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

[ParentsOf4]

@ParentsOf4

Wouldn't a more accurate accounting of the DVC cost per night figures look something like this?

Round #s for ease of use, and let's use the Wilderness Lodge. Let's say you paid $150 per point, for 150 points per year, and you bought in 1998. So, gorilla math time..

You paid $22,500 for your point allotment. You get 44 years worth of usage and a total of 6600 points. Each point is worth $3.50 approx. If a studio room is running you an average of 110 points for a week, that leaves you with $385 per week for your points. Right now maintenance there is around $6 per point, so that's $660. Add those two numbers together, and you get $1045 for the week, or $149 per night. So for 2014 a studio room at VWL is running a DVC member $149 per night.

Right now, September 10th-16th at WL is running about $250.

So, yes, there is a difference. But it is not quite as dramatic as you were implying. Unless a member got his/her points for free upfront, I think this is a better comparison then simply using the maintenance fees.

You're looking at it from a buyer's perspective. From a buyer's perspective, you're in the ballpark. (You also need to include closing costs, financing, inflation, lost investment opportunity, etc.)

To understand how DVC 'dumbs down' Deluxe Resorts, you need to look at it from Disney's perspective.

That theoretical $22,500 you paid back in 1998 does nothing for the Wilderness Lodge's revenue in 2014. Disney used that $22,500 elsewhere a long time ago.

 

[flynnibus]

In that case you really can't blame the CEO for being short sighted, they're in it for the money now.

Maybe if you are the CEO of Enron

The management of the company is supposed to lead the company to long term success WHILE delivering along the way. The problem is people often worry too much about today and prop up 'today' at the expense of tomorrow. (because today is the most volatile and it is hard to convince people the future is real)

 

[flynnibus]

You're looking at it from a buyer's perspective. From a buyer's perspective, you're in the ballpark. (You also need to include closing costs, inflation, lost investment opportunity, etc.)

To understand how DVC 'dumbs down' Deluxe Resorts, you need to look at it from Disney's perspective.

That theoretical $22,500 you paid back in 1998 does nothing for the Wilderness Lodge's revenue in 2014. Disney used that $22,500 elsewhere a long time ago.

Make it really easy for them...

I give you $100 today... and that's it.
Or I give you $5 today, and every day into the future for the life of the property.

Which plan makes you more money?

People seem to forget... what do real estate barons do? They LEASE and RENT... Why? Because there is more money in recurring.

The trade-off is garunteed vs future potential... but this is WDW. They should have the confidence in their product to believe they can fill the hotel rooms and don't need the immediate cash out.

 

[xdan0920]

You're looking at it from a buyer's perspective. From a buyer's perspective, you're in the ballpark. (You also need to include closing costs, financing, inflation, lost investment opportunity, etc.)

To understand how DVC 'dumbs down' Deluxe Resorts, you need to look at it from Disney's perspective.

That theoretical $22,500 you paid back in 1998 does nothing for the Wilderness Lodge's revenue in 2014. Disney used that $22,500 elsewhere a long time ago.

I didn't include any of that other stuff, because Dis doesn't see a dime of it. I'd like to think Disney is extrapolating the price per point over the life of the contract, not just the cost at the initial purchase. I mean, there is short sighted, and then there is staggeringly, mind bogglingly short sighted.

They are locking you into, what amounts to $150 per night, for around 10 nights per year(studio) for 44 years. That's how they SHOULD be looking at it.

 

[flynnibus]

They are locking you into, what amounts to $150 per night, for around 10 nights per year(studio) for 44 years. That's how they SHOULD be looking at it.

The revenue isn't recurring though - it's a one time sale. They can't simply hide their income by spreading it out for 44 years.

 

[ParentsOf4]

I didn't include any of that other stuff, because Dis doesn't see a dime of it. I'd like to think Disney is extrapolating the price per point over the life of the contract, not just the cost at the initial purchase. I mean, there is short sighted, and then there is staggeringly, mind bogglingly short sighted.

