Wilderness Lodge DVC additions - Copper Creek Villas & Cabins

[GoofGoof]

That is true. They haven't built a huge DVC like Kidani or SSR, so maybe that is part of the reason. If so, why aren't they building more, if they thought they could sell that many more points? They already have the plans completed for the River Country DVC resort, and that is supposed to be entirely DVC.

No DVC resort is ever actually "sold out". There are always literally thousands of points available at any resort due to foreclosures and Disney exercising their ROFL on resales. All you have to do is ask your guide what resort, how many points, and what use year, and they will make it happen. Certain combinations will cause you to be out on a wait list, though.

When they say sold out they mean they have stopped actively marketing the resort. You are correct that they are never really sold out.

 

[CaptainAmerica]

That is true. They haven't built a huge DVC like Kidani or SSR, so maybe that is part of the reason. If so, why aren't they building more, if they thought they could sell that many more points? They already have the plans completed for the River Country DVC resort, and that is supposed to be entirely DVC.

My guess would be that its time in the capital plan just hasn't rolled around yet. I believe River Country was considered imminent until it was "jumped" by GFV. Even if something is revenue-positive, they're still very deliberate about how much capital they're spending and when.

No DVC resort is ever actually "sold out". There are always literally thousands of points available at any resort due to foreclosures and Disney exercising their ROFL on resales. All you have to do is ask your guide what resort, how many points, and what use year, and they will make it happen. Certain combinations will cause you to be out on a wait list, though.

Dear God, people mortgage these things!?

 

[hpyhnt 1000]

A few problems with your analysis.

1) Consumers aren't showing any resistance to the pricing, either on the DVC side or on the regular room night side.

For the moment, that is true. Disney is certainly riding a wave of tourism that has descended upon Orlando after years of tepid travel due to the recession.

2) If and when consumers do show resistance, it won't be all at once. Volumes will slowly decrease rather than all of a sudden "crash." Further, Disney is not powerless in this regard. When they encounter resistance, they have more than enough flexibility to discount down or slow the rate of YOY increase.

Yes, they can discount down but that depends on how much they want to (or how much they can) eat into revenues. The worry is that Disney, as it has increased prices in the last decade, has also raised spending targets accordingly and is putting itself in a position where things like maintenance and various investments in resort infrastructure depend on DVC meeting certain benchmarks. No doubt WDW rooms are way overpriced so there is likely a huge amount of buffer that Disney can tap into. Plus, we don't really know what the break even point for the resorts is (ie: how many rooms at what dollar amount need to be occupied each night to break even?).

3) The real estate bubble is a poor analogy because the real estate bubble was driven by debt. Disney is nothing like your neighborhood real estate developer in that they're leveraged 100% and unable to hold assets without a cash injection in the event of a market downturn. If the bottom fell out of the economy tomorrow such that Disney couldn't sell DVC units at anything resembling a reasonable return, they have more than enough liquidity to hold them until a recovery while offering selective discounting.

4) There's zero risk to future "daily hotel stays" because, as I've already pointed out, Disney has flexibility. Rack rate means nothing to the hotel guest because rack rate isn't what they actually pay. As you alluded to, rack rate is a tool used to sell timeshares and create the illusion of value when they're discounted. It's never a target that Disney actually expects to get.

But I would be willing to bet that there are people who see the rack room rate of $400-800/night depending on the resort and time of year and immediately decide to stay offsite or at one of the partner hotels. That is largely the result of DVC. That is what I meant by Disney abandoning the revenue of nightly occupancies. They've made the calculation (and up to this point, it looks to be a good one) that it is better to use the pricing of standard hotel rooms as a way to drive people toward DVC. This model only works as long as people buy into DVC. And while they could do the reverse of recent history and drop prices and move DVC rooms back into the dedicated hotel inventory, that goes back to point 2 and what Disney's internal beak even number is in terms of filling X number of rooms at X dollars per night.

