90 minutes with DVC

[WebmasterDoc]

This afternoon, I had the pleasure of spending about 90 minutes with a friend who is a CM at DVC. We discussed many aspects of DVC and I gained a new respect for the issues faced by DVC in their relationship with Disney itself.

We talked about the Disney Collection, Concierge Collection, the DVC website and the various discounts negotiated for DVC members. It appears that there are many tiers of management (beyond DVC itself) and WDW operations, which are involved with decisions that, on the surface, might seem to be fairly simple and uncomplicated. These "outside” influences play a significant role in the end product that we ultimately see. Few of these programs actually represent the original goal of our DVC staff, but are more the result of the multitude of influences that affect the final presentation.

My assumption about the economic influence of the new point chart for the Disney Collection was incorrect. The ability (or inability) of CRO to rent out DVC points used for non-DVC reservations was NOT an ingredient in the 2002 listings. The needed points are determined by the room charges offered for DVC use by the other resorts. The influence of the non-DVC revenue considerations on the Disney Collection was an area I had grossly underestimated in my prior understanding of the issues involved in that program.

While I am certainly not privy to most aspects of these negotiations, it is certainly clear to me that DVC does not have carte blanche to operate within many other components of the corporation. This fact truly influences the ability to provide some of the very issues we discuss here every day.

I’m confident that our DVC staff and Board truly have the best interests of the membership in mind with their efforts on a daily basis. At some time, many of the programs designed for us will come to fruition and in the form proposed by DVC.

I also got a verbal glimpse of some of the future plans for DVC members, which DVC does have control over. ……No, I don’t have anything to share about BCV or VEP or pass discounts (except that DVC is NOT satisfied with the current status of that program), but our DVC staff does have some great ideas and programs which will affect our ability to interact directly with those making DVC decisions.

Stay Tuned!

 

[ripleysmom]

Doc, it would appear that what I believed, which is that the increase in point requirements for non-DVC resorts was a dollar decision made by Disney to maximize what they are getting for their hotel rooms in an economic downturn, was spot on. I also knew that this decision did not come from DVC, since the increase makes using this option much less attractive.

 

[lsutigger]

Thanks for the information. As in all business decisions, there are many varibles at work. Sometimes more knowledge helps in understanding the situation. Doesn't mean you have to like it, but it may help you to understand. Thanks again for taking the time from your vacation to chat with your friend and for the sharing the information.

 

[PamOKW]

Thanks for the insights Doc.

I'm not following what you are saying about the increase in Disney room rates. I think you are saying that the Disney resort says that they are charging $X for the room. DVC then sets the points to attain that cash amount. However, I still don't see how that caused a need for the drastic increases. DVC isn't paying more than rack rate are they? I'm not arguing. I'm just truly not following what you are saying.

 

[WebmasterDoc]

DVC then sets the points to attain that cash amount.

My understanding is that there is a formula used by DVC to convert the cost of the room to the points needed. I wasn't given any specific information about what these costs are or how the formula is applied (my contact was NOT involved with any of the negotiations), so I have no idea how the final figure was created beyond the simple explanation I was given. Sorry I don't have any more detail to offer!

From the impression I have, the term "negotiation" is probably defined differently what than my dictionary provides. It sounds as though it may have been decidedly one-sided.

 

[PamOKW]

Thanks Doc. As always, we don't have all the puzzle pieces. I understand that DVC may want to do things that aren't permitted by the other divisions. (A few years back they seemd to be skimping on landscaping -- but the same was true at all the WDW resorts.) At least it's good to know that they realize that the members want/deserve more, they just haven't been able to give it to us.