They are locking you into, what amounts to $150 per night, for around 10 nights per year(studio) for 44 years. That's how they SHOULD be looking at it.

No, using your example, they are locking me in at the Wilderness Lodge at $660/week and are using the $22,500 they received from me in 1998 to pay out salaries, bonuses, shareholder dividends, etc. back in 1998.

If we are lucky, some of that $22,500 paid in 1998 made its way into DCA (which opened in 2001), making Disneyland more profitable but doing zilch for the Wilderness Lodge.

Recall that back in 1998, roughly 25% of Parks & Resorts revenue went into capital investments. The remaining 75% went elsewhere.

If I'm running the Wilderness Lodge hotel today, I have to budget and provide services based on the $660/week I'm receiving in 2014, not the $22,500 corporate received in 1998.

 

[NeXuS1000]

Does any of you know if that's actually have it's calculated within Disney's resort business unit?

To me, that sounds very, very strange. As for actual bottom line income, yes, they receive that in 1998, in this case, but it would absolutely blow my mind if the DVC unit doesn't "pay" e.g. WL the amount of points, converted dollars, that a user spends when staying there. How else does DVC distribute the income? When you buy DVC, it's not attached to a specific resort, so it can only be when you spend points on staying somewhere that they could potentially allocate that revenue.

And if that is true, the money you spend in 1998, part of that actually goes to WL when you choose to go there. I can't see how it would work in any other way. I.e. when you buy DVC or pay annual fees, the money goes to DVC. And then when you choose to visit a resort, the DVC division pays WL for you going there. This would by far seem like the most logical, economical and structured approach to a system like this; otherwise it would completely fall apart and I doubt Disney are that dumb.

However, the $150 vs $250 comparison is still stark, and if we say that a calculation like that is more apt, it could help explain why DVC would dumb down a resort, or at least why the DVC additions are built with lowered quality, and that can impact the overall resort quality impression as well, of course.

BTW, regarding the "you paid in 1998" point... don't you pay every year when you're a DVC member? Again, as I see it, this is a recurring income for Disney, making them less prone to economical turmoil, which should, in theory, provide a better economic landscape for WDW. Of course, it all depends on how that income is handled, of course.

 

[flynnibus]

Does any of you know if that's actually have it's calculated within Disney's resort business unit?

To me, that sounds very, very strange. As for actual bottom line income, yes, they receive that in 1998, in this case, but it would absolutely blow my mind if the DVC unit doesn't "pay" e.g. WL the amount of points, converted dollars, that a user spends when staying there. How else does DVC distribute the income?

Why do you think they need to 'distribute the income'? It's profits for the parent company. They get sucked into the operating cash flow like everything else.

And if that is true, the money you spend in 1998, part of that actually goes to WL when you choose to go there. I can't see how it would work in any other way. I.e. when you buy DVC or pay annual fees, the money goes to DVC. And then when you choose to visit a resort, the DVC division pays WL for you going there. This would by far seem like the most logical, economical and structured approach to a system like this; otherwise it would completely fall apart and I doubt Disney are that dumb.

Why would DVC pay the WL nightly fees for DVC owned and maintained facilities? They need to pay WL for services they contract from them, and for shared responsibilities.. but that's what the maintenance fees pay for. Maybe they work out some up front costs, but that would be paid by DVC with money they collect up front. It's not recurring. The recurring costs are covered by the owners.

 

[ParentsOf4]

Does any of you know if that's actually have it's calculated within Disney's resort business unit?

As essentially a timeshare, each DVC resort distributes a projected budget to all timeshare members with sources of income. For example, BWV's income was:

Interest Income - Taxes and Operating: $5,631
Member Late Fees and Interest: $214,264
Breakage Income (i.e. Disney renting unused DVC rooms): $615,813
Member Annual Dues Assessment: $19,723,698
TOTAL REVENUES AND INCOME: $20,559,406

You can see that, overwhelmingly, income came from annual fees.

