Disney to sell their DVC unit?

[Chuck S]

I would be very surprised if they sell the Resorts, considering they are on Disney owned property that is leased by DVD/DVCMC. Nor do I think they'll sell the DVC resort management aspect, as that has built in profit for Disney, as well as provides them with "Breakage inventory " for cash rooms. It would make far more sense to sell off the three off-site resorts, if they really want sell of something.

 

[Duckbug.Ducktales]

Even if the source is to be believed (as in, the person overheard the right stuff and did not take anything out of context), it doesn't mean it will happen. As they state in the podcast, Disney was serious about starting their own airline but that never happened. This is too far-fetched right now to make decisions on, like choosing to sell on this reason alone.

We can speculate and debate and that's all fun, but I hope at the end of the day we don't lose sight of the fact that it's speculation built on a rumor that in turn stated nothing concrete.

 

[DonMacGregor]

It's interesting the buybacks didn't go out to SSR and did go to OKW. I would picture DVC holding OKW, because of its resale advantage adding years, and selling SSR, which is just so huge. I'm not feeling real confident about my SSR right now. It's such a beast of a property.

But they did/are:

Additional Buy Backs Offered By Disney.

 

[CanadaDisney05]

I didn't get a chance to listen to the podcast. Can someone please clarify what exactly is being discussed? Because the way I see it, they wouldn't exactly get a great deal of cash for DVC.

Disney doesn't own the properties. The contract owners do. Well I guess they do technically still own the properties as its a long term lease. But that means the buyer won't get access (or revenue) from the properties for 20-48 years. (I'm not sure, but do the resorts revert back to DVC or Disney at the end of the lease?). All they would be buying is the glut of unsold points at Riviera and Aulani, the small amount of ROFR points existing in inventory, the ability to ROFR future points, and the brand name.

 

[corpcomp]

The big questions are (and if someone mentioned this prior please excuse me) -
1. If they did sell DVC to another timeshare company like Marriott, what would happen to the resale value? I imagine it would drop big time. Disney is the only timeshare to my knowledge that actually goes up in value because of the buyback program and the constant increases in point value. The rest drop almost in half at the time of purchase and I've seen resale values with others which is the main reason I would never buy from them.

2. Would we lose our perks (dining discounts, retail purchases, etc...?

3. How would it affect the AP program? Would we all then lose the DVC level AP? No way I would go for the $1300 level.

I can see selling Vero and Hilton Head. Hawaii would be a big question.

Lots of uneasy questions.

Hope it does not happen. And I own at BCV. Have not seen the buyback letters some are referring to unless it does not apply to BCV.

 

[crisi]

I agree that we bought DVC for Disney.
We would not own a timeshare if DVC was not owned/managed by Disney.

I would imagine the majority of DVC owners feel the same way.

Don't underestimate inertia. DVC resorts will still be on property. They will remain (for those of us who already own) an inexpensive way to stay on property. All of the contracted benefits will stay in place. Many members will hold on, especially if changes are slow. Branding is negotiable. Perks are negotiable - and I would expect at least a short term deal to retain branding (Disney Vacation Club - managed by Marriott in smaller letters) and perks to be in place as part of any sale..

 

[crisi]

And that's where this rumor started? Because 3 business people were talking about DVC?

From experience, Accenture guys can't keep a secret and don't know where to talk shop. I once learned about a major and highly confidential platform change at a company where my husband worked from sitting next to people who didn't know to keep their mouths shut at lunch. I went home and said "I overheard..." and my husband blew a gasket. A month ago I sat next to a guy on an airplane who was working on an acquisitions powerpoint for a big company acquiring a small company (which you've heard of) which there isn't any public releases on (it may never happen - early in my career I did a lot of M&A work - it usually doesn't happen).

 

[hhisc16]

Don't underestimate inertia. DVC resorts will still be on property. They will remain (for those of us who already own) an inexpensive way to stay on property. All of the contracted benefits will stay in place. Many members will hold on, especially if changes are slow. Branding is negotiable. Perks are negotiable - and I would expect at least a short term deal to retain branding (Disney Vacation Club - managed by Marriott in smaller letters) and perks to be in place as part of any sale..

