Analyst says moderate and deluxe resort booking soft at Walt Disney World

Posted Friday, September 16, 2011 4:06 PM | Contributed by Jeff

Citing concerns about weakness at Walt Disney World's mid- and high-priced hotels, a Wall Street analyst on Friday lowered his earnings projections for the Walt Disney Co.'s theme-park division. Moderate and deluxe rooms together account for approximately 60 percent of Disney World's hotel inventory.

Read more from The Orlando Sentinel.

Friday, September 16, 2011 4:09 PM

If this is actually true, and there was any kind of significant impact on rates, I think I would actually consider going next year. As it stands now, I'm thinking I'll skip Florida in 2012. However, I am easily swayed.

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Friday, September 16, 2011 4:16 PM

Of the hotel inventory, about 8,400 rooms, or 39 percent, are value rooms. About 7,500 rooms, or 35 percent, are moderate and about 5,600 rooms, or 26 percent, are deluxe.

This is interesting. I never really thought about it. Not sure what I'd have guessed the mix was had I not read this first.

No point really. Just enjoyed the observation.

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Friday, September 16, 2011 4:31 PM

That's about the mix I would expect, but if you think about when each was built, it wasn't that long ago that they skewed high end.

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Friday, September 16, 2011 4:42 PM

I wonder if this also reflects a general trend towards fewer admissions, or if it's merely families coming who are going for a lower bracket of vacation, so to speak. Deluxers moving to moderates, moderates to values, and values off property entirely. Assuming most vacationers are renting a car, it can be hard to justify the expense of a "Disney hotel" over the other options available in Orlando. My parents are taking mine and my sister's families in the spring, and they decided to rent a house near Animal Kingdom. It will more than easily hold all 11 of us (several of the kids will even get their own bedrooms), it has its own pool, and it will cost less than what you would spend for ONE room at the moderates for the same amount of time. Disney Transportation, Themed pools, and extra magic hours (which many websites encourage you to avoid anyway) just don't make up for the extra expense. I know many people would never give up the "Magic" of an all Disney vacation, but for others, the numbers just don't add up.

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Friday, September 16, 2011 4:47 PM

I think things will pick up for them once the FantasyLand expansion eclipses Potter in the "free advertising" arena...

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Friday, September 16, 2011 5:11 PM

But, 'gator, new attractions drive *attendance*, and attendance is relatively firm. This is about *occupancy* at the resorts---or, more accurately, about occupancy at the different resort categories.

People are still coming. But, they are more cost-conscious when they do so, because they are hitting up the cheaper properties harder than the mid-priced/more expensive ones. That's interesting to me. I had thought the "hourglass effect" (i.e. shrinking middle class and lower median income, while the wealthy become more so) would *benefit* WDW and their high-end properties, not harm them. Instead, it appears the opposite is true.

What this says to me is that despite the common image of Disney as a luxury good, it's really a mass market one. Their customers are becoming more cost-conscious, suggesting they are at the "bottom" of the hourglass, not the "top".

This also puts their de-annexation of some RCID land for the Four Seasons/Golden Oak development into a completely different focus.

Last edited by Brian Noble, Friday, September 16, 2011 5:11 PM
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Friday, September 16, 2011 5:12 PM

One other thought: remember all those rumblings about differentiated access to FASTPASS (e.g. XPass) based on how much you are spending? I'd be inclined to double down on that bet.

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Friday, September 16, 2011 5:30 PM

It also makes me wonder about the non-stop DVC expansion (Grand Floridian DVC is under construction now, and a Fort Wilderness location is not going to be too far behind, though that has yet to be announced...of course, I don't believe the GF one is "announced" either). I would not be surprised to see OKW minus the Treetop Villas converted to a Moderate resort in the near future, as they have been pushing people with Moderate reservations there for free upgrades.

