Why DVC Building New Resorts at WDW

[DVCOwner]

For those that wonder why DVC is building more DVC resorts at WDW, it is very simple. DVC is being built for the money. According to DVCNews; "As of June 30, 2012, DVC Members own 5,514,584 points at AKV and 5,444,923 points at BLT." This means that at the two of the newest resorts that DVC has opened on WDW, they have made over a billion dollars in revenue. If piont cost averaged $105 than DVC has taken in $1,150,748,235. So for those out there saying DVC is taking money from the Parks, I can not see how that is possible. DVC is putting large profit into Disney and it is up to management how to spend it. I am sure that additional capital for construction of new resorts is well paid for within the DVC profits.

 

[Mr.Skunkape]

I really do not see any new resorts being built that are not DVC. The only reason that AoA was not a DVC was the fact that it is attached to a value and not a deluxe.

 

[tjkraz]

I know fans want more places to stay but Disney doesn't have a need for more accommodations. Every time a new member buys into DVC, the cash resorts lose a guest. By building more DVC resorts, Disney is shifting more and more people from the cash population to the DVC points population.

Essentially, every individual who buys into DVC creates an opening at the cash hotels. And Disney's hotel business / park crowds aren't growing at such a level which would necessitate construction of more hotel rooms.
I'm surprised they even built Art of Animation. However, that appears to be an attempt to go after the family suite market more aggressively.

Disney hotels only average 85% occupancy now--and that's with the recent pattern of discounting, package deals, etc. There simply isn't a need for more Value, Moderate or Deluxe guest rooms.

 

[slappy magoo]

I know fans want more places to stay but Disney doesn't have a need for more accommodations. Every time a new member buys into DVC, the cash resorts lose a guest. By building more DVC resorts, Disney is shifting more and more people from the cash population to the DVC points population.

Essentially, every individual who buys into DVC creates an opening at the cash hotels. And Disney's hotel business / park crowds aren't growing at such a level which would necessitate construction of more hotel rooms.
I'm surprised they even built Art of Animation. However, that appears to be an attempt to go after the family suite market more aggressively.

Disney hotels only average 85% occupancy now--and that's with the recent pattern of discounting, package deals, etc. There simply isn't a need for more Value, Moderate or Deluxe guest rooms.

There are ALMOST ALWAYS discounts and package deals, let's not say it's a "recent pattern." The types of discounts may be different than in years past, like free dining, but like a department store that jacks up the price of a sweater so when they sell it for 25% off you think you're getting a bargain, WDW will always charge a premium for their rooms and make you feel like you got really lucky when you're able to get a "pat for 4 nights, get 7" promotion. The exceptions are when demand exceeds supply, like during holidays.

DVCOwner is right in that DVC is a short-term cash cow that also pays long term dividends because most of the time the DVC members are going to vacation at WDW so that's practically locked-in tickets, meals, souvenirs, and the possibility of those member extending their vacations with room paid in cash.

While I won't immediately dismiss the notion that a new DVC member is in theory a customer who will not be buying cash rooms any time soon, I'd also hasten to point out...there are still a buttload of people in the world, the world population isn't shrinking any time soon, the global tourism market is still there, not everyone in the world will ever buy into DVC, and 85% average occupancy in resorts built on land the company owns, with sweetheart deals that affords them lower property taxes because of the tourism dollars they generate for the area (no matter how much WDW's marketing tactics keeps people onsite)...that ain't shabby.

Furthermore, while a lot of people who stay offsite opt to do so because of cheaper room rates, having more rooms, whimsically designed, with free transportation both to the parks and to/from the airports and those package deals and discounts, might sway more people to opt to stay onsite when they visit the area. Sure, AoA doesn't have a lot of discounts now, but that will change, and when it does, I suspect (as WDW probably does) the rooms will fill and the impact will be felt in surrounding offsite hotels.

 

[tjkraz]

I just typed a lengthy response and apparently forum software booted it.

To summarize:

* Yes there have long been discounts at WDW but the "recent pattern" over the last 3-4 years has been particularly advantageous to consumers. Only time will tell if that continues.

* It goes without saying that DVC is very profitable for Disney.