Disney certainly would not go belly up of DVC sales feel off a cliff. But I think they are setting themselves up for a fall with so many DVC rooms at WDW. DVC should be used to augment hotel revenues; I'm worried that it is being pushed into becoming an equal or majority source of resort revenue with nightly hotel revenue almost becoming secondary. Maybe I'm way off on that assertion (and @ParentsOf4 could probably clarify with the numbers) but the explosive growth of DVC across the resort, and the talk of it extending into the moderates, is something that makes you wonder.

ETA: 5) The "diminishing quality of amenities at DVC resorts" argument has been debunked by others more articulate than I am so I'm not even going to bother. In fact, a portion of maintenance fees paid by DVC members is used on upkeep for common areas that are shared with the "regular" hotel at a given resort. In that way, DVC members are actually subsidizing a portion of the maintenance of lobbies, pools, and restaurants on behalf of the regular guests.

Yes, but they are all using said lobbies, pools, and restaurants, many of which have not been enlarged and now have to deal with increased usage and guest numbers. And it is a similar story with the resort buses, monorails and watercraft. Around the Seven Seas Lagoon for instance, many more rooms have been added in the past 5-7 years, but it is still the same tired old monorails, ferries, and watercraft chugging around, all with the same capacity as 10 years ago but now older and having to carry more people. Crowds affect quality, both in terms of wear and tear but also in terms of lines, reception desk wait times, ambient noise levels, and a host of other metrics.

And this doesn't even get to the cutbacks in discounts, perks and other services that DVC members used to have. That is also harmful to the perception of quality.

Admittedly quality is something that is very subjective to each person. But enough people on these boards have posted various qualms here or there that I think declining quality is a fair point to consider.

ETA: of course, for point 3/4 the opposite could be true. By locking people into DVC, you get their dollars up front and, in a way, commit them into taking a Disney vacation. So in a downturn, people could decide, "well we already bought the points. Let's just go to Disney this year instead And we can go to X some other time."

 

[GoofGoof]

Dear God, people mortgage these things!?

For someone with such outspoken opinions about DVC you don't seem to know much about it or how it works

 

[CaptainAmerica]

But I would be willing to bet that there are people who see the rack room rate of $400-800/night depending on the resort and time of year and immediately decide to stay offsite or at one of the partner hotels.

I think this statement is the best summation of the crux of where we disagree. I think it's a very tiny percentage of visitors or potential visitors who would be scared away by rack rates. If you're knowledgeable enough to know what a rack rate is in the first place (whether from this site, The Unofficial Guide, Mousesavers, personal experience or wherever else), you're also probably informed enough to know about discounts. Most of Disney's advertising on television and elsewhere also focuses on discounts, whether Free Dine, room only summer rates, stay and play packages, etc.

You're looking at a small fraction of people who would price a vacation out based on an undiscounted package and then be scared into booking off site.

 

[CaptainAmerica]

For someone with such outspoken opinions about DVC you don't seem to know much about it or how it works

My dislike of the product is based on principle, not data analysis. I don't believe in prepaying for vacations, nor do I think it's wise to tie up so much cash in an "asset" with declining value. Every new piece of data I learn reinforces my belief in those principles.

To be clear, I hate it from a consumer perspective. I have no objection to its presence at WDW from a business perspective, nor do I believe it negatively impacts my experience as a "cash" guest.

ETA: To answer this specific point, I know you CAN mortgage vacation ownership interests, I just didn't realize enough people actually did so to the point of foreclosures forming a meaningful component of available inventory.

Edit 2: Also to clarify, I feel this way about all timeshares, not just DVC. Of all those available in the marketplace, DVC is probably the one I "hate least" because it trades strongly and you can actually sell it if you absolutely have to. There are some timeshares that you literally can't give away for free because nobody will take it off your hands.

