Understanding Why Disney's Magical Express Is Ending

[ParentsOf4]

So the expansion of WDW resorts we most recently saw, all being DVC builds - Did they all being a DVC builds help the recovery of the capex spent?
Also the Star Wars Hotel, built for 3 day stays - they built this knowing its going to add stress onto their resorts when families are done... wouldn't they hope that the guests moves to another resort on property for the remaining days of stay.

Disney's return on DVC resorts is measured in a few years. Those DVC points that Disney sells are immensely profitable. For example, BLT cost approximately $140 million to build while offering 5,618,859 points to sell. That's about $25/point. Disney started selling BLT at $112/point.

Disney's return on most cash hotels is decades. The Star War Hotel is not a typical hotel - it is a boutique experience. It will have margins unlike any other WDW resort. Even better, my guess is that stays at this hotel will be sold in blocks similar to restaurant reservations, meaning Disney will be able to run this at 100% occupancy (assuming demand is there).

 

[UNCgolf]

A busy resort doesn't mean eliminating all of the things I listed earlier. Also, employees don't depreciate over time, even if fiberglass does. That made sense in my head at least. I mean, if they aren't treated/compensated well, that is. The employees, not the fiberglass.

I agree, which is why I said it's not the only reason. Those kinds of eliminations have nothing to do with how busy things are.

I was talking more about overall cleanliness, food quality, etc. inside of the parks rather than anything to do with the resorts.

None of that is excused by the crowd levels, to be clear. I wasn't suggesting Disney is blameless. It's more that they would have to significantly increase spending on all of those things (staffing levels, purchases from vendors, and so on) to keep them at the same level, and guests have given them no reason to increase that spending because they're flocking to the parks anyways.

 

[tpac24]

@skipper_james on Tic Toc posted a video today I think many of you would find funny! It ties in with this topic nicely!

 

[flynnibus]

Disney either can spend a lot of capex to build more hotels, which takes a long time to recover this investment, or Disney can eliminate expensive onsite benefits and pocket the cash right now.

This argument doesn't make sense to me.

'More people' is a self-regulating problem here... because of the fixed capacity.

If Disney really 'didn't want more people' - they'd stop all the stupid festivals and runDisney promotions. But that's not the case.

 

[flynnibus]

I just paid $134 for a six hour compact Budget rental in the middle of BF Tennessee. The shortage is real but they are shuffling cars around

The prices I had for Tampa 2 weeks ago was 310-360 A DAY!

Luckily... one brand still honored my corp rates.

 

[JoeCamel]

The prices I had for Tampa 2 weeks ago was 310-360 A DAY!

Luckily... one brand still honored my corp rates.

Anyone that gets into a collision expecting their insurance company to cover a rental or most dealerships when you need extended repairs will be in for a shock when the paid rental is declined. Usual and customary might come into play. Time to make special meals for your friends, never know when you will really need a favor.

 

[ParentsOf4]

This argument doesn't make sense to me.

'More people' is a self-regulating problem here... because of the fixed capacity.

If Disney really 'didn't want more people' - they'd stop all the stupid festivals and runDisney promotions. But that's not the case.

Once COVID restrictions are lifted, Disney has plenty of space to fit Guests at the parks. They don't have that space at the hotels.

Think of it this way.

In normal times, how often did the theme parks close because they reached capacity? The Magic Kingdom, perhaps a couple of times a year. The other theme parks, never.

 

[flynnibus]

Once COVID restrictions are lifted, Disney has plenty of space to fit Guests at the parks. They don't have that space at the hotels.

Think of it this way.

In normal times, how often did the theme parks close because they reached capacity? The Magic Kingdom, perhaps a couple of times a year. The other theme parks, never.

Again... I don't need to remove DME to avoid oversubscribing the hotels... they already have their own limit system. It's self regulating without punishing everyone.

 

[BoarderPhreak]

Not only is DME (run by Mears) ending, but Disney resort transportation to/from the Swalphin is moving from Diz to Mears. I suspect there's some deeper issue afoot.

 

[ParentsOf4]

Again... I don't need to remove DME to avoid oversubscribing the hotels... they already have their own limit system. It's self regulating without punishing everyone.

