Credit Crunch Affects Disney's Timeshare Division

[DisneyWalker44]

While that's a frightening figure in and of itself, it also means that 93% of our nation is still gainfully employed.

To get picky for a second, the "official" unempolyment rate, which is currently a bit over 7%, only measures the % of people who are actively looking for a job who can find no job. It doesn't measure "discouraged" workers, people forced to take part time jobs, etc. Those are all included in another government measure - the "U6 rate," which is currently about 13.5%. I think the U6 is a better indication of people who would have difficulty making a timeshare payment.

That said, timeshare mortgages are completely different creatures than residential. People took out a ton of residential mortgages the knew they couldn't pay. Balloon payments, resets, negative amortization loans, etc. were all sold on the theory that (1) home prices would keep going up and (2) loans could always be rolled over into new ones. That's where you are seeing the worst of the mortgage meltdown. Yes, there are some losses on traditional mortgages, but even there a lot of the problem is due to forced that don't apply to timeshares. Normally, people can sell before they are foreclosed on. But the crash in home values has made that pointless. The percentage of DVCers who are "upside down" is probably very small.

 

[DisneyWalker44]

double post

 

[keishashadow]

Tim, I'm not surprised sales are currently up. They're selling new resorts to the first flush of "must have" buyers with cash and/or credit. How long will sales stay up in a down market after they've skimmed off the cream layer of ready buyers? And from what the experts are saying, it looks like it'll be a down market well into 2012. Hawaii will likely be selling by that time, but a couple of years is a long time in the timeshare business.

I'm expecting to see a discount for cash sales through Disney. And I agree with calgarygary that accepted rofr prices will probably go lower.
DisFlan

as i indicated, yet, upon reflection think it'd be less of a cash DING for them to offer an AP or tix media

a surge in sales of new offerings doesn't reflect the glut of resales of the 'old' ones...on the brokers lists i see growing longer every time i look. (one bright note - does appear as though the smaller contracts r still going for premium $s quickly, even when stripped) IMO, many DVCers r merely flipping all or portion of their existing holdings for new ones

To get picky for a second, the "official" unempolyment rate, which is currently a bit over 7%, only measures the % of people who are actively looking for a job who can find no job. It doesn't measure "discouraged" workers, people forced to take part time jobs, etc. Those are all included in another government measure - the "U6 rate," which is currently about 13.5%. I think the U6 is a better indication of people who would have difficulty making a timeshare payment.

That said, timeshare mortgages are completely different creatures than residential. People took out a ton of residential mortgages the knew they couldn't pay. Balloon payments, resets, negative amortization loans, etc. were all sold on the theory that (1) home prices would keep going up and (2) loans could always be rolled over into new ones. That's where you are seeing the worst of the mortgage meltdown. Yes, there are some losses on traditional mortgages, but even there a lot of the problem is due to forced that don't apply to timeshares. Normally, people can sell before they are foreclosed on. But the crash in home values has made that pointless. The percentage of DVCers who are "upside down" is probably very small.

predatory lenders/mortgage brokers looking for a quick $ sold the concept of the amercian dream of homeownership to many buyers who weren't qualified. made me ill when i started seeing this several years ago when selling RE...such high debt to income, ARMs to get buyers w/both little credit & employment history...knew it'd turn out badly for many . Now we'll all be subsidizing the industry with tax credits on purchase of new homes ($8K or so?...i don't even want to get into the details, as it certainly doesn't reward existing homeowners who made every effort to live within their means )

agree, know many people who r under employed & the summer job market for students is looking bleak

 

[DVC92]

The current unemployment numbers are WAY off. There are a lot of us who have fallen thru the crack now. I have been laid off for just almost 1 year and my unemployment has run out. How do I get counted now? I don't think I do any more. Same thing with my Mom...she is also out of work and her unemployment ran out some time ago as well. We have both fallen thru the crack and are no longer even counted in the unemployment numbers. I also look for PT work or "lesser jobs" but there aren't even many of those to look for. Of course I look online at all of the regular job boards...but I also look thru my little local up-county Gazette paper every week. 7 or 8 months ago even it still used to have a whole Classified Section. NOW, that entire section is gone!! The Help Wanted ads that used to be several pages now fit onto 1 page and it's mostly stuff like "Telephone - Work At Home" or "Drivers Needed" stuff. It is sad. ANYWAY, as long as the Ramen Noodle plant doesn't turn up as having the next salmonela outbreak I think we'll make it. It is another reason I'm glad we didn't finance thru Disney as I would feel obligated to sell our DVC if we had that high interest rate hanging over us.

