO points would convert to fewer points if you wanted to stay at WLV. Your 150 PO points would equal 75 points at WLV. On the flip side, your 150 WLV would be worth 300 at PO.

You could also impose other limitations on moderate DVC points. Maybe you could only book out of your home resort at a 3 or 4 month window (making it even more unlikely that people would be able to use them outside of their home resort unless they're staying at Vero Beach or Hilton head off-season). Maybe you can't use them at all for RCI or Disney Cruise vacations, they can only be used within DVC resorts. It's all admittedly not well-thought-out, so I'm not going to defend it with any particular amount of vigor. I'm just suggesting that a mod DVC can be done in a way that it would not impact the value of current DVC owners' points.

Of course, they could forgo the idea of moderate DVC points being cheaper, just make the points value less, and the minimum buy-in smaller for new contracts. Studios for a week at OKW run between 76-152 depending on the season. What if the moderate points were still $165/point, but a week in a mod resort would only run 40-100 points, and you only needed a 50 point minimum buy-in, but with some of the other limitations still in place (shorter window for outside the home resort and can only use them within DVC resorts) in exchange for that low minimum buy-in? Not only would it open the DVC market to people who found the cost prohibitive, but it gives current members a chance to maximize their points instead of banking unused points, they can add a night or two at the mod resort with what they have leftover for a year, if they wanted.

The problem with the moderate DVC is it is less profitable for Disney whether you charge less per point or less points per night. In terms of total profits if you charge half or $85 per point your total revenue is cut in half but your costs are not much lower since half the costs associated with DVC is related to sales and marketing. You could end up spending less on the physical building but it still would end up generating a much lower overall profit.

If you charge less points per night for the rooms you have the same problem. Half as many points sold means half the revenue without an offsetting reduction in cost. The other problem with less points means the maintenance fees would be very high since the costs would be spread over half as many points.

As an example, let's say a BLT size deluxe DVC resort is built with about 500 rooms and 6M points. If Disney charges $165 per point they have $990M in revenue from point sales. The rumored cost to build BLT was $200M but for this example let's assume $300M since costs are up. That represents a net profit of $690M before selling and overhead costs. In the timeshare industry it's not uncommon for selling expenses to be between 30 and 50% of sales. Now if a similar size resort is built but it's a moderate so either the price per point or the number of points is half. The revenue drops to $495M and since it's less elaborate the building cost drops to $200M. That's a profit before selling and overhead of $295M.

The only way to make up for the lower revenue would be to build a huge DVC resort with several thousand rooms. You probably need to triple the size in the example above to maintain profits. With that many moderate owners you pretty much have to have a completely seperate system. It doesn't work to have moderate owners trading in for deluxe resorts or the opposite. I can't see it happening unless they are sure that traditional deluxe DVC is tapped out. Otherwise you cannibalize the potential super profits.

 

[slappy magoo]

GoofGoof, your points are not invalid, but they are predicated on two ideas
1 - DVC would shift solely to a moderate model. It might feel sometimes that Disney treats DVC members with less than a white-glove treatment, but I don't think they'd ever abandon that base. By offering a moderate DVC resort, they're opening up an opportunity to reach a customer base they didn't reach and possibly never would. Revenue wouldn't be as high, but is it so low that it's not worth doing at all? Since it's all hypothetical in the first place, I haven't the foggiest.

2 - That they'd build a new "moderate" resort, versus taking sections of existing DVC resorts, retrofitting an extra sink and microwave to go with the tiny fridge in there (voila! kitchenette!) replacing one of the beds with a sleeper sofa and create studio-only moderate DVC rooms.

Imagine if DVC were to build a resort in or near one of the parks - heck, let's really Blue Sky it and say they're building the mythical fourth monorail resort, and they're sparing no expense, it's going to be the standard bearer by which all other resorts will be judged. And it's enough to really attract people who aren't DVC members to at least check it out...but they find the numbers don't work for them, and without losing that sale entirely, the DVC rep asks if they know about the new Magnolia Bend DVC studio villas. Thus, they can still appeal to a Deluxe-centric crowd who can already imagine the view at the new monorail resort and will move all manner of money around to afford to make it happen, and still not lose the sale of the more budget dependent potential customer.

And for the record, I don't think it'll ever happen. I'm not insisting it should. I'm suggesting it could. Maybe. Maybe as they finish adding DVC sections to all existing Deluxe properties, and they have to figure out where exactly they need to build next and build big to keep DVC profitable, there's something to be said to trying to attract customers who think DVC is out of their range. And there's a way to do it without alienating current members by making this moderate DVC approach attractive enough to new members while preventing them from having all of the same perks DVC members currently get, and without all of the amenities DVC resorts typically have.

 

[GoofGoof]

GoofGoof, your points are not invalid, but they are predicated on two ideas
1 - DVC would shift solely to a moderate model. It might feel sometimes that Disney treats DVC members with less than a white-glove treatment, but I don't think they'd ever abandon that base. By offering a moderate DVC resort, they're opening up an opportunity to reach a customer base they didn't reach and possibly never would. Revenue wouldn't be as high, but is it so low that it's not worth doing at all? Since it's all hypothetical in the first place, I haven't the foggiest.

2 - That they'd build a new "moderate" resort, versus taking sections of existing DVC resorts, retrofitting an extra sink and microwave to go with the tiny fridge in there (voila! kitchenette!) replacing one of the beds with a sleeper sofa and create studio-only moderate DVC rooms.

Imagine if DVC were to build a resort in or near one of the parks - heck, let's really Blue Sky it and say they're building the mythical fourth monorail resort, and they're sparing no expense, it's going to be the standard bearer by which all other resorts will be judged. And it's enough to really attract people who aren't DVC members to at least check it out...but they find the numbers don't work for them, and without losing that sale entirely, the DVC rep asks if they know about the new Magnolia Bend DVC studio villas. Thus, they can still appeal to a Deluxe-centric crowd who can already imagine the view at the new monorail resort and will move all manner of money around to afford to make it happen, and still not lose the sale of the more budget dependent potential customer.

And for the record, I don't think it'll ever happen. I'm not insisting it should. I'm suggesting it could. Maybe. Maybe as they finish adding DVC sections to all existing Deluxe properties, and they have to figure out where exactly they need to build next and build big to keep DVC profitable, there's something to be said to trying to attract customers who think DVC is out of their range. And there's a way to do it without alienating current members by making this moderate DVC approach attractive enough to new members while preventing them from having all of the same perks DVC members currently get, and without all of the amenities DVC resorts typically have.

I agree that they definitely could do a moderate DVC resort. I also agree that if they did there is a really good chance it would be a conversion of all or at least a large section of an existing resort. Possibly Caribbean Beach. Much cheaper and quicker that way. They would probably need 1,000+ rooms to make it work which is at least half of the existing resort.

While it's possible, I don't see it happening unless they start to feel Deluxe DVCs are fully mature and there is no room for meaningful growth. I do think the demand would probably be there. I'm not sure how many potential new owners there could have been convinced to buy the deluxe if they never created a moderate.

I have no clue how they would work the point system and trade-ins. They would want to be careful not to create a SSR part 2. A large resort where owners are looking to trade out a lot and demand to trade in is low. There is already a crunch at 7 months for the popular resorts. They cant flood the trade-in market with thousands of additional owners without upsetting current owners. If they remove the possibility to trade in to other DVCs it strips out one of the biggest benefits of the program and makes it harder to sell. I wouldn't want to buy in to a resort knowing I couldn't trade in.