Hotel Occupancy : Disney Wants Less?

[Tyler's Dad]

I posted this on a Genie post, but might be more relevant here.

Doing a little research and noticed some trends.

In 2011, Disney ran at 81% hotel occupancy and their stock was devalued based on the reports. Hotels were not booking in the Moderate and Deluxe categories, so cost per room was having to raise in the Value category, in order for them to operate at a profit and Art of Animation was opening soon, to add even more value rooms. So, Disney developed FP+ the next 2 years and when it went into effect, hotel guests received the benefit of pre-booking and hotel occupancy started going up. By 2015, this was at 89% and Disney stated that was almost too much and any further increase would require expansion, so Disney doubled down on DVC resorts and tried to add rooms to existing resorts, but tap into a fan base that wanted to own. This eased the pressure for a little while, but then by 2018, the occupancy was right back up there. At that time, Disney started allowing good neighbor resorts to use EMH and book FP+ at 60 days in 2019. They also announced the building of Reflections and Star Wars resorts to add more rooms to their inventory.

Now, at every step in this process, as Disney occupancy went through the roof, Disney tried to develop technology and or inventory that would help stay ahead. When occupancy took too big of a hit, they added technology to entice people to stay on-site. When that was maxed out, they tried to add inventory where they could or hurt their own occupancy in the case of giving the same benefits to good neighbor resorts.

When the pandemic hit, Reflections was abandoned, so there was no new inventory coming. They had already maxed out DVC space and brought on the good neighbor hotels. So, what is the next thing they could do to stop capacity from going up again? I think by removing some perks of staying on-site and introducing Genie+, they are going to get people that see that staying off-site might make more sense and will begin doing that. That will be good for Disney for a short while. Then, when everything in the resort opens to max capacity again, they will see occupancy rates going back down and bring back some incentives to stay on-site again. Once those work and capacity goes back up to the limit, then you bring back Reflections or fins some way to encourage off-site again. The wheel just keeps going around and around.

One last thing that interested me was the good neighbor hotel incentives and FP+. I would imagine Disney had to enter into a contract with them, for some amount of time, that would give the same FP+ availability to those hotels as on-site guests. Otherwise, Disney could have offered 60 days to them and then turned around and changed to 90 days for on-site guests and nothing would have changed. I almost wonder if Disney has to wait until next year or the year after before they can offer Genie+ benefits to on-site guests, in order to fulfill those contracts?

 

[OKW Lover]

I'm not quite sure what the point of this is. Can you explain in a different way?

I'd expect hotel occupancy to vary according to a myriad of factors. Not sure how much technology, marketing or special deals matters or what relationship that has to hotel occupancy. I guess you are saying this is all cyclical?

 

[Tyler's Dad]

I'm not quite sure what the point of this is. Can you explain in a different way?

I'd expect hotel occupancy to vary according to a myriad of factors. Not sure how much technology, marketing or special deals matters or what relationship that has to hotel occupancy. I guess you are saying this is all cyclical?

I think what I am saying is that I have seen a lot of people complaining about the loss of value that staying on-site has gone through lately and that they will stay off-site instead. From what I see, I think that is exactly what Disney wants right now. I also see a lot of complaints that Disney is not offering Genie+ at a discount or free for on-site guests and I think what I see is that as soon as occupancy goes down, they probably will.

Cyclical for sure and I guess I was just wondering if others saw what I saw or if I am just misreading?

 

[OKW Lover]

I think what I am saying is that I have seen a lot of people complaining about the loss of value that staying on-site has gone through lately and that they will stay off-site instead.

OK, thanks. I understand your point now.

From what I see, I think that is exactly what Disney wants right now.

However, I don't understand why Disney would want lower occupancy rates at their resorts. Wouldn't that harm earnings?

 

[Tyler's Dad]

OK, thanks. I understand your point now.

However, I don't understand why Disney would want lower occupancy rates at their resorts. Wouldn't that harm earnings?

From what I read, 89% was too full and they couldn’t operate at those levels long term. They would have to add capacity to lessen it. Probably too many employees needed for that many people. With Reflections being canceled, it’s either run at too full capacity or somehow stop people from staying on their properties.

Hotels are there to get people inot the parks. While they make money on hotels, it’s not as much as a person in the park.

 

[wfjny]

I think what I am saying is that I have seen a lot of people complaining about the loss of value that staying on-site has gone through lately and that they will stay off-site instead. From what I see, I think that is exactly what Disney wants right now. I also see a lot of complaints that Disney is not offering Genie+ at a discount or free for on-site guests and I think what I see is that as soon as occupancy goes down, they probably will.

Cyclical for sure and I guess I was just wondering if others saw what I saw or if I am just misreading?

I like the data, but not sure I would come to the same conclusion.

For me personally, as an out of state AP holder/DVC member, the reservations system is what has caused a bunch of issues.

We make multiple trips a year. However, I have had to limit our "Long Weekends" to just three park days, because that is all the reservations someone can make. Sure our standard summer week is at DVC, and those reservations are good as we are staying "on-site". But in previous years we would often make some 3 or 4 day trips. Due to our school schedule, we have a six day weekend over the Dr. King Holiday. We would normally stay at the Hampton Inn that weekend. Cannot do that now, as I don't know if I can get another reservation for day 4 after day 1.

