Surprising facts about DC 2002 point charts

[morphi]

PamOKW brings up some great questions about why the Conceirge Collection (CC) has stable rates while the DC program does not. I have no idea why that would be. Perhaps DVC negotiated flexible terms with CC resorts so the cash that DVC had to pay would reflect the free market and occupancy rates. If they did that with CC resorts, why wouldn't they do that with the DC resorts? Maybe they do not know how important the DC program is to the DVC program and so didn't think it as important to get flexible rates from DC resorts. Afterall, if DVC members want to stay at WDW, why not just stay at the DVC resort (might be their thinking).

Like I said, I would love to see DVC flex their muscle with the DC resorts to negotiate better, more flexible rates. Imagine if the GF wasn't making DVC a good offer. I'd love to see DVC take GF off the DC chart for a year just to increase their bargaining position for the next year. DVC is the largest single source of resort guests for the DC resorts. It'll never happen though.

Anybody else have a theory about why the CC rates are stable, but the DC rates are not?

 

[Johnnie Fedora]

I have the same thoughts about the Concierge Collection not increasing! Why not??? It's being speculated that the larger 2002 point costs are being used to make up some 2001 cash deficit due to a poorly negotiatied rate between the DVC and the DC. Of course, we can only guess the reason as DVC didn't bother to give any official explanation for the drastic change. The rates DVC pays to the DC should be variable based on the going rate for the DC rooms, or at the least, DVC should pay a rate that is substantially less than the rack rate (30-40%).

As Prplcrzy indicated, DVC rooms are very expensive as a cash rental. Does anyone know if DVC rooms go unrented because they are too expensive?? therefore making it difficult to replace the cash paid to DC resorts??

Dean, I posted last week or so with my idea of DVC offering an OC "Orlando Collection". It would give DVC a negotiating edge with the DC hotels ( if there are any real negotiations that go on between these two sister companies ). I'm sure they are considering this idea......NOT.

I am going to send a letter to MS about these point increases.

And PamOKW...I'm not really feeling like a black sheep.......more like a lamb on the way to the meat market.

 

[morphi]

Johnnie Fedora asked if anyone knows whether or not DVC had problems renting all of the rooms made vacant by DVC members using the DC (or CC) programs. A few days ago, I spoke to a person in the Finance department of DVC who helps to make the point charts for the DC program and is close to the negotiation of rates for the DC resorts. This person explained that DVC did indeed have some trouble filling the vacant villas. This was offered as part of the reason for the 2002 point increases.

For a non-DVC resort like GF, they need a certain occupancy rate to break-even. They may be able to break-even with 80% occupancy (depending on the average rate received). So they won't necessarily go into a loss if they do not rent all of their rooms.

However, when DVC has a vacant villa due to a DVCer's use of the DC program, they will definitely lose money if they cannot rent that room. This is because they paid cash to GF and didn't receive any cash from other sources to cover it. It's not an operating loss per se because the DVC resort itself was already paid for by DVCers buying into the program. Also, maintenance, taxes, and other overhead costs are covered by the annual dues that they get to keep even when a DVC member uses the DC program. The only other expense they need to cover is the cash paid to the DC resort. But in order to do this they MUST rent that villa. It sounds like they did not always do that in 2001 and so experienced some losses.

So DVC can experience a financial loss via the DC program by not being able to charge a rent high enough to cover the cash they paid to the DC resort AND by not being able to rent the vacant villas at all. The first problem should be able to be solved by negotiating a flexible contract with the DC resorts to pay the going rate for rooms. I do not know how to solve the second problem. Perhaps they should really cut rates drastically to rent those vacant villas in order to get people to stay there. If they charged $150/night for the 1-bedrooms, I'm sure they would be filled. But then this would make all of our DVC memberships seem like less of a good deal.

 

[DVCDAVE]

Would it be in OUR interest to have DVC NOT renew its contract with Disney for the resorts next year, and suspend the DC collection ??? This could send a clear message to Disney that DVC won't tollerate being Disney's sole profit center and wipping boy.

Just a thought......

 

[Pluto4President]

I don't like that idea Dave, sure they're more points but I still like staying at them....

