How far will Disney price gouging go?

[Ben_since_1971]

Supply, meet Demand. Econ 101.

 

[Club Cooloholic]

I for one get tired of people blaming the lack of investment in the parks on Disney Vacation Club. Disney Vacation Club has never failed to make a quick return on investment on the properties that they have built. Most sell out within a few years, returning in a short time the money invested in the time shares plus a lot of profit. I am hoping that at this years Disney Convention in August we will hear about major improvements at Walt Disney World.

I know your a proud DVC Owner and heck I might join you but you don't need to be so defensive. I doubt the bungalows they added to Poly are beloved by anyone but 4 percent of guests. DVC provides Disney a steady flow of money at purchase and years from now weather they improve the parks or not. Lets put it this if a restaurant offered a deal where you prepaid to eat there once a month for 5 years. If they got enough customers on board for that what would be the impetus to ever change or improve their menu?

 

[CP_alum08]

If you compare the price of Disney Parks to other entertainment it does not seem to be "price gouging." Have you gone to a movie lately and purchased a coke and popcorn? Gone to a major league sporting event?

I see the argument on here all the time and it's just nonsense. Sure the "prices" may be similar but a family of 4 spending $400 on a day at an NFL game versus $4000 on a week in WDW is completely different. Not many families go to WDW for a single day and not many families go to 7 sporting events (or Broadway shows, or movie, or whatever else people compare).

 

[flynnibus]

I for one get tired of people blaming the lack of investment in the parks on Disney Vacation Club. Disney Vacation Club has never failed to make a quick return on investment on the properties that they have built. Most sell out within a few years, returning in a short time the money invested in the time shares plus a lot of profit.

Here's a thought for you... Lotto winnings paid as a bulk sum vs annual payouts. That's basically what people are talking about.. DVC is a sugar rush.. where they are trading long term, increasing revenues, for a short term cash surge.

Additionally.. capital spend (even if it plans on a return) influences the availability of other capital expenditure in the same time period because of the need to minimize irregular spending surges.

 

[Rutt]

I see the argument on here all the time and it's just nonsense. Sure the "prices" may be similar but a family of 4 spending $400 on a day at an NFL game versus $4000 on a week in WDW is completely different. Not many families go to WDW for a single day and not many families go to 7 sporting events (or Broadway shows, or movie, or whatever else people compare).

What the.... Entertainment is entertainment. The point is valid. On a dollar for dollar basis, Disney is a better value than an NFL game for $400, or Great Wolf for $2000, or $150 for a night at the movies....hell even a baseball game is an easy hundred for two people now....

 

[rob0519]

The average guests (and several of my friends alike) see it as Disney is raising their ticket prices and building properties to pull more visitors into Disney time share. He was just mentioning this fact and that guests aren't seeing quality improvements and additions INSIDE the actual parks where the prices have increased. So to those average guests it seems as if though they are paying to fund projects at WDW that they aren't intending to experience. Disney needs to step up it's game at the parks and building more areas for guests to visit if they are wise.

WDW has become so crowded in the last few years that it's not even enjoyable anymore for some repeat customers. They can build more and more rooms and DVC's but all of those additional guests are going to be cramming the parks too. They really need to build another park at this point to even out crowds if they aren't planning on expanding what they already have in a major way.

I agree completely. Disney continues to add rooms and therefore guests with each DVC. They get a quick inflow of cash and we get more and more crowded, less enjoyable vacations. How many DVC rooms has Disney built in the last 20 years and how much additional space have they provided to spread them out?

It may sound simple. "Build another park", but it's not that simple. All guests, first timers and returning mostly want the same thing; to be in the Magic Kingdom. The only way to help thin the crowds at MK is to either expand it again, by a huge amount, build a new park that gives people who want to be at the MK a reason to go to the new park or build out Hollywood Studios as Magic Kingdom 2. None of the other 3 parks have the nostalgia factor or attractions for small children that draws people to the MK.

So the combination of increasing prices, overbuilding of lodging, massive increase in customers with no additional space and the ever decreasing quality in food, maintenance, etc. are slowly but surely making a WDW vacation much less enjoyable.

It will take one extremely huge hit to the economy to slow down this gravy train. Until then, the free market and supply and demand will allow and expect Disney to take it's customers for as much money as we are willing to shell out.

 

[DVCOwner]

I see the argument on here all the time and it's just nonsense. Sure the "prices" may be similar but a family of 4 spending $400 on a day at an NFL game versus $4000 on a week in WDW is completely different. Not many families go to WDW for a single day and not many families go to 7 sporting events (or Broadway shows, or movie, or whatever else people compare).