Living where you do, I know the Federal Government is always hiring for all types of positions. Try the following link: http://www.dcjobsource.com/fed.html

 

[BWV Dreamin]

From Mouseplanet.com :

McAlpin departs, Holz returns to Cruise Line presidency

As Mark Goldhaber reports in today's Walt Disney World Park Update (link), the Disney Cruise Line is getting an executive shakeup, as DCL President Tom McAlpin is leaving "to pursue other interests" and is be replaced by his predecessor, Karl Holz. Holz had been president of New Vacation Operations, overseeing the Adventures by Disney business.
With the announcement taking place on Friday, exactly one week after the deadline for executives to accept the Voluntary Separation Package, it seems likely that McAlpin took the buyout incentive. McAlpin, 49, has been at DCL since it's inception and was highly thought of within the cruise industry and by Disney Cruise Line guests. However, it may be that senior executives at the corporate level needed to make some changes to show that they're taking action on the difficult times facing the business.
With the world economy in turmoil, the Disney Cruise Line is way behind in their bookings for 2010, despite all promotions currently being offered. In addition, while the Park Service was reportedly willing to allow Disney Cruise Line to take slots for Alaska cruises despite the fact that they wouldn't be using them for the first two years of availability, Disney pulled out of the application process. That move results in Disney not having a chance to mount Alaska cruises for another 10 years, since slots are allocated on a 10-year basis and the next time slots will be made available will be for the years 2020 through 2029.
Holz, who will also retain responsibility for Adventures by Disney, has a double dose of difficulty facing him, as bookings for Adventures by Disney have been so low that some itineraries for 2009 have already been cancelled. With more and more potential travelers seeing their discretionary income dry up, people are less willing to commit to the premium prices charged by Disney for their cruises and tours.
After serving as Disney Cruise Line president from September 2003 through September 2004, Holz moved to become Chief Operating Officer for Disneyland Paris and was replaced at DCL by McAlpin. He moved from Disneyland Paris to New Vacation Operations in September 2008.
Holz will have his work cut out for him, as he will have many more cabins to fill once the two new Disney Cruise Line ships are completed and set sail in 2011 and 2012.

This really sheds light how the credit and economic situation has sorely affected Disney.

 

[Anal Annie]

Living where you do, I know the Federal Government is always hiring for all types of positions. Try the following link: http://www.dcjobsource.com/fed.html

Hey there - Thanks!! I already have Search Agents set up thru USAJobs.gov to email me based on keywords for all the openings at NIST and the DOE (they are 2 Govt agencies within a reasonable commuting distance for me). I just can't seem to nail the KSA's or whatever to get me a phone call. But so I just keep thinking the competition right now is gi-normous. It's hard to say HOW MANY applicants they get. When I follow up on the USAjobs.gov site after I apply I can see where sometimes the positions get cancelled.

 

[DVC92]

Hey there - Thanks!! I already have Search Agents set up thru USAJobs.gov to email me based on keywords for all the openings at NIST and the DOE (they are 2 Govt agencies within a reasonable commuting distance for me). I just can't seem to nail the KSA's or whatever to get me a phone call. But so I just keep thinking the competition right now is gi-normous. It's hard to say HOW MANY applicants they get. When I follow up on the USAjobs.gov site after I apply I can see where sometimes the positions get cancelled.

A little farther from you, but still in Montgomery County, are the FDA on Rockville Pike as well as NIH in Bethesda. I completely understand why you don't want to commute into DC or Virginia.

 

[Anal Annie]

A little farther from you, but still in Montgomery County, are the FDA on Rockville Pike as well as NIH in Bethesda. I completely understand why you don't want to commute into DC or Virginia.

