December DVC Sales Tumble

[NVDISFamily]

That and the direct perks don’t exactly add a whole lot of value on the West Coast. It’s one thing when you are paying for a hotel room for a few nights, it’s another thing when you are locking yourself into that location for decades potentially. I wouldn’t mind owning some points there eventually, but there are many reasons why it’s a distant third for me on the West Coast for DVC.

While not a direct perk the fact that you get free parking at the resort for up to two cars (don't tell anyone but we have gotten free parking for a third most of the time) at Disneyland Hotel when staying on DVC points is a perk that softens the blow of the tax by a few pennies. Unlike WDW, there is no free parking for hotel guests at Disneyland. You get a way better lounge (for now), whatever they are building at DCA, and the discount of mobile order QS food isn't too bad either.

VDH seems to be renting well and if in a year or two this holds and if I can steal a contract on the resale market for reasonable value I'd be tempted to add on another 100 to 200 points there. Heck, I can just use that as a store of value to rent and use for WDW trip swaps and such if needed.

 

[MarkNC2Disney]

discount of mobile order QS food isn't too bad either.

Learn something new every day

 

[Sandisw]

I am surprised they want to raise the prices for the sites that have been up for multiple years. Every year you lose around 2% of the total points of the contract, so wouldn't it make sense for prices to decrease over time? Or at least stay constant?

I think what they lose in the contract is more than made up by the cash reservations. They just have not seemed to be in a big rush to sell out RIV...so, they have some data and goals that we are not aware of that is driving that decision.

They also added resale restrictions to CFW which means that strategy is still on the table for them...

 

[tidefan]

Learn something new every day

They have real silverware at QS over there as well

 

[NorCalFanatic]

I think what they lose in the contract is more than made up by the cash reservations. They just have not seemed to be in a big rush to sell out RIV...so, they have some data and goals that we are not aware of that is driving that decision.

They also added resale restrictions to CFW which means that strategy is still on the table for them...

Resale restrictions are here to stay, I can’t see them reversing that decision.

They have no problem selling out VDH for cash on a consistent basis. People saying VDH is a disaster, needs more/better incentives, I doubt that will ever happen. They’ll be happy selling 10-20K in points a month for the next 10 years and keep selling it out with cash reservations. DLR isn’t WDW, there is limited inventory if you want to stay in the bubble.

 

[tidefan]

Resale restrictions are here to stay, I can’t see them reversing that decision.

They have no problem selling out VDH for cash on a consistent basis. People saying VDH is a disaster, needs more/better incentives, I doubt that will ever happen. They’ll be happy selling 10-20K in points a month for the next 10 years and keep selling it out with cash reservations. DLR isn’t WDW, there is limited inventory if you want to stay in the bubble.

You know, I keep seeing this (and BTW, not saying you are wrong at all), but where it strikes me as odd is, if the cash side of this is so great, why even make this tower DVC at all? Surely Disney makes more off of cash bookings via WDTC than they do off of DVC...

 

[kilik64]

You know, I keep seeing this (and BTW, not saying you are wrong at all), but where it strikes me as odd is, if the cash side of this is so great, why even make this tower DVC at all? Surely Disney makes more off of cash bookings via WDTC than they do off of DVC...

Because then they get the building paid for by other people and not them. They then still get to rent some rooms for a tidy profit and not have to worry about the hotel never not being booked.

I doubt they ever have another hotel built that's not either fully or partially DVC.

 

[NorCalFanatic]

Because then they get the building paid for by other people and not them. They then still get to rent some rooms for a tidy profit and not have to worry about the hotel never not being booked.

I doubt they ever have another hotel built that's not either fully or partially DVC.

That’s pretty much it! They’ve sold $100+ million in points at VDH, that’s a decent chunk of change.

 

[tidefan]

Because then they get the building paid for by other people and not them. They then still get to rent some rooms for a tidy profit and not have to worry about the hotel never not being booked.

I doubt they ever have another hotel built that's not either fully or partially DVC.

Just wondering out loud...

If it's not selling, then the building is not getting paid for by other people. Someone ran numbers in another thread awhile back and as long as occupancy is good (granted, sometimes it's not - looking at you, GF), Disney comes out way ahead by utilizing a traditional hotel model on cash bookings.

Now, if you view the building as a sunk cost, then yes, this model works quite well, but I don't know that I would want to consider a new build a sunk cost.

I am no accountant, but I suspect that perhaps there is some tax advantage to doing it this way?

 

[_auroraborealis_]

People shouldn't kid themselves that the lounge is DVC being nice and benefit-oriented to members. It's there to sell points, and it won't shock me to see them go more and more overt about that.

