The future of DVC, regardless of Comcast.

[KNWVIKING]

Recently there have been "rumors" of DVC being sold off to an outside entity. In another recent thread, Baron mentioned Marriott. I don't know if this will ever happen, but I can't think of an upside for Disney to do this. What would they gain ?

Currently, SSR is selling like hotcakes. Every price increase has been accepted by future members. Even the higher points totals at SSR haven't phased buyers. Cash is pouring in faster then the resorts are built. DVC has even resorted to envoking ROFR.

The resorts themselves, after they are build cost Disney nothing to maintain or operate as our dues cover all operating expenses and kick a little more profit into the kitty.

Disney also holds a small percentage of rooms at each resort for the purpose of cash rentals.

And the real beauty of it for DVC is that in 2042- with the exception of SSR- they get to start all over again.

Why would Disney/ME ever want to sell this cash cow ? Conversely, why would Marriott or anyone else want to pay the price to buy it, knowing they'll never own the land and will pay huge fees to Disney.

Where's the logic in selling - or buying - DVC ?

[rriley25]

Good questions.

I do believe that SSR sales may slow somewhat due to the uncertainty in future ownership. Having said that, I agree that DVC is a money-maker and would be regardless of ownership.

Typically, in large mergers, the new owner must find a way to recover some of the debt incurred during the process. This causes spin off's of some of the more profitable units in an effort to do just that. However, in this case, Comcast's offer is a stock swap. Stock swaps tend to be less costly, and in fact, will probably be the major reason this initial tender will be rejected.

As a DVC owner, one of my biggest concerns regarding this possible merger is the difference in company culture. Disney has managed to convince it's front line staff that the customer deserves to be treated well and with respect at all times and ththe CM's have provided a level of service not often seen in corporate America. The level of service provided will likely decline if a takeover occurs....IMHO anyway.

[Werner Weiss]

Originally posted by KNWVIKING
Why would Disney/ME ever want to sell this cash cow ? Conversely, why would Marriott or anyone else want to pay the price to buy it, knowing they'll never own the land and will pay huge fees to Disney.
Over on the DVC board, there's been speculation and concern that DVC could be sold off, or that just HH and Vero could be sold off, or that DVC could become Comcast Vacation Club. At this time, there is no reason to believe any of this will actually happen.

Personally, I think that the only way that DVC will be sold off is if the corporate financial wizards decide that it makes more business sense to outsource Disney's entire lodging business than to operate it (regardless of whether Disney merges with Comcast, merges with another compnay, or remains independent). In such a case, DVC, along with all deluxe, moderate, and value resorts, might end up in the portfolio of a major lodging company (or perhaps the buidlings would wind up with one company and the operations with another).

Disney would free up a large amount of capital. And Disney would continue to receive guaranteed profits from licensing. The lodging company (or companies) would add "trophy" properties to their portfolio(s).

Both sides would assume that the lodging company can bring greater efficiencies to the Disney resorts because lodging is their core business.

And it's likely that WDW guests, including DVC members, would see very little change. And what little change there is — such as the ability to earn and redeem major lodging chain frequent guest points or a trading priority with a major chain's timeshare collection — are likely to be positive.

[KNWVIKING]

How ? If they sold off the resorts outright I could see them generating new capital, but what capital are they tying up by hanging on to them ?

[Chuck S]

I agree, I doubt they would sell off just DVC without selling (or sub-contracting management) of all the Disney resorts.

I could see maybe sellling of VB and HH, but the bad press and hard feelings it would create amongst DVC owners there would hardly be worth it.

[Werner Weiss]

Originally posted by KNWVIKING
How ? If they sold off the resorts outright I could see them generating new capital, but what capital are they tying up by hanging on to them ?
By hanging on, the capital that those resorts represent cannot be put to other uses. Disney (or Comcast-Disney) could spend the capital in other ways if they sold the resorts.

Let's suppose they could sell the resorts for $8 billion. (I have no idea if that number is anywhere near the real value.) The value would be calculated based on the profit that the resorts can generate — not by how much it cost to build them. With that money, they buy another second-rate cable channel.

Sure, it sounds like a bad idea to me, too. But that doesn't mean that it can't happen.

[DVC-Landbaron]

Bingo Mr. Weiss.

The real cash for DVC comes from the up-front investment. That has already been realized. The rest is mediocre at best. And as you say, the sale would generate immediate cash that could be used for other things.

It's been in the cards ever since its inception. It's just that none of us realized it. But it was always in Ei$ner's mind!!

[Maistre Gracey]

Originally posted by DVC-Landbaron
The real cash for DVC comes from the up-front investment. That has already been realized. The rest is mediocre at best.
If that's the case, why would anyone want to buy the sold out DVC resorts?
I can see why Disney would sell, but who would pay a substantial amount of money for a business that makes very little profit, even less after paying Disney licensing fees?

