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

[Nemo14]

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 result 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.

That's exactly what confused me - I don't understand how it could work. Thanks.

 

[GoofGoof]

That's exactly what confused me - I don't understand how it could work. Thanks.

It makes no sense to do it...they will probably break ground next month

 

[Nemo14]

It makes no sense to do it...they will probably break ground next month

Exactly!

 

[crispy]

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.

WDW is not a benevolent benefactor bestowing a gift on us - we are all paying customers who are choosing to spend our dollars on their products. Don't confuse the relationship.

 

[LithiumBill]

I own timeshare off property. My family is not Riff-Raff. We do shop at Walmart.

Just needed to get that off my chest.

 

[jt04]

WDW is not a benevolent benefactor bestowing a gift on us - we are all paying customers who are choosing to spend our dollars on their products. Don't confuse the relationship.

I am waiting for the day the critics of WDW/TDO/TWDC etc. here band together to prove how as "benevolent benefactors" they would run an operation. I promise I will buy tickets and be one of your best customers. Will it be open by 2017? Cause I will be in the area.

PS- it might help if you secure rights to an IP first. Might want to look into DC Comics or perhaps go all out and get something like Star Trek or LOTR.

 

[SpaceMountain77]

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.

This is what I expect will happen.

DVC is currently commanding $165 a point and sales remain strong. They are able to market and sell a premium product, so why go down market? I often use BMW, Cadillac and Lexus for the purpose of analogy. Why offer an entry-level sedan for $19,995 when a $40,000 pricepoint can be achieved?

Think AKV. The point chart will be slightly lower, but the overall accommodations will remain the same.

 

[Nemo14]

I own timeshare off property. My family is not Riff-Raff. We do shop at Walmart.

Just needed to get that off my chest.

My post was not implying that - just a failed attempt at humor. Sorry.

 

[asianway]

I own timeshare off property. My family is not Riff-Raff. We do shop at Walmart.

Just needed to get that off my chest.

As long as it's not Westgate you have my support

 

[CDavid]

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.

Disney has realized that, going forward, they will no longer be able to fill the number of deluxe resort rooms they once did. While I am hardly the first person to say this, one really has to wonder how the TDO execs must have so little confidence in their own (resort) product. If the suits were really as dumb as they seem sometimes, they wouldn't be able to start their own car to drive home at night. Hence, they can see the writing on the wall as well as we can, and even though they may only be interested in propping up the financial numbers for another few years, they appear to be completely unable (or unwilling) to take corrective action.

The solutions aren't exactly rocket science, nor do they necessarily (or immediately) require significant capital investment. Indeed, there are several posters on this board with workable suggestions (more FP's, complimentary recreation activities, better transportation, etc.) to improve deluxe resort occupancy. What is required is providing the guest better value for the price paid; Disney can even "get away" with some degree of inflated prices because, well, it's Disney and the nostalgia/"brand loyalty" effect hasn't yet entirely evaporated.

However, rather than taking steps to increase demand, Disney "solves" the problem by reducing supply. That's backwards, but it's even worse than that, because substituting DVC for standard guest rooms will exacerbate the occupancy problem. Many DVC members are the guests who formerly stayed in those same deluxe resorts, so while DVC has been adding room inventory, it has come partially at the expense of deluxe (and moderate, at least) resort demand. Further, guests renting points from DVC members continues to grow in popularity; This (drastically) undercuts Disney prices and, again, is one less family who likely otherwise may have reserved a deluxe or moderate resort room. While it works against our interests as Disney consumers, I am surprised Disney does not explore ways to curb (or dissuade) point rental to just anyone, because the 'problem' (from their perspective) is only going to get worse.

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

While you are quite correct that 2001 was a turning point, the downturn initially occurred earlier in the year, prior to the September 2001 terrorist attacks. Obviously, the situation worsened after that (though the parks were hardly deserted later in the year), but the point is Walt Disney World was simply overbuilt with resort rooms at all levels. There simply wasn't enough demand for the existing room inventory - even without consideration of risk in any potential economic downturn - with the new abundance of value resorts drawing many guests who formally stayed at moderate or deluxe properties. That problem sound familiar?

 

[Cesar R M]

There are definitely eyes on the YC for more DVC.

I think (again, this part is OPINION) the convention crowd may play a factor here. But if you don't see it at YC, expect a chunk of BC to be converted sooner rather than later.

WDW is truly becoming The Timeshare Kingdom of the World. And, let's not BS ourselves or anyone else, that most definitely was not what the resort was about for its first 25-30 years and certainly not what Walt ever had in mind.

I actually wonder if this business model is sustainable.

 

[Chippy]

WDW is not a benevolent benefactor bestowing a gift on us - we are all paying customers who are choosing to spend our dollars on their products. Don't confuse the relationship.

This is one of the reasons I would not buy a timeshare. My perception is that, once the deal is done, DVC has your money and the need to improve is not there. Worse, my opinion may not matter as they have my money. I am not referring to the parks, but to the resort areas. As a cash guest (is that the right term?) I can still vote with my wallet. It may not matter to Disney in the long and I may end up paying move over time for on site WDW visits, but at least I will never feel trapped.