They're not spending that money out of kindness to anyone but themselves.

 

[tidefan]

People shouldn't kid themselves that the lounge is DVC being nice and benefit-oriented to members. It's there to sell points, and it won't shock me to see them go more and more overt about that.

They're not spending that money out of kindness to anyone but themselves.

I think that the biggest change that I've noticed in DVC was actually on our Disney Magic cruise this past August. I remember taking DCL cruises back pre-COVID and you would go to the DVC meetings and they would handout hats, etc. to members, then they would have the general meeting to pitch to non-members, and the first thing that the guides would say in the meeting was "Don't even ask us, go find someone with a DVC hat and ask them what they think of the program". In essence, it sold itself and existing members were probably the best sales staff they had.

Fast forward to our cruise this past August, and there's no mention of talking to existing members. In fact, I think they now do not want potential new purchasers to discuss things with existing members for many of the reasons that we debate on here. I mean, one of the biggest questions in the existing member meeting was people just wanting to verify that VGF was not restricted. I can't imagine that was a discussion they wanted new members to walk into.

Granted, this was just a subtle thing that I have noticed, but I think it indicates a bigger shift in people's perceptions of DVC.

 

[RivShore]

People shouldn't kid themselves that the lounge is DVC being nice and benefit-oriented to members. It's there to sell points, and it won't shock me to see them go more and more overt about that.

They're not spending that money out of kindness to anyone but themselves.

I had always assumed the lounges were funded out of our dues, is that not the case?

If they are funded by DVC as a cost of sales, we can most certainly expect to see it become more overt as/if sales slow.

 

[Brian Noble]

if the cash side of this is so great, why even make this tower DVC at all? Surely Disney makes more off of cash bookings via WDTC than they do off of DVC...

They might make more in total as a rental. But, those earnings are over a long period of time (I'd hope the analysis mentioned above included the time-value of money in its calculations. If not, they are probably wrong.) Even so, selling it as a timeshare has two different advantages.

Advantage one: it returns capital faster, which looks better on the balance sheet (important for quarterly reports) and allows them to recycle the capital more often. So, it's not a one-to-one comparison for timeshare vs. hotel, because the same capital can be deployed to build more timeshare units than hotel units over the lifetime of the hotel.

Advantage two: It transfers the risk of reduced travel demand from the company to individual owners. I suspect this is a bigger reason why Disney has gone down the DVC route so aggressively. Those of us who were around TWDC during the 9/11 and Great Recession periods remember some pretty stark moves. They closed parts of Port Orleans during the 9/11 travel slump "for refurbishment" but really to get those rooms off the books. During the Great Recession, they ran a "buy 4 get 3" promotion on hotels/tickets---effectively giving a discount north of 40% on the room.

And we all remember what happened during the pandemic. DVC resorts re-opened first, and the others took a while to come back online.

There was also a good Laughing Place article that Kevin Yee wrote way back when that looked at a consultant/internal report about what Peak Oil might do to WDW's viability. The short verison: If oil got north of $X/bbl, WDW ceases to be an interesting business because flying becomes prohibitively expensive. $X was lower than you'd think.

Thankfully, fracking to the rescue on the whole oil thing. But. the lesson remains: having a huge resort dependent on the whims of the general public to travel is risky. Timeshare owners, on the other hand, have already paid for their lodging, and are contractually committed to continue doing so. That reduces their travel friction, and essentially builds in some structural demand for the product.

Since 9/11, Disney has opened precisely three cash resorts/resort components: AoA (which started construction prior to the attack), the Gran Destino Tower (convention business--a different beast), and parts of Aulani (Hawaii, also a different beast). Everything else is either new DVC builds, bulldozing cash rooms for DVC builds (CBR->Riviera, CR-North->BLT), or converting cash rooms to DVC (GFV2, Jambo, CCV).

I had always assumed the lounges were funded out of our dues

They can't be, because they are not a general benefit, they are a Blue Card thing. Anything that is Blue Card is essentially paid for out of sales.

 

[Sandisw]

Just wondering out loud...

If it's not selling, then the building is not getting paid for by other people. Someone ran numbers in another thread awhile back and as long as occupancy is good (granted, sometimes it's not - looking at you, GF), Disney comes out way ahead by utilizing a traditional hotel model on cash bookings.

Now, if you view the building as a sunk cost, then yes, this model works quite well, but I don't know that I would want to consider a new build a sunk cost.

I am no accountant, but I suspect that perhaps there is some tax advantage to doing it this way?

The difference is that when it is DVC, DVD is the division that secures the funding, etc. for its build and then uses the sales and cash rooms to offset it. When its just the hotel, it has to go through WDPR.