I was just in Pittsburgh for the holiday weekend and went to a baseball game. There was one whole section of seats that filled with Mets fans from New York, mostly families. This whole section must of been a group of at least one thousand in total. They came as a tour group, all had on matching shirts, arrived in charter buses, where staying at a local hotels, and had meal packages included. I asked my son and he says this happens often on weekends when teams from other metro areas are planning. There where there for all three games (Pittsburgh won all three) and stayed for two nights. I do not know how much it cost, but I bet a family of four paid nearly as much as a few days in Walt Disney World.

 

[DVCOwner]

I know your a proud DVC Owner and heck I might join you but you don't need to be so defensive. I doubt the bungalows they added to Poly are beloved by anyone but 4 percent of guests. DVC provides Disney a steady flow of money at purchase and years from now weather they improve the parks or not. Lets put it this if a restaurant offered a deal where you prepaid to eat there once a month for 5 years. If they got enough customers on board for that what would be the impetus to ever change or improve their menu?

I agree with you except for one thing. If I prepaid my meals at a restaurant the restaurant would have to invest the money that I gave them to pay for the meals for the next five years. This is different than a Disney Vacation Club time share. Once I buy the time share from Disney, they have no need to hold on to the money I give them. They use it to pay off the Capital Investment, take the profit and do what every they want with it. Any additional cost for up keep and running the time shares is paid by the owners in their annual dues.

This is maybe why I am a little defensive. I paid Disney for the room and all the profit up front; what Disney does with this profit is up to them. So I would love for the millions of dollars in profits made selling Disney Vacation Club time shares to be reinvested in the Parks, but you can not blame Disney Vacation Club for the invest not being made.

 

[CaptainAmerica]

Once I buy the time share from Disney, they have no need to hold on to the money I give them. They use it to pay off the Capital Investment, take the profit and do what every they want with it. Any additional cost for up keep and running the time shares is paid by the owners in their annual dues.

Yeah... that's just not true. Timeshare accounting is extremely complicated but to make a long story short, Disney is legally obligated to set aside substantial reserves from the initial cash receipt from DVC sales. It's not nearly as simple as "they have their profit and can do with it what they want."

 

[DVCOwner]

Here's a thought for you... Lotto winnings paid as a bulk sum vs annual payouts. That's basically what people are talking about.. DVC is a sugar rush.. where they are trading long term, increasing revenues, for a short term cash surge.

Additionally.. capital spend (even if it plans on a return) influences the availability of other capital expenditure in the same time period because of the need to minimize irregular spending surges.

But if the investment in one part of the company is returning the investment in a quicker and greater rate; it should free up capital for other expenses. The best example of this would be Disney wants more people to stay on property. So additional rooms are needed. Which would return the capital investment and free up money to be spent in the Parks at the fastest rate, building a new hotel or building and selling a new Disney Vacation Club resort?

 

[CaptainAmerica]

Here's a thought for you... Lotto winnings paid as a bulk sum vs annual payouts. That's basically what people are talking about.. DVC is a sugar rush.. where they are trading long term, increasing revenues, for a short term cash surge.

That's not how it works.

 

[flynnibus]

That's not how it works.

I'm sure you are trying to talk about how the revenue is recognized.. but the effect is similar. You give up long term revenue streams for short term guaranteed amounts.

 

[DVCOwner]

Yeah... that's just not true. Timeshare accounting is extremely complicated but to make a long story short, Disney is legally obligated to set aside substantial reserves from the initial cash receipt from DVC sales. It's not nearly as simple as "they have their profit and can do with it what they want."

I may have made this sound to simple. Florida law does require Disney to hold on to a part of the inventory that they can not sell. This is used for cash customers and need inventory for times of renovation. The inventory and the cash reserves needed to operate the Disney Vacation Club resorts is factored into the price of each unit sold (in this case each point sold). So once the inventory is gone and only the reserve is there, the original capital needed to build the resort is paid in full.

I know that it is more complex than I am making it. All I am trying to say is that a outlay of capital in a Disney Vacation Club resort is has a much faster rate of return than most other investments that would be made at Walt Disney World. I am sure that a new multi-million dollar ride would tie up capital for a much longer time then a time share resort.

 

[CaptainAmerica]

You give up long term revenue streams for short term guaranteed amounts.

No. You don't. Revenue is as long-term as the length of the DVC contract. DVC is structured as a reversionary transfer of title (meaning you don't get to keep it forever. It's a fixed amount of time and then Disney gets their property back).

A time-share seller should recognize profit on time-sharing transactions as specified under the profit recognition guidance in the sections in Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate, that specify the accounting for other than retail land sales. For purposes of recognizing profit, nonreversionary title should be transferred. If title transfer is reversionary, the seller should account for the transaction as if it were an operating lease.

