Home » Disney Just Ambushed Some of its Most Loyal Customers. Here’s What it Means.

Disney Just Ambushed Some of its Most Loyal Customers. Here’s What it Means.

You’ve heard the phrase said thousands of times. Change is a part of life. When you purchase something from a company, you understand that caveat emptor applies. The rules when you buy might not remain in place down the line. It’s why companies add all those terms of service updates that you never bother to read. They’re making changes to benefit themselves, not their customers. This week, a certain segment of Disney’s most loyal customers are dealing with such a situation. Here are several facts you need to know about Disney’s latest ambush of their devoted fans.

A different kind of April Fools’ Day

Image: Disney

A few months ago, The Walt Disney Company announced that members of the Disney Vacation Club would receive new identification cards. On the surface, this sounded innocuous. Disney dropped in an odd caveat toward the end of the statement. They casually mentioned that current membership cards would expire on April 3, 2016. My wife remarked that it was an oddly specific, seemingly random date. She jokingly wondered what doomsday event the company had planned for April 4, 2016. As fate would have it, that “joke” demonstrated shrewd instinct about how a major corporation runs their business.

Disney has always had an issue with the resales market, something I’ve discussed before. Savvy buyers understand that a DVC resale costs a fraction of the cost of direct purchase through Disney while adding largely the same benefits. That’s why DVC resales have enjoyed a sales explosion over the past year. Prices have spiked in a way that hadn’t happened in the 25-year history of the DVC.

The issue is that Disney doesn’t earn a dime from such sales, at least not explicitly. The implicit revenue boost comes from the other things DVC members purchase when they visit a DVC property. Disney doesn’t lose out completely when someone buys resale, but the opportunity cost their accountants identify is at least $110 per point. With tens of thousands of points purchased via the resales market, the revenue lost via opportunity cost is so large that it creates a ripple, even on a spreadsheet as sizable as The Walt Disney Company’s. 

Class warfare, Disney style

Image: Disney

In March of 2011, Disney announced its largest alteration of the DVC membership agreement in the two decades of the program. They notified current and potential customers that DVC ownerships purchased via resales would lose access to some member benefits. Various Disney properties that don’t participate in DVC are still technically available for rental via the Adventure Collection, Concierge Collection, and Disney Collection. Disney changed the rules of DVC to restrict hotel stays at these properties to members who bought points directly from Disney.

On April 4, 2016, barely five years after the first time they did so, DVC fundamentally changed the rules of their membership program once again. This time, the change is more aggressive. Disney is no longer willing to sit on the sidelines and watch apathetically as resale dealers enjoy record sales. Without any warning, the company altered the DVC program. Customers who purchase via resales no longer enjoy Membership Extras afforded to direct buyers. In other words, anyone who tries to save money through a resales acquisition of DVC membership now enjoys fewer benefits despite the fact that they’re participants in the DVC program. Yes, current members are grandfathered in with the same rights and privileges that they had in 2011. Still, it’s the latest example of Disney favoring the customers who spend more money with the company over the ones who are more budget-conscious.

That was then, this is now

Image: Disney

Two important aspects of this announcement merit further discussion. The first is that Disney handled the announcement differently this week as opposed to what they did in 2011. Five years ago, the corporation proclaimed the changes far enough in advance that they gave customers a chance to allow for the difference in policy. Disney afforded potential customers with the opportunity to beat the deadline, thereby avoiding (additional) harsh feelings about the change.

In 2016, Disney offered no warning. The only hint was that oddly specific expiration date for current membership identification, something I’ll discuss further in a moment. Their lack of alerting DVC owners has caused quite a stir within the insular DVC community. At best, it’s a thoughtless announcement that agitates even the most loyal members. At worst, it’s a malicious attempt to enforce new rules on customers who had already finalized their plans for 2016 vacations at Disney resorts. Due to the structure of DVC, members must book their rooms several months in advance. The majority of program participants book between seven and eleven months in advance.

Think about the situation from the perspective of someone who followed these rules. A person who booked a May vacation to Walt Disney World late last year would have reasonably expected a lot from their vacation that they won’t get now. There’s no Star Wars weekends, the new Frozen attraction won’t be open, Soarin’ Around the World won’t debut in America until after its global premiere at Shanghai Disneyland Park, 24 Hours of Disney isn’t occurring this year, and Rivers of Light is officially delayed until at least June. On top of all the disappointment of that, DVC members now discover that the program actively considers resales buyers second-class citizens.

Don’t ask me. I just work here.

Image: Disney

The second and vastly more alarming aspect of this discussion involves the information coming from Disney. On April 4th, the Senior Vice President of Marketing & Sales Strategy at Walt Disney Parks and Resorts, Ken Potrock, posted a message to all current DVC members. He explained the rationale behind the changes while announcing the new rules.

At the time, the people most affected by the modifications were new buyers currently going through the resales purchase process. For obvious reasons, resale companies quickly wrote emails to Disney. They requested clarification about the hard deadline of April 4, 2016. If you’re unfamiliar with the resales purchase program, it can take three months or more to complete. My sole resales purchase to date actually took five months due to no fault of our own. Getting strangers to sign documents can be a challenge.

Disney is aware of this, which is why the original quotes from their employees reflected the correct strategy. Anyone who had finished Right of First Refusal, the point where Disney passes on the opportunity to reclaim a contract, would enjoy the full benefits. That was the April 4th evaluation. On April 5th, Disney reneged on this promise. They sent out notifications to the major DVC resales sites, indicating that anyone who wasn’t a member by April 4th was out of luck. Even people who started their paperwork in calendar 2015 wouldn’t enjoy Membership Extras. It’s a tone-deaf policy change, and it reflects the lack of strong infrastructural communication among Walt Disney World employees.

The power of the card

Image: Disney

The logical question here is how Disney will police such an arcane rule. If they line up five people Usual Suspects-style, there’s no way to tell who is a direct DVC purchaser as opposed to a DVC resales member, right? That’s where the DVC membership card comes into play. As one of the new highlights of the 25th anniversary celebration, Disney trumpeted that it’d send new identification cards to members. That means (at least some) Disney employees knew in January of 2016 that they were going to incorporate a major policy change in April.

For two years now, DVC members and annual pass holders have wondered aloud why Disney doesn’t store their information on a Magic Band. Instead, the company requires its cast members to ask people if they’re entitled to additional discounts, one of the proverbial Membership Extras. Qualifying participants must display their card to earn the discount. The pre-2016 cards will no longer work for these purposes. Anyone lacking the blue 2016 card is out of luck. And that’s the catch here.

New DVC owners who buy via resales from this point forward will not receive a membership card. It’s almost as if they don’t exist in the eyes of Disney’s overlords. This does lead to a fundamental question.

How great are Membership Extras?

Image: Disney

That’s not the million-dollar question, but it is, at least, the several thousand-dollar question. Given the pricing disparity between resale and direct purchase, which is as much as $60 per point, what are you giving up from now on if you choose resale? The most obvious different is the price discount at shops and restaurants. The offshoot of this tactic by Disney is that they’re also eliminating Tables in Wonderland as an option for resales buyers. Effectively, if you join through resales purchase, you’ll pay more on your Disney merchandise and especially your meals. While I don’t love it as much as some, Tables in Wonderland is a wonderful way to eat cheap at Disney. The company isn’t pulling any punches by eliminating it.

What is Disney’s goal here?

Image: Disney

Their business maintains the same objective as they’ve demonstrated throughout the past few years. They’re trying to maximize their revenue stream as much as possible. They understand that while some DVC participants will see the Membership Extras as trivial, others will want them. What’s their only option? They’ll have to buy some points directly through Disney.

Current DVC members must acquire at least 25 points when they add on to their existing contract. Even at the lowest possible price of $110 per point, that’s $2,750 per transaction that Disney will receive from each person who chooses to “upgrade” to full membership. Disney also has the right to boost the minimum number of points to 50, which would double that profit per customer. In other words, Disney is no longer just targeting non-DVC members with their sales pitch. They’re tweaking the rules of their longstanding system to pressure resales owners to give Disney more money.

The ultimate outcome from this is one I worry Disney isn’t considering enough. Membership in the Disney Vacation Club looks less attractive today than it did at the start of 2016. It’s an odd choice to trumpet the 25th anniversary of the program then reveal an insidious change to the membership rules. As one of the strongest champions of DVC, I’m taken aback by this aggressive move.

Whether this strategy proves to successful in boosting DVC sales or sets back the program is the story to follow in coming months and years. If you’ve been on the fence about purchasing DVC, this probably isn’t the best time to buy. You should wait until the dust clears.