With resorts at Walt Disney World, Disneyland, and stand-alone properties closed, Disney Vacation Club has a “point pool problem.” Here we’ll address DVC’s current policies, how this problem will play out, why occupancy rates will be significantly higher for DVC than hotels, and potential solutions.
For starters, DVCMember.com has posted a Travel Alert that includes “Temporary Updates to Our Cancellation Policy.” In pertinent part, this states that Vacation Points returned due to a cancellation of a resort reservation will not be placed in a holding account and will be returned to the current Use Year. This applies to all reservations checking in within the next 30 days.
When a reservation involving Borrowed Points is cancelled, the Borrowed Points will be returned to the Use Year they were borrowed from. This applies to all reservations regardless of arrival date. Please allow up to 15 business days for this process to be completed. Reservation Points returned due to a cancellation of a Disney Collection or a Concierge Collection reservation will be returned as Reservation Points in the current use year…
Unsurprisingly, this has led to a lot of questions. Members inquired about reservation cancellations involving Points that are set to expire soon. Right now, points set to expire in cancelled reservations are doing exactly that. We have a mid-May Animal Kingdom Lodge reservation with banked posts from last year, and it seems like a foregone conclusion that those points will be forever lost, with no recovery options. Sad, but understandable given the circumstances.
In the travel alert, Disney Vacation Club goes on to indicate that it is evaluating the banking and expiration policy and the use of certain points impacted by the closures. As a part of that process, DVC indicates the need to be considerate of the impact any changes could have on future inventory availability for the Membership overall. A decision will be made once there’s a better understanding of how future operations will be impacted (for a heads up when that happens, subscribe to our free email newsletter).
If my math is correct, there’s a total of roughly 75.85 million Disney Vacation Club points across all units at all resorts, including the ones outside of Walt Disney World. However, that includes undeclared points, including over 4.5 million at Disney’s Riviera Resort. That means the actual number in circulation is likely just shy of 70 million points.
It’s important to include the non-WDW resorts like Aulani, Hilton Head Island, Vero Beach, and the Grand Californian in this analysis, as those supplies of points do impact demand at Walt Disney World resorts (VGC much less so than the other three).
We won’t fixate on that point here, as it’s something covered in our Why is Disney Vacation Club Availability So Limited? post from a couple of years ago. Actually, what’s covered here is somewhat of an outgrowth of that discussion. The same ideas apply as there.
Essentially, we have a scenario where the entirety of Disney Vacation Club points represent the water in a pool, and the entire inventory of DVC rooms represent the pool itself. Normally, the water comes pretty close to filling the pool, with a bit of space at the top.
Now imagine lifting up all of that water, losing a bit to splashing, shrinking the size of the physical pool by ~25%, and then attempting to deposit the water back into the pool. You couldn’t. There’s now more water than there is physical space in the pool, meaning over 20% would overflow and be gone forever. (Well, since we’re talking about water, it’d actually evaporate or soak into the ground, but you get the idea.)
If that’s too conceptual, let’s explain with a simplified example. Let’s assume one of the DVC resorts at Walt Disney World has 12 million points (none do–bear with me). Setting aside borrowing and banking rules, which tend to normalize over the course of time, that means 1 million points are available and must be used during each month of the year.
If the resort is closed for two months, the 2 million points of room inventory from that period are gone forever. However, the supply of outstanding points is not. This means that the available unused points for the year exceeds room availability by millions of points. Hence the pool example, and also why it’s going to be incredibly slim pickins’ for DVC availability the next couple of years unless Disney steps in and somehow remedies the situation.
That’s the problem facing Disney Vacation Club right now. There is some breakage, but normal occupancy is above 95%. This allows for refurbishments or even the occasional closure due to a hurricane, but not the resorts being shuttered for several months.
One thing that’s worth pointing out here is that Disney Vacation Club resort occupancy is higher than standard hotel rooms at Walt Disney World, and doesn’t fluctuate much at all based upon travel seasons or most external variables. DVC occupancy will remain at that level without regard to the outside world for an obvious reason–DVC members already have pre-paid for their room, so they have something to lose by not using it.
This disparity between hotel and DVC occupancy rates also presents what we feel is the most plausible remedy for the situation. Basically, these hotel rooms represent a second pool that isn’t totally full, and it’s an even bigger pool than the one described above! Rather than spilling water all over the ground, we could put most of it back into the now smaller pool, and the other ~20% into the larger pool.
In non-pool terms: if there’s surplus inventory at the resorts around Walt Disney World, let Disney Vacation Club members use that via some sort of conversion rate that resembles point charts (or simply dump unsold hotel rooms at sister resorts into the DVC booking system).
Of course, there’s a cost to doing this in terms of staffing, maintenance, and burden on infrastructure. However, all of that should be relatively minor. The key is that there’s little opportunity cost, meaning that these rooms likely would go unfilled otherwise. Since hotel rooms are perishable inventory, there’s little downside to this approach.
In fact, there’s arguably considerably more upside than downside. Filling rooms that will otherwise sit empty fosters goodwill among DVC members. That’s positive both from a “future customer” perspective (getting them to add-on to their contracts) and also preventing them from becoming “former owners” who sell their contracts, further flooding the market during the recession. (Which has a ripple effect of consequences for Disney–none of them good.)
There’s also the matter of guest spending. Empty rooms are not spending any money on park tickets, food, merchandise, and so forth. Giving up these rooms as a goodwill gesture means Disney Vacation Club members–who already had tens of thousands of dollars to purchase DVC in the first place–have bigger budgets to blow on all of those things.
Of course, this all assumes that hotel occupancy will drop across the board once Walt Disney World reopens.
We aren’t going to relitigate that question. We already discussed that at length in our How Bad Will Crowds Be at Walt Disney World After Reopening? and “showed our work” in support thereof. Rather, we’ll simply take a quick comparative look at how hotel occupancy fared the last two times the United States faced significant travel disruptions or recession.
Post 9/11, Walt Disney World closed 16% of its resort rooms, removing them from the inventory entirely (and thus artificially bolstering the occupancy rate). Disney did not release occupancy rates for those periods, but the Walt Disney Company’s 2002 Annual Report (see page 55) paints a clear picture of the double-digit declines. Across all of Central Florida, hotel occupancy plummeted to 44% (Disney’s numbers track with local trends, but are typically higher).
During the Great Recession, the situation was somewhat similar, albeit not as pronounced. Americans didn’t fear traveling, many just couldn’t afford to do so. At the lowest point, operating income for Disney Parks & Resorts was down 50% to $171 million, from $339 million a year earlier. However, Walt Disney World used aggressive discounts to hold hotel occupancy at an incredibly respectable 89% (all per the Los Angeles Times).
Walt Disney World is a much more sophisticated operation than it was nearly two decades ago in the aftermath of 9/11. As such, I would not expect things to be as dire now as then. Today’s scenario does otherwise bear closer resemblance to 9/11, as that encompassed both travel fears and financial uncertainty, whereas the Great Recession was solely the latter.
It’s thus hard to say where the occupancy rate will settle for the next couple of years, and how much of a surplus there is that could theoretically be allocated to Disney Vacation Club.
There’s also the logistics of doing this so as to ensure that there truly is not much of an opportunity cost. Walt Disney World obviously won’t want to offer this exchange if those rooms could be sold, even at a deep discount.
We should also reiterate and stress that this is simply our idea of a possible solution. It’s definitely not official, nor is it even a rumor. However, it seems plausible and is one of two workable solutions (the other being to declare the rest of Disney’s Riviera Resort as a cushion).
Of course, we wouldn’t expect any solution until a reopening date for Walt Disney World is known. If the closure stretches beyond June 1, the window of options could start to close. At some point, the excess “water” (point supply) would overflow the free space in the larger pool, too.
About the only other “solution” is the status quo, which is essentially to grant flexibility to banking and borrowing rules, but not to address the inventory of rooms. Legally, there’s nothing more they’re required to do. Owners agreed to the rules of the game when buying, and we are the ones positioned to eat the loss if Disney does not intervene.
That’s how Disney Vacation Club has handled the shortage of availability created by the Aulani folly, but the key difference there is that the cause is more opaque and the result is not as pronounced. The present situation is more problematic, and the longer the resorts remain closed, the more availability is going to dry up and competition will grow more fierce for the limited inventory that remains available. Disenchanted DVC members are not in Disney’s best interests, which pretty much necessitates some sort of solution. We think metaphorical pool hopping is it.
Thinking about joining DVC? First be sure to read our Ultimate Guide to Disney Vacation Club. This covers the pros & cons, resale v. direct, how much money you’ll save, and other important things to know before taking the plunge. If you still can’t decide whether membership is right for you, “try before you buy” and rent points from DVC Rental Store. If you are convinced a membership is for you, check out the discounted options at DVC Resale Market. Planning a Walt Disney World trip? For comprehensive advice, the best place to start is our Walt Disney World Trip Planning Guide for everything you need to know.
Do you have any ideas as to other possible solutions to this Disney Vacation Club point pool problem? Think DVC will do something to remedy this issue? Have you lost points as a result of this? Had trouble finding DVC availability for later this year? Do you agree or disagree with our assessment? If you’re an existing Member, what do you think? Share any questions, tips, or additional thoughts you have in the comments!