I have a neighbor who works at the FDA down on Gude Dr or something...so I've thought about them but they don't have their own campus like NIST & DOE & I think they are prone to moving people / depts around 'cuz they just lease space. I don't want to have to go to Sil. Spring or something 3 months later!! That would be my luck! But that's why I don't search their openings. I worked in on Conn. Ave. in Ch. Chase & Wisconsin Ave in Bethesda for 18 1/2 years....I got stuck in that NIH mess more times than I want to remember....I just can't bear the thought of going back down there. Gas...parking...wear & tear...commute TIME My last job that I got laid off from was only 8 miles. BOY did that spoil me!!! I didn't even have to USE I-270!! That was heaven to be able to use secondary roads! I am trying not to go past Shady Grove / Research Blvd if I can help it. DS has swim practices & stuff now that I need to be able to get home for so I guess I'm a little picky. But thanks much for the ideas!!

(sorry for hijacking ya'll!)

 

[OneMoreTry]

I wouldn't be surprised if we see lots of people just walking away from contracts at some point before this recession is over. They'll have to list them low due to need for quick relief from debt and some still won't be able to sell them fast enough. With decreased cash flow from selling off contracts DVC won't have money to cover them at the prices they'd like so they'll be letting them go low.

The symptoms will be a big drop in resale prices and increased incentives to make direct purchase from Disney attractive without dropping the "NEW" point price. And ultimately those prices will probably drop at least a little.

I see a spiraling slippery slope -- much like a toilet flush-- following the economy around and down the drain.

 

[tjkraz]

From Mouseplanet.com :

McAlpin departs, Holz returns to Cruise Line presidency

(snip)

This really sheds light how the credit and economic situation has sorely affected Disney.

Yeah, I'm sure this won't be the last one of these we hear about since Disney offered buyouts to over 600 execs. There was an interesting article by Jim Hill a few weeks ago when the buyout offers became public knowledge. One of his points was that some long-time execs tend to stay on board in a largely non-productive mode waiting for Disney to offer them these attractive buyout packages. As outsiders it's impossible for us to judge whether one departure is "good" and another "bad" for the company, but I think it's a given that Disney will benefit from some of the separations.

The line about 2010 DCL bookings being behind doesn't surprise me either--I'm sure people aren't making vacation commitments 18-24 months ahead of time like they have in years past.

However unless I'm mistaken, all of the DCL promotions offered in recent months have been for 2009 sailings. In fact, the "kids sail free" promotion ended a few days ago I don't think there is another offer available now. Hopefully that at least bodes will for 2009. Not saying it's business as usual--but I doubt the ships will be half empty either.

Still I'm cautiously optimistic about how DVC will be impacted. DVC performed quite well back in the 2001 recession. That was the period when Disney was forced to close entire resort hotels because tourism had fallen off so much, and many Americans were afraid air travel would never again be safe. Folks continued to buy DVC points at a then-record pace.

Other timeshares may be suffering right now--but then DVC doesn't give away free vacations and lock folks in a room for 4 hours in order to badger them into buying. DVC's low-pressure sales approach can pay dividends with regard to the better-qualified customer they are likely to attract and the willingness of the customer to buy in the first place.

We already know that DVC saw a sales increase in Oct - Dec 2008...even with the stock market crash and other economic forces. Some have suggested that to BLT sales were driving the increase--which may be accurate. But now DVC has VGC sales coming on-line to CA residents in this quarter and the rest of the US in the next quarter.

As DisneyWalker44 illustrated, DVC owners certainly aren't subject to the same forces which have damaged the traditional housing market.

We hear general information about how 300 million Americans are suffering--but we really have no way of knowing how that translates into 140,000 DVC owners. We simply cannot assume that such a small subset of our nation will follow national trends in how their finances are impacted. The small group of DVC owners may collectively suffer less (or more) than the nation as a whole. Which will it be and how will they (we) respond?

We know that the economy stinks and that TWDC isn't doing as well as it has in years past. But even in a tough economy, there are industries continue to buck the trends--healthcare for one. Time will tell whether DVC is able to buck the Walt Disney Company trend toward dramatically reduced earnings.

 

[keishashadow]

We hear general information about how 300 million Americans are suffering--but we really have no way of knowing how that translates into 140,000 DVC owners. We simply cannot assume that such a small subset of our nation will follow national trends in how their finances are impacted. The small group of DVC owners may collectively suffer less (or more) than the nation as a whole. Which will it be and how will they (we) respond?