 

[Wildflower]

Does anyone have stats on PARK capacity versus RESORT capacities current and projected? DVC as another a way to put larger sums of money in the coffers short term and DVC/hotel expansions long term possibly contributing to push more guests to stay on-site via capacity limitations... Granted this is EXTREMELY rare right now (holidays a few hours into the day) but going forward think this might be part of the vision?

 

[ParentsOf4]

A few problems with your analysis.

1) Consumers aren't showing any resistance to the pricing, either on the DVC side or on the regular room night side.

Consumers are showing resistance to pricing, which I why I posted this earlier on the thread:

I believe this is part of a conscious pricing strategy by Disney. Disney has shifted away from mega DVC Resorts (the relatively recent SSR, AKV, BLT, and Aulani are 4 of Disney's 5 largest DVC resorts) to smaller, higher priced additions at existing Deluxe Resorts.

Disney would rather sell fewer points at higher prices, but this also means potential timeshare buyers are being priced out of the market. There is nothing inherently good or evil about this. This is simply how Disney is choosing to price this luxury item.

Disney was having similar problems filling its hotel rooms for a few years, but the number of occupied rooms has been outstanding for the first 2 fiscal quarters of 2015.

So far, this high hotel occupancy rate has not translated into higher DVC sales. Again, this seems to be part of an intentional strategy on Disney's part. Disney wants fewer DVC points sold but at higher prices.

2) If and when consumers do show resistance, it won't be all at once. Volumes will slowly decrease rather than all of a sudden "crash." Further, Disney is not powerless in this regard. When they encounter resistance, they have more than enough flexibility to discount down or slow the rate of YOY increase.

See above.

3) The real estate bubble is a poor analogy because the real estate bubble was driven by debt. Disney is nothing like your neighborhood real estate developer in that they're leveraged 100% and unable to hold assets without a cash injection in the event of a market downturn. If the bottom fell out of the economy tomorrow such that Disney couldn't sell DVC units at anything resembling a reasonable return, they have more than enough liquidity to hold them until a recovery while offering selective discounting.

Overwhelmingly, the DVC market is debt driven. Most buyers take out high interest rate loans to make their DVC purchases. For example, a week in a PVB Standard View Studio this summer requires 169 points. At today's price of $165/point and with closing costs, a PVB buyer needs to cough up over $28K for the initial purchase, plus another $1K in annual Maintenance Fees. Most DVC buyers take out loans to make this purchase.

During the height of the real estate bubble, Disney was foreclosing on record numbers of DVC members and offering discounts to those still purchasing direct. Meanwhile, resale prices were at record lows and DVC memberships could be acquired for less than 50 cents on the dollar.

For some perspective, VGF currently is selling for approximately $145/point on the resale market, compared to its direct price of $165/point. Considering resale's closing costs are higher, resales currently are selling for less than a 10% discount, a discount more typical in the mid-2000s before the most recent real estate bubble.

@hpyhnt 1000 wrote:

And that right there sums up the entire problem with WDW's hotels and DVC. They want to raise the cost of DVC points to lock in more money from people. But to do that, you also need to raise hotel prices so that DVC still appears to have "value." What results is an ever upward climb of prices until it all crashes because the consumer finally says, "No, this is insane. I'm done."

At this point, it is clear that Disney has more less decided that it is willing to sacrifice potential revenue from daily hotel stays in favor of the chance at getting people to buy into DVC at exorbitant prices. But in the process, all they are doing is creating a Mouse version of the real estate bubble, not to mention diminishing the quality and amenities of WDW resorts as a whole.

Like you, I don't see Disney "creating a Mouse version of the real estate bubble." I cannot envision a scenario where Disney would be forced to discount direct DVC prices by more than 10% or 20% and, as I believe you suggest, Disney has the financial resources to weather a downturn in the DVC market, essentially carrying the Maintenance fees of excess DVC points until better economic times.

However, Disney is creating a revenue stream bubble. Because of the way a DVC sale is structured, each unit sold represents 1 year of phenomenal revenue followed by 49 years of subpar revenue for a Deluxe Resort accommodation.