BWV's list of costs were longer, but the biggest ones were Housekeeping ($5.3M), Administration & Front Desk ($3.8M), and Maintenance ($3.4M).

Even for the the DVC member paying $67/night, Disney makes a nice little profit on these fees.

Now imagine how much profit Disney is making charging the cash guest $405/night!

BTW, regarding the "you paid in 1998" point... don't you pay every year when you're a DVC member? Again, as I see it, this is a recurring income for Disney, making them less prone to economical turmoil, which should, in theory, provide a better economic landscape for WDW. Of course, it all depends on how that income is handled, of course.

DVC members pay a purchase price and an annual Maintendance Fee (MF). The purchase price is paid once. The MF is paid every year.

Using BWV as an example, the current purchase price from Disney is $130/point. The 2014 MF is $6.01/point.

 

[NeXuS1000]

Why do you think they need to 'distribute the income'? It's profits for the parent company. They get sucked into the operating cash flow like everything else.

Because that's how corporations keep track of the profitability of various units and ensure that good works pay off. Disney wants to know if WL is more popular than e.g. GF, and if it is, continue to invest to ensure continued growth. That's a fundamental of capitalism. And it's why groups providing "internal" work in corporations still "bill" the clients within the same corporation; you need to track where the money ends up.

Why would DVC pay the WL nightly fees for DVC owned and maintained facilities? They need to pay WL for services they contract from them, and for shared responsibilities.. but that's what the maintenance fees pay for. Maybe they work out some up front costs, but that would be paid by DVC with money they collect up front. It's not recurring. The recurring costs are covered by the owners.

Right, but the point is still that WL receives continuous income for whatever the DVC unit "rents" from it. And this ensures a continuous stream of money for WL resort upkeep, or at least those shared areas.

FYI, when I talk about the recurring costs, I did mean coming from the owners; none the less, part of that money surely goes to the resort that the DVC unit is connected to.

Of course, one argument for why DVC could dumb-down a resort is that it "locks in" in the customer; I don't know how hard it is to get rid of a DVC membership, but if it is hard, then Disney wouldn't need to care about resort maintenance to keep the money coming. But is that really the case?

 

[flynnibus]

Because that's how corporations keep track of the profitability of various units and ensure that good works pay off

Those are simple metrics that don't need to be backed up with actual transactions. It would be incredibly stupid of Disney to hold onto money for that for years to pay itself all while that money is depreciating and can't be invested or repurposed. Your theory would pretty much make DVC a losing proposation purely from the idea of dead money.

And it's why groups providing "internal" work in corporations still "bill" the clients within the same corporation; you need to track where the money ends up.

When services are rendered - yes. But DVC isn't renting a room from the WL. It's a DVC room.

Right, but the point is still that WL receives continuous income for whatever the DVC unit "rents" from it. And this ensures a continuous stream of money for WL resort upkeep, or at least those shared areas.

No - it would receieve income for the services DVC contracts from the resort.

How do you think they could sell deeds if the room were just 'rented' from the WL?

 

[NeXuS1000]

As essentially a timeshare, each DVC resort distributes a projected budget to all timeshare members with sources of income. For example, BWV's income was:

Interest Income - Taxes and Operating: $5,631
Member Late Fees and Interest: $214,264
Breakage Income (i.e. Disney renting unused DVC rooms): $615,813
Member Annual Dues Assessment: $19,723,698
TOTAL REVENUES AND INCOME: $20,559,406

You can see that, overwhelmingly, income came from annual fees.

BWV's list of costs were longer, but the biggest ones were Housekeeping ($5.3M), Administration & Front Desk ($3.8M), and Maintenance ($3.4M).

Even for the the DVC member paying $67/night, Disney makes a nice little profit on these fees.