Owners of AUL, VB, and HHI have to be the most nervous about this rumor.
The resale value of our "off site" resorts would possibly drop if this became true.
These 3 resorts are also the locations up for the most discussion to be purchased or managed by someone other than Disney due to their location.

 

[crisi]

I would be very surprised if they sell the Resorts, considering they are on Disney owned property that is leased by DVD/DVCMC. Nor do I think they'll sell the DVC resort management aspect, as that has built in profit for Disney, as well as provides them with "Breakage inventory " for cash rooms. It would make far more sense to sell off the three off-site resorts, if they really want sell of something.

The amount of money they can making running DVC is small and the margins are pretty set and can't be increased (through legal means). And they wouldn't sell the property - they'd sell the branding, management, etc, and lease the resorts themselves.

 

[Duckbug.Ducktales]

(it may never happen - early in my career I did a lot of M&A work - it usually doesn't happen).

Exactly

 

[jennypenny]

I don't think it's so far-fetched. It would explain the quick addition of VGF2 ... it would make DVC more attractive to prospective buyers if they could point to crown jewel properties at WDW and DL selling points like hotcakes.

I also wonder now if the 'upgrades' were to convert the system to something more standardized for the industry. Let's face it, there aren't many players in the timeshare market that could handle DVC ... Disney must have a buyer in mind (if the rumor is true), so it would make sense to make changes that would make the transition easier. It might also explain the appointment of a 'numbers' person to run DVC.

Maybe Disney wants to get out of the hotel business entirely and let someone else like Marriott run the onsite properties. It wouldn't surprise me given all the sudden soft refurbs and IP injections. Chapek doesn't seem that interested in the Parks division.

 

[Brianstl]

I don't think it's so far-fetched. It would explain the quick addition of VGF2 ... it would make DVC more attractive to prospective buyers if they could point to crown jewel properties at WDW and DL selling points like hotcakes.

I also wonder now if the 'upgrades' were to convert the system to something more standardized for the industry. Let's face it, there aren't many players in the timeshare market that could handle DVC ... Disney must have a buyer in mind (if the rumor is true), so it would make sense to make changes that would make the transition easier. It might also explain the appointment of a 'numbers' person to run DVC.

Maybe Disney wants to get out of the hotel business entirely and let someone else like Marriott run the onsite properties. It wouldn't surprise me given all the sudden soft refurbs and IP injections. Chapek doesn't seem that interested in the Parks division.

Not just VGF2, but a new buyer would get to the new Disneyland property and it would explain the talk of a new DVC Poly tower.

 

[CanadaDisney05]

Owners of AUL, VB, and HHI have to be the most nervous about this rumor.
The resale value of our "off site" resorts would possibly drop if this became true.
These 3 resorts are also the locations up for the most discussion to be purchased or managed by someone other than Disney due to their location.

I asked this in a separate post. But in the case where DVC were to sell off Vero, HHI or AUL, what would the buyer even be getting? The 2% of points that DVC owns, plus a small amount of ROFR inventory, plus the glut of unsellable Aulani points, plus a small annual management fee? Why would anyone buy this? It's 20 years before they would be able to make any real revenue. And at that point, they are selling a nearly 50 year old resort as a timeshare. Just thinking about it, I feel like they would have to pay someone to take it.

 

[crisi]

I didn't get a chance to listen to the podcast. Can someone please clarify what exactly is being discussed? Because the way I see it, they wouldn't exactly get a great deal of cash for DVC.

Disney doesn't own the properties. The contract owners do. Well I guess they do technically still own the properties as its a long term lease. But that means the buyer won't get access (or revenue) from the properties for 20-48 years. (I'm not sure, but do the resorts revert back to DVC or Disney at the end of the lease?). All they would be buying is the glut of unsold points at Riviera and Aulani, the small amount of ROFR points existing in inventory, the ability to ROFR future points, and the brand name.

Disney would sell, not the properties themselves (they aren't going to let go of property next to the Magic Kingdom) but the brand, membership, and operation In exchange, the company that buys them, would get the right to run the DVC resorts and be entitled to the management margins - which is a fairly set, predictable revenue stream. They would be able to sell contracts - either unsold contracts or contracts that they acquire through foreclosure or non-payment of dues or through ROFR if they choose to exercise that. They can pull apart the resorts from each other and add them to an existing system (you'd still likely get home resort advantage, although those terms might change with more or less of a booking window) making onsite Disney resorts a feature of their existing system.

