A quick separate post to let you know I’ll be leaving for ‘the World’ tomorrow night for a quick pre-labor day trip. $48 discounted rooms at a Value resort were just too hard to pass up… Disney knows how to ply the weakness in this family with PIN offers!
If there is anything you’ve recently noted or were interested to find out more about, let me know and I’ll do my best to look into it and post next week when we return.
Sorry it’s been a bit since my last post, things have been a whorl wind around here with the end of summer school (and my final class in my MBA thank you very much!) and work. Yeah, I have a ‘boring’ day job too… so this site takes a back seat to that when things are hoppin’ at work like they have been. It doesn’t hurt that things around Disney have been quiet as we expected with the exception of the recent string of unfortunate accidents. Are prayers go out to those who’ve recently lost a loved one at Disney.
The fun news this month has been the build up to D23 of course, which I’m happy to report I (along with a friend and former Disney employee) will be attending. Just today in fact it appears that Disney has begun issuing the online tickets for the Expo.
Here is a peek at what they’ve sent to those of us to date:
| Dear E-Ticket holder, Attached please find a PDF of your E-Ticket(s) to the D23 Expo. Please save this PDF to your computer and PRINT ALL necessary tickets. If you ordered multiple tickets, you MUST PRINT OUT each individual ticket. You will need to redeem your E-Ticket in the main lobby of the Anaheim Convention Center on the date of your confirmed attendance. Please make note of the Expo Hours listed below. Parking: Parking is available at the Anaheim Convention Center for $12 a day. Per Anaheim Convention Center policy, no special or complimentary parking rates will be offered to Annual Passholders at any of the lots, including overflow lots, for this event. Shuttles: The Anaheim Resort Transit will operate buses to and from the Anaheim Convention Center. Please check their schedule (www.rideart.org) for times and pick up/drop off locations. Hours: Ticketing will begin at 7 a.m. each day of the Expo. The show floor will open at 8 a.m. for D23 Members and 9 a.m. for the general public. The show floor will close at 5 p.m, with additional programming at the Expo theaters continuing throughout the evening. Line Formation: No on property line ups will be allowed at the Anaheim Convention Center prior to 5 am. For additional information please visit www.D23Expo.com. We look forward to seeing you at the Expo! |
The box in the bottom right has my name, a bar code and the length of the pass (a 4 day in my case).
Disney did a great job with the Expo website and the links through to hotels in the area of the convention center as well. Bravo on that. we’ll be staying literally right across the street from the convention center, so it should be fun!
You saw this all over the Disney related web on Friday:
Disney hotel workers reject contract proposal by 92 percent
When put that way it sounds like a resounding defeat for the Disney folks and a great triumph for the democracy of the Union.
Until you read the article a little closer… Here is the excerpt:
Exactly 1,079 of the current 2,100 rank-and-file union members that wash dishes, clean rooms and wait tables at the three Disney-owned hotels in the resort voted on the contract proposal at the Disneyland Hotel, said Unite Here 11 President Tom Walsh.
So read that closely: what it really says is 92% of the 51.38% of the 2,100 union members who did vote, didn’t vote for the current proposal.
The Union did have a simple majority (as defined by more than 50%), but not a super majority (typically 75%). What is required is probably set by the Union in accordance with the Union’s charter and rules.
I’m all for the Union doing it’s best to defend and improve the lives of its members. I come from a mid-west pro-union family myself. The Union has the right to negotiate on behalf of its workers to make sure they get the best benefit from working for Disney that they can. Disney on the other hand of course has the right to want to control costs and keep this contract in line with other contracts, etc. etc.
What I’m not for are one sided discussions when the facts in the rest of the article don’t support the title.
Somewhere recently on a blog or website that I didn’t make a specific note of there was a discussion about the Richard Petty Driving Experience folks deciding to try and drive more folks to their crown jewel racing experience at the WDW raceway.
It looks like some of that is starting to roll out. Last week on Friday and Saturday for instance you could have booked the Rookie Experience for 43% off the list price.
Next up right now as far as announcements are concerned is the race for the ‘King Cup’.
Image Copyright 2008 Richard Petty Driving Experience
You can find out more here.