Now imagine how much profit Disney is making charging the cash guest $405/night!

Hehe, well, doesn't that still tell a story of a continuous stream of income, directed at a specific Resort (in this case, BW)? Sure, a lot of the money would be directed straight at BWV, but some of it would also be for the shared resort services, right?

DVC members pay a purchase price and an annual Maintendance Fee (MF). The purchase price is paid once. The MF is paid every year.

Using BWV as an example, the current purchase price from Disney is $130/point. The 2014 MF is $6.01/point.

Ah, I see. None the less, the recurring, annual cost, as you wrote above is clearly labeled towards specific resorts. And even with the initial, upfront cost, I highly doubt that Disney don't track where DVC points are used, converted to dollars, thus giving resorts economic incentive to attract DVC clientele.

 

[WDW1974]

My biggest complaint about the resort. Why should I have to go to CityWalk just to grab a hot dog?

I know they say you shouldn't post when angry ... but I have a line that I'd so like to use here (nothing against you!) sometimes it just is very tiring having to fight 'da man every damn day.

 

[NeXuS1000]

Those are simple metrics that don't need to be backed up with actual transactions. It would be incredibly stupid of Disney to hold onto money for that for years to pay itself all while that money is depreciating and can't be invested or repurposed. Your theory would pretty much make DVC a losing proposation purely from the idea of dead money.

No, that's not what I'm saying. It's like putting your money in a savings account in a bank; it's not like your money are just lying around, waiting for you to come back for them. They are actively being used for investments etc. Yet they still appear, virtually, in your account at all times.

In the same manner, when you pay DVC the initial upfront cost, of course Disney goes out and spends that money, but none the less, when you use DVC points to stay at a resort, there's nothing stopping Disney from still allocating that resort a corresponding amount of revenue.

When services are rendered - yes. But DVC isn't renting a room from the WL. It's a DVC room.

Sure, and again, going back to my initial question: does DVC dumb down the resort? If the money goes to the DVC areas + the shared facilities, wouldn't the DVC income theoretically help keep those parts of the resort in good shape?

 

[flynnibus]

No, that's not what I'm saying. It's like putting your money in a savings account in a bank; it's not like your money are just lying around, waiting for you to come back for them. They are actively being used for investments etc. Yet they still appear, virtually, in your account at all times.

In the same manner, when you pay DVC the initial upfront cost, of course Disney goes out and spends that money, but none the less, when you use DVC points to stay at a resort, there's nothing stopping Disney from still allocating that resort a corresponding amount of revenue.

What you are saying makes no sense. Disney can't make up revenue. Disney can't spend money or invest and then 'virtually' count it again somewhere else. I'm bored of talking in repeating myself here. DVC doesn't pay their host resort for the rooms on a nightly basis. How do we know? Because the DVC budgets are shared with the owners... and we have common business sense.

Sure, and again, going back to my initial question: does DVC dumb down the resort? If the money goes to the DVC areas + the shared facilities, wouldn't the DVC income theoretically help keep those parts of the resort in good shape?

Cold Fusion...it's for you man. Invest.

 

[WDW1974]

Do you think it is because it's cheaper to not fight back? Or is it risk aversion taking over everything? The fear of a CM acting wrongly and ending up in the press or courts?

I would love to see some standards of decorum enforced in the resorts.

I just don't understand how Disney can even think they have standards or rules of any value when they never enforce them?

Great questions. My answer would likely be all of the above.

It's always cheaper to not fight back, again in the short term. Risk aversion is a huge deal as well. I haven't even gone into the battle being waged about putting huge code of conduct signs in front of every Disney theme park worldwide (yes, malls and, from what I've been told, Six Flags and other operators have them). This is a MAJOR initiative from Legal, but the problem is what you post in Florida isn't even the same as what can be posted in CA., forget about the EU or the 'two Chinas' ... at some point, if you have to put in writing that illegal behavior is against ''the rules'' then I think we have all lost the war.

