The Spirited 8th Wonder (WDW's Future & You!)

[SpaceMountain77]

The attitude about the Florida property is not going to change anytime soon, but people 'out there' can still voice concern and most importantly, 'vote with their wallets'.

I had the fortunate opportunity to visit the Disneyland Resort over 70 times in 2011. There were many nights that I would stop by, after work, to have dinner at the French Market, stroll through the shops and enjoy a few attractions.

Although DLR has had its dark days, I always left Disneyland thinking that it is impossible to truly copy an original. The first time I returned to WDW, after my numerous DLR visits, I was somewhat disappointed because I realized that WDW is missing something that I long thought it had. WDW is missing a heart.

 

[Pumbas Nakasak]

I was somewhat disappointed because I realized that WDW is missing something that I long thought it had. WDW is missing a heart.

WDW is a tourist destination, the theme park equivalent of Cancun or Benidorm, with all the associated magic.

 

[fauna]

If they want to put in the Deluxe Resorts, make the bus service at those resorts measurably better. Dedicated, single resort routes.

Do you know how many times I've been on the dreaded Swan-Dolphin-Yacht-Beach-Boardwalk bus from Animal Kingdom or DTD where an entire filled to the rafters bus full of ed off people all agree that it's NOT worth it to shell out for a Deluxe when you have to wait 20-45 minutes for a bus and then be on it for up to an hour through 4-5 stops?

Lots. Well, not anymore because we usually cab it to the Boardwalk from AK or DTD. We build the cost into our budget and that's money Disney doesn't get, the cab company does.

 

[BrerJon]

I think if DVC was really going to help the parks to expand, we'd be hearing more talk of a bigger return on that by now.

Anyone arguing that more DVC money means more money for the parks needs to get a better grasp of history. DVC has been around since 1991, so that's 23 years of waiting to see this money poured back in the parks. If anything, the more DVC resorts open, the slower the pace of refurbs and new attractions in the parks has become, especially in the last decade. I'm not saying they're related, but it would take a very trusting pixie-duster to believe that after two decades of the opposite happening, suddenly DVC will pay for WDW to have Universal level attractions in its parks.

 

[stlphil]

I'm just shocked that instead of turning every deluxe into DVC, they don't just lower their hotel prices for one year as a "test" to see how much better their occupancy rates would be...it's asinine...

Unfortunately, that can't happen because they would also have to lower DVC prices. "And we will never do that," say the corporate overlords.

 

[BrerJon]

Imagine waking up to an alligator sunning himself right outside your door....

Taking a lead from Animal Kingdom Lodge, maybe you can pay extra for a room with a Swamp Wildlife View.

 

[asianway]

I firmly believe it is bonuses for the executives in the short term.
I also think we will see the start of "One DVC", much like "One Disney" where all the plates, bedding, furniture, lamps will all become the same at some point in the future. Remember the styrofoam cups at the studio villas? And all of it to line the wallets of executives with more, and larger bonuses.

Generic DVC refurbs would be cheaper.

The savings would not be to Disney but to the condo association.

Savings to the condo result in lower dues.

DVC mgmt is paid their mgmt fee as a percent of dues billed out.

Lowering dues actually costs DVC money.

This is one thing you don't have to worry about

 

[Brian Noble]

DVCers have endless choices at WDW. Folks who want a true deluxe resort sans timeshare barely have any choice at all.

They really only have one: the Four Seasons. And, before the Four Seasons was built, they arguably had none---at least none that (appeared to be) within the borders of RCID, though there are several beyond the borders. From where I sit, there is a reason that Disney partnered with FS: they recognized that they simply aren't structured in a way that allows them to run a true "deluxe resort" as the outside world views it. And, if you've ever stayed at something that really is a "deluxe resort," the differences become clear immediately. The Disney resorts all offer essentially the same level of guest service; friendly and chatty (perhaps to a fault), but they aren't actually all that good at helping with an issue or solving a problem. I haven't ever figured out quite why this is so, but it is.