The opening of the Art of Animation resort next year should help the balance of rooms, but will be quite a bit more than most Value properties in the off-season for the true family rooms from what I've heard. That will make things a little more interesting, and might actually move a few more people away from the "lower level" Moderates. I still can't believe Coronado is a Moderate level, it really is right up there.

Last edited by maXairMike, Friday, September 16, 2011 5:31 PM
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Friday, September 16, 2011 5:49 PM

Speaking of the "Family Rooms", maxair, I just don't get those. At all. Regardless of season, they cost more than twice the rack rate for the 'standard' value room, and often are much more than that as they usually don't get discounted as heavily as the 'standard' rooms, if at all. The kitchenette is nice, but the 'living room' is basically a bedroom, as it is where your kids will (likely) sleep, so it doesn't do you any good when you are awake and they are not. I don't see any reason to pay a premium for it over the cost of 2 rooms.

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Friday, September 16, 2011 10:11 PM

Brian Noble said:
People are still coming. But, they are more cost-conscious when they do so, because they are hitting up the cheaper properties harder than the mid-priced/more expensive ones. That's interesting to me.

To expand that even further, I think it's key that they don't fluctuate or discount on admission. It's incredible to me that they've managed to keep attendance pretty constant in the last few years.

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Saturday, September 17, 2011 7:50 AM

It also makes me wonder about the non-stop DVC expansion (Grand Floridian DVC is under construction now, and a Fort Wilderness location is not going to be too far behind, though that has yet to be announced...of course, I don't believe the GF one is "announced" either). I would not be surprised to see OKW minus the Treetop Villas converted to a Moderate resort in the near future, as they have been pushing people with Moderate reservations there for free upgrades.

The DVC *sales* numbers have remained pretty robust. For example, here are the August stats:

http://dvcnews.com/index.php/dvc-program/financial/1696-monthly-sal...ugust-2011

In other words, DVC *sales* seem to be tracking the "hourglass" idea nicely. Still strong demand for an expensive product, despite more or less everything. In fact, Disney's timeshare arm has dropped some since pre-recession, but it has been much more stable than most other timeshare developers, including name brands like Marriott.

The phenomenon you are talking about is *rentals* of those rooms. But, DVC room rentals aren't really something that Disney cares about directly---after all, the Members "own" them, not Disney. Most of those rooms are rented out as a consequence of the internal exchange system. When a DVC Member uses points for a Disney Cruise Line, Adventures By Disney, or Disney Collection (non-DVC hotel) vacation, DVC inventory backing those points is turned over to DRC/CRO to rent out. The proceeds are then used to pay for the cruise, tour, or hotel stay the Member desired. Many speculate that the resale restriction on internal exchanges was done, in part, to reduce the amount of inventory used in this way to help maintain price support. And if that does not work, expect the point charts for DCL, ABD, and DC bookings to increase---more points relinquished to make up for lower room rates.

Last edited by Brian Noble, Saturday, September 17, 2011 7:53 AM
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Saturday, September 17, 2011 8:10 AM

Speaking of the "Family Rooms", maxair, I just don't get those.

I expected them to be about par with, or maybe slightly less than, two Value rooms. On the other hand, the existing suites at Music (which *are* about the cost of two Value rooms) sell *very very* well, and these new ones look like they are (a) much more strongly themed, more "Disney", and (b) have much more flexible space. Rather than be constrained by two equal-sized portions, the "master" is a little smaller to make for more living space in the "second room":

http://yourfirstvisit.net/2011/08/21/family-suite-floor-plans-for-d...on-resort/

These are clearly a step up from the existing ones, and so Disney may be able to get these sorts of room rates. We'll see what happens going forward.

I have to admit, though, that from the day we had kids, we *NEVER* stayed in a single hotel room for more than a night or two. We always stay in full suites, condos, or sometimes even private homes. Not just for the space, but also for the amenities you have---a place to sit down to breakfast, real living space rather than just beds to sit on during downtime, etc. From a purely personal perspective, these new suites look more appealing than two connecting rooms, just because of those features.