Disney needs to keep selling DVC units in order to keep this revenue bubble from collapsing but, as indicated by the declining number of DVC points sold per annum, Disney is facing an uphill battle as it continues to raise direct sale prices even as the total number of DVC points grows.

4) There's zero risk to future "daily hotel stays" because, as I've already pointed out, Disney has flexibility. Rack rate means nothing to the hotel guest because rack rate isn't what they actually pay. As you alluded to, rack rate is a tool used to sell timeshares and create the illusion of value when they're discounted. It's never a target that Disney actually expects to get.

You are giving the consumer too much credit. You and I understand WDW's pricing better than 99.9% of WDW's hotel Guests. Plenty of WDW Guests pay rack rates.

Perhaps more importantly, whether a DVC members uses their points or rents them out on the secondary market, each DVC unit sold represents one less room at Disney's hotel rates. Even with a 30% discount, Disney's Deluxe Resorts are really expensive compared to the rest of the Orlando market, but paying DVC's "49 year rate" is well below market rate for most offsite hotels, representing a subpar revenue stream for Disney.

On the plus side, each hotel room converted to DVC also means one less room that Disney has to fill via a "room only" or "free dining" discount. As the number of Deluxe Resort rooms decline, presumably Disney will need to offer fewer discounts to fill the remaining Deluxe Resort rooms, meaning RevPAR will approach rack rate.

With hotel occupancy currently approaching 90%, Disney's decision to convert hotel rooms to DVC looks really dumb. Long term, it will be interesting to watch whether 2015's 89% or 2013's 79% is more representative. With over 5,000 Deluxe Resort rooms and a growing number of nearby deluxe accommodations (e.g. the Waldorf Astoria and the Fours Seasons), I suspect Disney is making the right move.

ETA: 5) The "diminishing quality of amenities at DVC resorts" argument has been debunked by others more articulate than I am so I'm not even going to bother. In fact, a portion of maintenance fees paid by DVC members is used on upkeep for common areas that are shared with the "regular" hotel at a given resort. In that way, DVC members are actually subsidizing a portion of the maintenance of lobbies, pools, and restaurants on behalf of the regular guests.

This is a subjective topic with both sides dug in; neither side is winning any converts.

 

[GoofGoof]

My dislike of the product is based on principle, not data analysis. I don't believe in prepaying for vacations, nor do I think it's wise to tie up so much cash in an "asset" with declining value. Every new piece of data I learn reinforces my belief in those principles.

To be clear, I hate it from a consumer perspective. I have no objection to its presence at WDW from a business perspective, nor do I believe it negatively impacts my experience as a "cash" guest.

ETA: To answer this specific point, I know you CAN mortgage vacation ownership interests, I just didn't realize enough people actually did so to the point of foreclosures forming a meaningful component of available inventory.

Edit 2: Also to clarify, I feel this way about all timeshares, not just DVC. Of all those available in the marketplace, DVC is probably the one I "hate least" because it trades strongly and you can actually sell it if you absolutely have to. There are some timeshares that you literally can't give away for free because nobody will take it off your hands.

Just giving you a hard time

I think a large number of people who buy direct from Disney do finance. Even a small 160 point contract today would run over $25K. Not many people have that much cash to put down. The finance rates are really pretty high ranging from 9% to 17.5% depending on how much you put down and your credit score. Typically structured as a 10 year loan. Disney packages the loans and sells them to an investment bank but when people fail to make payments and go into default Disney will take the contract back and repossess the points and then resell them. Since the resale market is typically below the direct purchase price most people who finance are underwater for a while. All it takes is a lost job, a medical emergency or a divorce and people end up in default.

I don't think it's as common to finance a resale purchase, but it's possible to do. Rates are even worse in most cases.

 

[gmajew]

@CaptainAmerica I see your points on DVC but it is a choice and if you have the disposable income it is actually a really good deal to basically lock in your vacation spending going forward. My family decided it was for us because we have the money to do it and we love coming to the parks now, my wife and I felt it was a right long term decision because we love SC and Hawaii and figured we can use both of those hotels when we get older.