Disney absolutely fears nothing as much as bad publicity from CMs that results in legal action (yes, the pedophile situation that was reported on CNN before Disney got a huge break with planes being shot out of the sky and war in the Gaza, is exactly what the second-worst nightmare they have. The worst? A terrorist attack at a park or just a random crazy guy with guns) ... So, even a CM getting into a fistfight while working crowd control at EPCOT and trying to prevent a child from being injured is absolutely against everything Disney works hard to maintain: total control.

I admit I was shocked when about a year ago I saw a CM in the Grand Flo lobby strongly, but politely, 'suggest' a family having a picnic move outside to the tables set up near the Grand Flo Cafe.

But often, it isn't that anyone is breaking rules. Just that people have no decorum, no class, no common sense. I don't know how you deal with that. I really don't.

 

[flynnibus]

But often, it isn't that anyone is breaking rules. Just that people have no decorum, no class, no common sense. I don't know how you deal with that. I really don't.

You have to be willing to turn away dollars. Something I doubt Disney has the stones to do.

 

[doctornick]

Those are simple metrics that don't need to be backed up with actual transactions. It would be incredibly stupid of Disney to hold onto money for that for years to pay itself all while that money is depreciating and can't be invested or repurposed. Your theory would pretty much make DVC a losing proposation purely from the idea of dead money.

I think the point is more like this (using the WL example): In 1998, that $22,500 that Disney made by selling a DVC contract goes into their revenue for that year. Understandably. It doesn't go in some lock box to be used later to run WL.

But wouldn't it be sensible that while the 1998 money is revenue for that year, there is an expectation that Disney, as part of running WL as both a hotel and managing the DVC, will plan to use revenues at some indeterminate point in the future to help maintain/plus WL for both the DVC members and cash guests using it? The basic principle being that in 1998 they used that revenue to (say) help build DCA, so if DCA makes money in 2014 why can't some of that revenue be used to maintain WL? Not the exact same dollars, but shuffling of money within P&R (or company wide) in the future.

IOW, the high revenues they make off DVC sales should have some internal company expectations that in return for that profit now, they will need to use company money later to keep those resorts running properly. I don't think that happens and that's illustrative of how P&R seems to be run in a short sighted manner. Sales of DVC units shouldn't be looked at as "all profit for right now".

 

[Disneyhead'71]

I wish TDO all the luck in the world with their toddler, princess, and timeshare business model.

Since I am not a toddler, Princesses aren't really my thing (us queens usually poison them), and I have no intentions of handing TDO tens of thousands of dollars to be "locked in" to decades of vacations to an obviously declining product, all I can think of is, is going on down there.

Let me know when TDO gets around to once again giving a **** about the parks.

 

[hokielutz]

This is a significant cost, though, isn't it? DVC points stays get limited Mousekeeping -- trash removal a few days in, new bedsheets after a week. That's got to be a significant decreased expense for the hotel over a cash guest -- not only less staff, but less cost to clean the sheets and have replacements, etc.

I wonder also if DVC rooms tend to have shorter or longer stays than cash rooms. It "seems" like a timeshare would elicit longer stays but I'm not sure that happens in practice; longer stays are better for the resorts because you don't have to change over the room as often.

Also, DVC tends to get limited supplies of stuff like coffee and shampoos. I think that DVC owners are supposed to get charged to get those items outside of their normal "cleaning" day when it is scheduled, unlike cash guests where they would be complimentary.

Granted I don't have specific experience with DVC rooms, but I would imagine operations might be similar to other 'time-share' type operations.
Specifically.... even though you are saving on man-power by not cleaning the room each day... there are additional operational costs for repair and replacement of room items. DVC's introduce small appliances, furnishings, etc... and most time-share places I have stayed at use relatively cheap cookware, and small appliances that are broken, break down, or are just plain missing upon check-in.