I think the issue is very simple: Disney has reached the end of the line with ever increasing prices and doesn't wish to shift their pricing model. This solves their problems in the short term ... buys them another 5-10 years if a new management team doesn't come in and change things.x

I've said this before in the context of DVC discussions, but I think there is something else going on as well---a reduction in exposure to risk. 9/11 scared the living daylights out of TDO, and with good reason. The falloff of travel demand---particularly by air---hammered WDW hard. They closed entire resorts, and were giving away buy-four-get-three deals just to get people to show up. WDW is deeply exposed to changes in the air travel market. There was an interesting Yee piece many years ago on what happens to WDW under an oil price spike, and it's ugly.

And, if you look back, that moment of 9/11 was the turning point in how TDA viewed hotels vs. timeshare---that's when they went all-in on DVC. They haven't opened a single new hotel room that wasn't already under construction (in some form) before 9/11 happened. But they have been converting hotel rooms to DVC units. This makes sense because it shifts some risk from WDW to DVC owners---the owners get a break on total lodging costs in return for a commitment to occupy (or, at least pay for the operation and upkeep of) that unit for many decades. If the owner decides that travel to Florida on an annual or semi-annual basis is no longer interesting, it is their problem to unload the contract, not Disney's. So if the travel landscape changes, Disney is not left entirely alone holding the bag.

I'd even argue we are starting to see this in action, and that's in part what's going on with WDW tourism. Airfares have gone up (and up significantly) over the past few years as the industry has consolidated and removed capacity. Those capacity reductions have been focused on leisure routes, which Orlando is lousy with. As airfare rises faster than inflation, a family wishing to vacation in Orlando has to cut back somewhere else---and one of the easiest places to cut back is the cost of lodging. The Deluxe resorts are the most exposed to this, because their value proposition is the weakest.

 

[GoofGoof]

Yes, to me, the conversion of hundreds of deluxe hotel rooms to DVC villas suggests that they believe a ceiling has been reached. It reminds me of the quote, in order to achieve our goals we must lower our standards. Instead of developing an aggressive market strategy to fill unoccupied rooms, they will remove hundreds of rooms from the inventory and artificially inflate the occupancy rate.

I don't think they see it as lowering standards. Here's an alternative view point. They do have a strategy to fill unoccupied deluxe rooms. Sell them to people as a timeshare. If you take 300 former deluxe rooms and turn them into timeshares then your net rooms gained/lost is zero. Some of the people who stayed at WL in cash rooms will now be DVC owners and stay on points. If Universal really plans to expand to 10,000 rooms and new resorts keep popping up on Intl Drive and the surrounding areas they will draw guests away from WDW. Let's take the 300 rooms in question as an isolated example. If they leave them cash rooms guests could choose to stay at WL or at Uni or off property. Disney has to compete. If they convert the same 300 rooms to DVC they have essentially gotten people to prepay for 50 years of stays and have locked them in as hotel guests. They can't decide to stay off property.

This business model works to an extent for a certain type of guest. The repeat visitor who generally stays on property. WDW has so many new guests and one time visitors. They still need plenty of hotel rooms to accommodate these people as well.

 

[lazyboy97o]

Generic DVC refurbs would be cheaper.

The savings would not be to Disney but to the condo association.

Savings to the condo result in lower dues.

DVC mgmt is paid their mgmt fee as a percent of dues billed out.

Lowering dues actually costs DVC money.

This is one thing you don't have to worry about

Disney probably also charges the owners for design services as well.

 

[Nemo14]

I'm a little confused about the prospects of DVC at the moderates. Would here be a different classification and/or price of points to keep the "riff-raff" out of the Deluxe DVC's?

 

[71jason]

My concern is that both you and Disney executives greatly overestimate "brand loyalty" on the part of vacation guests; Detroit once made the same mistake, and we know how that turned out.

TWDC made the same mistake before, as well. The Lion King was the #1 animated movie ever released. A decade later--after a string of flops I doubt many posters here even remember (Home on the Range? Treasure Planet?)--Disney was forced to buy its #1 marketplace competitor and let them run the shop just to stay in the animation game they invented.

Entertainment tastes move much more quickly than other market areas (e.g. cars). The way things are going, it won't take 3 generations for WDW to lose its market position. An emphasis on DVC at the expense of the parks could come back to bite them as soon as a decade from now, if the rumors of a third gate and new hotels at Universal and the continued improvement of I-Drive come to pass.