It is not a good investment if you need to finance the deal or if you do not admit you will not always use it or want to use it.

 

[CaptainAmerica]

Consumers are showing resistance to pricing, which I why I posted this earlier on the thread:

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I believe this is part of a conscious pricing strategy by Disney. Disney has shifted away from mega DVC Resorts (the relatively recent SSR, AKV, BLT, and Aulani are 4 of Disney's 5 largest DVC resorts) to smaller, higher priced additions at existing Deluxe Resorts.

You're presenting two different narratives. Are total points sold down because customers are showing resistance to pricing, or are total points sold down because Disney has shifted from quantity-driven DVC sales to price-driven DVC sales? I agree with the latter, disagree with the former. Your chart omits both price-per-point and points available. I'd be interested to see a graph comparing percentage of potential DVC revenue captured year-over-year (Points Sold * Price Per Point) / (Available Inventory * Price Per Point). If THAT chart shows year-over-year decline, then I'll jump on board with the "consumers are rejecting the price" narrative.

Overwhelmingly, the DVC market is debt driven. Most buyers take out high interest rate loans to make their DVC purchases. For example, a week in a PVB Standard View Studio this summer requires 169 points. At today's price of $165/point and with closing costs, a PVB buyer needs to cough up over $28K for the initial purchase, plus another $1K in annual Maintenance Fees. Most DVC buyers take out loans to make this purchase.

I agree that the DVC market is debt-driven from the consumer side (analogous to the homeowner in the real estate market). My point is that it is not debt-driven on the developer's (Disney's) side (analogous to the builders and developers in the real estate market).

 

[wdisney9000]

The person to whom I responded was talking about a deterioration of resort amenities and services due to the inclusion of DVC. I have no opinion whatsoever on what perks are afforded to DVC members. Not sure what that has to do with anything. Even cast members have perks that fluctuate based on seasonality and demand.

I was only mentioning that the perks for AP'ers and DVC discounts have been significantly reduced over the last few years. DVC resort amenities and perks/discounts kinda fall under the same category, IMO. We stay DVC often and while the resort amenities havent exactly gotten worse, they havent gotten any better either with the exception of the recent room updates at BWV, BCV, VWL, but those seemed to be due to the age and in some cases, absolutely horrible shape rooms were in.

 

[CaptainAmerica]

I was only mentioning that the perks for AP'ers and DVC discounts have been significantly reduced over the last few years. DVC resort amenities and perks/discounts kinda fall under the same category, IMO. We stay DVC often and while the resort amenities havent exactly gotten worse, they havent gotten any better either with the exception of the recent room updates at BWV, BCV, VWL, but those seemed to be due to the age and in some cases, absolutely horrible shape rooms were in.

But I don't think the person I responded to was talking about what it's like for DVC members. I think he was trying to make the point that the mere presence of DVC at a deluxe resort somehow makes the resort experience worse for cash guests.

 

[LuvtheGoof]

Dear God, people mortgage these things!?

I don't know why, but they do. Of course, since it is a mortgage, you can deduct the property taxes and interest if you itemize.

 

[CaptainAmerica]

Of course, since it is a mortgage, you can deduct the property taxes and interest if you itemize.

Ooh, my favorite financial strategy. Pay the bank $3,000 in interest so you can avoid paying the IRS $750 in taxes.

 

[LuvtheGoof]

Yes, but they are all using said lobbies, pools, and restaurants, many of which have not been enlarged and now have to deal with increased usage and guest numbers. And it is a similar story with the resort buses, monorails and watercraft. Around the Seven Seas Lagoon for instance, many more rooms have been added in the past 5-7 years, but it is still the same tired old monorails, ferries, and watercraft chugging around, all with the same capacity as 10 years ago but now older and having to carry more people. Crowds affect quality, both in terms of wear and tear but also in terms of lines, reception desk wait times, ambient noise levels, and a host of other metrics.

