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Old 01-29-2015, 10:07 PM   #11
Don Munsil
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Mike I agree with 99% of what you posted. Your post is excellent and I'm only commenting on one tiny thing that is really not your primary point at all. It's just a minor peeve of mine when I hear the phrase "our dues would go up."

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Originally Posted by DVC Mike View Post
My point was, if DVCMC wasn't allowed to rent out these rooms, our dues would most likely go up that much per point.
FWIW, this is what I disagree with. If the breakage income didn't exist, our dues would very likely go up less than the lost breakage revenue. The lost revenue would be split in some ratio between DVD and the members, and we have no real way to determine what that split would be.

Once you come to the conclusion (as I have) that the dues are not actually tightly tied to actual costs, you realize that setting dues is essentially like setting hotel prices, which is not primarily about costs, especially for higher-end hotels. At the low end, obviously hotels can't go below their costs and stay in business, but at the high end, the costs and price are almost totally uncorrelated. If, for example, the Four Seasons's or Waldorf-Astoria's costs go up, for the most part their profits go down, because their price is already set as high as they can reasonably go and still fill the resort to their target occupancy. They might end up raising the price by some fraction of the actual increase in costs, but they don't have the pricing power to "pass on" extra costs.

DVC is in a similar situation. They can't completely pass on all extra costs, or rather they could but it would likely be self-defeating. If dues go too high, it starts to hurt new points sales, as the value proposition doesn't look as good as it did and sales staff have to work harder for each sale. Personally, I think that's the largest constraint, and that's why I predict that dues will tend to go up roughly in tandem with hotel prices, at least until DVD stops actively selling new properties.

Really, the big question we should ask ourselves about breakage is why there's a 2.5% cap in the first place. Why don't we get all the breakage revenue, or all of it minus a reasonable fee to cover the cost of handling the cash reservations? Don't we "own" those room-nights? The answer, as with so many other things about DVC, is that we agreed to let DVD have everything over 2.5% when we signed the paperwork. I suspect that's a significant source of profit for DVD, which is why they are so unhappy with point rental brokers. Any increase in point rental cuts directly into breakage revenue, and that reduces Disney's profit.

Last edited by Don Munsil; 01-29-2015 at 10:10 PM.
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Old 02-12-2015, 11:10 AM   #12
DisneyLeah
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Quote:
Originally Posted by DVC Mike View Post
As an example, as I write this in January 2015, Disney has announced the Polynesian Villas & Bungalows - consisting of 20 bungalows and 360 studios. However, only 10 of the bungalows and 142 of the studios have been "declared" so far and can be booked by members using points. For now, the other units can only be booked using cash. DVC will declare more villas for the member inventory as it sells more of the resort's points.
Hi Mike - thank you for the entire explanation as well as the particular tidbit about PVB. Is this information publicly available? I'm curious what the current allotments are at PVB and rather than asking you to find this information, I'd look for it myself (if you'd be willing to tell me where to look).

thanks for all the great info!
much appreciated!
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Old 02-12-2015, 11:18 AM   #13
Marmar
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Mike, Thank you so much for explaining this
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Old 02-12-2015, 12:17 PM   #14
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Originally Posted by DisneyLeah View Post
Hi Mike - thank you for the entire explanation as well as the particular tidbit about PVB. Is this information publicly available? I'm curious what the current allotments are at PVB and rather than asking you to find this information, I'd look for it myself (if you'd be willing to tell me where to look).

thanks for all the great info!
much appreciated!
DVD files all legal documents with the county. The information was taken from the initial declaration DVD filed. I'm at work and don't have the link handy, but it's the exact same link used to lookup anyone's deeds.
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