MG

[DVC-Landbaron]

Someone who is in that particular business already. A development on Disney property would definitely enhance their image (scope, marketability, etc.) thereby increasing interest and revenue.

It is my understanding that Marriott is already interested.

[KNWVIKING]

but they also generate substantial cash with their financing on those points - in the area of 10% APR. I don't know the percentage of member who have chosen to finance thru DVC, but just reading the DVC board leads me to believe a substancial portion do.

I also find it hard to imagine Marriott paying mega bucks for the current DVC resorts - with the exception of SSR - because they would have virtually no way of recouping that investment. The very argument you're using for ME wanting to sell - little additional profit after up-front cash- would mot definitely apply to Marriott or any other potential buyer.

If anything, I can imagine WDW leasing acreage to Marriott so they can build their own on-property resort or possibly buying up SSR. DVC as I know it would continue as is, but DVC 2 would but under someone elses ownership.

[vernon]

If it were the financing area that someone were interested in ( and I'm not sure about that because most financing is done over 10 years, therefore many of the loans are coming to an end) then it would make more sense for a company like Bank of America or Citibank to be interested. Disney may charge 10% on their financing (which I think is outsourced anyway) but either they are paying to borrow that money, or it could be invested for about half that %age rate.

I'm sure Mariotte would like to be able to build a timeshare on Disney property, but DVC has been such a MASSIVE cash producer to Disney why sell off something that is so successful.

It is also the case that if Disney were to sell the DVC all those properties that will be returning to the Disney fold in 38 years time (and will basically be in full working order) would belong to whoever bought the company. IMHO the only person that would benefit from taking the money now for that huge windfall in 2042 would be a shortminded chairman who's desperate to inflate the profits because he thinks his time in charge ( and share options potential) is very limited. Hmmmmm sound like anyone we know. Eisner maybe, but it seems the Comcast boys are reasonable forward thinking and only someone who sees their tenure disappearing down the swanee is likely to take that option. IMHO DVC is safer with Comcast than it is with Eisner.

Again why sell off part of your property (indeed slap bang in the middle of your property) when you get special dispensation for owning all that land. It would seem an increadably shortminded action to sell off any land at WDW,let alone something as currently profitable as DVC that has a future huge potential in the not too distant future. I understand it could be argued that the potential future profit would be the "carrot" for Mariotte ( or any other timeshare company) but the amount of up front cash they would have to pay in order to secure that incalcuable future windfall would be astronomic. I don't think they (or anyone) is that cash rich, JMHO.

I can see a decent argument for selling off DLC, because that could be done as a "job lot", freeing Disney/Comcast of the Californian parks commitment allowing it to concentrate on pumping money into WDW and really raising the bar there.

[KNWVIKING]

***"IMHO the only person that would benefit from taking the money now for that huge windfall in 2042 would be a shortminded chairman who's desperate to inflate the profits because he thinks his time in charge ( and share options potential) is very limited. Hmmmmm sound like anyone we know."***

I'll agree that ME could try and do this, I just don't think there is enough up-side for a potential buyer. Not enough return for the purchase price.

***"( and I'm not sure about that because most financing is done over 10 years, therefore many of the loans are coming to an end) "***

I don't know why must would be coming to an end.Since the late '90s the flow of new sales- and loans- have been non stop. Of course some notes are and have ended, but there are new ones being signed everyday.

[vernon]

Viking, I think we're arguing the same point. I agree there isn't enough in it for a potential buyer.

I'm also pretty sure the financing is outsourced already. Even if that isn't the case it makes more sense for a finance company, not a timeshare company to take on that particular aspect.

[raidermatt]

Really now, I don't think anybody making these decisions really cares much about what will happen in 38 years.

So, we are left with what would happen now.

Yes, the bulk of the return on DVC is realized up front. Just as its a way for a guest to pre-pay for vacations, its a way for Disney to get pre-paid for vacations.

Why would Disney sell?

If its profitable for them to run, then it would be profitable for someone else to run. Therefore, Disney would have another opportunity for up-front cash.

No, not as much as if they simply sold a hotel, but still a nice chunk of change.

Why would Marriott (or anyone else) buy? Same reason Disney might not sell... because they are in the business of running timeshares, not just collecting up-front capital.

Its just a question of which direction each wants to take.

Having timeshare properties in WDW would be extremely valuable to Marriott. It would be a selling point for all of their properties.

I'm not saying it will or will not happen. Only that there's no way we can look at how Disney runs their business today and say its not a realisitc possibility.

[Another Voice]

The lure to Marriott is that the WDW properties would be a fantastic addition to their existing time share network. Imagine all the people on the edge of buying that place at a ski resort if they knew they could also use their points in Florida. All hotel companies fight to get the best locations at the most popular destinations, this is no different.

