90 minutes with DVC

[WebmasterDoc]

there were outside WDW forces telling DVC to charge more than they would have otherwise needed to based on market forces.

I can't find any of my posts in this thread where I said that, so I apologize if that was the impression I gave. I WAS NOT told that DVC had to charge "more than they would have otherwise needed". I was told that DVC does not decide these charges on their own and does not have the responsibility for the reservations using these points once they are converted to "Reservation Status" by a DVC member.

Once points are used for a non-DVC reservation, CRO has a maximum of 11 months to use them...and in most cases much less than that. That is the reason we can't even make a DC reservation (or any other non-DVC) within the last 60 days of a use year- CRO needs reasonable time to utilize the points.

My statements were intended to point out that the point charts for non-DVC resorts are not created solely by DVC. There is significant influence from other "interested" parties within the company. In order to offer these options, DVC must have cooperation of these other corporate entities. The value of each and any DVC option must be weighed by us as individual members. Just because one member feels that a point cost is too high at GF doesn't mean that another member won't still make the same reservation....and be happy with the decision.

One man's heaven..............

 

[Dean]

Sorry Doc if I mispoke or misinterpreted. I guess what I heard you typing is that there were other forces besides the simple cost and income at work.

 

[WebmasterDoc]

I guess what I heard you typing is that ........

I'll try to type more quietly in the future! Shhhhhhh!

 

[JonHM]

Thanks, Doc, not only for your investigative work , but for your fine and in-depth reporting of it as well! And thanks to everyone else who has taken part on this thread, great back and forth!

 

[PamOKW]

There are so many variables it is hard to know what is really happening. I totally understand the concept of DVC rooms bringing in less cash than last year when they are rented. That is true of all WDW rooms (and probably most hotel rooms around the country). However, if that were the simple equation, then the point costs for The Plaza, The Biltmore, etc. should also have gone up dramatically. In fact, I'd expect these outside hotels to go up before a WDW hotel.

Also, the number of points can be divided up by CRO any way possible. They don't need to rent a two-bedroom. they could rent 2-4 studios instead. They also have the flexibility to spread it over different seasons.

Just sticking within the same season I'll try to look at it again.

2001 --
Weekday in January cost 26 points. This is enough points to rent a studio at OKW for 3 nights (plus 2 points left over). Rack rate for the GF Lagoon View is $380. Rack rate for the OKW Studio is $244 . That would bring $732 for the $380 room. Assuming a 40% discount on the OKW room that would still bring in $438 for the $380 room (which when discounted 40% is worth $228).

For 2002 they are asking 41 points which is equivalent to 5 nights in a studio (plus 1 point). That brings in $1,220 for the $380 room. Discounted 40% that's $732 for the $380 room which can most likely be had for $228-$199 per night.

The points could be broken out other ways as well...the 41 points could get 2 nights in a 1-bedroom plus 1 studio night or almost 2 nights in a 2-bedroom. Any way you break it out, the $380 full rack rate can be covered and multiples of a $199 a night GF room can be covered.

As Doc indicates, maybe they will continue to charge these amounts as long as there is a member willing to pay. JMHO, maybe they decided to continue the program in name only just to have it to point to as an example. It is there to be used even if prohibitively expensive.

The cost relation seems out of whack. Even if they are letting rooms go empty and losing points at the DVC resorts the ratio of points to costs is extremely high. The other WDW resorts have not suddenly increased in value versus the DVC resorts. The fair market values are still roughly equal.

 

[Synonymous]

It sounds to me like the best way to think of things is to consider DVC, other Disney resorts, the parks, etc., each as separate companies, with their own incomes and profits. They deal with each other by necessity, but they aren't going to hurt their own profitability by giving things away to other divisions. Any discounts DVC members get on parks, non-DVC rooms, restaurants, or recreation has to be supported by a good business case for the division giving the discount.

DVC, naturally, wants to get the best disocunts and perks it can for us, because such things increase DVC's appeal and profitability. The other divisions, though, couldn't care less about DVC's profitability.

Somewhere there must be a division that looks to the overall profitability of the Disney empire and, one would think, has the Big Picture in mind. But, although DVC may be very profitable, how big are those profits in the overall scheme of a billion dollar company? I would guess (and that's all it is) that profits from DVC are dwarfed by profits from the theme parks. They are probably even much less than the profits from the numerous non-DVC resorts. So there wouldn't be much incentive for the upper Disney management to go out of its way to make sure DVC gets perks at the expense of the other divisions.

 

[caverill]

Thanks for the information Doc!!!! You sure have great connections.

We just joined in 2000, so I don't have a lot of history on DVC.