 

[morphi]

I LOVE that idea Dave! Now I like having the option of staying at the DC resorts, but I would give up the option for one year just to insure that these ridiculous price hikes don't happen again. One alternative is to only take one of the DC resorts out of the DC program. Then DVC members can still use DC, but all the DC resorts would see the power of DVC. I'd suggest the Poly or GF since the price increases with them were the highest implying that DVC got the worst deals with them.

 

[DVCDAVE]

Pluto4President;

I didn't mean for the idea to be permenant, just a 1 year non-renewal if the DVC negotiating team couldn't get better terms for DC for its members. The point being, let Disney feel the 'power' of DVC members, and the impact we can have on their bottom line of their resorts.

I too enjoy DC and don't want to go away either, but I will forfeit one year, to gain down the road.

 

[Pluto4President]

sorry, my misunderstanding. Ok, I guess, a year will work, maybe Would definately need the 11 month window in that case!

 

[PamOKW]

Maybe next time they survey members to see what we find to be valuable parts of the program we should lie....seems like letting them know we like DC backfired.

 

[CarolMN]

IMHO, we don't need DVC to "NOT renew" the contract with the DC resorts to prove the theory that DVC members are a significant source of revenue to the non-DVC resorts. DVC members have only to stop using points to stay at the DC resorts. No need to eliminate the option. If DVC members continue to use the DC option at or near the same rate as in past years, the non-DVC resorts will have no reason to offer a better deal to DVC members.

If the theory is true and the DC resorts also actually track revenue from DVC members, I would expect that reduced usage of the DC option will provide the same result as eliminating the option altogether. From reading the posts lately, it appears that very few (if any) members plan to stay at a DC resort using points.

It will be interesting to see what happens. If bookings are down for the DC resorts, then most probably, DVC will also have problems renting DVC rooms. Glad I'm not the one who has to figure out how to make it work so that both DVC and DC resorts make a profit!

 

[morphi]

I think that when they survey us again for our opinions we need to state more adamantly than ever that DC is VERY important to us. The DVCers who use the DC program like to occasionally stay at the DC resorts, and the DVCers who do not use DC directly still benefit by having greater flexibility in getting the room they want, when they want it. We all need to tell DVC that DC is critical to DVC and tell them that they must do whatever they can to get better, more flexible contracts with the DC resorts. (Mainly, DVC should only pay the DC resorts the average rate they are getting for the rooms rented to the general public.)

 

[Dean]

I would suspect that the more you tell them you want it, the higher the costs will be. Those that find this an important issue should demand DVC negotiate better deals and drop the locations they can't ge a value at least $8-10 per point based on usual discounts, not rack rates.

 

[DVCDAVE]

DEAN; Can you elaborate a little bit more, I am not getting the full meaning of what you are trying to say.

 

[Dean]

Dave, basically I'm saying that the more you tell DVC you want to stay at GF, etc; the more difficult it will be for them to get a good rate at that resort. The more the other side thinks they won't get DVC money, the more likely they are to give a good deal. So instead of saying to DVC, get us a good deal at GF (or whatever); we should tell DVC to get a great deal or drop them. And this year may be the best time ever to do this with the slower economic times. I, for one, don't think that simply voting with our feet will be enough.

Personally I'd love to use points to stay at other WDW resorts, it would just have to be a good deal. When I say a good deal, I mean compared to the points it would cost to stay at a comparable DVC room. I'm less interested in what the cost in points is compared to the quoted rack rate. For example, if a GF room costs $400 per night total cost and I can stay there fore 40 points but a studio at WL or BW is only 12 points (or OKW for 8 pts), the value is not there for me. Even though in theory it's $10 pp. In this scenario, I'd put the cutoff at around 20 points per night for GF, AKL, YC/BC and the Poly for most nights. A quick comparision would be Moderates the same points as a studio at DVC, Contemporaty about 20-50% more, deluxe resorts about 60-100% more and concierge an additional 5 points per day. Obviously this is way off the previous or new versions listed but does give a fairly accurate protrayal of my level of interest (or lack of) in the DC.

Same principals could be applied to the CC, DCL, etc. For DCL, I'd have to get at least $8-10 pp (minimum) value compared not only the the DCL cost but similar cabins on similarly rated cruises (HA, RCCL, Premier) for the highest discount available routinely.