So, I think it could be something related to that....and, being DVC does give them the best of both worlds...sell and shift the expenses to DVC...in the meantime, rent the rooms for cash....

 

[Disfamwa]

They also have no problem selling out VDH for cash. I see a few more sale contracts have popped up for sale , everyone seems fixated on $180. We’re ready to pounce when they drop another $30ish a point.

There is already a VDH contract listed in the $150s that has been sitting for a month.

 

[tidefan]

They might make more in total as a rental. But, those earnings are over a long period of time (I'd hope the analysis mentioned above included the time-value of money in its calculations. If not, they are probably wrong.) Even so, selling it as a timeshare has two different advantages.

Advantage one: it returns capital faster, which looks better on the balance sheet (important for quarterly reports) and allows them to recycle the capital more often. So, it's not a one-to-one comparison for timeshare vs. hotel, because the same capital can be deployed to build more timeshare units than hotel units over the lifetime of the hotel.

Advantage two: It transfers the risk of reduced travel demand from the company to individual owners. I suspect this is a bigger reason why Disney has gone down the DVC route so aggressively. Those of us who were around TWDC during the 9/11 and Great Recession periods remember some pretty stark moves. They closed parts of Port Orleans during the 9/11 travel slump "for refurbishment" but really to get those rooms off the books. During the Great Recession, they ran a "buy 4 get 3" promotion on hotels/tickets---effectively giving a discount north of 40% on the room.

And we all remember what happened during the pandemic. DVC resorts re-opened first, and the others took a while to come back online.

There was also a good Laughing Place article that Kevin Yee wrote way back when that looked at a consultant/internal report about what Peak Oil might do to WDW's viability. The short verison: If oil got north of $X/bbl, WDW ceases to be an interesting business because flying becomes prohibitively expensive. $X was lower than you'd think.

Thankfully, fracking to the rescue on the whole oil thing. But. the lesson remains: having a huge resort dependent on the whims of the general public to travel is risky. Timeshare owners, on the other hand, have already paid for their lodging, and are contractually committed to continue doing so. That reduces their travel friction, and essentially builds in some structural demand for the product.

Since 9/11, Disney has opened precisely three cash resorts/resort components: AoA (which started construction prior to the attack), the Gran Destino Tower (convention business--a different beast), and parts of Aulani (Hawaii, also a different beast). Everything else is either new DVC builds, bulldozing cash rooms for DVC builds (CBR->Riviera, CR-North->BLT), or converting cash rooms to DVC (GFV2, Jambo, CCV).


They can't be, because they are not a general benefit, they are a Blue Card thing. Anything that is Blue Card is essentially paid for out of sales.

Oh, I get all of these advantages, I really do. What I am pointing out is that if it's not selling, then those advantages aren't as great. I mean, if they've only sold 20% of it and it has to shut down and restart, say using the COVID instance. Now, they would not be able to shut down all of DLH because of the VDH component, so there is risk there as well.

I was reacting more to the people that are saying that they don't want it to sell. Well, if it doesn't sell, then you don't get that upfront capital, so I would think that they'd want it to sell...

That said, I'm sure that they have a number of very smart people that have probably run the numbers on game theory here, so I am sure that they are playing the probabilities.

ETA: I am also very sure that whatever strategy that they have in mind, it is done in consideration with whatever their bonus structure is...

 

[Brian Noble]

I suspect the other piece in play is that Anaheim is content with a longer time horizon than Orlando, because the total inventory that Anaheim can ever sell is going to be limited. It's not like there is going to be another DVC resort on sale in Anaheim in three years, so they don't want to price it too low/sell it too fast.

I have a sense that this is also why Aulani's current pace is just fine with Mickey.

But, ultimately the why doesn't really matter. We'll know they are unhappy when the sales approach changes.

 

[tidefan]

I suspect the other piece in play is that Anaheim is content with a longer time horizon than Orlando, because the total inventory that Anaheim can ever sell is going to be limited. It's not like there is going to be another DVC resort on sale in Anaheim in three years, so they don't want to price it too low/sell it too fast.

But, ultimately they why doesn't really matter. We'll know they are unhappy when the sales approach changes.

Very true!

 

[nlenguyen]

I am seeing that most nights, the rooms are all sold out except for garden rooms for cash, the cashout seems to be more profitable for them, similar to Aulani which is always packed during the summer for cash rates and points rooms

 

[tidefan]

I am seeing that most nights, the rooms are all sold out except for garden rooms for cash, the cashout seems to be more profitable for them, similar to Aulani which is always packed during the summer for cash rates and points rooms

Though, I imagine, they would probably rather not have to do this: