Re: 2008 Dining Plan Changes

Alpha wrote:
Sandi says:

Dvc and DCL have special perks for FFliers, whay can't WDW as a whole recognize and reward loyalty? Even a special "welcome back" package
in the room -maybe ponchos, or mugs, or a pin-would make FFs feel
their business is appreciated.

I've often thought this as well. And the last time I remember
discussing it here, I think B1ck3r responded that Disney does what's in
its best interest and because Disney invests so much in knowing its
business, it obviously makes no business sense for them to do such a
thing, or else they'd already be doing it.

Well, Mr. B1ck3r doesn't live here any more!

Reminds me of the joke about the economics professor and the grad
student walking down a street. They come upon a $20 bill lying on the
ground. The grad student says, "Look, a twenty." The economist
responds, "Nonsense. If there were a $20 bill on the street, someone
would have picked it up already."

LOL!

Anyway, if loyalty programs work for other companies that run similar
businesses -- for instance, Marriott, Hilton, etc. -- then why wouldn't
one benefit Disney? *Is* Disney dropping the ball, or have they done the research on this and concluded that a loyalty program isn't worth it?

WARNING! Big boring post by Rudeney dead ahead:

Even though B1ck3r might not have gone about explaining it correctly, he wasn't always wrong in his opinions. Your economics joke was a good segway into the real issue. As any good economist knows, it's always about supply and demand. As long as guests are buying what Disney has to sell at the prices it offers, then there is no need for any sort of incentives. The supply and demand curves have crossed at what is called the equilibrium point, which means the price is right for everyone.

Guests are willing to pay that price because they believe it is a "value proposition". That is, the perceived value of the goods and services received have exceeded the price, even if just by $0.01. This is basic buyer philosophy. The value proposition holds true for everything that we purchase, even things like commodities and utility service from regulated monopolies. Basically, it means you will only spend money when you see it as being worth while. If you think it's worthwhile to pay $500 per month for electricity to keep your home a few degrees warmer or cooler, then you will do so. If you don't see the value in that, you will adjust the thermostat. The same goes for a vacation at WDW. If you see the value in paying about nearly $100 per person per day for park admission, food, and incidentals, then another $400 per night for lodging, then you'll stay at a WDW deluxe resort. If not, then you may choose to downgrade to a moderate or value resort, or even stay off-site. Some people won't see the value in going to WDW at all.

On the other side, Disney is willing to supply the goods and services at that equilibrium price because it meets their budgetary goals. When demand begins to greatly exceed supply, then there are only two things that can be done. One is to move the demand curve and the other is to move the supply curve. This results in a new equilibrium price that will be higher or lower. Some markets are so volatile that the equilibrium price is never reached, but in others, it's a fairly simple equation.

Moving the demand curve is done by adjusting the price, or, really, by adjusting the "value proposition". If supply exceeds demand, then you create more demand by increasing the perceived value to be higher than the price. This can be done by lowering the price or by increasing the offerings. This is what others like Marriott and Hilton are doing with their loyalty programs. They may not be changing the price as much as they are increasing perceived value by adding extras, like giving high-level loyalty members free upgrades. This incents those members to remain loyal to one program so they can build more points and attain that higher level in the program. The customers perceive that as valuable. When demand is too high, it can be reduced by lowering the value proposition, either by higher prices or fewer incentive.

The supply curve is much more difficult to move in the resort industry. Of course supply can be lowered by closing rooms, and Disney has in fact done that (we saw that first-hand when half the GF was closed in late summer 2001). increasing supply can only be done by building more rooms, and that is expensive. Of course in doing this, the company will probably also raise prices, thus lowering demand slightly. A good executive management team will figure out how to concentrate on supply that is going to result in the highest profits while not hurting demand. It appear to me that Disney has finally figured that out in the form of DVC.

Now, bringing his all together, Disney resorts are experiencing a high level of demand right now. In this case, and the fact that there really is no direct competition, there's no reason for them to offer any incentive program "today". If demand continues to increase, you will see the value proposition decrease for guests (in other words, the rooms will be more expensive). The good thing about the hotel industry is that while supply can change very quickly, prices can. If they see that weekend demand far exceeds weekday demand, then it makes sense that they would want to push the demand curve down on the weekends and up on weekdays, which can be accomplished by raising weekend prices, or by offering lower prices or incentives for weekday stays.

All of the same theories can be applied to food as well. The dining plan was created to put butts into restaurant seats, which it did. Now, there are not enough seats so they have to move the curves. They will do this by reducing demand with a lower value proposition. This can be accomplished by reducing the quality and quantity of food and service (which we have seen) and in higher prices for the plan (which we are about to see).

All of this is in fact the realm of "good people doing a good job", even though it's not what we as customers want. About the only thing we can do is vote with our dollars. Unfortunately, it takes billions of dollars to control the vote, so until the environment changes (either internally or, more likely, externally), then our votes probably won't count much. In the mean time, all we can do is consider the value proposition. When you believe that the value offered by a Disney vacation just barely exceeds the price, then go. If not, then don't. For me, the value is much less than what it once was. We are finding more value in other entertainment and vacation offerings. We still find some small value in Disney, so we will continue to spend there every now and again, but not like we used to. Where Disney was getting somewhere over $6K a year from us, they are now averaging about $2K.




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- RODNEY

Tentative Next WDW Vacation
Spring Break 2008
(226 Days To Go!)
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