 

[crisi]

Exactly

I spent five years trying to sell Burger King in the late 80s early 90s. Well, I just did the Powerpoints and typed the memos - the accountants and M&A guys were trying to sell it.

 

[CanadaDisney05]

Disney would sell, not the properties themselves (they aren't going to let go of property next to the Magic Kingdom) but the brand, membership, and operation In exchange, the company that buys them, would get the right to run the DVC resorts and be entitled to the management margins - which is a fairly set, predictable revenue stream. They would be able to sell contracts - either unsold contracts or contracts that they acquire through foreclosure or non-payment of dues or through ROFR if they choose to exercise that. They can pull apart the resorts from each other and add them to an existing system (you'd still likely get home resort advantage, although those terms might change with more or less of a booking window) making onsite Disney resorts a feature of their existing system.

Right. The only thing I see there that may be of any value to a 3rd party is the ability to integrate DVC resorts into their existing trading system. Prop up their existing portfolio. Keeping in mind that the revenue that they can generate from selling existing inventory will be built into the purchase price, everything else sounds like peanuts.

 

[Lumpy1106]

Owners of AUL, VB, and HHI have to be the most nervous about this rumor.
The resale value of our "off site" resorts would possibly drop if this became true.
These 3 resorts are also the locations up for the most discussion to be purchased or managed by someone other than Disney due to their location.

Interesting why everyone keeps saying this. It seems to me like the contracts maintain access to the WDW resorts NMW - maybe they'd lose this if they were resold? If you bought Aulani and you intend to stay at Aulani Seems like you couldn't lose much. Maybe the Disney branding and activities on property? It seems to me like the WDW owners might lose some of the on-site perks, plus resale could get more restrictions. That seems worse to me.

 

[crisi]

Right. The only thing I see there that may be of any value to a 3rd party is the ability to integrate DVC resorts into their existing trading system. Prop up their existing portfolio. Keeping in mind that the revenue that they can generate from selling existing inventory will be built into the purchase price, everything else sounds like peanuts.

I think it probably is, and one of the reasons Disney may not manage sell it ...there is a big difference between looking to sell a subsidiary and actually closing the deal. Disney is going to want a LOT of money for it, and the revenue stream for a buyer doesn't seem to be there - except to be able to add this to their portfolio and sell more timeshares in Branson with "and you can stay at Disney's Beach Club Villas." On the other hand, I've seen some acquisitions that closed that were WAY stupider. HP buying Compaq comes to mind.

 

[sethschroeder]

Disney doesn't own the properties. The contract owners do. Well I guess they do technically still own the properties as its a long term lease. But that means the buyer won't get access (or revenue) from the properties for 20-48 years.

Except I can't see Disney selling the land. So do they sell a land lease to the new owner so they can do another 50 years contract beyond the existing contract? There really isn't that much money in already sold out resorts. They essentially are buying the rights to run ROFR and control who services go through.

Also with "breakage" is Disney really going to want some 3rd party running multiple hotels in the premium locations on property? Think about it this way the resort section of this board will now be talking about not checking Priceline (which Disney controls their pricing on) but checking XYZ company to see if they have discounts on Grand Floridian, Poly, or others.

 

[CanadaDisney05]

Except I can't see Disney selling the land. So do they sell a land lease to the new owner so they can do another 50 years contract beyond the existing contract? There really isn't that much money in already sold out resorts. They essentially are buying the rights to run ROFR and control who services go through.

Also with "breakage" is Disney really going to want some 3rd party running multiple hotels in the premium locations on property? Think about it this way the resort section of this board will now be talking about not checking Priceline (which Disney controls their pricing on) but checking XYZ company to see if they have discounts on Grand Floridian, Poly, or others.

Yea that's exactly my understanding. I just don't see the value for the buyer. The only value added for a buyer I can see is that they can add the WDW resorts into their trade portfolio which may help them market their own properties. Even so, I don't see Disney earning big bucks on this.