Comments about DVC being sold...

[DVCBob]

Check out DIS poster "Another Voice" comments on the Rumors board. He suggests that ME is interested in selling off WDW hotels and DVC. Not looking to start a rumor just wanted to point people to this post.

 

[PamOKW]

Lots of folks are speculating in the wake of Disney's resignation. I don't think the prospect of selling off the resorts only makes a lot of sense. I could see turning over the management of the resorts (like SW&D) but not selling the property.

 

[Maistre Gracey]

Some of the posters on that board are highly knowledgable about Disney. I am not sure if 'Another Voice' is some sort of Disney employee with some inside scoop, or not.
That being said, much of what is discussed on that board comes out negative toward Disney. Many of the posters there really seem to find fault with everything Disney. This gets a little old and tiresome for me, so I don't read too much over there.
Please don't get me wrong- that is not a slam on the people on that board, but rather my personal preferance for a more uplifting, light hearted, positive view of Disney.

Selling DVC makes no sense to me. I am not sure why Disney/DVC would be building new DVC resorts only to sell them off...

Many hotels were built under Eisner, and again, why would he build them just to sell them?

I do not believe Disney and Eisner are in the real estate business of building, then selling hotels.... even for a profit.

 

[Granny]

Originally posted by Maistre Gracey
Some of the posters on that board are highly knowledgable about Disney. I am not sure if 'Another Voice' is some sort of Disney employee with some inside scoop, or not.
That being said, much of what is discussed on that board comes out negative toward Disney. Many of the posters there really seem to find fault with everything Disney. This gets a little old and tiresome for me, so I don't read too much over there.
Please don't get me wrong- that is not a slam on the people on that board, but rather my personal preferance for a more uplifting, light hearted, positive view of Disney.

Selling DVC makes no sense to me. I am not sure why Disney/DVC would be building new DVC resorts only to sell them off...

Many hotels were built under Eisner, and again, why would he build them just to sell them?

I do not believe Disney and Eisner are in the real estate business of building, then selling hotels.... even for a profit.

Agreed!!

 

[Chuck S]

As long as building resorts and "selling" DVC points to members is profitable for Disney, I don't see this happening. After all, if Management is turned over to an outside company, it can't do anything but hurt DVC sales. Nor, do I see Disney trying to sell the land under the resorts, then what, you'd have plots of land surrounded by "Disney" owned land. Kind of puts the damper on any alternative development in the future, after the DVC contracts expire.

 

[crisi]

There are some financial implications to not owning your own real estate. The Sale Leaseback of buildings is a good tax strategy in a lot of cases.

The other posibility - that they continue to own the buildings but outsource the management - also may be a sound financial strategy.

It is possible that one or the other of these situations happens, but the buildings continue to be operated under the Disney name, and that probably won't hurt sales.

Personally, I wouldn't take the risk of mismanagement hurting the Disney name....

 

[Happy Birthday Cat]

Selling off assets does give an immediate boost to the bottom line. It brings in large amounts of cash and usually reduces large amounts of long term debt. Many executive salaries are based on current profits, not what is good for the company in 10 years. I could see why ME would want to boost current earnings. It seems like his days are numbered.

On the other hand I agree with what's being said. Looking at the long term interest of the company, it seems like a foolish move if it is really considered.

HBC

 

[Horace Horsecollar]

Originally posted by PamOKW
Lots of folks are speculating in the wake of Disney's resignation. I don't think the prospect of selling off the resorts only makes a lot of sense. I could see turning over the management of the resorts (like SW&D) but not selling the property.

Unfortunately. selling off the Disney resort hotels might make business sense when you're a company with a lot of debt -- and when you're a company that can continue to profit from those hotels even if you no longer own them. (And yes, if the hotels are sold as a "package," it's highly likely that DVC would be part of the deal.)

Roy E. Disney's resignation letter, as published at MiceAge, contains a lot of truth about Eisner's performance. But, in the end, it doesn't matter whether this letter accelerates Eisner's departure, whether it backfires and more firmly establishes Eisner's power, or whether it doesn't lead to anything. What matters is what the financial wizards at Disney recommend to senior Disney executive management as the way to handle dept and maximize short-term profits -- regardless of who is at the top.

Disney could sell the physical assets (buildings), management contract (operations), or both. My guess is that they will either sell neither or both. In the lodging business, some companies concentrate on hotel operations (like Marriott International, which operates hotels that are owned by many different companies). Other companies concentrate on hotel ownership (like Host Marriott, whose hotels are operated under various brands by various companies).

