Disney to sell their DVC unit?

[Brianstl]

But their debt load, even after the Fox buy, is not that bad and is much better than their peers.

And the sale of DVC, which has a built in end date starting in just 20 years, is not going to move the overall debt needle at all.

They added a significant amount of debt at the beginning of the COVID crisis to make sure they had cash to survive. Their debt load isn't awful but their borrowing cost have increased. They need cash they can dump into new productions for Disney+ without borrowing more money. Their planned on revenue generating streams have been hammered for 18 months by COVID.

I am not saying it is going to happen, but I am sure Disney is examining all of their options.

 

[StitchesGr8Fan]

We already have that through RCI

Everytime I have looked, the resorts I see aren’t great. We are resale so no concierge class.

 

[Chuck S]

This keeps getting brought up in this thread, so I'll bring it up again. DVC doesn't own HHI, VB, or AUL. The "owners" (the people) do. There really isn't anything of value for Disney to sell off here. All a potential buyer would get is

1) all unsold Aulani points. Considering they've been trying to sell these for 10+ years I'm not sure what true value their is here.

2) the small inventory of ROFR points they have

3) the ability to ROFR future resales.

4) the 2% of points that the developers are required to own.

5) the small profit they earn every year for managing the properties.

6) the ability to add these properties into their existing systems as a trade opportunity.

Given this, their just isn't enough value for a prospective buyer to offer any nominal amount.

But Disney DOES own the cash hotel portion of Aulani, and could sell the cash hotel and DVC management/sales portion as a package deal, just to offload the cash resort if it isn't making money.

 

[sethschroeder]

This keeps getting brought up in this thread, so I'll bring it up again. DVC doesn't own HHI, VB, or AUL. The "owners" (the people) do. There really isn't anything of value for Disney to sell off here. All a potential buyer would get is

1) all unsold Aulani points. Considering they've been trying to sell these for 10+ years I'm not sure what true value their is here.

2) the small inventory of ROFR points they have

3) the ability to ROFR future resales.

4) the 2% of points that the developers are required to own.

5) the small profit they earn every year for managing the properties.

6) the ability to add these properties into their existing systems as a trade opportunity.

Given this, their just isn't enough value for a prospective buyer to offer any nominal amount.

With AUL, HHI, VB some think if they sell it wouldn't be like WDW and they would actually sell the land itself. In 20 years time someone would own a beachfront resort that could be sold again with buildings already in place and maintained/updated by DVC members previously. Additionally in 30 years or whatever someone would also own AUL outright.

Until that date comes around they would own a portion of the resort and drive profit (although likely minimal) from the management and room rental/breakage.

Disney may choose to cash out on those resorts not instead of waiting until 2042 to sell it all off. So yes while right now owners "own" it the company who buys it really is in control just like Disney is in control today about what happens. Come expiration date this new owner then will assume full control.

 

[crisi]

DVC doesn't have to be a huge profit for it to be beneficial to Disney. If nothing else, I would think it would be even more valuable after the past 1.5 years. When Disney had to shut down the Disney owned hotels, they still have to pay for staff for upkeep and maintenance. On the flip side, the DVC owners pay for the upkeep and maintenance, and nothing comes out of Disney's pockets. If there's a natural disaster? Great, DVC members foot the capital charges. Sure there's a point glut, but is that really an issue? The points have an expiration date on them each year. At some point, people know they have to use the points or they expire. They tighten up the rules on extending expiration dates, and voila, problem solved.

In addition, with DVC, the members pay for the capital cost of developing the property. Disney doesn't have to pay much, if anything at all. Furthermore, in 20 years, they have potential proven hotels they can add to their inventory as hotel rooms (if it's needed) instead of DVC rooms, recycle as new DVC development, or sell contract extensions.

That, in my experience, doesn't make it safe. The question isn't can they make money - the question is can they make MORE money doing something else. And sometimes not even then. I've shut down profitable units because another unit is doing better, and the executives just don't want to spend time there. I watched a beloved division with a ton of brand loyalty get shut down and the employees let go because the CEO just "didn't like it." I watched a profitable division get spun off because of a personal dislike of the business by the CEO and a disastrous acquisition happen over another personal relationship between CEOs.

Burger King never LOST money in all the years we spent trying to sell it. It just wasn't a good fit in the portfolio of businesses the corporation had. Selling it would have freed capital to invest in a company that was a better fit.

 

[CanadaDisney05]

With AUL, HHI, VB some think if they sell it wouldn't be like WDW and they would actually sell the land itself. In 20 years time someone would own a beachfront resort that could be sold again with buildings already in place and maintained/updated by DVC members previously. Additionally in 30 years or whatever someone would also own AUL outright.