I just don't see what the big deal is about the points at non-DVC resorts raising. One of the reasons we purchased DVC was to protect ourselves against the raising cost of staying on-site.

In 1994 we paid $ 119 a night at DxL, in 1999 we paid $169. This was the reason we joined DVC.

It shouldn't be a huge suprise that the points to stay at non-DVC resorts increased and will need to increase over the next 40 years.

If you really want to stay at non-DVC resorts, you may be better of paying cash and using your DVC points in another way.

Just my thoughts....

 

[Dean]

I received a returned a call today to MS about some info I had previously requested and was interested to find out some additional info that may apply to some of this. First, DVC only rents out about 75% of the rooms given to CRO. Second, DVC values our points at basically $5.64 per point for OKW, or basically the price divided by the term plus the yearly fees.

I also learned something else and that is that anyone who gets an exchange can call MS and get dining reservations, do requests and the like.

 

[PamOKW]

Clark -- Not knowing the history is why you don't see a concern. A system has been in place for nearly 10 years to effect the trade between a DVC room and other WDW resort rooms. Only minor changes of a point or two have ever occurred. The trade included a premium use of points to stay at the WDW resort. This year there has been a fairly dramatic shift in points needed to stay at these non-DVC resorts. Curiously, points to stay at resorts not owned by DVC haven't experienced these dramatic shifts so the idea that the price for DVC rooms went down so low that they can't pay for a WDW non-DVC room doesn't seem to hold.

It's not earth shattering but it is disconcerting to have a radical change with little explanation.

It would be like the dues. We know they can legally go up 15% in a year but for the last 5 years they have stayed stable. If you open this year's bill and it is up 15% you might want to have some explanation other than "because we can".

 

[PKS44]

The market is a wonderful thing.
If the DC is too expensive, few DVCers will utilize it. PamOKW's calculations suggest that the DC exchanges were nicely profitable for CRO, but now they are being gluttonous. If true, then they will either laugh all the way to the bank, or they will come back down to earth with lower points so they can get their hands on those supposed profits again.
If you don't like it-stay at home (I mean your DVC home).

I personally doubt that PamOKW's calculations are a fair representation. First, there is nothing like the demand for GF rooms anywhere on WDW property. That is why they command the most money, and the most points of all resorts. Certainly the market demand is NOT equal to OKW, no matter how much "better" it is...Dean says CRO ends up eating 25% of the DVC points they hold. So let's take those 2002 pts--41 points used for a GF weeknight (the most likely time a DVCer will use points) knock down to 31 pts they will get to use Most people using CRO want a Fri and a Saturday, especially in January. Those 31pts won't cover it (20pt/night) It's 1.5 weekend nights at maybe $200/night or $300. Now some of that 25% loss is based on the inability of CRO to book weekday rooms, I'm sure, so the calculation is overly harsh. But it is easy to see how 26 pts would not be worth it to the GF. I suspect the real answer for what the market will bear and be profitable for CRO is somewhere between 26 and 41/weeknight.

Paul

 

[PamOKW]

I agree this is like putting together a puzzle without all the pieces. I'm not sure how they use points that come from a Vero or a HHI Home Resort owner. Whether they must be used at those resorts or can be transferred to other DVC resorts.

However, even if you feel GF is booked solid (then why the $199 December rates this year?) it still doesn't explain the changes in the other Deluxe resorts. Even the Moderates and Ft. Wilderness are running high.

Regular Season rate for Ft. Wilderness is 27 points. Rack Rate is $254. Currently discounts range from $134 to $149.

Points for Ft. Wilderness are 19 weekdays. Using Dream Season as a "medium" point to compare....that would be equivalent to 2 nights in an OKW Studio (short 1 point). Rack rate is $269 so that is more than double in a rack-to-rack comparison. Currently OKW studios are available at a discount of $179. That's still $358 to cover a Rack Rate of $254 and a "real" cost as low as $135.

Poly WV is 44 points Su-Thurs. Rack Rate $405 and discount price of $229. 44 points will get more than 4 nights in an OKW studio or almost 2 weekend nights. At 4 times $269 or even 2 times $269 the costs are covered easily. Using the OKW discount of $179 the discount to discount cost is easily covered and the rack rate is pretty much covered as well. The two weekend nights at discount would fall short of the rack rate but $139 above the discount at the Poly. If a DVC member booked a weekend night it would cost 79 points or the equivalent of 3 weekend OKW nights or nearly 8 weekday nights.