The hotels would remain Disney-branded (though there could be a tagline like "by Marriott" or "by Hilton"). In addition to an immediate cash infusion, Disney would get ongoing revenue from licensing the Disney name, collecting a ground lease, and getting whatever percentage of the revenue or profit they can negotiate.

Would it be good long-term business? Probably not. But how does that matter to an executive who must show immediate results (and who stands to profit handsomely from immediate results)?

And what does that mean to those of us who are DVC members? It really shouldn't make much difference if the 2% management fee (profit) component of our dues ultimately flows up to Disney or to Marriott or to Hyatt or to another lodging company. In fact, there may even be a benefit if we end up affiliating with a larger timeshare company that could provide a trading priority to us.

 

[jaysue]

Interesting thread - does anyone have any info on how the Fairfield resort (I think that is the name) in the corner near Pop Century/CB I-4 is coming along and are the costs (if published yet) comparable to DVC?

thanks
jaysue

 

[Werner Weiss]

Originally posted by Chuck S
As long as building resorts and "selling" DVC points to members is profitable for Disney, I don't see this happening.

Companies sell profitable operations all the time — especially companies that need the cash to retire dept or to invest elsewhere. Not surprisingly, profitable opeations fetch a lot more cash than unprofitable operations.

For example, this year Sears sold its traditionally very profitable credit card business to Citibank.

If Disney sells its resort hotels to a major hotel company, they can continue to be called Disney hotels. The public should see very little difference, except that they might be able to earn and use frequent guest rewards points from that hotel company. And Disney Vacation Club could continue to operate under the same rules, providing the same quality, and still carrying the Disney Vacation Club name.

After all, a Sears Card is still a Sears Card.

(Sure, I'd rather see Disney remain "whole." I'd prefer for Disney to run Disney, not merely to license the name to other companies and take a cut of the money. But I'm also realistic about what could happen as the pressure increases to raise the Disney stock price.)

 

[Lisa P.]

Jaysue, RCI has already got a listing for the new Fairfield Orlando at Bonnet Creek. I have not read of anyone being able to trade in via RCI yet so I doubt FF has given them any weekly deposits.

The resort is still not listed on Fairfield's website. However, some FF owners have already made reservations there for June 2004 vacations. Most of these owners' points are from other Fairfield home resorts. Welbro Building (same company that has built several Marriott resorts) reports that construction is expected to be completed by March 2004. FF has been selling pre-construction points for many months and their salespeople may sell Bonnet Creek points from anywhere in the system. Current pricing is about 13.5¢/pt or $135 per 1,000 pts, negotiable down to about 10.5¢/pt. Resales at other home resorts are only about 3¢/pt.

All units are considered "Deluxe" - no standard units are listed on the current points chart for FF Orlando at Bonnet Creek:

Prime Season (weeks 7-14, 23-33, 51, 52 - incl spring break/ Easter, summer, Christmas, New Year)
--- 1BR=166K --- 2BR=224K --- 3BR=308K --- 4BR=424K ---

High Season (weeks 1-6, 20-22, 34, 35, 40-42)
--- 1BR=126K --- 2BR=189K --- 3BR=231K --- 4BR=347K ---

Value Season (weeks 15-19, 36-39, 43-50 - incl early May, Sept, Nov to early Dec, Thanksgiving)
--- 1BR= 84K --- 2BR=112K --- 3BR=175K --- 4BR=231K ---

Nightly points are listed (Fri-Sat and Sun-Thu) but I've left that out (don't know how to post a more detailed chart). Feel free to email me with any questions. I'm not employed by FF.

 

[Lisa P.]

HH & WW, do you think the profit from such a sell-off would outweigh the lost management fees/profit over time? I could see this being beneficial -OR- detrimental to DVC members, depending on the quality provided by a new management company. Interesting to consider.

 

[Werner Weiss]

Originally posted by Lisa P.
HH & WW, do you think the profit from such a sell-off would outweigh the lost management fees/profit over time? I could see this being beneficial -OR- detrimental to DVC members, depending on the quality provided by a new management company. Interesting to consider.

The scenario in this thead is based on the idea that if Disney were to sell its hotels, the DVC resorts would most likely go with them.

First, I think that it's very unlikely that Disney would actually sell off their WDW hotels and DVC resorts. My point was simply that nobody should think that such a sale could never happen, or that companies never sell profitable operations.

I think it would be a bad move in the long run for Disney. But, in the scenario in this thread, the goal would be short-term financial results, not what's best in the long run.

Keep in mind, that for its first 30+ years, the Disneyland Hotel wasn't owned by Disney. Disney just earned a licensing fee. Then Disney, under Eisner, finally bought the hotel because it would allow more control and would be more profitable.

 

[PamOKW]

The loss of control is why I would think actually selling the hotel property would be a long-shot. I understand that it would be a way for Disney to get a cash infusion but it seems to go against their previous habit of keeping total control over WDW. That need for control is part of why they won't permit anyone to "live" at a DVC resort. If they were going to sell, I'd think they would look at selling the entire operation, theme parks and all. I'd be concerned if that were to happen.

I could see them selling the management rights to the resorts.

 

[Horace Horsecollar]

Originally posted by PamOKW
The loss of control is why I would think actually selling the hotel property would be a long-shot.
[snip]
That need for control is part of why they won't permit anyone to "live" at a DVC resort.

There are already hotels on site that are neither owned nor managed by Disney. For example, Tishman Hotels owns the WDW Swan, the WDW Dolphin, and the Hilton at WDW. The first two are operated as Starwood (Westin, Sheraton) hotels, and the third is, of course, operated as a Hilton.

Yes, Disney doesn't want permanent residents living in the Reedy Creek Improvement District (RCID), so that Disney can control all RCID voting. But having hotels that are not owned by Disney is not a problem for the RCID. Otherwise there wouldn't be any today.

Originally posted by PamOKW
I could see them selling the management rights to the resorts.

But the real "control" (policies, quality of the guest expereince) goes with the management rights, not with the physical asset ownership. If Disney wants to extract cash from the hotels, they could sell the physical assets and continue to operate them. That's what Marriott International does. Marriott International owns almost no hotels, but Marriott is a leading hotel chain and a respected brand -- beacuse of how Marriott manages and controls the Marriott-branded hotels.

 

[timC]

Having worked for a company that's completed 3 "mega-mergers" in the past 6 years, I know that anything is possible, particularly when shareholders are restless. I would not be surprised if ME made some strategic moves... beginning with BOD changes.

That said, I'm not familiar enough with Disney financials or the hotel industry to comment on whether this particular scenario would make sense for Disney. In fact, I seemed to be under the impression that Disney was looking to expand their interests in the travel/vacation industry... If so, why sell these assets?

 

[Horace Horsecollar]

Originally posted by timC
In fact, I seemed to be under the impression that Disney was looking to expand their interests in the travel/vacation industry... If so, why sell these assets?

Disney might have been looking to expand their interests in the travel/vacation industry in the mid-1990s when they built DVC resorts at Hilton Head and Vero Beach, when they launched regional attractions like Disney Quest and Club Disney, and when they announced Disney's America in Virgina.

But that's no longer the case. The emphasis more recently has been to make as much money as possible from existing operations and locations, and to keep expansions relatively cheap (like Pop Century or Disney's California Adventure).

The reason to sell assets would be to free up capital, to improve the return on investment.

Selling assets doesn't have to mean any significant changes from the guest perspective. I hope I haven't scared anyone with anything I've written in this thread. That's not my intention.

 

[mitros]

You forgot to mention that there are some people over there that THINK they have all the answers.

 

[Maistre Gracey]

Well, if this ever happens, Disney would not likely be our premier vacation spot. Part of what I really enjoy about WDW is the uniform branding of the parks, hotels, restaurants, and recreation(I know there are exceptions).
I just could not bring myself to stay in a 1br at "The Villas at Hilton's Wilderness Lodge".

So now that you have shown me why Disney could improve their bottom line by selling a profitable entity like DVC, why would this be better than unloading dead weight such as ABC? I understand that a profitable entity is worth more than one that is losing money, but if all the profitable ones are sold, what is left?

MG

 

[Chuck S]

First off, while it is possible for Disney to "sell-off" or not manage their own resorts, this is highly unlikely. This whole "what-if" scenario was brought about by speculation of how Roy Disney's recent departure may affect the Walt Disney Company.

While it will certainly seem odd not to have a "Disney" at Disney, he would have retired during the course of the DVC contracts anyway - he is 73. He also has not had great influence in decision making for several years. Disney has made no moves in the direction of breaking up the resorts or theme parks since Eisner joined the company - in fact he was brought in to prevent that 20 years ago when it seemed to be a real possibility - why would that strategy suddenly change? Eisner, age wise, has 11 years left that he is eligible to serve as CEO, and I don't see any cause to think there will be any immediate effects from Roy's departure.