Disney is not trying to punish anyone. Corporate Disney is doing the math and taking a fresh look at what is and is not needed.

Disney's hotels have already reached their limits. They don't have space for more Guests. Potential onsite Guests are being turned away - they cannot book the rooms they want.

Disney has a few choices. Disney could build more hotels. However, this is ties up a great deal of capex and the return is spread out over decades. It's not a particularly attractive option for a new CEO, especially in the Age of COVID.

Disney could raise prices or cut costs. As it turns out, Disney has decided to do both.

As I eventually will explain in another post, WDW hotel prices are up more than 16% since 2019. (My guess is 2021 prices would have gone up even more if not for COVID.)

Disney also has decided to cut costs.

Extra Magic Hours (EMH) was the first major expense to go. DME is the second.

Corporate leadership believes that EMH and DME are no longer needed to keep hotel occupancy high. EMH and DME are viewed as expensive anachronisms that are getting in the way of profits.

 

[flynnibus]

Disney is not trying to punish anyone. Corporate Disney is doing the math and taking a fresh look at what is and is not needed.

Disney's hotels have already reached their limits. They don't have space for more Guests. Potential onsite Guests are being turned away - they cannot book the rooms they want.

Disney has a few choices. Disney could build more hotels. However, this is ties up a great deal of capex and the return is spread out over decades. It's not a particularly attractive option for a new CEO, especially in the Age of COVID.

Disney could raise prices or cut costs. As it turns out, Disney has decided to do both.

As I eventually will explain in another post, WDW hotel prices are up more than 16% since 2019. (My guess is 2021 prices would have gone up even more if not for COVID.)

Disney also has decided to cut costs.

Extra Magic Hours (EMH) was the first major expense to go. DME is the second.

Corporate leadership believes that EMH and DME are no longer needed to keep hotel occupancy high. EMH and DME are viewed as expensive anachronisms that are getting in the way of profits.

Again... what does reaching capacity have to do with justification to cut costs? You said raise prices or cut costs? Again how does cutting costs speak to addressing this oversubscription you keep referring to?

The cost cuts are not a tool to demotivate excess suiters... that is what i meant by “punishing everyone”

They didn’t have to deal with excess suiters at all... disney can redirect them to countless 3rd partners and/or encourage other dates further out. Cutting costs doesn’t mean disney turns away less people except by discouraging customers enough to them off. How is that a positive “fix things” strategy?

I don’t see this as anything more than capitalizing on the opportunity and sustained demand they have to cut costs as part of their long established path of pay to play and offsetting other expenses.

Never let a good crisis goto waste. Disney has used the reset period to pull the band aide on lots of stuff.

 

[flynnibus]

Corporate leadership believes that EMH and DME are no longer needed to keep hotel occupancy high. EMH and DME are viewed as expensive anachronisms that are getting in the way of profits.

Thats a very different motivation then “we have excess capacity and we need a solution”. That is a “we can reduce services and still come out ahead in net because “the savings will outweigh the losses” mindset”

 

[HarperRose]

Not only is DME (run by Mears) ending, but Disney resort transportation to/from the Swalphin is moving from Diz to Mears. I suspect there's some deeper issue afoot.

Swan/Dolphin transportation switched to Mears weeks ago.

 

[orky8]

Again... what does reaching capacity have to do with justification to cut costs? You said raise prices or cut costs? Again how does cutting costs speak to addressing this oversubscription you keep referring to?

The cost cuts are not a tool to demotivate excess suiters... that is what i meant by “punishing everyone”

They didn’t have to deal with excess suiters at all... disney can redirect them to countless 3rd partners and/or encourage other dates further out. Cutting costs doesn’t mean disney turns away less people except by discouraging customers enough to **** them off. How is that a positive “fix things” strategy?

I don’t see this as anything more than capitalizing on the opportunity and sustained demand they have to cut costs as part of their long established path of pay to play and offsetting other expenses.

Never let a good crisis goto waste. Disney has used the reset period to pull the band aide on lots of stuff.