Seems my post just a couple of days ago about how DVC adds to the room mix at WDW was timely indeed. At least in the sense that I mentioned in some detail how Disney treats DVC units in counts of occupancy and per room guest spending.
Here is what I had to say:
‘So while in general DVC units would be treated somewhat differently since they are ‘ownership’ shares, that apparently mostly applies to revenue recognition for when the contracts are sold (and again when they are re-sold on the secondary market as part of a package of mortgages much like what got the rest of the real estate into a mess in the first place). Tom Staggs has mentioned a few times over the last couple of years that Disney has had some delayed revenue recognition because they’ve been having to hold onto those contracts longer than normal. Disney collects transaction costs and presumably some upfront money when a contract is sold, but can’t recognize the rest of it until it has a fair price, which is whatever a bond holder will pay for it in the secondary market.’
I say timely because Jason Garcia of the Orlando Sentinel just wrote an interesting piece (and a pretty good one I might add) on just the thing we were noting above about Disney’s issues over the last year or better with having to hold onto DVC contracts longer than normal.
So lets talk just a bit about how this all works, in general terms anyhow. Disney, under the Disney Vacation Club subsidiary, offers to sell you and I an ownership interest in one of their properties. For $98 a point (after discounts), Disney offers to sell you a contract good for 160 points for 50 years. That means the cost is about $15,680. Disney offers you a 10 year mortgage with a 10% down payment at a prevailing interest rate, you sign the paperwork and out the door you go. The proud owner of a deeded share of a nice resort complex in Florida at your favorite place to vacation! You pay the yearly maintenance dues to help pay the operating expenses of your nice place, make your monthly mortgage payment, and enjoy your DVC membership for years to come.
Inside the DVC however, all is not so peaceful! Disney probably takes part of your upfront payment for general sales and administrative expense (after all, someone has to pay all those people in the parks and in the DVC center selling you the property, and usually that’s born by the acquirer at the point of sale). So they record money in at $15,680 times all the other contracts for the quarter, subtract expenses and then have the underlying mortgage and 10 years of interest payments to look forward too. At 10%+, it’s decent money, as long as you pay on time.
The problem is of course that all of the mortgages weigh down Disney’s balance sheet overtime as they accumulate, and Disney would rather have your money now instead of over the next 10 years where depreciation will eat into the return (at 2% growth for inflation, it won’t take long for that 10% to not be worth much in future years). So Disney takes large bundles of these mortgages, wraps them together and sells them to an ‘investor’ like a discounted bond. The investor pays money now for a stream of payments in the future and Disney gets a lump sum payment in year 1 or 2 for the WHOLE contract. Just like Fannie and Freddie do for most of yours and my conventional home mortgages.
That upfront payment is of course risk rated and that affects how much (or little in this case) the investor is willing to pay for the bundle of contracts. The investor bakes in an estimated default rate in what he’s willing to offer so as to try and make sure he stays in the black over the life of the contract, since he now owns it and can loose money. Here that investor was Citi Corp, who you and I as taxpayers now own a large chunk of.
In this case Citi also asked Disney, according to the Sentinel article, as part of the agreement to backstop, or provide the equivalent of insurance, to Citi in the event that more than an expected number of contracts started to default. That would be like that other insurance company that you and I ALSO now own a large part of did for many in the conventional mortgage market, AIG.
In turn, Disney got the right to take back and exchange any deals that were going bad so that they could keep the points inside the system and maintain the overall experience while protecting your ownership interest as well.
You’ve been enjoying your DVC membership for a couple of years and suddenly something happens and your unable to keep up your payments. This isn’t a primary residence, so you don’t qualify for any government assistance to reset or refinance your mortgage. You can try to sell it through an after market reseller, but chances are you will probably have to offer it for less than you owe on it to attract a buyer unless you’ve made substantial principal payments in the last couple of years. You make a tough decision and let the mortgage lapse into default and heading for foreclosure.
Disney has to buy back your contract and swap it and if they can’t then that insurance kicks in and Disney pays Citi a flat rate to essentially payoff your contract. This happens at a higher than projected rate and Citi comes back during a normal contract renegotiation and tells Disney it can no longer honor the terms of the original agreement because its suffering losses far in excess of what it had estimated it would (i.e. they are either not making as much money or they are actually loosing money).
