"Bookings soft at Disney World's moderate and deluxe resorts"

[WebmasterMike]

I wonder if we are getting ready to see discounts in the near future.

http://www.orlandosentinel.com/the-daily-disney/os-disney-hotel-occupancy-20110916,0,5636252.story

Analyst says bookings are soft at Disney World's moderate and deluxe resorts

By Jason Garcia, Orlando Sentinel
11:17 a.m. EDT, September 16, 2011

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.

"Based on our tracking of hotel occupancy at Walt Disney World, we believe the value resorts are seeing slightly better trends than moderate/deluxe resorts" for the fall and early winter, UBS Investment Research analyst John Janedis wrote in note to investors.

Moderate and deluxe rooms together account for approximately 60 percent of Walt Disney World's hotel inventory.

UBS said it now expects Walt Disney Parks and Resorts to generate $1.62 billion in earnings before interest and taxes during Disney's next fiscal year, which begins next month. That's about 2 percent lower than the firm's previous estimate of $1.66 billion.

Disney has been steadily raising prices at its U.S. hotels and theme parks in hopes of conditioning travelers to no longer expect the deep discounts Disney offered during the deepest part of the global recession. And UBS' checks indicate that rates are up across the board at Disney hotels — including by roughly 3 percent the lowest-priced value hotels, such as Disney's All-Star Resorts.

UBS said rates are up by mid-single-digit percentages at Disney's moderate hotels, such as Disney's Port Orleans Resort, and by low-to-mid-single-digit percentages at its deluxe hotels, such as Disney's Grand Floridian Resort & Spa.

"However, we think occupancy levels are flat to down [year over year], particularly at the deluxe resorts and only slightly better than the value/All-Star resorts," Janedis wrote. "Given the relative price points — with deluxe resort average rates 200 percent greater — the mix could also be having somewhat of an impact on parks margins."

Disney World has approximately 21,600 hotel rooms in its inventory, not including Disney Vacation Club time-share units, which are also rented out to travelers. 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. The share of value rooms will swell further next year with the opening of Disney's Art of Animation Resort, Disney World's first new hotel since Disney's Pop Century Resort, another value hotel, opened in 2003.

Occupancy in Disney's U.S. hotels — which includes roughly 2,400 rooms at Disneyland in Anaheim, Calif. — was 81 percent during the third quarter of the company's fiscal year, which ended July 2, down one percentage point from a year ago. But per-room spending, which includes the average nightly room rate, jumped 14 percent for the period.

Management said in August that fiscal fourth-quarter bookings were running 2 percent behind last year's pace, while room rates were up by a mid-single-digit percentage.

 

[WaltD4Me]

"Disney has been steadily raising prices at its U.S. hotels and theme parks in hopes of conditioning travelers to no longer expect the deep discounts Disney offered during the deepest part of the global recession. And UBS' checks indicate that rates are up across the board at Disney hotels — including by roughly 3 percent the lowest-priced value hotels, such as Disney's All-Star Resorts."

Does anybody in the Disney heirarchy live in the real world? Not only do they want to put it out there they not to expect discounting, but to prove they are sincere about it at the same time they are raising room prices AND ticket prices AND food prices, ect...

 

[lugnut33]

"Disney has been steadily raising prices at its U.S. hotels and theme parks in hopes of conditioning travelers to no longer expect the deep discounts Disney offered during the deepest part of the global recession. And UBS' checks indicate that rates are up across the board at Disney hotels — including by roughly 3 percent the lowest-priced value hotels, such as Disney's All-Star Resorts."

Does anybody in the Disney heirarchy live in the real world? Not only do they want to put it out there they not to expect discounting, but to prove they are sincere about it at the same time they are raising room prices AND ticket prices AND food prices, ect...

If the price raises generate more profits then Disney is fine with a lower occupancy rate. However, if occupancy rates really fall quick (and there is no indication that this is happening), then you'll see the deals come back.

Ticket prices will continue to go up until less people come through the turnstyles. I don't see any indication of less people in the parks, therefore prices will continue to go up.

 

[chirurgeon]

Here's hoping they come up with an even better rate than the AP rate Kathy snagged for me at Riverside for Disapalooza. Maybe I can get back to my beloved POFQ.

Kim

 

[jcb]

You have to wonder how UBS manages to track hotel occupancy at Walt Disney World given that it isn't information WDW releases until the quarterly financial reports.