Until that date comes around they would own a portion of the resort and drive profit (although likely minimal) from the management and room rental/breakage.

Disney may choose to cash out on those resorts not instead of waiting until 2042 to sell it all off. So yes while right now owners "own" it the company who buys it really is in control just like Disney is in control today about what happens. Come expiration date this new owner then will assume full control.

Right. At the end of the day this is just my opinion, but I don't see a lot of value for a third party to spend any material amount to earn a small, capped profit for 20+ years just so they can eventually get a resort that's 40+ years old. The execs who will eventually see the benefit of those decisions are likely in high school right now.

If Disney really wants to offload these resorts in the short to medium term, I almost feel like they would have to pay a third party to take them.

 

[sndral]

One addendum: in each of those "merger" cases (Wyndham adding Shell, Diamond adding Sunterra, HIVC adding Silverleaf) that have actually happened, the inventory wasn't just suddenly combined. Existing owners in the acquired system had to buy into the merged system, or could retain the usage rights they already had. As you can imagine, many owners stayed put. The inventory they owned stayed with them.

So, even if TWDC sells DVC, and even if the buyer wants to merge it with an existing system, there is still a long period during which nothing much will change.

I interpret ‘existing owners in the acquired system had to buy into the merged system’ to mean that as a DVC owner if I want access to the system/properties which the new ’owner’ owns/operates I need to pay money to them to do so.
I’m curious to know what access/usage rights owners in the acquiring system gained to the acquired system, and more specifically what procedures were in place to protect existing owners’ ability to book their own properties?
Hypothetically, let’s say Wyndham, which already owns Bonnet Creek, buys DVC, if I want to stay at Bonnet Creek I have to pay more money for that privilege because I’m not a Wyndham member, I assume the Bonnet Creek folks don’t have to pay more money to gain access to a DVC resort because they are already members of Wyndham - what mechanisms would be in place to protect me from the bazillion existing Wyndham owners competing with me for availability at DVC resorts?

 

[Brian Noble]

The example I know best was the Wyndham/Shell acquisition.

Shell owners were offered the opportunity to convert their Shell points into Wyndham points. There was a fixed-rate conversion: X shell points were worth Y Wyndham points. My recollection is that the conversion rate was fair to both parties. Early on, the price to convert was cheap and the conversions were treated as if they were developer purchases (for Wydnham's version of "the Blue Card"). Over time, the price went up, and the ability to have them be qualified was limited in a variety of ways.

A Shell owner that converted brought the inventory they owned with them into the combined system, and assigned the occupancy rights to that inventory to the Wyndham trust in exchange for participating in the Wyndham system. That included the usual home-resort reservation priority mechanism. Wyndham has a home-resort/open-season reservation system that is very similar to DVC's, though the time periods are different: 13 and 10 months instead of 11 and 7. So, Shell owners had access to their underlying Shell entitlements between 13 and 10 months prior to check in. After 10 months, all owners can book anything available in the combined system.

In a hypothetical DVC acquisition, it could unfold in at least three ways: DVC could be managed as a completely separate system (how Marriott/Hyatt work). DVC owners could be invited to (pay to) join the acquiring system, adding DVC inventory to the acquiring system. Or, owners in the acquiring system could be invited to (pay to) join DVC, adding acquiring system inventory to DVC.

It's probably pointless to get too worked up about the unwashed Wyndham horde sullying the hallways of DVC at this point, because all of this is a long long way into a future that (IMO) is probably not going to happen.

 

[CanadaDisney05]

It's probably pointless to get too worked up about the unwashed Wyndham horde sullying the hallways of DVC at this point,

Riffraff, street rats

 

[Sandisw]

https://

This keeps getting brought up in this thread, so I'll bring it up again. DVC doesn't own HHI, VB, or AUL. The "owners" (the people) do. There really isn't anything of value for Disney to sell off here. All a potential buyer would get is

1) all unsold Aulani points. Considering they've been trying to sell these for 10+ years I'm not sure what true value their is here.

2) the small inventory of ROFR points they have

3) the ability to ROFR future resales.

4) the 2% of points that the developers are required to own.

5) the small profit they earn every year for managing the properties.

6) the ability to add these properties into their existing systems as a trade opportunity.

Given this, their just isn't enough value for a prospective buyer to offer any nominal amount.

Could they sell them the land so they take over the lease?

Could they the. remove from BVTC? So they are no longer part of the system.