 

[crispy]

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.

Which makes you wonder if those who now own deluxe DVC would start staying at a moderate DVC because they could stay longer or use less points essentially creating the same problem that they have right now - unused deluxe properties. Or do you think those who buy into a specific type of DVC (moderate DVC or deluxe DVC) would be locked into using only those properties and those in the moderates would have reduced benefits (similar to those who buy resale vs. directly from Disney)?

 

[GoofGoof]

This is what I expect will happen.

DVC is currently commanding $165 a point and sales remain strong. They are able to market and sell a premium product, so why go down market? I often use BMW, Cadillac and Lexus for the purpose of analogy. Why offer an entry-level sedan for $19,995 when a $40,000 pricepoint can be achieved?

Think AKV. The point chart will be slightly lower, but the overall accommodations will remain the same.

That's my gut feeling too. They aren't going to make it cheaper because it hurts their bottom line. They would be essentially turning CBR into SSR part 2. They did have the most trouble unloading SSR points and it usually has the most availability out of DVC resorts. People like having a DVC that's attached to a deluxe resort and/or has unique transportation to a park.

 

[GoofGoof]

Which makes you wonder if those who now own deluxe DVC would start staying at a moderate DVC because they could stay longer or use less points essentially creating the same problem that they have right now - unused deluxe properties. Or do you think those who buy into a specific type of DVC (moderate DVC or deluxe DVC) would be locked into using only those properties and those in the moderates would have reduced benefits (similar to those who buy resale vs. directly from Disney)?

A portion would. There is a faction of DVC owners who bought in to save money and are looking for value. I could see those people looking to trade in for moderates to stretch their points out if they made the points significantly lower.

 

[SpaceMountain77]

However, rather than taking steps to increase demand, Disney "solves" the problem by reducing supply. That's backwards, but it's even worse than that, because substituting DVC for standard guest rooms will exacerbate the occupancy problem. Many DVC members are the guests who formerly stayed in those same deluxe resorts, so while DVC has been adding room inventory, it has come partially at the expense of deluxe (and moderate, at least) resort demand. Further, guests renting points from DVC members continues to grow in popularity; This (drastically) undercuts Disney prices and, again, is one less family who likely otherwise may have reserved a deluxe or moderate resort room. While it works against our interests as Disney consumers, I am surprised Disney does not explore ways to curb (or dissuade) point rental to just anyone, because the 'problem' (from their perspective) is only going to get worse.

This is an eloquently written and, in my opinion, very accurate post, but when you speak to DVC members, guides and service representatives there seems to be a notion of independence when it is truly interdependence.

Maybe I have taken too many spins in a giant teacup, but I truly believe Disney views WDW's long-tem viability as being driven by DVC and conventioneers, not cash-paying guests. Moreover, instead of expanding its fan base, it seems as though they want loyalists to sign the scroll and surrender their condominium association voices.

 

[SpaceMountain77]

That's my gut feeling too. They aren't going to make it cheaper because it hurts their bottom line. They would be essentially turning CBR into SSR part 2. They did have the most trouble unloading SSR points and it usually has the most availability out of DVC resorts. People like having a DVC that's attached to a deluxe resort and/or has unique transportation to a park.

Yes, I agree and suspect that the moderates will have a few hundred villas instead of the 700+ maximum available at AKV, OKW and SSR.

 

[jt04]

There must be a WDW DVC saturation point.

Can't they just rent unused DVC rooms. I think that might be the strategy for having the resorts be a mix of rental and DVC. That way they can shift rooms as the market ebbs and flows between the types of accomadations that might be popular at any point in time. Much more flexibility that way.

 

[GoofGoof]

Can't they just rent unused DVC rooms. I think that might be the strategy for having the resorts be a mix of rental and DVC. That way they can shift rooms as the market ebbs and flows between the types of accomadations that might be popular at any point in time. Much more flexibility that way.

The points sold cover almost all of the available rooms 365 days a year. Disney keeps a small percentage of points back when they sell the points. It's mostly for taking rooms offline to do maintenance. If someone trades in their points for a cruise or a stay at a Disney hotel the points go to general reservations to be rented as cash rooms. If a DVC room is not rented by an owner using points it will shift to cash reservations at either the 30 or 60 day point, I can't remember which one. The only way Disney could rent DVC rooms as cash rooms is if Disney kept a portion of the points themselves instead of selling all of them. Then Disney would have to transfer the equivalent of the dues back to the DVC resort. They are run as independent timeshares.

 

[SpaceMountain77]

Can't they just rent unused DVC rooms. I think that might be the strategy for having the resorts be a mix of rental and DVC. That way they can shift rooms as the market ebbs and flows between the types of accomadations that might be popular at any point in time. Much more flexibility that way.

The answer is yes, with an it depends attached. First, DVC retains a small percentage of points at each DVC resort, which makes this, in part, possible. Second, DVC can only use member points when they are exchanged (e.g., Disney Collection, DCL) or unreserved rooms are within a certain window.