In addition to the marketing angle, Marriott could make a much better profit off the DVC operations than Disney – the mouse is demanding that DVC bail out a bankrupt network, offset losses from a retail chain, pay off a $5 billion debt to buy the Power Rangers, and to send the monthly check to Ben Affleck until Pearl Harbor finally gets buried. The return at DVC may not be enough for Naked Mike, but it could be huge for a company like Marriott (that knows its business and sticks to it).

From Disney's side, they get a chunk of cash to invest in "high return" options like airline leases or to pay down their junk debt. It's not to difficult to see that those returns are going to be much better for the company [U]now[/I] rather than a trickle of funds over forty years. Besides, Disney still keeps what it wants and why the DVC was created in the first - a steady stream of wallets heading into the parks.

Naked Mike has already sold of close to a third of Walt's property in Florida (when Disney sold off Celebration and places like Crossroads). There's no reason to believe that Eisner wouldn't be willing to sell off even more as "underperforming assets". Or it cold simply be a Swan & Dolphin deal; Disney owns the land and others own the structure.

There are few obstacles that ever keep Naked Mike from cash.

The lure of immediate cash has been the driving factor behind everything has done in the last several years. They under-funded California Adventure to get a positive cash flow immediately, animation is focused on quick (and forgettable) DVDs instead of classics that earn money over decades, the Stores dropped high quality merchandise for high volume, high margin trinkets.

DVC is not immune.

[KNWVIKING]

***"Why would Marriott (or anyone else) buy? Same reason Disney might not sell... because they are in the business of running timeshares, not just collecting up-front capital."***

Not sure what you mean here Matt. Marriott builds and sells timeshare resorts similar to DVC. Marriott buying DVC would only allow them to collect dues and maintain the properties, which isn't where the profit is. As for the prestige of having the resorts and using them as a selling point for other off-properties, well, maybe. The current owners of DVC points like using their points at their DVC resorts. It is very difficult for an outsider to trade into a week at DVC resorts. So while it may sound and look good in your advertisement brochures, in practicality it's not really going to benifit other Marriott owners. Of course, maybe Marriott only cares about the image.

[KNWVIKING]

***"The lure to Marriott is that the WDW properties would be a fantastic addition to their existing time share network. Imagine all the people on the edge of buying that place at a ski resort if they knew they could also use their points in Florida. All hotel companies fight to get the best locations at the most popular destinations, this is no different."***

Only if Marriott can construct new resorts on-property. As I said earlier, DVC members want to stay on-property. Marriott may be able to grab a few more sales now with a DVC buyout announcement, but once their member realize how difficult it is to actually stay there,it will backfire on them.


***In addition to the marketing angle, Marriott could make a much better profit off the DVC operations than Disney – the mouse is demanding that DVC bail out a bankrupt network, offset losses from a retail chain, pay off a $5 billion debt to buy the Power Rangers, and to send the monthly check to Ben Affleck until Pearl Harbor finally gets buried. The return at DVC may not be enough for Naked Mike, but it could be huge for a company like Marriott (that knows its business and sticks to it)."***

Well, if DVC is sold, it's not like these debts are going to disappear. I doubt the up-front purchase money would be used to pay off outstanding debt. And how would Marriott be able to make more profit off the existing sold out DVC properties ? Cut back on staff ? maintenance ? transportation ? raise dues for reaons not spelled out in our contract ?

[Another Voice]

"Only if Marriott can construct new resorts on-property."

Hardly. The vast majority of people in this country don't want to plop down twenty-grand and be forced to go to WDW every year for the next half century. The Marriott has the better solution: you're buying into a massive chain of reosrts located all over the world. So you convince someone who to buy your new Aspen development with the idea they can go to WDW when they want to. In other words, Marriott builds where ever they want but can still "sell" WDW.


"I doubt the up-front purchase money would be used to pay off outstanding debt. "

Your probably right, it will go to put another layer of gold leaf of Naked Mike's parachute.

"And how would Marriott be able to make more profit off the existing sold out DVC properties ? "

A) See above.
B) Like Disney isn't make a good profit off your "maintenance fees" now?
C) Imgine how much Marriott will make off everything else (from boat rentals to "special vacation offers just for our most magical members") to all the trapped DVC members.
D) "I'm sorry, but other members are have booked all the rooms for the dates you've requested. But we do have a room available for a slight "convenice fee" upgrade."
E) Five Words: Marriott's Yacht and Beach Club.

[raidermatt]

Marriott buying DVC would only allow them to collect dues and maintain the properties, which isn't where the profit is.
Yet, they are (at least for now) committed to the business of maintaining and collecting on them. Just as Disney is and/or was.

Again, there is profit to be made, its just a question of who wants to be in that business.

But yes, its not the kind of quick return you get on new sales, which leads to the point that it would help Marriott with all sales.

Only if Marriott can construct new resorts on-property. As I said earlier, DVC members want to stay on-property. Marriott may be able to grab a few more sales now with a DVC buyout announcement, but once their member realize how difficult it is to actually stay there,it will backfire on them.

I don't see why Marrott couldn't be allowed to construct more resorts. Further, they deal with this sort of inequity already.

The bottom line is this:

If the business of running DVC is not profitable, Disney will find a way out.

If it is profitable, there will always be somebody willing to do business in the most popluar resort destination in the world.

Again, its just a question of strategic direction.

[JDH]

it all comes down to which comes first The Walt Disney Company or Michael Ei$ner as to what process is chosen to fight off any take over. I'm leaning towards any process that Ei$sner thinks will make HIM the most and save his butt.

Guess that's not much of a stretch in reasoning.

[KNWVIKING]

***"The vast majority of people in this country don't want to plop down twenty-grand and be forced to go to WDW every year for the next half century."***

I can't speak for the vast majority, but I know DVC can't build resorts fast enough to keep up with demand. the economy,9/11, SARS, terror,war and realality tv have had no affect on sales The only stumbling block so far is the Comcast situation right now. Some posters on the DVC board have stated they are being a little more cautious, taking a wait and see attitude.

***"B) Like Disney isn't make a good profit off your "maintenance fees" now?"***

They are only taking a couple points as profit. Marriott will not be able to increase that margin.

***C) Imgine how much Marriott will make off everything else (from boat rentals to "special vacation offers just for our most magical members") to all the trapped DVC members.***

How would they be more profitable then what WDW/DVC is doing now ? And in reality, no company is going to get rich renting water mice.

***D) "I'm sorry, but other members are have booked all the rooms for the dates you've requested. But we do have a room available for a slight "convenice fee" upgrade."***

This could happen, but on a very limited scale. And again, they aren't going to get rich with "convence fees".

***So you convince someone who to buy your new Aspen development with the idea they can go to WDW when they want to. In other words, Marriott builds where ever they want but can still "sell" WDW***

But they can do this already thru RCI or II.

[lenshanem]

If Marrioot bought DVC and added that to theri timeshare network how woudl that effect DVC members? Woudl they keep the same system for us or make us switch to their sysytem? Can they do that? (Anyoen knwo from our paperwork?) Woudl it be hard for us to book at the DVC properties then if it is open to all Marrtt timeshare owners?

[*Robin*]

Adding to that Shan, I'd like to know if it would also open all Marriott resorts to DVC owners?

Just curious...we've been considering DVC for a very long time, and are seriously reconsidering now.

[raidermatt]

I haven't studied the contract on this, but my understanding is we only bought the rights to stay at our home resort, so that is all that is guaranteed. I don't believe a sale would void anything that is contractually guaranteed, like consistent point values.

However, certainly other Marriott owners would have access to the WDW DVCs. On the plus side, I think its likely DVC owners would have access to the Marriott properties.

I'm not sure how Marriott handles "home resort" priorities, and exchanges to and from more and less popular choices. I have some of their material at home... if I can find it tonight I'll see if that's addressed.

Bottom line, would it be harder to book? My GUESS is that there would still be a priority system for DVC owners to book at DVCs. However, I would suspect it would get more difficult to book on short notice. I could be wrong on that, however, as Marriott does have some other desireable properties. I'm guessing Marriott owners may be asking the same questions...


They are only taking a couple points as profit. Marriott will not be able to increase that margin.

The point is, SOMEBODY wants to be in the business of making those few points. We know Marriott does. Certainly if Disney does, they won't sell.

I'm just not confident that's the case.

If Disney wants out, the only question is the price.

And, as AV said, who says some of the non-DVC resorts wouldn't be part of the deal?

[KNWVIKING]

I realize the properties could be sold by ME. But I'm just not convinced the return would be sweet enough for any potential buyer.

[DVC-Landbaron]

KNWVIKING

You are totally confusing me. When this thread first started you said that Disney would be NUTS to sell DVC BECAUSE it is soooooooooo lucrative! As in:
Why would Disney/ME ever want to sell this cash cow ?

And now you say:
But I'm just not convinced the return would be sweet enough for any potential buyer.
Make up your mind and I’ll gladly debate, but it’s very hard trying to hit a moving target!!

WHICH IS IT!!!!!!????

[lenshanem]

http://www.disboards.com/showthread.php?s=&postid=4910362#post4910362

I started a thread on the DVC board smilar to this to see what people wodul say. Thought i'd make reference.
:)

[KNWVIKING]

You have convinced me that ME is desperate enough to try and sell DVC for the quick fix, regardless of the cash cow it has been. You win that arguement.

But that quick fix price would have to be high enough to bail him out , but it is my belief that that price would be too high for Marriott to consider. The big, up front cash has already been made by DVC.

[raidermatt]

These kinds of transactions happen all the time... Think about the mortgage industry, where some are interested in servicing, and some only in booking. Some change their minds.

Collections... some handle their own, some sell off to somebody else to do it.

Whatever the profit is on the existing DVCs, there will always be an appropriate selling price that would satisfy both parties.

Again, it all boils down to strategic direction.

[KNWVIKING]

Mortgages always work off thin margins though. There are very few "cash cow" opportunities with mortgages.

The timeshare industry though needs that up front cash infusion that comes from selling points,weeks or whatever system they use. The dues always pay the overhead & provide a couple points profit and then the resort tries to up sell various items & events to add to the bottom line. I guess it would all boil down to the selling price.

[raidermatt]

I guess it would all boil down to the selling price. Yes, as well as what is included in the deal (such as other non-DVC resorts).

I agree on the up-front sales point, but I really believe Marriott would view this as a way to sell other properties in their club. Also, the right to build more WDW properties (or buy them from Disney) could also be part of it. After all, if the demand is there, as it appears to be, certainly both Disney and Marriott would want to take advantage of it.

[lenshanem]

Is there an actual rumor that marriott might buy DVC and/or soem WDW resorts or is this something that was just brought up in the thread?

[morphi]

I've got a question about on-going profits that Disney derives from DVC that I hope you guys can answer. How does Disney (or another company if they buy DVC) get any money from existing DVC memberships.

I understand they can make SOME money from the financing charges for those members who financed their DVC purchase. But what other sources of revenue are there?

Don't the dues simply cover costs and nothing more? Aren't the dues limited to exactly cover the operating, maintenance, tax, etc. charges associated with the resorts? If so, then how can a buyer make any profit by buying DVC from Disney?

It's also my understanding that the points charged for booking a non-DVC WDW resort (e.g., Grand Floridian) is always calculated to exactly break-even (in the medium-term) with the money DVC gets by then renting out the vacant DVC rooms that those points were not used to rent.

What am I missing?

[DisneyKidds]

AV has stated that he has heard rumors that Marriott has shown interest in the Disney resorts. That is enough to make me consider it a viable rumor. How likely a rumor is another question.

As for someone, especially an outfit like Marriott, buying DVC - I think it would be an attractive option even if the margins on the existing resorts are thin. Marriott is used to that as it is what they do. Those "thin" margins are where they make a lot of their money so to them it is attractive. ME could justify the sale by calling the margins thin, as they are certainly thin enough to be somewhat lost in a mega media conglomerate. I also agree that WDW resorts would be one hell of a feather in the Marriott Vacation Club cap, even if they provided next to no margin. Add in the fact that any sale would probably provide rights and opportunity to build new resorts (Eagle Pines) as well as finish selling SSR.............I think their is plenty to attract a buyer. Throw in the possibility of purchasing the whole lot of Disney resorts and it could be very attractive to an outfit like Marriott. As has been said, it could all come down to price.

I really hope DVC and the Disney resorts remain as part of a Walt Disney Company that continues to operate as an independant entity long into the future. If that doesn't happen I guess I'd be happier with someone like Marriott buying DVC than someone else. They are a nationally recognized, high end brand with experience operating a premier timeshare service. It would seem the DVC contracts are (hopefully) strong enough to assure no major changes in point structure, as well as to maintain a home resort preference for DVC owners. Beyond that I could live with being able to take advantage of the Marriott network of properties. Hell, if I were to consider another timeshare it would be Marriott's.

Here's to hoping the dream scenario of Eisner out, white knight in, independant Philosophy focused Disney (including resorts) sailing into the sunset. Ah...........to dream.

[G.Tyler]

I have a question regarding DVC. I thought someone once told me that one of the best features of DVC ownership was that unlike most timeshares, we have actual deeded interest which gives the general membership a voice in its direction. I've been a member for years but for logistical reasons I have never attended one of our annual meetings but I did have the impression that we were protected under Florida law in regards to real estate ownership/interest, and that the board and the general membership would have a say if an organization such as Comcast or anyone else should try to initiate a spin-off. I don't know that any of what I have posted here is correct, I'm asking.

[lenshanem]

I also agree that WDW resorts would be one hell of a feather in the Marriott Vacation Club cap, even if they provided next to no margin.

That si what sucks. Say we keep our proirity booking window for our home resort, but after that it opens up to all DVC owners AND Marriott owners. Thus, we DVc owners woudl almost be forced into booking our ressies that far in advance with no hpes of booking eleswhere or changing our dates if we needed to cause Mariott owners will have filled up all our DVC rooms.

[lenshanem]

I wnet and checked out Mariott's tiemshare site. Their resorts look very nice. I do wonder how they wodul value our points comapred to their's. Do they evn have studios? I kept seeing oen and two bedrooms.

[raidermatt]

Many timeshares don't have studios... can't say which of Marriott's do, if any. I know we were told by our DVC guide that when we did an exchange through DVC, we would likely need to book a 1-bedroom, but since we haven't done an exchange, I don't really know if that's true. (She could have been just trying to get us to buy more points...)

I'm with DK... I'd like to see DVC remain under Disney's umbrella. (Actually, if Disney is going to stay in this timeshare thing, I'd like to see them build or buy some properties in other "premier" locations).

However, if someone is going to buy them, I think Marriott is about as good as we could hope for.

We've actually started to look at their Maui resort, which looks very nice... that's why I have some promotional materials at home. However, I pulled a Homer and forgot to look at it last night... DOH!

[KNWVIKING]

***However, if someone is going to buy them, I think Marriott is about as good as we could hope for.***

We stayed at the new Marriott resort on I-Drive a couple years ago and went thru the sales presentation. Had we not had two boys in college we may have purchased there. It would compliment our DVC membership very nicely. Marriotts program does have some unique features.

[lenshanem]

I ahve to say I wnet to Marriott's timeshare website and it looked quite nice. We only have 200 poinst though. I'm curious how they wodul value our DVc points. It might be we ahve too littel poinst to effectively be able to book vacatiosn within their sysytem?

[DisneyKidds]

There are Marriott Vacation Club properties that have studios, although I don't think all do. I stayed in a studio unit at the Marriott property in Breckenridge, CO. It was very nice.

[YoHo]

Could be worse. Could be picked up by Trendswest.

[KNWVIKING]

Or Westgate.

[Another Voice]

Marriott and Disney right now are very much just a rumor. There have been lots of rumors in the past, and Eisner himself has often said it's time to "reap the benefits of ten years of investments in the parks". This line has already been used to justify selling off the cast member housing, Crossroads, and even the complete abandonment of Celebration.

Given his need for money now it's, shall we say, not unlikely he is taking a fresh look at options that have already been explored.

There are three ways Disney intended to make money from DVC. First – the basic premise is that you get a whole bunch of guests to pre-pay for fifty years worth of hotel stays. That's a lot of cash in one chunk. The financial concept is that you invest all that money and collect lots of interest – enough to cover the construction loan and then some. The key, of course, is to find places to invest the cash that returns more than the loans cost (not difficult to do, but Disney has some problems).

Second is of course they've locked in a whole lot of people for the next fifty years. All those tickets, all those meals, all that plush really adds up. And since the guests have already paid, there's very little incentive for anyone to say "let's go to Miami instead!". DVC is a giant sized version of a Starbuck's card. You more or less get locked into a place because they already have your money.

Third is from maintenance fees and other charges that passed on to the "owners". Sure, the costs are just supposed to cover maintenance – but when the plumbers are Disney, the gardeners are Disney, the staff is Disney, the electricity and the water are Disney and even the property taxes go to Disney – gets which company ends up with all those fees?

On the Marriott or other potential buyer's side – the key to success for a time share is the variety of units in the plan. Most people veiw these "clubs" as prepaid vacation plans, not a specific real estate deals. Marriott's biggest selling point is the vast number of quality units they have. There are certainly vastly more people the would like to choose from Paris, New York, Vail, Cancun and WDW for their annual vacation than just go to WDW year-in, year-out.

Marriott would also be able to sell unused rooms as hotel stays, collect all kinds of nice fees, probably invent a few new ones and otherwise up the revenue. Plus, Marriott runs many times more hotel rooms that Disney does. One would think they probably get a better deal on little bottles of shampoo than the mouse, so Marriott's cost of operation is going to be significantly lower than Disney's (meaning more profit for M.).

Yes, Marriott would miss out on that big chunk of cash from the initial sale – but they have plenty of other new units going in around the world and they can factor in how much adding WDW would boost their sales.

[vernon]

There are three ways Disney intended to make money from DVC. First – the basic premise is that you get a whole bunch of guests to pre-pay for fifty years worth of hotel stays. That's a lot of cash in one chunk. The financial concept is that you invest all that money and collect lots of interest – enough to cover the construction loan and then some. The key, of course, is to find places to invest the cash that returns more than the loans cost (not difficult to do, but Disney has some problems Disney has alreasy taken all the meat out of this aspect, next tranche isn't due until 2042. IMHO it's almost impossible to quantify the value accurately and because of that I can't see any buying company committing themselves to the high side of a valuation. Second is of course they've locked in a whole lot of people for the next fifty years. All those tickets, all those meals, all that plush really adds up. And since the guests have already paid, there's very little incentive for anyone to say "let's go to Miami instead!". DVC is a giant sized version of a Starbuck's card. You more or less get locked into a place because they already have your money. I agree, but any managing company isn't going to make much off just selling themepark tickets to Disney through DVC. The number of DVC members that use the UMP is a minority of members, most buy APs or hoppers. Disney makes money from selling tickets, Mariotte would not make much. Only the restaunts on DVC exclusive properties ( Olivia's and SSR's offerings) would be "money makers" to Mariotte and they wouldn't contribute much ( if anything)
Third is from maintenance fees and other charges that passed on to the "owners". Sure, the costs are just supposed to cover maintenance – but when the plumbers are Disney, the gardeners are Disney, the staff is Disney, the electricity and the water are Disney and even the property taxes go to Disney – gets which company ends up with all those fees? As has been pointed out maintenance fees are not a profit making area. The board of DVC have a legally binding duty to ensure that the work is done in a cost effective manner. It simply wouldn't be possible to make a huge killing from maintenence fees. Also Disney makes savings of numbers because they employ plumbers, gardeners and electricians for ALL WDW. If Marriotte were to have only two main resorts and a few "half or share" resorts they wouldn't be able to spread those costs over as large a number of resorts as Disney.

With the legal set up of DVC I'd be interested to see if an outside company could crash through and enforce DVC members to accept allowing Mariotte members from non DVC resorts access at say 7 months. I think there would,could and should be a huge legal argument that while Marriotte ( or anyone else) could buy DVC, they could only do so if they continued to run it under the current legal commitment that Disney undertook with the members when they bought in.

In reality all you're left with is Mariotte making money from boat rentals, housekeeping, Olivias (and SSR restaurants) and a small commission from some UMP tickets. The only major "profit" will have to wait until 2042. Any potential "marketting" upside is offset by a potential class action lawsuit, unless Mariotte could convince the majority of members that their interests were better served by being in the "Mariotte" fold, but if that were the case we'd have bought into Mariotte in the first place.

Mikey's on shakey enough ground as it is, if he were to propose to sell off DVC as a cut down price the investment company shareholders would chop the ground out from underneath him. JMHO. Celebration and even Crossroads you can make an argument that they were land investments, separate from WDW ( or at the very least on the periphery). WDW hotels are an integral part of WDW, to sell off things in the heart of the development would be a much harder "sell" and I don't think Mikey has the support or power to carry it off at the moment.

I know it makes a nice "scare story" but IMHO it just doesn't hold water.

[KNWVIKING]

The only way I see a Marriott buying DVC is if they are allowed to continue building new units, well beyond the completion of SSR. Without the big up-front cash from initial sales, I just don't see a potential buyer willing to part with a few billion dollars just to collect fees and rent boats.

[Another Voice]

"Disney has alreasy taken all the meat out of this aspect."

Yes - but all of that can be factored into the purchase price. Plus that exactly why Disney has a massive incentive to sell. Nakes Mike has already milked the properties - why keep them around. People are still going to WDW and drop their money there, why not pick up a few bucks more by selling off something they've already bought.

DVC is exactly like Celebration - stick around to sell off the property than dump all the overhead.


"The board of DVC have a legally binding duty to ensure that the work is done in a cost effective manner. "

Does DVC bid out its maintenance contracts? Who defines "cost effective". Certainly Marriott already has rather large staff to handle their timeshare and hotels in Orlando already, let along all their other properties. And besides, Marriott doesn't have to cut their maintenance budget to pay off the debt for 'The Power Rangers'. It's even very possible that DVC members would see their charges go down if someone else took over.


"current legal commitment that Disney undertook with the members when they bought in.."

Jeffry Kaztzenberg, Peggy Lee, Mike Ovitiz, Roy Disney, the 'Pooh' rights holders and a long, long, long, long line other others might have a word or two with you about how Disney views "legal commitment". When it comes to money, you might as well take your contract and use it as a coffee filter.


"The only major "profit" will have to wait until 2042."

Nope - the profit comes from that couple looking in Maui and the wife goes "ooohhhh - we can go to Disney World too!!!!!!". Timeshares compete on the size of the network. Adding DVC adds a lot of valuable rooms to the Marriott Club, hence increasing the value of all Marriott timeshares. Besides, who says Marriott woun't be able to build at WDW, or Disneyland or Paris or Hong Kong?

Besides, the purchase price isn't going to be a few billion dollars. Right now Naked Mike will take what he can get, and Marriott isn't run by idiots.


"if he were to propose to sell off DVC as a cut down price the investment company shareholders would chop the ground out from underneath him."

The DVC is such a tiny. tiny. tiny part of Naked Mike's empire that no one would care. He sold Celebration - which was a third of the land of WDW - and no one batted an eye. How is selling some resorts going to compare?

But DVC does represent a bit more cash he can play with. He can tout that he's fully realized the investment in DVC and now cashing in, the money to be used for more magical investments.


In the end all the arguements against selling the DVC are just the same as for not selling the Anaheim Angels - somehow only Disney can magically make money and no one else can. Sorry, but Marriott is a lot better at the resort/timeshare game and Naked Mike wants a little more glitter on his parachute.