There isn't much point in belaboring this. It is a drastic change and I imagine it will cut down in member usage during most of the year. Maybe it's better to let rooms go empty or to drastically reduce them rather than to continue to provide an option to DVC members. I'm just saddened to see this happen but it won't really have that much direct impact on me. I'll stop playing the broken record and move on to other topics.

 

[TroyWDW]

I think Synonymous has the correct thought process. Each entity (Parks, the Resorts, etc.) is a separate profit center for Disney. Each business manager is trying to maximize the profitability of their business unit. The business managers at the Grand Floridian have little interest in the satisfaction of DVC members regarding the Disney Collection program.

For example, DVC approaches the Grand Floridian to obtain a one year contract for DVC members to stay at the GF in 2002. The GF business managers then quote prices (in dollars, not DVC points!) that must be paid by DVC for each stay. The DVC folks then have a choice, accept or decline the contract.

At my company, we call this the "Fear and Greed" negotiation.

The seller is attempting to be as greedy as possible and setting the price as high as possible, to the point where the buyer will almost walk away and not sign the contract.

The buyer is trying to instill fear in the seller that we will walk away if they don't lower the price. The buyer pushes the seller to the point where the seller almost walks away.

(Note that in this negotiation, the price of the home resort DVC room has no impact on the contract between DVC and the Grand Floridian.)

Assuming that DVC actually utilizes a large number of rooms at the other Disney Resorts, then
we could have expected the price for the Grand Floridian to go down in 2002. With a soft business climate, DVC should have been able to negotiate a lower price. We should have tracked with the other market prices.

But, if DVC uses a small number of rooms at the other Disney Resorts, then we have very little negotiating power. The "Fear" side of the equation is very small and the managers at the GF can raise the price and we have to take it or leave it. Big customers get discounts, little customers get price increases.

The DVC managers could have walked away from the contract, but then we wouldn't have any ability to stay at the Grand Floridian. Instead, they apparently negotiated the best deal they could and gave us the option to decide for ourselves whether to stay at the GF. Imagine the response from the DVC members if DVC had announced that there would be no Disney Collection in 2002 due to the high prices that the other Disney Resorts wanted.


The DVC folks have a fiscal responsibility to translate the monetary costs of the contract into DVC points. My uneducated guess is that DVC did not change this translation process and that the increase in points in 2002 is due to the increase in the contract price point with the other Disney Resorts. I believe this is the statement that Doc relayed to us.

It appears that for 2002, Greed won out over Fear.

Troy

 

[kem330]

PKS- I respectfully disagree with your logic that GF is more expensive because it is more in demand. It is higher in cost because it is the most upscale place on property in the eyes of Disney. It is more luxurious and well located and therefore more expensive to stay there. But I wonder which resort truly is in higher demand ?

 

[PKS44]

I believe GF is the most expensive for the same reason anything is expensive- because the seller can get away with it. If the demand for the place were not high enough the price would come down...It could be the most upscale place in the universe and still not command a high price if people were not willing to pay that price. That is how I am defining demand, not by the total number of people requesting a place. The All Stars probably would be the most in demand by such a calculation...
I think TroyWDW's logic is mistaken in that it contradicts what Doc tells us is the process...DVC does not negotiate a cash price. DVC deposits the DVC points to CRO for the reservation at any nonDVC hotel. CRO has 11 months to use those points at a DVC hotel. CRO collects the cash for that reservation.

Paul

 

[prplcrzy]

I think that Troy's assessment of the situation is pretty close. That is the way all negotiation goes. If there is no bargaining power on one side it is not really a negotiation, is it? It's more of a take it or leave it attitude and they obviously had to take it. Look how mad everyone is about the rise in points to use the DC. How do you think everyone would have reacted if they said we are not offering it any more?

 

[Dean]

Unless DVC is willing to walk away from the table or list only the resorts that give an "appropriate" price, there is little leverage.

 

[PKS44]

What none of us knows is what the Profit is to CRO to offer the DC to DVC...If they were making any money on the deal and they push the prices too high- then people won't use the DC and they will LOSE...If they were not making a profit- then they had no choice but to push prices higher. This is something that will change over the next several years, the "invisible hand" will work it all out. In the meantime if you are unhappy you have a very easy way to show that-stay in your DVC home instead. I really don't see that as such a sacrifice.

 

[prplcrzy]

pks44,

I see your point, I was just trying to point out that there is really no negotiation if one side holds all of the cards. There never will be negotiations with the DVC for anything, it will just be a take it or leave it kind of thing. I have no problem with my home resort, but I would like to see them offer meaningful things to the DVC members, after all we did (and are doing) something for them. They (Disney, not DVC) are not doing anything for us because they don't have to. If they don't have to they won't, not very magical if you ask me.