Disney balks at the amount of ‘insurance’ Citi now wants and talks break down. In the meantime Disney keeps selling contracts, but its lost its ability to go for the ‘easy money’ by packaging and selling them and instead now has to service the loans and generate cash from the interest payments. DVC cashflow slows and the Parks and Resorts folks take a cash hit because they are now lugging around all those mortgages they’d have otherwise not had.
So it’s an interesting peak into how the market works.
John over at ‘The Disney Blog’ commented about my post from yesterday about attendance at WDW. In his comments he asked if and how I thought DVC affected the occupancy rates, etc. for the parks. John, hope you don’t mind me responding on my blog here instead of in the comments on yours!
I had to go back to the actual 2008 Form 10K that Disney is required to file with the Securities and Exchange Commission to find the answer! This data is more in depth financial analysis data than what Disney publishes in their otherwise very nice Annual Corporate Report. At the end of the day this report is really nothing more than a slickly produced marketing piece and a lot of the real data is in the 10k. Disney isn’t the only one that does that by the way, its general corporate practice.
So the answer is that yes, Disney includes DVC in the hotel statistics. Here is the appropriate excerpt from page 33 of the 10k:
(1) Per room guest spending consists of the average daily hotel room rate as well as guest spending on food, beverages and merchandise at the hotels. Hotel statistics include rentals of Disney Vacation Club units.
There is a nice table there as well that shows that in 2008 Disney had over 8,566,000 available room nights with average per room guest spending of $223.
So while in general DVC units would be treated somewhat differently since they are ‘ownership’ shares, that apparently mostly applies to revenue recognition for when the contracts are sold (and again when they are re-sold on the secondary market as part of a package of mortgages much like what got the rest of the real estate into a mess in the first place). Tom Staggs has mentioned a few times over the last couple of years that Disney has had some delayed revenue recognition because they’ve been having to hold onto those contracts longer than normal. Disney collects transaction costs and presumably some upfront money when a contract is sold, but can’t recognize the rest of it until it has a fair price, which is whatever a bond holder will pay for it in the secondary market.
Direct from the same report on page 13 is what it has to say about the number of DVC rooms:
‘The Disney Vacation Club (DVC) offers ownership interests in eight resort facilities located at the Walt Disney World Resort; Vero Beach, Florida; and Hilton Head Island, South Carolina. Available units at each facility are offered for sale under a vacation ownership plan and are operated as rental property until the units are sold. Disney Vacation Club inventory consists of a mix of units ranging from one bedroom studios to three bedroom villas. Unit counts in this document are presented in terms of two bedroom equivalents. As of September 27, 2008, DVC has approximately 2,300 Units. There are approximately 700 additional Units under construction at the Walt Disney World Resort. These include the second phase of Disney’s Animal Kingdom Villas as well as the recently announced Bay Lake Towers at Disney’s Contemporary Resort and the Treehouse Villas at Disney’s Saratoga Springs Resort and Spa.’
Now we have to parse this carefully to get the full picture… note the second line above that I bolded and underlined. UNSOLD rooms are counted as RENTALS for the sake of the note above about hotel statistics and occupancy rates. NOT all the 2,300 available rooms.
So lets do a little more math. If there are 22,216 rooms in the hotels that times 365 = 8,108,840 available room nights. If we subtract that from the number above on the 10k of 8,566,000 available, we get 457,160 room nights difference. Divide that by 365 gives us about 1,252 rooms available for rent (i.e. you and I can book them outside DVC) on average across the year. That means about half of the DVC rooms are open on average at any point in the year for the general public.
Now add that to the 22,216 rooms I quoted yesterday (Disney’s 10k says they have approximately 22,000 so we are close!), and we get about 23,468 rooms in ‘two bedroom’ equivalents. (I could have also gotten this number directly by dividing 8,566,000 by 365, but it wouldn’t have told me the number of rooms open for rent in the DVC resorts!).
