gossip re DVC

[Budshark]

Now I can say you did disregard a factor

The per point MF profit from DVC year over year.

Using your numbers and a swag at averaging... a studio BCV for an average of 20 pts/night for 335 nights a year would earn Disney $31,000 in MF.

So if Disney "nets" 100K/yr for renting - and we subtract 31K/yr for DVC MF - it takes a bit longer to "recover" the initial DVC surge in investment through renting (~7 years). (I'm assuming a 500,000 net because your subtraction for the DVC marketing is a bit unfair since you did not provide an equal "marketing" overhead for the renting side of the business). And again - like you said this is a complex equation, because that "surge" of investment buy-in for DVC generates returns for Disney through other investments, growth, etc.

Also, this is just keeping the numbers consistent. The sell-rate for all points a popular DVC resort is actually closer to the 95-98%. The occupancy rate is irrelevant. The hotel rooms could sit empty - but the points have still been sold. In addition as mentioned above - a DVC resort is particularly resilient to economic downturns and other concerns. This is of prime importance to the hotel industry after 2001 (building a base guaranteed cash flow).

Again - interesting discussion but its all based on trying to "guess" what Disney is going to do with a piece of property...
And the best part is - they've already decided what to do - they're probably just watching to see what theories we can conjure up!

 

[bwvBound]

Maybe find a way to build "out" over the water?

Poly-DVC-Units over the water?? Oh, my DH would jump on that so quickly!!

 

[canda]

I think I am getting a headache

 

[Machta]

I think I am getting a headache

Wait, wait! We haven't even tried to figure in the cost of construction of the deluxe resorts versus the villas! And then we can have fun talking about the amortization schedule they must have used on the north wing of the Contemporary! We could have fun for years with this!

Or, we could just go sit outside our nice little BCV one-bedroom with a hot cup of tea.

 

[Budshark]

Wait, wait! We haven't even tried to figure in the cost of construction of the deluxe resorts versus the villas! And then we can have fun talking about the amortization schedule they must have used on the north wing of the Contemporary! We could have fun for years with this!

I sense sarcasm!!! I KNOW that wasn't directed towards me!

So are you all saying you don't want to talk about the various financial implications, possible investment returns and tax considerations involved in a DVC vs. Hotel discussion? I can't think of a better thing to do!

Although I did just get word that we are in the system for our BWV resale - so discussion about sitting on a balcony does sound pretty good!

 

[hellerjw]

What about the costs associated with insiders purposely leaking false rumors on these boards vs. rumors that turn out to be true years from now

 

[Machta]

I sense sarcasm!!! I KNOW that wasn't directed towards me!

So are you all saying you don't want to talk about the various financial implications, possible investment returns and tax considerations involved in a DVC vs. Hotel discussion? I can't think of a better thing to do!

Although I did just get word that we are in the system for our BWV resale - so discussion about sitting on a balcony does sound pretty good!

No, by all means, let's drive ourselves crazy! Has anyone figured out how to post charts & graphs yet? We need visuals! And then sit on the balcony!

 

[pilferk]

I sense sarcasm!!! I KNOW that wasn't directed towards me!

So are you all saying you don't want to talk about the various financial implications, possible investment returns and tax considerations involved in a DVC vs. Hotel discussion? I can't think of a better thing to do!

Although I did just get word that we are in the system for our BWV resale - so discussion about sitting on a balcony does sound pretty good!

You know what....I have to agree here.

Talking about sitting on our balcony at AKV DOES sound a heck of a lot nicer than debating financials.



I think I'll continue down that path and leave the money discussions for another time.

 

[jodifla]

At one time before WDW even opened Disney had plans to build the"Future" Persian Resort with most of the resort over the water of Bay Lake.

-------------------------------------------------------------------

Before the MK was even built plans were in place for 4 hotels to be on the monorail line.The Grand Floridian hotel is on the land that was set aside and dedicated to be the "Future" Asian Resort Hotel (A). The "Future"
Venetian (B) Resort was going to located between the Poly (5) and the Contemporary (8). A fifth hotel was going to build on a monorail spur which ended at the "Future" Persian Resort (C). That resort would be located just to east of the Mk and North of the Contemorary and would built with much of the hotel being on /over the water of Bay Lake. So even though the GF was not built until 18 years later a hotel was planned for that area at the same time the monorail was planned.

I got this picture and my info from my"The story of Walt Disney World"
Commemory Edition Book 1971.

OMG! I had this poster on my walls for years. I got it during my first trip back in '72.

 

[3DisneyKids]

Just subscribing....

 

[poohmomof5]

I am a self confessed math geek and I work with real estate and financials for a living. I also travel with my business to conventions too. So this is so much fun...speculating on the cost of maintaining resorts, the issue of real money now vs. speculative money in the future, suites vs. standard accomodations and who would pay for what.

What a blast! I am not sure where I fall into the argument right now, but I know that I have stayed at the Contemporary last year in an expensive newly remodeled room and I wasn't really thrilled with anything except the view of the fireworks every night and the walking to MK! There was NO storage in the room, the quick service place was small and didn't have much selection, the pool was fun for the older kids, but the toddler couldn't do anything. So, I think a new building would breathe alot of life into that place!

But, occupancy rates, real cash vs future business etc is really fun to speculate about!

I'm dreaming about our first visit home to AKL inSept right now...

Poohmom

 

[tjkraz]

I'm not going to quibble with your conclusion....I'm not confident in either side...but you're not taking into account the increased investment revenue from getting the money "up front" (not to mention the money they make on financing, to boot). By taking the initial "up front" cost of DVC points, and investing it, I'd suspect that ROI significantly effects the balance of the equation.

There is interest to be accounted for on both sides of the equation. Disney vacation packages require down payments at the time of booking and even room-only reservations require a deposit equal to one night's stay.

I suspect the interest to be earned by DVC is greater, but again that's just one of many unaccounted-for variables.

Another significant variable would be average guest spending. Let's compare a DVC family with enough points to spend 3 weeks per year at WDW to three cash-paying families each spending a week in a Deluxe cash room.

The DVC family has APs. The three families each have to buy 7-8 day MYW passes. The DVC family has access to a kitchen in their room. Aside from having a few snacks in the room, the cash families will most likely be eating at Disney restaurants all trip long. And who is likely to spend more on souvenirs--the DVC family who is on their 10th or 50th or 100th trip, or the three non-DVC families making their occasional trip to WDW.

The other thing to take into account: That $400 per night also has to cover significant expenses like maintenance, housekeeping, bell services, front desk, utilities, etc, etc .....something DVC member's maint fees take care of....+ all the same sorts of sales, marketing, and ancillary expenses DVC has to cover with "point cost". Surely you'd think, considering the expanded services, that would be more than 23% of the total revenue on a unit.

Well, the dues cover the maintenance, housekeeping (albeit on a lesser schedule), bell services, etc. Dues would also cover sales and marketing expenses to the point that it includes the operators who take guest reservations--DVC provides that service, too, via our dues.

The only things I can think of not covered by our dues would be actual advertising and the daily housekeeping. As far as advertising goes, I don't think any of us even know whether the resorts get charged for WDW advertisng. I don't think I have EVER seen hotel-specific ads, so the question is whether each hotel is asked to make some contribution for the generic "Walt Disney World" commercials, web banner ads, and so forth.

DVC dues tend to run about 20-22% of the cash cost of the same room. So how much higher would it be at cash resorts just to add advertising and daily cleaning costs?

 

[tjkraz]

NoThe per point MF profit from DVC year over year.

Using your numbers and a swag at averaging... a studio BCV for an average of 20 pts/night for 335 nights a year would earn Disney $31,000 in MF.

So if Disney "nets" 100K/yr for renting - and we subtract 31K/yr for DVC MF - it takes a bit longer to "recover" the initial DVC surge in investment through renting (~7 years).

The Maintenace Fees are not "profit". They cover the operating expenses of the resort. When I went from $130K in revenue to $100K in profit (approx, of course) on the cash room, that put the cash and DVC on equal footing--net of fairly identical operating expenses.

(I'm assuming a 500,000 net because your subtraction for the DVC marketing is a bit unfair since you did not provide an equal "marketing" overhead for the renting side of the business).

Marketing for individual Disney resorts is a whole different animal from DVC. The cash resorts don't have full-time staff taking people on tours of guest rooms. The cash resorts don't have dozens of sales booths all over WDW (and DCL, and HHI, and Vero, and a mall in Chicago) staffed 18 hours per day. The cash resorts don't give out free meal vouchers or annual passes or baseball caps or beach towels. The cash resorts don't have a full-time legal staff to process purchase agreements and record deeds.

For that matter, Disney doesn't even market its resorts on their own. They market the entire "World" and we have no way of knowing how much (if any) of those costs would even get charged back to the resorts.

And again - like you said this is a complex equation, because that "surge" of investment buy-in for DVC generates returns for Disney through other investments, growth, etc.

Cash resorts would similarly earn interest (albeit at a lower volume) off of down-payments for vacation packages and room-only reservations.

Cash resorts also increase their rates by 3-5% annually. That rate almost always exceeds inflation, meaning that a higher percentage of the revenue is going to Disney as the years progress.

Also, this is just keeping the numbers consistent. The sell-rate for all points a popular DVC resort is actually closer to the 95-98%. The occupancy rate is irrelevant. The hotel rooms could sit empty - but the points have still been sold. In addition as mentioned above - a DVC resort is particularly resilient to economic downturns and other concerns. This is of prime importance to the hotel industry after 2001 (building a base guaranteed cash flow).

My assumption was a DVC resort sold 96% to members vs. a cash resort able to obtain a 92% occupancy. Clearly there is a challenge in reaching that 92% occupancy.

But even in the portion of my post that you quoted, I indicated that resort occupancy is king. DVC at the AKL made sense because they weren't coming close to 92% occupancy. By comparions, I would hold my breath waiting for Disney to convert Poly rooms to DVC. I suspect that resort runs well above 92% on average, as does the post-refurb Contemporary.

Again - interesting discussion but its all based on trying to "guess" what Disney is going to do with a piece of property...
And the best part is - they've already decided what to do - they're probably just watching to see what theories we can conjure up!

Well, you're the one who challenged my words so I'm simply trying to explain the rationale, and I stand by my comments. If Disney can fill a cash room with a guest 90+ percent of the time at several hundred dollars per night, that room is going to earn them a lot more revenue over a 50 year period than selling the room as DVC points.

Obviously the challenge is in consistently filling that room. Selling someone 300 DVC points and knowing they will return year-after-year is low risk, low reward. Trying to put a different family in a room 48 weeks out of the year is high risk, high reward.

 

[asianway]

You are leaving out the management fee Disney collects from the DVC resort, Disney does profit during the entire term of the ground lease.

 

[tjkraz]

You are leaving out the management fee Disney collects from the DVC resort, Disney does profit during the entire term of the ground lease.

Some of that management fee will offset expenses incurred on the cash side. For example, it's my understanding that the management fee covers the expenses of what we know as "DVC": Member services reps taking phone calls, accounting collecting member dues, etc.

I would assume it a wash since many of those functions are duplicated on the cash resort side. But one could also argue that some portion of the management fee is an expense incurred by DVC members which is NOT present in cash resort budgets.

 

[asianway]

No.....the management fee is just that, a fee on top of the actual expenses charged back to the association

 

[tjkraz]

"Management Fee - Fee paid to DVCMC for providing management services (including home office expenses) to the Association according to the Property Management Agreement. The fee is equal to 12% of the total operating budget exclusive of real estate taxes, transportation fees and the management fee. "

If the management fee doesn't include the costs associated with operating the DVC program itself, I'd be curious to hear which budget category you believe they are in.

 

[asianway]

What I am saying is that it is not a wash, there is a profit built in there. To the extent that they can operate more efficiently than 12%, they will keep any overage.

 

[tjkraz]

What I am saying is that it is not a wash, there is a profit built in there. To the extent that they can operate more efficiently than 12%, they will keep any overage.

I would agree with that statement.

 

[Budshark]

Well, you're the one who challenged my words so I'm simply trying to explain the rationale, and I stand by my comments. If Disney can fill a cash room with a guest 90+ percent of the time at several hundred dollars per night, that room is going to earn them a lot more revenue over a 50 year period than selling the room as DVC points.

Obviously the challenge is in consistently filling that room. Selling someone 300 DVC points and knowing they will return year-after-year is low risk, low reward. Trying to put a different family in a room 48 weeks out of the year is high risk, high reward.

Whoa... I wasn't challenging your words... its all good - just different opinions. Sorry you took it that way...

But... I will say you are understating what it takes to maintain the Disney resorts. Last I checked, Disney did a lot of "spending" to fill those rooms (free Magic your way upgrades, free DDP, other perks). They often discount rooms, sell package deals, etc. When was the last time Disney "discounted" points for a DVC room or offered up free ticket upgrades or DDP for DVC members who stayed during certain times of the year?

But again - nothing personal, I just wanted to make sure that we gave even billing to DVC room profitability vs. saying that a rental room had FAR greater profit potential... I would agree there is greater profit potential in a rental room - but its just that. Potential - not guaranteed.

(And I stuck to my promise with no math or interest discussions in this post! )