* Yes there are a "buttload" of people but Disney still has to lure in the business. It's unquestionable that Disney is constantly shifting guests from the cash population to DVC. The number of guest rooms at WDW has been constantly growing--the only thing some people find objectionable is the fact that the growth is largely limited to DVC. There are more guests than ever staying in Disney accommodations. It just so happens that this constant shift of people from cash to DVC is opening up capacity at cash resorts, thus eliminating the need to build further.

* It's certainly Disney's plan to chip away at off-site locations but further discounting (if necessary) can easily erode the benefits. If you have 1000 rooms sold for $120 per night, you gross $120,000. But 1200 rooms discounted to $100 per night yields the same $120,000. Discounting is a weapon in Disney's arsenal, but it isn't the be-all, end-all.

 

[GoofGoof]

DVC provides Disney with more rooms without taking on a ton of debt to finance them. Even if they wanted to stop building rooms and shoot for 95%+ occupancy there is nothing to stop Universal or others from building. Loosing a cash guest to DVC is much better than losing them to someone offsite.

The other major factor is the push to keep people on property longer. Just like with free dining, WDWs approach is to keep people on property longer and get them to spend more money. DVC works for that. I have no stats to support this, but based on my own experience and what I have heard from others DVC members tend to stay longer. If you planned to do 1 week but have enough points for 8 or 9 nights why not stay a little longer. Some people end up doing more than 1 trip a year too.

I think the 3rd factor is getting people to stay at upgraded accommodations. In my opinion a lot of people who buy into DVC would not necessarily be staying at a deluxe resort without it. This increases the number of guests staying in a deluxe resort so you make more money. Sure, some of the DVC people will switch from Contemporary to BLT but a lot more probably are upgrading.

I have heard some people make an argument that people spend more on meals, souvenirs and other incidentals when they are staying on points since they don't have a hotel bill to pay at checkout. I'm not sure I buy into it, but it makes some sense. I really don't think this way, but I have heard people say "my room is free so now all I have to worry about paying for is..." or "once I have paid off my loan in 10 years I am staying for just the cost of my maintenance fees.". This mentality could lead to additional spending on other items.

Finally, I don't buy the argument either that spending on DVC has somehow caused Disney to not spend on the parks. There was a whole thread on this and in my opinion nobody made a compelling argument that the 2 are related. If anything more DVC will lead to more park spending. When presenting a project to management it has to help when you can talk about all of the DVC guests who have contracts for the next 30+ years. Locked in revenue streams unless you believe people will stay at DVC on property but not go to the parks.

 

[Funfy]

We are DVC members that would not be going every year and staying in a deluxe if we weren't DVC members. The costs of a yearly vacation vacationing the way I like to vacation, would have been out of reach without being a DVC member. So, my family was not taking away from cash resorts, but, adding money to the overall Disney coffers through my DVC membership and my current and future stays.

Even though we have the kitchens, we only eat breakfast there. We always do the DDP. I am on vacation. I do most of the cooking. If I am cooking, I am not on vacation. It doesn't cost more for my family, but, even if the DDP costs more money than paying out of pocket, I would still purchase it for ease of use. I am not nickle and diming every decision and I have older kids that go off by themselves/with friends and can purchase whatever counter service they want and we meet back for table service. I plan our vacations into infinity until we arrive and then I don't want to think again until I get back home.

We also often take my husband's family, they would probably not be going without staying on our points. And if they did go on their own, they would probably not be staying higher than a value or offsite. So, by our being DVC members, we have brought in additional dollars that would not be there without our DVC membership.

 

[tjkraz]

We are DVC members that would not be going every year and staying in a deluxe if we weren't DVC members. The costs of a yearly vacation vacationing the way I like to vacation, would have been out of reach without being a DVC member. So, my family was not taking away from cash resorts, but, adding money to the overall Disney coffers through my DVC membership and my current and future stays.

It doesn't have to be a 1-to-1 relationship. It stands to reason that DVC members average more trips than cash guests...and therein lies the tremendous value to Disney.

However, if you were not a DVC member you would still take SOME number of cash trips. Whether you would visit every-other-year, every 3 years, every 5 years...whether you stay at a Deluxe, Moderate or Value...as a cash guest you would be occupying space at some resort with some frequency just as you did in your pre-DVC days.