 

[DVCDAVE]

Well put, and I understend now. I agree with you. Except I would, and have stayed at DC on the prior schedule, at the FW Cabins. Now though I would urge members to not use the DC out of principle, further I would urge DVC powers to be, NOT to renew any contract with Disney Resorts until we get a better deal with them. I say, bring Disney to its knees until we get a fair shake as you described. The best weapon we have is not to let this issue die, and let all potential purchasers aware of this issue. The more they know, the better informed they will be prior to purchase. Th less attractive this exchange is, the less sales DVC will attract.

 

[vernon]

I agree with you Dean. DC needs to be in place BUT it needs to be at a sensible price. If one hotel in a catagory (i.e. delux,mod etc) gets too pricey, drop it in favour of one of the others. I'm certain if for example the Contempory were to get ALL of the DVC bookings for monorail resorts it would impact their profitability in a positive manner and the others would lose not only $$ for room rentals but also lose restaurant, services and shop business as well.

While I think bringing Disney to their knees is hopeful IMHO it would be possible for DVC to make some of the hotels squeek a bit if they were dropped.

 

[morphi]

I don't think it would be counter-productive to tell DVC how important the DC program is to DVC. In general, I agree with Dean that when you state that a certain product is very important to you, it allows the seller of that product to raise prices. However, I do not think that applies in this case.

Several people who work for DVC (including one in the finance department) have told me that they do not operate the DC program for a profit. Assuming this is true, then us explaining how important DC is to us should NOT cause increased rates. The rates are simply determined by the variance in the cash that DVC pays DC resorts and the cash DVC takes in by renting vacant DVC villas. DVC tries to make the cash outlay and intake equal so they breakeven. They do not try to maximize their cash intake by increasing the points required to use the DC program.

By telling DVC that DC is important to us, we would be encouraging them to negotiate better, more flexible contracts with the DC resorts so that DVC's cash outlays to the DC resorts will more closely follow the cash intake of DVC (because both will fluctuate with the free market instead of just one).

As long as we do not demand one particular DC resort, DVC should be able to negotiate those flexible rates with DC resorts by pitting them against one another with the threat that one of them may be dropped from the DC program for a year if they do not offer flexible rates to DVC.

 

[JonHM]

either through us telling DVC to either get better rates or drop DC, OR through us all boycotting DC, what if either of those two things simply convinces DVC that we really don't want it, and they make it go away... Permanently. None of you see that as a possibility if we follow one of those two courses of action?

I completely understand Dean's point that the more we tell them we want it, we want it, we want it, the worse off we will be, BUT there has to be some sort of middle ground, non?

 

[morphi]

On the topic of how the points charged by DVC for DC rooms ought to be calculated, I think their current approach is correct. I do not think that they should try to set the points so a GF room is comparable to a BWV 1-bedroom or where one point is equivalent to $10. Instead, they should simply set the number of points in a way that the cash DVC pays to the DC resort equals the cash DVC gets for renting out the vacant DVC villa. This is how they currently do it. I think it is the most fair.

Say one night in a GF Lagoon View room is $400 and an OKW 1-bedroom costs $300 to non DVC members. (This is not the rack rate, but the average rate they are getting for each room type on that night.) Also assume that that OKW room costs DVC members 20 points. The point cost for the GF room should be = 400 / 300 * 20 = 26.67 or about 27 points. This makes sense since the DVC member would give-up 27 points to stay at GF so DVC would have to pay $400 to GF. Those 27 points going to the DC program would free-up an OKW 1-bedroom for 1.35 (=27/20) nights. At $300/night, this will yield DVC cash income of $405 (=1.35*$300). This basically matches the $400 they paid to GF so the DC program would break-even. This is how it should be. (Actually, the GF night should cost a little more than 27 points to cover the probability that DVC will not be able to rent the OKW villa at all.)

While I agree that the current approach to setting points for the DC program is correct, I think the problem lies with them not negotiating rates with the DC resorts that reflect the free market (as explained in earlier posts). But trying to match cash outlays with cash income is the fairest way to set-up the DC program.

 

[morphi]

JonHM, perhaps my earlier suggestion is that good middle ground. I suggested that instead of urging DVC to drop the DC program altogether (even for just a year) or in boycotting the whole DC program as individual DVC members, that we should urge DVC to threaten to drop one resort in each class of resorts if they do not offer rates that are based on the free market. That way, DVC members scan still use the DC program at most resorts AND DVC will be showcasing its economic power so that ALL DC resorts will offer more flexible rates during the next year's negotiations.