Operating leases are recognized over the life of the agreement (so 40 years of revenue).

http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176156442970&acceptedDisclaimer=true

I may have made this sound to simple. Florida law does require Disney to hold on to a part of the inventory that they can not sell. This is used for cash customers and need inventory for times of renovation. The inventory and the cash reserves needed to operate the Disney Vacation Club resorts is factored into the price of each unit sold (in this case each point sold). So once the inventory is gone and only the reserve is there, the original capital needed to build the resort is paid in full.

I know that it is more complex than I am making it. All I am trying to say is that a outlay of capital in a Disney Vacation Club resort is has a much faster rate of return than most other investments that would be made at Walt Disney World. I am sure that a new multi-million dollar ride would tie up capital for a much longer time then a time share resort.

It's not just about the initial capital to build the resort. Disney also has to set aside capital for future resort needs. Future repairs and maintenance are not funded 100% by member maintenance fees, but also from a sizable chunk of the initial purchase cash.

 

[flynnibus]

No. You don't. Revenue is as long-term as the length of the DVC contract. DVC is structured as a reversionary transfer of title (meaning you don't get to keep it forever. It's a fixed amount of time and then Disney gets their property back).

So like I said.. when you recognize the revenue. Doesn't change what I also said.. which is about locked in money vs a greater potential money that you may actually have to work for. It's 'cheap' money.. and you lose upside. The amount you will collect per room will never increase and your dollars will decrease in value as well. But it's locked in!

It's not just about the initial capital to build the resort. Disney also has to set aside capital for future resort needs. Future repairs and maintenance are not funded 100% by member maintenance fees, but also from a sizable chunk of the initial purchase cash.

Compared with... 100% funded by Disney if it were not a timeshare. Tell me again how that's a burden for Disney?

 

[CaptainAmerica]

So like I said.. when you recognize the revenue. Doesn't change what I also said.. which is about locked in money vs a greater potential money that you may actually have to work for. It's 'cheap' money.. and you lose upside.

You lose nominal upside, but it's about a wash when you factor in the time value of money.

Compared with... 100% funded by Disney if it were not a timeshare. Tell me again how that's a burden for Disney?

I never said it was a burden for Disney.

 

[raven]

I for one get tired of people blaming the lack of investment in the parks on Disney Vacation Club. Disney Vacation Club has never failed to make a quick return on investment on the properties that they have built. Most sell out within a few years, returning in a short time the money invested in the time shares plus a lot of profit. I am hoping that at this years Disney Convention in August we will hear about major improvements at Walt Disney World.

Animal Kingdom was built when? 1996? So that was the last park to be built and it thinned out crowds a bit. But since 1996 WDW has about doubled room it's room capacity (if not more) so during peak times you have double the amount of guests as you did before 1996. Now, also since 1996 a number of attractions have closed with no immediate replacements. So there was more to do in some parks than there is to do now. But now we double the guests staying on property AND double the day guests who are filling up new hotels outside of Disney. All of this added capacity on site and how does Disney plan to curb crowds? Not by building more areas to visit but by raising ticket prices to thin out the lower middle class from visiting. So rather than anybody being able to visit WDW it's slowly becoming a place only for foreigners, DVC owners, upper middle class and lucky contest winners. Anyone else has to save up for several years before they can afford to visit the over crowded mouse trap.

 

[asianway]

No. You don't. Revenue is as long-term as the length of the DVC contract. DVC is structured as a reversionary transfer of title (meaning you don't get to keep it forever. It's a fixed amount of time and then Disney gets their property back).


Operating leases are recognized over the life of the agreement (so 40 years of revenue).

http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176156442970&acceptedDisclaimer=true


It's not just about the initial capital to build the resort. Disney also has to set aside capital for future resort needs. Future repairs and maintenance are not funded 100% by member maintenance fees, but also from a sizable chunk of the initial purchase cash.

Future needs are 100% funded by member fees. Nothing from the initial sale is set aside for it

 

[CP_alum08]

I was just in Pittsburgh for the holiday weekend and went to a baseball game. There was one whole section of seats that filled with Mets fans from New York, mostly families. This whole section must of been a group of at least one thousand in total. They came as a tour group, all had on matching shirts, arrived in charter buses, where staying at a local hotels, and had meal packages included. I asked my son and he says this happens often on weekends when teams from other metro areas are planning. There where there for all three games (Pittsburgh won all three) and stayed for two nights. I do not know how much it cost, but I bet a family of four paid nearly as much as a few days in Walt Disney World.

Ok, now you're comparing apples to apples. One baseball game compared to a week long WDW vacation is like apples to much, much larger apples.

 

[CP_alum08]

What the.... Entertainment is entertainment. The point is valid. On a dollar for dollar basis, Disney is a better value than an NFL game for $400, or Great Wolf for $2000, or $150 for a night at the movies....hell even a baseball game is an easy hundred for two people now....

You're misunderstanding my point. Dollar for dollar WDW may be a better value, but it's still a lot more dollars. And a lot more dollars may be harder to swallow even if the perceived value is better.