Last month, Rasulo told analysts (including the UBS analyst):

In Q3, from a rate perspective, whereas rates were up across the board, they were up significantly more in the value and moderate segment than they were in the higher end segments, as you might expect when you're coming off an economic downturn, that people at the end of the economic spectrum are going to be the ones that could not come and that they kind of rush to it when they can. In terms of the booking window, you know, we've lengthened about a week over the last five or six months, from 13 weeks to 14 weeks on our average booking. Read into that what you will; I'm not sure there's a giant statistical difference between the two, to be honest with you.​

http://a.dolimg.com/investorrelations/webcasts/Q3_FY11_Earnings_Transcript.pdf

Lug is right about booking rates, moreover. Disney is less concerned with occupancy than they are about the average “per room guest spending” (hotel, food, beverage and merchandise purchased at the hotel) rate which for Q3 was $262 (up significantly from $230 in 2010). Iger and Rasulo were positively giddy about this rate despite the slightly lower booking rate.

 

[PeterPan09]

I can tell you that the values are packed and have been for weeks now. I've had more than one guest tell me that they chose to stay for less so they could spend more on other things like food and experiences. I'm sure someone is tracking that too.

Maybe that's what the economy is doing. Making people more interested in the experience than the extras of staying at a moderate or a value?

 

[dalt01]

Disney is less concerned with occupancy than they are about the average “per room guest spending” (hotel, food, beverage and merchandise purchased at the hotel) rate which for Q3 was $262 (up significantly from $230 in 2010).

i can only buy into this up to a point. its the old volume vs profit arguement..........make a lot on one room or make a little on 10..........the auto dealer i work for has always said "sell cars and good things happen"....meaning service, parts, referrals and repeat business. sell at a lower margin to get more people into your customer base.........so........is it better to fill the resorts at a discount or hold your price and ignore the empty rooms? remember an empty room makes absolutely no money..................................

 

[jcb]

Dalton, I agree with you. If occupancy bookings are down dramatically then that will obviously affect per room guest spending rates.

What Rasulo also was saying (page 7 of the link in my prior post) is "we remain willing to make a short-term trade-off between modestly lower occupancy [which he said were 2% lower than 2010 levels] and significantly higher room pricing, as we believe that a return to normalized pricing levels will drive greater long-term profitability."

If the UBS analyst is right, and Moderate and Deluxe bookings are soft, then look for Rasulo to hit the panic button. Disney management watches booking rate trends very closely.

The proof (as to whether UBS is correct) should be seen pretty soon. If I have counted right, we are just about to the 12 to 14 week period for holiday bookings. By this I mean that 12 to 14 weeks is the period when most folks (obviously not DISsers) book their Disney vacations. If bookings are in fact "soft" it won't take Disney long to start rolling out some discounts.

 

[DebbieT11]

I believe we'll begin seeing more of the last-minute upgrade offers.... for people that are booked at a value, they'll receive an offer to upgrade to a moderate with availability for their dates for a nominal additional amount. This will place heads on pillows in their moderates, and Disney can re-sell the value room that has such a high demand.

There are threads here on the Dis that have Pop Century guests being offered CBR for an additional $19 a night upgrade fee.

Getting the guest into a moderate may just make them a new future moderate customer, too!

 

[bookworm0312]

I believe we'll begin seeing more of the last-minute upgrade offers.... for people that are booked at a value, they'll receive an offer to upgrade to a moderate with availability for their dates for a nominal additional amount. This will place heads on pillows in their moderates, and Disney can re-sell the value room that has such a high demand.

There are threads here on the Dis that have Pop Century guests being offered CBR for an additional $19 a night upgrade fee.

Getting the guest into a moderate may just make them a new future moderate customer, too!

Wish I'd get one of those! We leave in 3 weeks and are staying at Pop Century!

 

[ADP]

Too much too fast. More than likely when the breaking point is reached we'll see a large drop off in attendance. Not a gradual drop off, but a quick and large drop off all at once.

 

[WaltD4Me]

Too much too fast. More than likely when the breaking point is reached we'll see a large drop off in attendance. Not a gradual drop off, but a quick and large drop off all at once.

Of course I don't know what holiday bookings are looking like, but I think there is going to be a large drop off after the holidays. Many people, even non-DIS'ers have their holiday trips booked, after the holidays though all the higher prices are going to have an effect....especially since there is little sign of the economy getting much better. I understand Disney is looking at in park spending, but look at Vegas, they are giving rooms away to get people in the casinos and restaurants. And a crowded park doesn't mean they are spending money in it...or at least as much money. Look at when they ran the 4 for 7 promotion, the parks were packed, but in park spending actually took a dip, especially in merchadise sales.

I'm planning a trip for November and for the first time in years, I am looking at staying off property. I can get the DTD Hilton for less than a Disney Value and for less than 1/2 the price cheaper of a moderate. Maybe Disney doesn't care because I'll still be going to the parks, but I'll still be giving my money to someone else for the room and probably some meals. Do I want to stay off property? No, but with higher ticket, room and food prices and with airfare the way it is, I needed to look at a cheaper option. And I'm sure I'm not the only one.