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Saturday, September 17, 2011 11:24 AM

We just booked a stay at a moderate resort in February. The added meal plan was too much to pass up, especially since the meal add-on for value resorts just wasn't enough to get us to book. Then again, we have only booked value once and were so turned off by it that we have always booked moderate since...

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Saturday, September 17, 2011 1:59 PM

Brian Noble said:
But, 'gator, new attractions drive *attendance*, and attendance is relatively firm. This is about *occupancy* at the resorts---or, more accurately, about occupancy at the different resort categories.

I'm always willing to be wrong, but I think of the FantasyLand expansion as being more of a "girly" addition to MK. When it comes to females, price becomes less of a constraint (not sure how to describe that in economic theory terms, but on a micro level, it's always seemed to play out that way in my experience). Short version is that I'm seeing an uptick in the kinds of attendance where the value-moderate-luxury curve starts trending somewhat upwards....obviously, we're talking about effects *on the margin*, and not some overwhelming shift where all the luxury rooms will fill up for years to come...

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Sunday, September 18, 2011 7:02 AM

You're in pretty deep waters for a data-driven guy, 'gator.

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Sunday, September 18, 2011 7:12 AM

maXairMike said:
I would not be surprised to see OKW minus the Treetop Villas converted to a Moderate resort in the near future, as they have been pushing people with Moderate reservations there for free upgrades.

We got a free upgrade from a Pop Century studio to OKW 1-bedroom suite a few years ago. It was a combination of the internal exchanges Brian mentions freeing up the DVC properties, and a free dining promotion leading to a waiting list for Pop Century.

Disney comes out ahead on this, as they then get 2 families instead of one, and they have the potential for both to start off their vacation happy. The first family because of the free upgrade. The second family gets the reservation they weren't sure they could get.

There is also the marketing angle. Our free upgrade to OKW was in August with the usual heat. Coming back to your suite after a long day in 95 degree heat to a fridge with in-the-door ice and water, and having 900 square feet to spread out changed how we vacation at Disney.

We've only stayed in a value room once since then, and that was so the niece and nephews we took this year could experience the theming and atmosphere of Pop Century on their first Disney trip.

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Sunday, September 18, 2011 5:22 PM

Being in the industry, this is no surprise to me. The general theme I am hearing from many park operators this season is that while crowds are strong, people are simply reaching into their wallets less.

Value rooms are often less than $100 a night. Most Moderates are north of $150 a night and the cheapest Deluxe room I could recently find is in the $250 range, and that was for WL or AKL. The monorail resorts are more in the $350 range.

When times are tough, as they currently are, leisure is one of the last things people completely cut out. Rather, folks just cut back. So I can completely see people saying "we will still go to Disney World, but this time we'll stay in a Value resort and save a few bucks"....

And any savy WDW vacationer knows that the standard guest room in a Value, is almost identical to a standard room in a Moderate. You might pay more than $75 more a night for a Moderate and all you really get is some better theming, a slightly better pool complex and maybe a sit down restaurant at the resort. You really are throwing good money after bad by staying at a Moderate over a Value. It isn't until you get into the Deluxe category when you start to see some real better location and class of lodging.

I know many people who will religiously stay in a Value and are perfectly happy with their $89 a night rate as they laugh at all the chumps paying a lot more, for not a lot more....

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Monday, September 19, 2011 1:23 AM

What you get the most, in my opinion, with moderate and up is location. I think the value resorts are more than adequate, but they might as well be in the keys.

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Thursday, September 22, 2011 10:05 AM

Brian Noble said:
You're in pretty deep waters for a data-driven guy, 'gator.

LOL, aren't I supposed to be willing to swing for the fences once in awhile? Too many bases-on-balls and I'll get a rep for being soft...every so often, I gotta play with the big boys, take some WAGs, get the uniform dirty. ;)

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