Disney to sell their DVC unit?

[Aussie RJ]

I'm nervous about this one folks. Disney is stocking the shelfs with inventory (GFV2, DLH, OKW buy backs).. Boosting products to sell for a prospective buyer... selling would certainly fill the short term revenue burdens of the pandemic.
What I found interesting was Len Testa changed the format of his show to get this out 'first'. I would be interested watching this weeks DVC Fan discussion "Whats Happening with OKW" with the team armed with Len's information... obviously the show was recorded prior to Len's bombshell.

 

[Duckbug.Ducktales]

I'm nervous about this one folks. Disney is stocking the shelfs with inventory (GFV2, DLH, OKW buy backs).. Boosting products to sell for a prospective buyer... selling would certainly fill the short term revenue burdens of the pandemic.
What I found interesting was Len Testa changed the format of his show to get this out 'first'. I would be interested watching this weeks DVC Fan discussion "Whats Happening with OKW" with the team armed with Len's information... obviously the show was recorded prior to Len's bombshell.

I don't think they'll be discussing this on the DVC Show for now, it's just too speculative.

 

[BruinEd03]

I certainly believe they are exploring it, and have probably explored it in the past. DVC is a way for Disney to bring in capital. If they are running out of places to build or feel the market is getting saturated, DVC will have filled its potential from a balance sheet perspective. Running DVC isn't the profitable part for Disney. The end life of the resorts is going to be a logistical issue they might as well make someone else's.

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.

 

[Wakey]

Question- what would be the benefit for the purchasing company? Relatively minor profits from running DVCMC, who if they peed members off too much could be voted out? Only real benefit I can see would be the properties transfer and they get the right to redevelop and resell when the current contracts are up? That’s a lot of hassle and a lot of money for such a long term realisation?

 

[Leight19]

I think I view the concept of these rumors slightly different then most here. The owners of the dvc resorts for next 50 years are us dvc members, that is what we bought and have rights to. What Disney owns is the land we built on, a percentage of their own points, and rights to manage the resorts for profit within legal requirements of time shares and what’s specified in our contract.

I would imagine the potential owners would be buying the rights to manage resorts and potential profits rather then buying the resort/land and proper way to view this would be them buying a revenue stream. Essentially they pay some lump sum upfront with some negotiated rate long term (especially for resorts commingled with hotels) and Disney doesn’t have to worry about managing the dvc resorts. I view this almost how I’d see a big bank selling mortgage loans after they initiate and process the loan.

The mutual benefit here is the dvc resort management is a very predictable revenue stream with low risk, low roi investment compared to other things Disney may invest in. Disney essentially would be evaluating and saying the dvc resort building/selling business is the most profitable aspect for their investment and they outsource rights to manage to third party for upfront money they can invest in higher roi. This may not necessarily be a bad thing for us as product doesn’t necessarily need to change and it allows a smaller company to more closely focus on dvc (think similar to how mears owns and manages dme fleet but it was still very much branded as Disney product/service).

I believe the dvc model has been very profitable for Disney and even if they made this move I’d expect it’s focused on management of sold resorts and Disney would still continue to build and sell dvc resorts (I think it would parallel how dvd and dvcm work now with dvd staying Disney and dvcm going third party). This would mean Disney would likely maintain pressure for new owners to deliver on the management so their future dvc products continue to be high demand. This could actually be a good thing because it would better align what’s good for Disney with what’s good for dvc members as Disney would no longer have profit incentive to find ways to generate revenue and would have tremendous stake in customer satisfaction with product to ensure future sales. This is all speculation but figured I’d throw out this potential view of it as potentially not awful lol.

 

[jimim]

So and so sports betting, brought to you by ESPN, a walt disney company.

Omgggggggggg can you imagine betting at Disney. “Where’s daddy mommy”. “Well son your degenerate father is over espn. Kiss your genie passes away for the rest of the week and you deffiently might as well forget about those lightening passes that money was gone by breakfast yesterday” “why mommy!? Why has Mickey made daddy like this”

 

[EM Lawrence]

I was a bit surprised when I scanned Disney’s 10-K. From the revenue recognition section:
“Resorts and vacations - Sales of hotel room nights and cruise vacations and rentals of vacation club properties are recognized as revenue as the services are provided to the guest. Sales of vacation club properties are recognized as revenue upon the later of when title transfers to the customer or when construction activity is deemed complete.”

I interpret rentals of vacation club properties as breakage income, whereas sales in the second sentence as normal DVC contracts.

ETA - I don’t know how Disney’s subsidiaries work (e.g. DVC, DVD etc), and the ownership structure of the land and buildings.

I was waiting for someone to look it up! I figured someone would be curious enough to do it. So it looks like Len was correct in that sales of DVC properties are counted as revenue when the sale is made.

 

[Westerlin]

I was waiting for someone to look it up! I figured someone would be curious enough to do it. So it looks like Len was correct in that sales of DVC properties are counted as revenue when the sale is made.

Exactly, so to maintain a positive revenue stream they need to keep selling contracts.

 

[GAN]

Omgggggggggg can you imagine betting at Disney. “Where’s daddy mommy”. “Well son your degenerate father is over espn. Kiss your genie passes away for the rest of the week and you deffiently might as well forget about those lightening passes that money was gone by breakfast yesterday” “why mommy!? Why has Mickey made daddy like this”

Are you suggesting all people who gamble on sporting events are degenerates, or just the ones that go to Disney? I'd quit but it's too lucrative.....