 

[stlrod]

What you also need to consider is that the value of the what you are trading (points) in exchange for a room in the DC is not as high as it was last year and that Disney needs to charge more points to make up the difference. Let me explain. Let's say a BWV owner (slightly deranged) wants to go to WDW for Xmas but stay at the GF. He trades his points for GF. Now Disney "owns" those points and needs to sell a room to someone else. Due to the economic slowdown, Disney has lowered its prices at the resorts to fill rooms. Most people would choose 50% off rack-rate at a deluxe Disney resort over a BWV at full rack rate. Therefore, in order to get rid of those points, Disney needs to compete with itself by reducing the price of room for which it received by using the owner's points. Thus, someone like me comes along and grabs a 2BR over Xmas at less than half the rack rate. How can Disney make-up for the loss of revenue which would normally be expected from those points? By collecting more points from the owner who traded. I wouldn't be surprised if following a very high occupancy year, the points needed to get in to the DC goes down.

 

[WebmasterDoc]

As always, we don't have all the puzzle pieces.

That about says it all, Pam!

The conversation today was really an eye-opener for me. There are so many components and levels of management that are involved with every decision made at DVC (and most other areas within Disney). I had naively assumed that Disney somehow behaved differently than other large (huge) corporations, but realize now that there are many constants in the business world.

As a DVC member, I found some of these things to be annoying and bothersome....as a Disney stockholder, I found the same issues to be reassuring.

The many divisions within Disney have a certain amount of autonomy, but all have a responsibility to be profitable- even when dealing with each other. DVC has no special status in this regard, despite their immense success.

 

[PamOKW]

stlrod -- Your theory is what I had thought. However, Doc's conversation indicated that the price for the DVC rooms doesn't enter into the equation (or at least wasn't the primary factor). I can't figure out what is actually going on that caused the drastic increases. It sounds like DVC had to either accept this program or not. These large increases after 10 years of stability just don't make sense to me. If Disney is looking to DVC members to pay rack rate (or more) while the rest of the world is paying discounted rates it just seems like abuse of a loyal customer base.

 

[WebmasterDoc]

stlrod, that had been my thinking previously, but found today that the current economy was not a consideration for the 2002 point chart.

That would explain how some dates went down and in other DVC options (like Concierge Collection) there was little or no change in the required points. If the economy was a consideration, all points would most likely have increased.

 

[WebmasterDoc]

Disney is looking to DVC members to pay rack rate (or more) while the rest of the world is paying discounted rates

While I doubt that DVC is paying more than rack rate, the other resorts must base the charge on their expectations for any given time period, not on where the actual going rate ends up. In this regard, I suspect that DVC has little to bring to the table in terms of an incentive for the GF to lower it's rates.

It seems that most members do NOT use the Disney Collection and therefore it does not comprise a significant source of revenue for the DC resorts. Yes, they will get paid for the room, but why should they offer a discounted rate to DVC when they MAY be able to get rack rate from other guests. Most discounts are not offered until a few months before a date, the DVC rates are contractual and must be honored for the entire year. I'm NOT trying to defend the charges- just playing devil's advocate.

The final decision for us as DVC members, is are the charges more than we are willing to pay or is the rate acceptable? I know what my response would be!

 

[stlrod]

Doc, I hadn't noticed one important paragraph of your first message (as a lawyer, I should read the whole thing--hopefully, I'll be more careful in reading over the DVC purchase papers I received today.) Still, I have a hard time believing that the ecomic factors were not a consideration. As you noted, each division has a responsibilty to be profitable. the only way the Disney Division that rents resort rooms can be profitable is charge more points for its rooms. If it lowered them for DVC members, members would go to the resort rooms and that division could end up w/empty DVC rooms. I think the Concierge rooms are more likely to stand on their own. My guess is that Orlando is probably going to see the most dramatic impact of the economy on tourism--oh well, better for us who love Orlando. I am anxious to see what happens with the Disney California points. My suspicion is that we are going to see a split between Disneyland Hotel and Paradise Pier with lower points for Paradise Pier.