 

[Nemo14]

TWDC made the same mistake before, as well. The Lion King was the #1 movie ever released. A decade later--after a string of flops I doubt many posters here even remember (Home on the Range? Treasure Planet?)--Disney was forced to buy its #1 marketplace competitor and let them run the shop just to stay in the animation game they invented.

Entertainment tastes move much more quickly than other market areas (e.g. cars). The way things are going, it won't take 3 generations for WDW to lose its market position. An emphasis on DVC at the expense of the parks could come back to bite them as soon as a decade from now, if the rumors of a third gate and new hotels at Universal and the continued improvement of I-Drive come to pass.

Yes, but by then there will be an entirely different management team, so the present team doesn't care as long as they're making huge profits today. Very dangerous attitude...

 

[asianway]

Disney probably also charges the owners for design services as well.

Good one-WDI can get their hands in the pot too with an onerous overhead allocation

 

[SpaceMountain77]

I don't think they see it as lowering standards. Here's an alternative view point. They do have a strategy to fill unoccupied deluxe rooms. Sell them to people as a timeshare. If you take 300 former deluxe rooms and turn them into timeshares then your net rooms gained/lost is zero. Some of the people who stayed at WL in cash rooms will now be DVC owners and stay on points. If Universal really plans to expand to 10,000 rooms and new resorts keep popping up on Intl Drive and the surrounding areas they will draw guests away from WDW. Let's take the 300 rooms in question as an isolated example. If they leave them cash rooms guests could choose to stay at WL or at Uni or off property. Disney has to compete. If they convert the same 300 rooms to DVC they have essentially gotten people to prepay for 50 years of stays and have locked them in as hotel guests. They can't decide to stay off property.

This business model works to an extent for a certain type of guest. The repeat visitor who generally stays on property. WDW has so many new guests and one time visitors. They still need plenty of hotel rooms to accommodate these people as well.

My WDWMagic account is less than 24 hours old and I am going to make a comment that often gets me burned. There must be a WDW DVC saturation point.

Currently, there are 12 resorts in the DVC system, 8 of which are located at WDW. Excluding DVC Poly estimates, the maximum number of villas presently available at WDW is 4,359. The DVC attitude seems to be expansion always in all ways at WDW. Eventually, the if you build it, they will buy philosophy will no longer hold true.

DVC can easily convert thousands of rooms at WDW, resulting in millions of points available for sale. However, at some point, the desirability may no longer be there.

 

[stevehousse]

Speaking of the 4 Seasons, what kind of benefits do their guests receive for staying on Disney property? Do they get Disney busses and EMH? Magic bands???

 

[crispy]

I've said this before in the context of DVC discussions, but I think there is something else going on as well---a reduction in exposure to risk. 9/11 scared the living daylights out of TDO, and with good reason. The falloff of travel demand---particularly by air---hammered WDW hard. They closed entire resorts, and were giving away buy-four-get-three deals just to get people to show up. WDW is deeply exposed to changes in the air travel market. There was an interesting Yee piece many years ago on what happens to WDW under an oil price spike, and it's ugly. http://miceage.micechat.com/kevinyee/ky091807a.htm

And, if you look back, that moment of 9/11 was the turning point in how TDA viewed hotels vs. timeshare---that's when they went all-in on DVC. They haven't opened a single new hotel room that wasn't already under construction (in some form) before 9/11 happened. But they have been converting hotel rooms to DVC units. This makes sense because it shifts some risk from WDW to DVC owners---the owners get a break on total lodging costs in return for a commitment to occupy (or, at least pay for the operation and upkeep of) that unit for many decades. If the owner decides that travel to Florida on an annual or semi-annual basis is no longer interesting, it is their problem to unload the contract, not Disney's. So if the travel landscape changes, Disney is not left entirely alone holding the bag.

I'd even argue we are starting to see this in action, and that's in part what's going on with WDW tourism. Airfares have gone up (and up significantly) over the past few years as the industry has consolidated and removed capacity. Those capacity reductions have been focused on leisure routes, which Orlando is lousy with. As airfare rises faster than inflation, a family wishing to vacation in Orlando has to cut back somewhere else---and one of the easiest places to cut back is the cost of lodging. The Deluxe resorts are the most exposed to this, because their value proposition is the weakest.

This is a very insightful post and shows an angle I hadn't thought about. We always drive so airfare is never a consideration for us, but what you are saying makes perfect sense. The deluxe resorts really are between a rock and a hard place - the are priced liked some of the top resorts in the world, but they don't have the offerings or the sophistication of a true deluxe resort. I am sure many people who used to stay at a deluxe have "downgraded" to a moderate because the gap in services between a moderate at WDW and a deluxe at WDW really isn't that huge or have moved to an offsite hotel where there are often better amenities and larger rooms for a lot less. People aren't just being squeezed by Disney hotel prices, but by the airfare, too.

 

[jt04]

How long have you been "trusting"? What have they rewarded you with after all this time?

Since 1971. I would say Disney Springs is the latest cool new thing guests have "rewarded" with. Before that, 4 theme parks, 2 water parks, numerous resorts and recreation opportunities. Stuff like that.

 

[GoofGoof]

I'm a little confused about the prospects of DVC at the moderates. Would here be a different classification and/or price of points to keep the "riff-raff" out of the Deluxe DVC's?

I don't see it working. Here's why the various options don't work:

1. Sell the points for less money per point: They can't sell the points at a lower price than the current resorts if they are eligible for trade in. If they wanted to sell the points for something like $75 they would need to create a new "lower" level point classification to make it work. This lower level would not be eligible for trade in to the deluxe level that currently exists. I can't see them building at a moderate and not offering the option to trade in to different resorts which is a big selling feature for DVC. I guess they could offer a 2 for 1 trade in option where you would have to trade in 200 moderate DVC points to get 100 deluxe. The other problem is trading in through RCI. It would mess up the trade in prospects.
2. Charge less points per night for the moderate DVC: They could sell the points for $150 but require less points per night. If a week in a deluxe DVC studio usually runs 110 points make the moderate studio only 55 points per night. The reason I don't think this works is that dues are paid per point. They would need twice as many rooms to collect the same dues. If the dues cover a lot of shared expenses those expenses would be almost the same as a deluxe resort but you'd have half the dues coming in. They would need to build big (600 to 1,000 DVC rooms) to reach economies of scale instead of the 300 that works at a deluxe resort. That's a huge gamble and has a lower profit margin for Disney.
3. Hybrid approach - convert half of a moderate resort into a Deluxe DVC: A 3rd option is to take half of CBR and turn it into a deluxe DVC resort. Sell the points for the same price and charge almost as many points per night. This would require substantial reworking of the rooms to make them bigger and a substantial upgrade of the common areas used by the DVC resort. They would also need to address the bus issues. This would be expensive and you would still have the stigma of CBR being a moderate not a deluxe.

I can see why Disney likes the prospect of using DVC sales as a way to pay for a resort refurb like they are doing at Poly and probably WL now. I just don't know if the economics make sense to sell moderate DVC. I think it would be popular, but that doesn't mean it would be lucrative or as lucrative as the current DVC offerings. One of the things DVC does for Disney is convert regular visitors who tend to stay at moderate or value resorts into guests who stay at deluxe resorts. The break even points really only work vs a deluxe resort. I think a significant portion of DVC owners were people who didn't always stay at a deluxe resort.

 

[GoofGoof]

My WDWMagic account is less than 24 hours old and I am going to make a comment that often gets me burned . There must be a WDW DVC saturation point.

Currently, there are 12 resorts in the DVC system, 8 of which are located at WDW. Excluding DVC Poly estimates, the maximum number of villas presently available at WDW is 4,359. The DVC attitude seems to be expansion always in all ways at WDW. Eventually, the if you build it, they will buy philosophy will no longer hold true.

DVC can easily convert thousands of rooms at WDW, resulting in millions of points available for sale. However, at some point, the desirability may no longer be there.

There is a saturation point. We don't seem to have reached it yet. Prices keep rising, a lot, but people keep buying. The market is not sending any kind of signals to Disney that the market is saturated.