[raidermatt]

Without the big up-front cash from initial sales, I just don't see a potential buyer willing to part with a few billion dollars just to collect fees and rent boats.
As AV said, the purchase price wouldn't be above what the purchaser felt they could get return on...

Its simple really... if there is no profit in running DVC, then Disney wants out.

However, there is profit. (isn't there a "management" fee?)

Its just a question of who wants to be in that business. If Disney decides they don't want to be in it (and many have presented wonderful cases for why they wouldn't), why on earth would they not consider a sale? Further, as I've said, we KNOW Marriott wants to be in it, plus they have a much larger network to reap the benefits from.

So if the price is right, there is no reason for them not to jump all over it.

As for legal committment... there is really very little Disney is actually legally committed to with DVC, beyond basic timeshare laws, and the DVC point system.

Is the ability to book at our "non-home" resort in any window even in the contract? I didn't think so, but I could be wrong.

[KNWVIKING]

All the up-front cash has been made by Disney. Now all that remains is a few points profit on the dues.

Why wouldn't it be a good idea to sell DVC for X dollars to someone like Marriott? I'm sure Marriott would be required to pay "rent" or some other pure profit fees to Disney. Disney could lay off how many thousands on workers. Disney would still have the resorts full of paying guests. Basically Disney would recieve another huge chunk of cash and nothing else would really change other then the name of the resort.

And who's to say that Disney doesn't start DVC 2, and starts all over again.

So from the time I started this thread till now I've been convinced that ME could and probably will sell off DVC. I'm now convinced it's not a bad BUSINESS decision for Disney. The only thing I'm not convinced of is why it's a good deal for Marriott. Sure, being able to offer Disney resorts to your portfolio can be a positive, but are Marriott's traditional buyers "Disney" type people ? As AV said, the world has more people more interested in Paris then WDW.

If you were Marriott, what would have to be included in the deal to make the up-front purchae price worth it ?

[Lewisc]

The purchase price isn't a set number. The price will be set based on what's included in the deal. The more that's included (the right to build more units for example) the more Marriott will pay.

There was a rumor that DVC was going to build a new complex next to one of the golf courses. I'd think Marriott would be willing to pay for the right to develop that.


Originally posted by KNWVIKING
If you were Marriott, what would have to be included in the deal to make the up-front purchae price worth it ?

[raidermatt]

And who's to say that Disney doesn't start DVC 2, and starts all over again.
I'm sure who has the right to build what would be addresed in the contract.

...I've been convinced that ME could and probably will sell off DVC.
For what its worth, I don't have a very good read on the probability. If I had to guess at a simple yes or no, I'd still say no. I'm just saying its not beyond something he would do, and the deal could work, if both are truly interested.

Sure, being able to offer Disney resorts to your portfolio can be a positive, but are Marriott's traditional buyers "Disney" type people ?

There are two types of timeshare people... one is those who go only where they buy. The others are those who want variety and choices. I don't know enough about the industry to know what the breakdown is, but I know variety and choice are a big selling point. Even Disney promotes this to the folks who buy DVC. Certainly if there is benefit to Disney in providing options to Disney fans, there is benefit to Marriott in having options, especially exclusive options like WDW.

[KNWVIKING]

***Even Disney promotes this to the folks who buy DVC. Certainly if there is benefit to Disney in providing options to Disney fans, ***

We have options within our membership for outside resorts, but the economy of the DVC system is to use those points at DVC resorts. Marriott's system - from what I recall - didn't penalize as badly for staying outside certain locations.

***There was a rumor that DVC was going to build a new complex next to one of the golf courses. I'd think Marriott would be willing to pay for the right to develop that.***

That was the Eagle Pines location. It was more then a rumor,though as DVC had actually started doing the land survey's. It was put on hold when they decided it was better to tear down DI and build there.

[Lewisc]

Originally posted by KNWVIKING
[BThat was the Eagle Pines location. It was more then a rumor,though as DVC had actually started doing the land survey's. It was put on hold when they decided it was better to tear down DI and build there. [/B]

I think they decided it was cheaper to build DI since the infrastructure (roads and utilities) were already in place. My point is Disney already has another location ready to go. The can either get $$$ for it in a few years when it's developed or sell the rights to Marriot and get the $ now.

[vernon]

I think they decided it was cheaper to build DI since the infrastructure (roads and utilities) were already in place. My point is Disney already has another location ready to go .The can either get $$$ for it in a few years when it's developed or sell the rights to Marriot and get the $ now. True, but this wouldn't need to be linked to "selling off" DVC , it would be selling off land for Mariotte to build it's own timeshare on Disney property. It wouldn't alter the status of DVC members, their points system or the ability to switch within that system. I can see why that would be attractive to Mariotte, but they wouldn't need to buy the on going DVC set up. As it isn't a "cost" to Disney, and it isn't a big profit maker to another company if it were outsourced it's one of the "lose lose" situations that few companies would bother with.