That means that DVC rooms are about 5% of the total rooms available at any given time. Since most DVC’s price at the Deluxe resort rate, this would make my table from yesterday look like:
To get 90% occupancy using yesterday’s assumptions of near 100% in the value resort (36%), high in the moderates (28%), then the new Deluxe number would be 26% which is a Deluxe occupancy of about 76% or 6,159 rooms every day of the year on average. The numbers are a little hard to compare to yesterday since all of the percentages shifted, but the additional DVC rooms means that Disney has to sell about 1,127 more Deluxe rooms on average than I said yesterday to maintain a 90% occupancy.
So all of that is to say that if you own a DVC contract and stay at Disney World you don’t count in the occupancy numbers directly, just in the total number of nights rooms were open to the general public. My guess is also that many DVC members are season pass members, so as I noted yesterday, it’s not clear how AP members affect gate count from the info Disney provides in any of their reports.
Chris, a reader here at allthingsdiz.com, posed the following question in the comments section of my recent post on the 3rd Quarter Conference Call highlights post:
‘What do you think about reports that attendance is really down for summer? True? I've only heard this anecdotally, but it seems to be coming from lots of sources.’
I started to answer Chris in a response comment, but my thoughts got so big I decided to turn it into a post so we don’t get lost in the Comments part of the blog!
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That's a good question I'm not sure any of us have a good idea about except Disney. I've read many of the same reports presumably as you with pictures, wait times and what not showing a very dead park, especially during the weekdays.
Disney on the other hand says attendance is inline with this time last year in general, the hotel rate utilization is still in the 90+% category and they just raised admission ticket prices. So my bet is that unless Disney is lying to everybody (which I strongly doubt) then demand would appear to still be fairly strong. Bob Iger says he is happy with where things are given the general state of the economy anyhow.
What Disney doesn’t break out for us, though I’m sure they know what the answers are if not literally than at least statistically, is the demographics of the gate count: adults vs. children, type of ticket, discounted tickets, etc. All we get is a pure gate count, so it’s entirely possible that the wait times are down for some of the larger rides due to a shift in the types of people visiting. Maybe more people are coming with younger children and older adults who don’t or can’t ride the thrill rides? I guarantee that the line at Peter Pan is STILL WAY too long (despite FastPass).
The same can be said for the food in the Parks. I read somewhere that someone said recently that they got a walkup to Le Cellier. That fact seems to me to be 2 fold in possible cause. First, it won’t be that way now that free food is in effect. And second, I offer the general observation that park attendance =/ (does not equal) strong dining attendance, especially in the more expensive sit down restaurants when people are on a fixed budget. They do tell us that per guest spending in the parks is down quite a bit from last year, which would seem to be in line with this theory, even though that includes merchandise as well. Those are again only numbers Disney really knows, but they are separate, though possibly correlated, measures.
It will be interesting to see what happens with the late fall free food where they are ‘tiering’ the service based on the hotel your staying at. We probably won’t have any definitive data there either, but if Disney brings it back later, then I’d say that says something.
The other demographic they don’t break out is per resort occupancy, just overall occupancy rates. My guess is that, as usually would be the case, the Value resorts are stuffed to the gills, the camping side of the campground is booked solid, and it’s not until you get into the Moderate and Deluxe resorts that you start to see occupancy drop.
If Wikipedia is right (though we could cross reference with The Unofficial Guide if we really wanted too), then by my calculations there are about 22,216 hotel rooms distributed as follows:
That last figure is not counting Shades of Green or Swan/Dolphin, nor any DVC resorts. That means we can get 90% occupancy with all the Value rooms (37%), say most of the Moderate rooms (how about 28%?), which leaves a Deluxe room occupancy of only about 24%. Those are just my guesses of course. We also haven’t touched off site stays, nor Season Pass members.
So overall I’d say that based on Disney’s conference call and Len and Fred’s Crowd Calendar and updates that Disney attendance is still fairly strong. I’d further guess based on the train of thought illustrated here though, that it’s the demographics that have shifted, making for a shift in wait times based on the types of rides people want or are able to ride and the places budget conscious eaters want or can afford to eat.
That’s a long winded answer, and now you know why I made it a post instead of replying in the Comments!
Feel free to expound, add thoughts or what not in the Comments to this post…
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