But that isn't happening any more.

Instead of filling a room at Port Orleans every-other-year or the Poly every 5 years, you are taking annual trips to Saratoga Springs or BoardWalk Villas. Whatever the pattern may be. And that's GREAT for Disney's bottom line. This isn't a commentary on the value of DVC or members' spending habits.

But what it does is demonstrate why there isn't a need for Disney to build more cash resorts. Most of the building is happening at the DVC level and they are successfully shifting many guests from cash properties to DVC.

 

[GoofGoof]

It doesn't have to be a 1-to-1 relationship. It stands to reason that DVC members average more trips than cash guests...and therein lies the tremendous value to Disney.

However, if you were not a DVC member you would still take SOME number of cash trips. Whether you would visit every-other-year, every 3 years, every 5 years...whether you stay at a Deluxe, Moderate or Value...as a cash guest you would be occupying space at some resort with some frequency just as you did in your pre-DVC days.

But that isn't happening any more.

Instead of filling a room at Port Orleans every-other-year or the Poly every 5 years, you are taking annual trips to Saratoga Springs or BoardWalk Villas. Whatever the pattern may be. And that's GREAT for Disney's bottom line. This isn't a commentary on the value of DVC or members' spending habits.

But what it does is demonstrate why there isn't a need for Disney to build more cash resorts. Most of the building is happening at the DVC level and they are successfully shifting many guests from cash properties to DVC.

I agree with the point that building DVC resorts has slowed the construction of cash rooms. I don't expect to see new moderate or deluxe resorts anytime soon. If anything they could do a half cash, half DVC resort.

The new trend with AKV, BLT and GFV seems to be adding DVC to deluxe resorts. Poly is probably next. This makes a lot of sense since they can leverage existing infrastructure. They also share expenses with existing deluxe resorts making them more profitable. For example BLT and CR share bell services and check in. The fixed costs associated with these services are now split between BLT and CR. The margin on the CR rooms has gone up since the expenses went down, but they didn't lower the cash price. Another area of "super profit" with DVC is renting cash rooms at DVC resorts. A studio MK view room at BLT during regular season is $564 per night. The 2 bedroom MK villa is $1,066. These rates are definitely higher than CR rooms. I am pretty sure a certain number of DVC rooms a are held back for cash guests.

 

[GoofGoof]

I think overall tourism numbers in Orlando are up even though WDW attendance is relatively flat. The boy wizard is attracting a lot of visitors. This is an interesting question. One of 2 things is probably happening. More Disney park guests are staying on property (free dining encourages this big time). This would lead to increased room rentals without increased park attendance since you would be moving people from off property to on. That would also support the theory that DVC keeps people on property since the majority of new rooms built are DVC. Another possibility is people staying on property are spending more time at Uni or other non-Disney parks. I tend to think this is probably true especially with The Wizarding World of Harry Potter being so new. The answer is probably a mix of both.

 

[DVCOwner]

I know for me I do spend as much cash per trip as I did when I was not a DVC member and only came once every three years. Now we come to WDW about every 18 months. I spend a lot more money in the parks than I did when I was paying cash for my rooms. I usally bring 10 or more family and freinds that would not go to WDW if I was not providing the rooms for free. Also two of my friends that never went to WDW before I let them stay in my rooms purchased into DVC after a couple of trips, Even more money that WDW would not have gotten that they get now. DVC is money in the bank for WDW.

 

[GoofGoof]

Good points, especially about WWOHP. I always enjoy talking with other guests when visiting WDW. 10 years ago, no one ever mentioned UO. In the last couple of years, I've seen more Universal shopping bags than ever before at WDW resorts. Onsite guests often mention their plans to visit UO explicitly for WWOHP.

I have to admit I was one of those people that always bashed Universal as being inferior. My opinion has definitely changed. WDW is still my first love and my oldest son is only 5 so hasn't gotten into Harry Potter yet, but he loves super heroes and transformers so he is itching to go to Uni. Once my kids get into Harry Potter we will definitely be going probably on every trip for a day or 2.