Because if you are oversubscribed, you need to increase supply or find a way to decrease demand. Essentially, Disney doesn't care if it loses 1% of people b/c of the loss of DME since they have too many people anyway, so why not cut costs. The question is whether it will be 1% or 10% that say the value is no longer there. Disney seems to think the hit will be negligible, and if they lose a few folks, so be it.

 

[jt04]

Disney is not trying to punish anyone. Corporate Disney is doing the math and taking a fresh look at what is and is not needed.

Disney's hotels have already reached their limits. They don't have space for more Guests. Potential onsite Guests are being turned away - they cannot book the rooms they want.

Disney has a few choices. Disney could build more hotels. However, this is ties up a great deal of capex and the return is spread out over decades. It's not a particularly attractive option for a new CEO, especially in the Age of COVID.

Disney could raise prices or cut costs. As it turns out, Disney has decided to do both.

As I eventually will explain in another post, WDW hotel prices are up more than 16% since 2019. (My guess is 2021 prices would have gone up even more if not for COVID.)

Disney also has decided to cut costs.

Extra Magic Hours (EMH) was the first major expense to go. DME is the second.

Corporate leadership believes that EMH and DME are no longer needed to keep hotel occupancy high. EMH and DME are viewed as expensive anachronisms that are getting in the way of profits.

EMH also got in the way of event and after hour ticketing. Not that I think this is a negative trend. To the contrary.

 

[bcoachable]

It bugs me.
This company became the best because they were great (maybe even the best) at putting us (the guest) first. In the past, they always seemed to consider ways to improve our experience’s.
Today, they have switched to focusing on ways to cut costs in order to make more money- at the expense of guest experience. I get it- it’s a business- but it used to be a business focused on us...
Wake up, Disney, remember what got you here!

 

[BoarderPhreak]

Swan/Dolphin transportation switched to Mears weeks ago.

Okay, but what's your point? These changes were announced more or less at the same time. DME won't change until EOY. There's something up between Diz and Mears.

 

[unmitigated disaster]

At least as it concerns WDW hotels, Disney doesn't want more people to come.

In the last full quarter before COVID hit, domestic hotel occupancy was at an incredible 92%.

Here's what Jay Rasulo, former Disney CFO, had to say about hotel occupancy in 2015:

You know, Michael, I think hoteliers in general will tell you that to try to fill a hotel beyond 89%, 90%, 91% is extremely difficult because to go beyond that, it takes too many matchups of people who are staying three nights, checking out; replaced by five nights; replaced -- in rapid succession. It becomes quite difficult.​

​

So I think that you are right -- that when you see occupancy in that kind of range, you are getting close to pretty much a full house.​

From Disney's perspective, the hotels are full. In fact, they are more than full. Guests are being turned away because no rooms are available.

Disney either can spend a lot of capex to build more hotels, which takes a long time to recover this investment, or Disney can eliminate expensive onsite benefits and pocket the cash right now.

It's ugly but true - Disney cares more about its bottom line than its Guests.

While I sympathize with trying to fit everyone into rooms - I've spent many an hour juggling rooms for full house nights - there's an easy solution: cap reservations. If you always leave, say, 50 -100 rooms (depending on the size of the resort) off market but ready to go in case of mix ups/engineering issues, etc. - that wiggle room is already there. The average guest certainly won't notice and if they do they'll likely think "something is out of order in the room" rather than "Disney is LYING. They have availability!!"

 

[peter11435]

While I sympathize with trying to fit everyone into rooms - I've spent many an hour juggling rooms for full house nights - there's an easy solution: cap reservations. If you always leave, say, 50 -100 rooms (depending on the size of the resort) off market but ready to go in case of mix ups/engineering issues, etc. - that wiggle room is already there. The average guest certainly won't notice and if they do they'll likely think "something is out of order in the room" rather than "Disney is LYING. They have availability!!"

Well... yeah. And that 50-100 represents the 8% they are missing to reach a full 100%

 

[unmitigated disaster]

Well... yeah. And that 50-100 represents the 8% they are missing to reach a full 100%

He's doing the same thing management does at my hotel: simultaneously about the stresses of full houses [that they never have to deal with personally] while humble bragging about how full they are. They don't get to do both. They have a solution for at least the short term. They can shut up already.