As I see it, I think they are using the reservations to encourage more people to actually stay on-site...

But I do agree, what was once free is now a pay service. I can completely see them offering free Genie+ like they offer free dining at times...

Or free/discounted photo pass...

Just my two cents...

 

[_19disnA]

Not quite sure if you are asking our view or exactly where your comments are going. Disney (the company) is a LOT more then amusement parks & hotels. They have also added other divisions/sold some/etc. in the last 10 years, so a different company now and difficult to make comparisons to 2011. Stock price can move up/down for a lot of different reasons not directly related to any one factor. No financial advisor has any better crystal ball on how stock prices will move in the future regardless of what they claim.

 

[CrankyDad]

Hotel GM here. You are incorrect about them not wanting increased occupancy. Once they hit a break even standpoint (say 45% occupancy) the flow thru on their profit goes up rapidly.

i am on mobile so not conductive to long typed out response, just leave it at your premise is not correct.

 

[focusondisney]

If they want more capacity, taking rooms out of inventory to convert to DVC doesn’t make sense either. Nor does themed hotel with very limited capacity.

 

[Dave006]

They also announced the building of Reflections and Star Wars resorts to add more rooms to their inventory.

The Star Wars hotel is a special experience and not a major hotel room addition to capacity. It is a another technology pilot.

Reflections was planned based on sales of the other DVC time shares. However due to the pandemic their slow sales rates at the Rivera resort took a noise dive. They just stopped the initial ground prep for Reflections for now.

This was based on their experience after 2001 & 2008. Adding more inventory at the MK vs the DS area would steal sales from the massive Rivera DVC. So for now Disney has held off the addition of a new DVC at the MK along Bay lake for now.

Now FP+ was simply the outgrowth of the original FP system from 1999 using the creative design of MagicBands, RF technology for guest interaction and Tapstiles that were developed at a cost that exceeded 1 Billion dollars in technology development.

Geni and Geni+ are just the latest implementation of FP+ and to utilize smartphone technology and AI that will continue to adapt as technology allows Disney to enhance MDE.

Dave

 

[Disneyfan754321]

Hotel GM here. You are incorrect about them not wanting increased occupancy. Once they hit a break even standpoint (say 45% occupancy) the flow thru on their profit goes up rapidly.

i am on mobile so not conductive to long typed out response, just leave it at your premise is not correct.

Thank you something just did not seem right

 

[Leight19]

Hotel GM here. You are incorrect about them not wanting increased occupancy. Once they hit a break even standpoint (say 45% occupancy) the flow thru on their profit goes up rapidly.

i am on mobile so not conductive to long typed out response, just leave it at your premise is not correct.

I have no hotel experience and thought something similar. My assumption would be at 89% average occupancy they too often hit demand periods that fluctuate above 100% and that justifies building more hotels to capture missed revenue. For the example of good neighbor hotels, Disney gets kick back for providing that benefit and likely realized it was a way to get revenue with quicker turn around time/less financial risk then building more inventory.

My cynical take on these changes are that Disney decision makers are so disconnected from audience they do not recognize these changes will impact decisions to go and stay on site (this was confirmed in reports about how shocked they were with backlash over dme going away). The other viewpoint I have is that with pent up demand and 50th Disney thinks people will swallow any changes they implement and will just accept it as new norm later (or disney will just offer benefits when needed later ).

 

[CaptainAmerica]

I think many of the people in this thread are making the mistake of mixing long-term decisions with short-term decisions and acting like they're all a part of one common trend.

Long-term Decisions that Might Indicate a Trend
- Paying for parking
- No more DME
- Magic Bands no longer free
- Replace FastPass+ with Genie+
- Change EMH from one hour in one park to 30 minutes in all parks
- Add Evening hours for Deluxe resort guests

Short-term Factors Unrelated to the Items Above
- Pent-up demand following the peak of the pandemic
- Reduced demand while we're still in the tail of the pandemic
- Staffing shortages (domestic)
- Staffing shortages (international)
- 50th Anniversary demand (including Rat, Harmonious, and Disney Enchantment)
- DVC points glut
- No dining plan

 

[HopperFan]

....... so Disney doubled down on DVC resorts and tried to add rooms to existing resorts, but tap into a fan base that wanted to own. This eased the pressure for a little while, but then by 2018, the occupancy was right back up there. At that time, Disney started allowing good neighbor resorts to use EMH and book FP+ at 60 days in 2019. They also announced the building of Reflections and Star Wars resorts to add more rooms to their inventory.

Now, at every step in this process, as Disney occupancy went through the roof, Disney tried to develop technology and or inventory that would help stay ahead. When occupancy took too big of a hit, they added technology to entice people to stay on-site. When that was maxed out, they tried to add inventory where they could or hurt their own occupancy in the case of giving the same benefits to good neighbor resorts.