Not exactly true. DVC has paid for pool additions and major refurbishments at all resorts that it was added to. The VGF received an all new pool with kids play area, DVC members do NOT use the regular lobby as we check in at the villas (very nice and relaxing, sitting in a chair getting personalized service!). Bay Lake Tower has a separate check-in for DVC guests, and added another pool. The Poly pool refurb was completely paid for by DVC, as was the lobby refurb, and Trader Sam's, I believe. I'm not sure if the Poly has a separate check-in for DVC as of yet, but I thought they were going to do that as well. They are adding a restaurant and plussing the pool at Wilderness Lodge as well. All paid for by DVC, not the resort as part of DVC being added to it. So there are benefits to every guest. And the people saying that bringing DVC to a deluxe resort is undermining the quality of that resort are just full of it. It is actually giving people more options, since you couldn't get a 1 - 2 - 3 bedroom unit with full kitchen/washer& dryer/etc. before (with some VERY limited exceptions), but you can rent them for cash now. The deluxe resorts have not lost one single amenity that it had before DVC being added.

 

[CaptainAmerica]

The deluxe resorts have not lost one single amenity that it had before DVC being added.

Something something Walmartification of Disney something something something honey boo boo something iPad selfie-stick something something.

 

[Bocabear]

Not exactly true. DVC has paid for pool additions and major refurbishments at all resorts that it was added to. The VGF received an all new pool with kids play area, DVC members do NOT use the regular lobby as we check in at the villas (very nice and relaxing, sitting in a chair getting personalized service!). Bay Lake Tower has a separate check-in for DVC guests, and added another pool. The Poly pool refurb was completely paid for by DVC, as was the lobby refurb, and Trader Sam's, I believe. I'm not sure if the Poly has a separate check-in for DVC as of yet, but I thought they were going to do that as well. They are adding a restaurant and plussing the pool at Wilderness Lodge as well. All paid for by DVC, not the resort as part of DVC being added to it. So there are benefits to every guest. And the people saying that bringing DVC to a deluxe resort is undermining the quality of that resort are just full of it. It is actually giving people more options, since you couldn't get a 1 - 2 - 3 bedroom unit with full kitchen/washer& dryer/etc. before (with some VERY limited exceptions), but you can rent them for cash now. The deluxe resorts have not lost one single amenity that it had before DVC being added.

Actually VGF did not get an all new pool... they added a splash play area...in advance of the villas, but no new pool.

 

[LuvtheGoof]

Actually VGF did not get an all new pool... they added a splash play area...in advance of the villas, but no new pool.

Ahh, my bad. I thought they had refurbed the pool there as well.

 

[wdisney9000]

Something something Walmartification of Disney something something something honey boo boo something iPad selfie-stick something something.

You mock those complaints, so do you think that Disney is not being "Wal Marted" by having nearly the same merchandise in every park and everything having "Disney Parks" instead of a WDW logo? Have they not lowered standards to "Honey boo boo" levels through their actions such as complete lack of enforcing dress codes in signature restaurants and letting kids blast their Ipad video games while the couple next to them is trying to enjoy their $200 diner at Yachtsmen Steakhouse, or cleanliness standards that are more on par for an outlet mall? Is Cutting back on attraction and janitorial maintenance in an effort to boost the bottom line while offering high priced hard ticket events to do nothing more than eat cupcakes and watch a parade from a better angle a good thing?

Dont get me wrong, Disney is still a great place to visit. I still go and have a blast, but if you visit often enough its hard not to notice the changes that have occurred. Im fine with them building DVC but not when they are dragging their feet on everything park related. Its clear where their concentration is focused and its not the parks. Do you not think that men like Iger could give a rats behind about the parks because he will be long gone by the time any of the repercussions begin to occur from building/adding more DVC resorts than attractions in ten years?