We know that the economy stinks and that TWDC isn't doing as well as it has in years past. But even in a tough economy, there are industries continue to buck the trends--healthcare for one. Time will tell whether DVC is able to buck the Walt Disney Company trend toward dramatically reduced earnings.

even healthcare industry is started to feel the pinch, a couple hospitals have closed their doors in the PIT tri-state area, citing decline in activity. The big providers will survive though.

i'll quote harry truman as how one typically views any economic downturn

It's a recession when your neighbor loses his job; it's a depression when you lose yours.

 

[Anal Annie]

From Mouseplanet.com :

McAlpin departs, Holz returns to Cruise Line presidency

As Mark Goldhaber reports in today's Walt Disney World Park Update (link), the Disney Cruise Line is getting an executive shakeup, as DCL President Tom McAlpin is leaving "to pursue other interests" and is be replaced by his predecessor, Karl Holz. Holz had been president of New Vacation Operations, overseeing the Adventures by Disney business.
With the announcement taking place on Friday, exactly one week after the deadline for executives to accept the Voluntary Separation Package, it seems likely that McAlpin took the buyout incentive. McAlpin, 49, has been at DCL since it's inception and was highly thought of within the cruise industry and by Disney Cruise Line guests. However, it may be that senior executives at the corporate level needed to make some changes to show that they're taking action on the difficult times facing the business.
With the world economy in turmoil, the Disney Cruise Line is way behind in their bookings for 2010, despite all promotions currently being offered. In addition, while the Park Service was reportedly willing to allow Disney Cruise Line to take slots for Alaska cruises despite the fact that they wouldn't be using them for the first two years of availability, Disney pulled out of the application process. That move results in Disney not having a chance to mount Alaska cruises for another 10 years, since slots are allocated on a 10-year basis and the next time slots will be made available will be for the years 2020 through 2029.
Holz, who will also retain responsibility for Adventures by Disney, has a double dose of difficulty facing him, as bookings for Adventures by Disney have been so low that some itineraries for 2009 have already been cancelled. With more and more potential travelers seeing their discretionary income dry up, people are less willing to commit to the premium prices charged by Disney for their cruises and tours.

IMO both DCL and ABD are in trouble bcuz they have priced themselves out of the average families reach. I mean, have you priced a DCL cruise for 2010 yet? Holy Cow! The Baltic & Med Cruises are very port intensive itineraries & are at least twice as much as some of the other cruise lines that are doing basically the same itineraries. I think part of the thinking is that you're just not on the ship enough to get the value out of it for what they're charging. If you're in a port every day you're not on the ship enjoying all the amenities that they offer. I see people on the cruise boards posting that they can find suites on RCL or NCL for less than what DCL is charging for inside cabins. The transatlantic crossings are both during the school year and many people with older children simply cannot take their kids out of school for that long. It really makes people think twice in this economy what they can get for their money. DCL needs to get their prices in line with other cruise lines in order to stay competitive in this economy. Right now they are only for the bourgeois.

 

[jodifla]

IMO both DCL and ABD are in trouble bcuz they have priced themselves out of the average families reach. I mean, have you priced a DCL cruise for 2010 yet? Holy Cow! The Baltic & Med Cruises are very port intensive itineraries & are at least twice as much as some of the other cruise lines that are doing basically the same itineraries. I think part of the thinking is that you're just not on the ship enough to get the value out of it for what they're charging. If you're in a port every day you're not on the ship enjoying all the amenities that they offer. I see people on the cruise boards posting that they can find suites on RCL or NCL for less than what DCL is charging for inside cabins. The transatlantic crossings are both during the school year and many people with older children simply cannot take their kids out of school for that long. It really makes people think twice in this economy what they can get for their money. DCL needs to get their prices in line with other cruise lines in order to stay competitive in this economy. Right now they are only for the bourgeois.[/QUOTE]

This is so true! Particularly with RCCL bringing on the Freedom, Liberty and Oasis of the Seas, there's less and less reason for a family with teens to book on DCL.

 

[anna08]

Count me in as a one-time DCL cruiser who won't spend that much money again. It was just not nearly as fun and was more expensive than a land vacation. The cruise thread was full of "too expensive" comments after the new dates were launched. To get back on subject, I hope tjkraz is right that we might have a different financial profile than the rest of the country, but I was surprised at the 75% financed their DVC purchase figure.

If folks suddenly can't pay their contracts or MF, how does that impact our MF?