When the pandemic hit, Reflections was abandoned, so there was no new inventory coming. They had already maxed out DVC space and brought on the good neighbor hotels. So, what is the next thing they could do to stop capacity from going up again? I think by removing some perks of staying on-site and introducing Genie+, they are going to get people that see that staying off-site might make more sense and will begin doing that. That will be good for Disney for a short while. Then, when everything in the resort opens to max capacity again, they will see occupancy rates going back down and bring back some incentives to stay on-site again. Once those work and capacity goes back up to the limit, then you bring back Reflections or fins some way to encourage off-site again. The wheel just keeps going around and around.

One last thing that interested me was the good neighbor hotel incentives and FP+. I would imagine Disney had to enter into a contract with them, for some amount of time, that would give the same FP+ availability to those hotels as on-site guests. Otherwise, Disney could have offered 60 days to them and then turned around and changed to 90 days for on-site guests and nothing would have changed. I almost wonder if Disney has to wait until next year or the year after before they can offer Genie+ benefits to on-site guests, in order to fulfill those contracts?

To clarify for other readers "Good Neighbor Hotels" do NOT get Disney perks. They only meet basic requirements of what they offer: AAA approved, shuttles, location, WDW info & ticket desk ...

Too often people are expecting EMH and other Disney Resort perks when they book Good Neighbor and are disappointed to find out they do not. The hotels that do get these perks are few and have different classification. If the perks are important, be sure to verify the hotel you are looking at has it, but note they have been annual contracts and it could change.

https://www.wdwgoodneighborhotels.com/

 

[katyjeka]

I have worked at the same hotel for over twenty years. We've increased our prices drastically not to limit the sale of rooms but to make up for the lack of business. I can't believe what people are paying to stay at our hotel which is not located in a tourist area. I stand by what I have been saying for months. Less people are traveling to WDW because of covid and when they once again feel safe they will be back. Disney is missing oversea travelers and Americans who are traveling to visit family that for so long they were unable to see.(I think this is why our business is good, families visiting grandparents,cousins,etc) I've traveled to Disney for more years than I care to admit and do not mind a crowd. I've never seen so much availability this close to our December trip. I don't believe they don't want to sell rooms, simply put the demand is not back yet. I do think when vaccines are readily available for all ages and people are once again sick of visiting family the rooms will sell.

 

[CaptainAmerica]

Less people are traveling to WDW because of covid and when they once again feel safe they will be back.

In my social circle, the exact opposite of this is true. Everyone I know is vaccinated and feels perfectly safe getting back to normal but they don't want to deal with the masking, closures, and limited service.

I do think when vaccines are readily available for all ages and people are once again sick of visiting family the rooms will sell.

The rooms that are available are already selling. Disney can't open all of their inventory because they don't have the staff to support it, not because there's a lack of demand.

 

[jimmymc]

I'm not sure Disney would want to reduce perks just to push people out of the hotels. Hotels make more money the more people stay there, which is why places will sell rooms at very low prices last minute if they aren't sold. In fact, hotels tend to overbook reservations, because having to pay to move someone last minute is still more profitable than having rooms go empty. Costs like housekeeping, transportation, and the onsite perks are far outweighed by the cost of the room. The ideal hotel from a business perspective fills every room, there is no financial benefit to having rooms empty.

 

[katyjeka]

In my social circle, the exact opposite of this is true. Everyone I know is vaccinated and feels perfectly safe getting back to normal but they don't want to deal with the masking, closures, and limited service.


The rooms that are available are already selling. Disney can't open all of their inventory because they don't have the staff to support it, not because there's a lack of demand.

I agree that staffing is a problem. However I now have a lot of options open for our December trip. This is something I've never seen before.i really don't think they are filling the rooms as easily as precovid.

 

[Dave006]

The largest reason for the holidays having more openings with cancellations is and continues to be the lack of international holiday (vacation) travelers. We will have a better idea when the UK opens up for November holiday travel back to Florida.

Australia guests are still locked down and can't travel without a mandatory 2 week quarantine when they return.

The discount Airlines are severely restricted in the UK and EU at the moment.

Dave

 

[wfjny]

In my social circle, the exact opposite of this is true. Everyone I know is vaccinated and feels perfectly safe getting back to normal but they don't want to deal with the masking, closures, and limited service.
The rooms that are available are already selling. Disney can't open all of their inventory because they don't have the staff to support it, not because there's a lack of demand.

I am seeing the same thing. In short. most people I know are vaccinated, and most want to get back out. They are also sick/done/frustrated with various mask rules, reservations, and the unexpected changes.

A lot of my friends have been keeping their "vacations" to the 3-4 hour driving radius. For my local friends (Charlotte, NC), those trips could be as far as Pigeon Forge & Great Smokey Mountains, TN, Meryl Beach & Charleston, SC, Outer Banks, NC, or Atlanta, GA. All are just a drive, no worries about TSA, mask rules on a flight, unruly passengers, or delays. Just hop in your personal car and go.

I mention my issue with Disney reservations, but beyond that, for a good portion of the US, Disney is a flight away. Even people that want to go to Disney may not want to go thru the hassle and expense of flying. I would also say that many of us "regulars" would still recommend against someone making the first or once in a lifetime trip to Disney now. For a variety of reasons, the parks do not have everything open, and because of that some of the magic is lost...