When will WDW go over the cliff?

[ParentsOf4]

If they've built more capacity and the percentage usage is down, that doesn't mean there are less people coming. The ROI on the hotels across property is a more critical factor. If you have 10,000 rooms with a 90% occupancy rate and build an additional 10,000 rooms your occupancy rate dropping to 78% means you have 6,600 more people staying than you did before. 10,000 @ 90% = 9,000 rooms occupied, 20,000 @78% = 15,600 rooms occupied.

Occupancy rates in absence of changes to total capacity numbers are meaningless. What matters is whether the added uptake of the total capacity is sufficient to pay for the overall costs of adding the capacity, plus factoring in the ancillary increases in merchandise, food and ticket sales.

At the 2012 earnings conference call, Jay Rasulo said "Walt Disney World attendance was down modestly".

Hotels are an interesting financial beast, much more so than the theme parks. The incremental opex of a hotel with a 70% vs. 90% occupancy rate is small, yet the revenue difference is significant, making it highly profitable to fill additional hotel rooms.

At this point, I believe one of the major objectives of Next Gen will be to fill rooms at the Deluxe Resorts, where occupancy rates are reported to be the softest.

If TDO plays Next Gen correctly, it could be a source of significant revenue growth along with additional opex reductions. (I suspect EMH eventually will be eliminated because of Next Gen.)

It doesn't make financial sense for WDW to have completed AOA unless there was or will be demand for additional Value Resort capacity. At this point, I believe Value Resort demand is relatively strong compared to Deluce Resorts. Still, why add rooms when occupancy is diverging from 100%? In addition, what can be done about the soft Deluxe Resort occupancy?

Offering discounts are expensive since people who might have been willing to pay full price also will demand these discounts. Discounts mean lost revenue. What else can be done?

My suspicion is Next Gen will provide a multi-tiered theme park experience for guests. By granting special FP & ADR access based on resort level, this encourages Moderate Resort guests to upgrade to Deluxe, Value guests to upgrade to Moderate, and offsite guests to upgrade to Value. There are a lot more offsite than onsite guests. So, building AOA makes sense if the expectation is demand for Value Resorts will increase.

I suspect Next Gen will be used to generate additional demand for onsite hotels by tempting some offsite guests to stay onsite and some onsite guests to upgrade their hotel.

Returning to the point of this thread, from Walt Disney's original egalitarian vision for his theme parks, I believe Next Gen represents WDW going over the cliff. Sadly, if TDO plays it correctly, I think the only people who will notice are those who post on websites such as this.

 

[ginadee]

I didnt know its been in decline for the past decade. Its fantastic and magical every time Ive been. And since being on this site Ive gotten even more excited about my next trip and lots more magical things to look for.

 

[the.dreamfinder]

Oh boy!

 

[CP_alum08]

In the most recent annual report, Disney's domestic hotel occupancy rate is down another 3% to 78%, excluding the post-9/11 era, an all-time low. Only a few years ago it was about 90%.

Then I stand corrected on the numbers. However, with the way the country has been the past few years is it really all disneys fault? Isn't tourism in general down?

 

[Goofnut1980]

My two cents worth... I see it like this, I continue to go to the parks and love it. So much I bought DVC. I think Disney does different things to keep the magic alive at the parks. Economically you can not build, build, build every year or you would not see profits. You would be laying people off.

I think they make sure that they will have strong attendance to know the money will be coming in after making a large upgrade. It just makes financial sense. I think they went stagnant for many years post 9/11 and mortgage crisis when people stopped traveling and spending money so easily. They needed to make sure funds were available to run a business. In no way am I saying that regular maintenance should be avoided to make areas unsafe, but you can't expect new things every year.

It does amaze me how people get so negative about Disney not doing anything, but then when they do update and maybe shorten a film by 25 seconds, those same people who say Disney doesnt do anything, complain they took it away. Disney can't win for those folks either way. And if it really means that much to you. Go apply for a job in Disney and work your way up the ranks to make the changes you want to see.

I have learned on these boards, take most opinions with a grain of salt and not let it affect my vacation. (Which is only 10 days away!)

I am sure many will not agree with me and many may. It is only my opinion about the task at hand.
I wish everyone a Magical Day!

 

[lazyboy97o]

I feel the Walt Disney Company is still recovering from the Eisner era's decisions and practices. Iger seems to be trying to transition Disney into a new era, IMO.

Why did the current executive team spend years conspiring against Michael Eisner? Just so they could become the saviors of the Company?