No idea if this makes it profitable but I think there may be ways for those properties to be uncoupled in some way.

The Board of each association then hires someone beside DVCM to manage the properties

 

[sethschroeder]

eventually get a resort that's 40+ years old

Thing is they can push DVC to pretty much update everything inside and outside these resorts at not cost. Maybe I am nuts but even if Disney keeps these they are not leveling these locations in 2042. They will have some of the updating already paid for by the previous DVC owners, put some extra money in to it, and sell the resorts again.

How many 40 year old very well maintained resorts get leveled in Florida, Carolina, or Hawaii?

 

[CanadaDisney05]

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Could they sell them the land so they take over the lease?

Could they the. remove from BVTC? So they are no longer part of the system.

No idea if this makes it profitable but I think there may be ways for those properties to be uncoupled in some way.

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Could they sell them the land so they take over the lease?

Could they the. remove from BVTC? So they are no longer part of the system.

No idea if this makes it profitable but I think there may be ways for those properties to be uncoupled in some way.

The Board of each association then hires someone beside DVCM to manage the properties

If they did this, it would be reflected in the purchase price. Since they gain nearly no control of the new entity's ability to increasing the profit margins, the offer would have to be at a substantial discount on future cash flows for it to make sense.

So unless Disney was completely starved for cash, it doesn't make too much sense for them to accept an offer that is heavily discounted.

 

[Brian Noble]

Could they sell them the land so they take over the lease?

Very very unlikely---at least not without also de-annexing it from RCID.

 

[CanadaDisney05]

Thing is they can push DVC to pretty much update everything inside and outside these resorts at not cost. Maybe I am nuts but even if Disney keeps these they are not leveling these locations in 2042. They will have some of the updating already paid for by the previous DVC owners, put some extra money in to it, and sell the resorts again.

How many 40 year old very well maintained resorts get leveled in Florida, Carolina, or Hawaii?

I can see the value in selling or keeping the resorts in and around the 2037 market for exactly the reasons you are suggesting. My point is that 2042 is just so far out. The current execs will not see any benefit until they are long retired/dead.

 

[DonMacGregor]

It's probably pointless to get too worked up about the unwashed Wyndham horde sullying the hallways of DVC at this point, because all of this is a long long way into a future that (IMO) is probably not going to happen.

One shudders at the thought of the Fort Walton hoi polloi trodding shoeless across the polished floors of the Grand Floridian, ice chests dripping diluted Bud Light from empties saved for their 5c redemption value...

 

[dvc lover 1970]

[

They bought Fox for the existing library and IP. It doesn't help them with the production cost for new content for Disney+ and much more new content is what Disney+ needs right now for subscriber growth and to reduce churn.

would it have been possible for them to have started their own IP for Disney + without buying Fox?

 

[RivShore]

They added a significant amount of debt at the beginning of the COVID crisis to make sure they had cash to survive. Their debt load isn't awful but their borrowing cost have increased. They need cash they can dump into new productions for Disney+ without borrowing more money. Their planned on revenue generating streams have been hammered for 18 months by COVID.

I am not saying it is going to happen, but I am sure Disney is examining all of their options.

True Covid has hurt cash flow more than they ever could have expected, but surprisingly, the rates on that new debt raised in 2020 was very low. And some of it was used to retire older higher rate debt. The point is that there is no dire need to retire debt by selling DVC, such a small division would not have any impact on the current debt load.

https://deadline.com/2020/05/walt-d...boost-financial-position-covid-19-1202931499/
"Disney has raised $11 billion in debt in an effort to bolster its financial position. The financial details were disclosed Tuesday morning in an SEC filing. Interest rates for the six-part raise range from 1.75% to 3.8%."

 

[RivShore]

would it have been possible for them to have started their own IP for Disney + without buying Fox?

Maybe but how long and at what price? Things like 20 something seasons of the Simpsons will take a long time to recreate.

 

[scoobdoo]

The suggestion was not even that it would be permanent, just a temporary handover. That makes me even more nervous about the value of my contracts.

Let's be perfectly honest: if DIS sells DVC, the value of points will plummet overnight.

 

[Chuck S]

[

would it have been possible for them to have started their own IP for Disney + without buying Fox?

Given Disney's film library, they probably would be fine without FOX for Disney+...where FOX will have the biggest impact is that it gave control of Hulu to Disney, and Hulu will likely be the main outlet for the FOX library and shows like The Orville. Hulu was much in need of product. Hulu and Fox give Disney a way to do more shows and series for a grown up audience, separated from the actual Disney branding.