 

[kem330]

First off Doc, Thank you for spending the timea nd energy to provide us with this information! I'm with Pam, it doesn't make sense that DC points went up in low season and down in some higher seasons- If there is more availability in Jan and lower rates, you would think that would be passed on to DVC. Likewise I think the Easter points or some weekends went down a little which makes no sense since they have no trouble renting the rooms then. Sounds like a bureaucratic nightmare! It's funny that a branch that has been so profitable for Disney is treated like a poor relation sometimes. Sounds like they could use a little management shake up. One doesn't cut one's nose to spite one's face! Well it's reassuring that the DVC management is looking out for us! Thanks again!

 

[WebmasterDoc]

It's funny that a branch that has been so profitable for Disney is treated like a poor relation sometimes.

I agree, but suspect that the other divisions may feel that DVC won't be made profitable at their expense. Unless DVC directly affects their bottom line, there is no real incentive to offer any real discount.

 

[kem330]

now I get it! It makes perfect sense from the other divisions point of view- in a way- except they don't seem to get that we support them also- especially the theme parks and restaurants- but I can see it doesn't benefit the resorts division too much to offer us a deal. Sounds more like jealous stepsisters!!! fighting over who gets a bigger piece of the pie. Hard to see the whole picture isn't it ? (even for us as well)

 

[wdwnut]

Thank you Doc for reporting some "concrete" tidbits rather than the rumor/hearsay that has been circulating. I think we all appreciate the time and effort you put into keeping us up to date and informed. thanks again.

 

[Dean]

Thanks Doc, interesting post. I too would be surprised if both sides of the equation weren't considered for the DC in spite of what you were told. Also, I can't see where WDW would benefit if more points were used as the income from the points would go to the DVC and not other WDW companies. The only benefit for other WDW areas would the be cash price paid for the DC rooms.

It would also seem to me that if the Board is not acting in good faith for the benefit of the members that they are violating the trust we've placed in them as well as violating their fiduciary responsiblity as members of the board. I also suspect that what you've proposed is happening is in violation of the Laws of the State of Florida. Sounds like I might just need to make a local phone call downtown to the state office that oversees timeshares and make an official inquiry about these issues. I believe that the recent and past reductions and substitutions in furnishings are in violation of the contract and POS as well along with a few others concerns, so I've been thinking of making that call anyway.

Regardless, I still believe that if DVC would only be willing to offer the other WDW hotels that gave them a "fair" exchange rate, the others would take notice. If there were a more reasonable and equitable program, more members would take advantage of it. I do realize that DVC needs to work within the WDW as a whole and that at times there needs to be give and take along with compromises on both sides of the table.

 

[prplcrzy]

Hey Doc,

Great post! Just wondering what you meant by the DVC is not currently happy with the discount program. Was it your friend that wasn't happy about the program or the DVC. Did he mention if they were attempting to negotiate new discounts or if this was not a possibility? Did he mention what they thought would be a good discount? Do they have any pull at all?

 

[dvcdudes]

Just adding my name, so I can keep track of this thread.

 

[WebmasterDoc]

Just wondering what you meant by the DVC is not currently happy with the discount program.

The impression I got was that they (the DVC staff) would like to have a DVC rate for AP's- better than what is available thru DC. This seems to be something which the staff discusses almost daily and suggests at every opportunity.

Was it your friend that wasn't happy about the program or the DVC.

Good question! I know he is not satisfied personally with what we have now. The "DVC" we all talk about is not any one person...it is a combined effort of the operations staff and the members. They really do listen to what we have to say (and they do read this board as a barometer of the membership). The staff seems to have lots of ideas to benefit the membership and the program in general. These ideas have to be supported by other areas within the company in order to be implemented.

The website is a perfect example of this. The DVC staff would love to have an interactive site, with discussion board and online account access. That was the direction it was headed with the announcement last fall about "early 2001". In between, there were some decisions made outside of DVC, which in effect ended the project for the time being.

I also suspect that what you've proposed is happening is in violation of the Laws of the State of Florida.

Dean, just curious what you think has been violated?