 

[TheMick424]

This one worries me a bit. Disney is always looking to maximize revenue, and create new streams where they didn't exist before. Will be following closely.

 

[hhisc16]

I think I view the concept of these rumors slightly different then most here. The owners of the dvc resorts for next 50 years are us dvc members, that is what we bought and have rights to. What Disney owns is the land we built on, a percentage of their own points, and rights to manage the resorts for profit within legal requirements of time shares and what’s specified in our contract.

I would imagine the potential owners would be buying the rights to manage resorts and potential profits rather then buying the resort/land and proper way to view this would be them buying a revenue stream. Essentially they pay some lump sum upfront with some negotiated rate long term (especially for resorts commingled with hotels) and Disney doesn’t have to worry about managing the dvc resorts. I view this almost how I’d see a big bank selling mortgage loans after they initiate and process the loan.

The mutual benefit here is the dvc resort management is a very predictable revenue stream with low risk, low roi investment compared to other things Disney may invest in. Disney essentially would be evaluating and saying the dvc resort building/selling business is the most profitable aspect for their investment and they outsource rights to manage to third party for upfront money they can invest in higher roi. This may not necessarily be a bad thing for us as product doesn’t necessarily need to change and it allows a smaller company to more closely focus on dvc (think similar to how mears owns and manages dme fleet but it was still very much branded as Disney product/service).

I believe the dvc model has been very profitable for Disney and even if they made this move I’d expect it’s focused on management of sold resorts and Disney would still continue to build and sell dvc resorts (I think it would parallel how dvd and dvcm work now with dvd staying Disney and dvcm going third party). This would mean Disney would likely maintain pressure for new owners to deliver on the management so their future dvc products continue to be high demand. This could actually be a good thing because it would better align what’s good for Disney with what’s good for dvc members as Disney would no longer have profit incentive to find ways to generate revenue and would have tremendous stake in customer satisfaction with product to ensure future sales. This is all speculation but figured I’d throw out this potential view of it as potentially not awful lol.

As DVC owners, do we have a say in who manages DVC?
I own HHI and I read DVCMC has a 3 year agreement that expires on 9/15/2022.

"thereafter, the management agreement automatically renews for successive periods of 3 years, upon its expiration, unless either party gives the other written notice of nonrenewal."
(pulled from DVC @ HHI Owners Association document)

 

[Suzabella]

I could see Disney hiring a management company - ex. Marriott is a managing company- but I don't see them selling. They'd never let go of property they own that close to the parks assuming the new buyers would also want the land those resorts sit on.

 

[Wakey]

I think I view the concept of these rumors slightly different then most here. The owners of the dvc resorts for next 50 years are us dvc members, that is what we bought and have rights to. What Disney owns is the land we built on, a percentage of their own points, and rights to manage the resorts for profit within legal requirements of time shares and what’s specified in our contract.

I would imagine the potential owners would be buying the rights to manage resorts and potential profits rather then buying the resort/land and proper way to view this would be them buying a revenue stream. Essentially they pay some lump sum upfront with some negotiated rate long term (especially for resorts commingled with hotels) and Disney doesn’t have to worry about managing the dvc resorts. I view this almost how I’d see a big bank selling mortgage loans after they initiate and process the loan.

The mutual benefit here is the dvc resort management is a very predictable revenue stream with low risk, low roi investment compared to other things Disney may invest in. Disney essentially would be evaluating and saying the dvc resort building/selling business is the most profitable aspect for their investment and they outsource rights to manage to third party for upfront money they can invest in higher roi. This may not necessarily be a bad thing for us as product doesn’t necessarily need to change and it allows a smaller company to more closely focus on dvc (think similar to how mears owns and manages dme fleet but it was still very much branded as Disney product/service).

I believe the dvc model has been very profitable for Disney and even if they made this move I’d expect it’s focused on management of sold resorts and Disney would still continue to build and sell dvc resorts (I think it would parallel how dvd and dvcm work now with dvd staying Disney and dvcm going third party). This would mean Disney would likely maintain pressure for new owners to deliver on the management so their future dvc products continue to be high demand. This could actually be a good thing because it would better align what’s good for Disney with what’s good for dvc members as Disney would no longer have profit incentive to find ways to generate revenue and would have tremendous stake in customer satisfaction with product to ensure future sales. This is all speculation but figured I’d throw out this potential view of it as potentially not awful lol.

yes if it was this, it would mean just selling DVCMC to a third party. That would mean minor changes but interestingly the company would have zero control over ‘perks’ and Disney would lose significant control for virtually no gain, as the ability to manage DVC won’t be worth much (profits are limited by the contract I believe). And there’s no way I could see Disney handing over management of some DVC integrated in hotels-what a nightmare. But if the discussion was about selling all the hotels, surely that would be the story.
If 3 corporate financiers were talking about it as suggested, I doubt it would be such a low level matter and is more likely to involve selling off some of the properties. But again, would Disney want others owning properties integrated into the hotels they own?

 

[M:SpilotISTC12]

As DVC owners, do we have a say in who manages DVC?
I own HHI and I read DVCMC has a 3 year agreement that expires on 9/15/2022.

"thereafter, the management agreement automatically renews for successive periods of 3 years, upon its expiration, unless either party gives the other written notice of nonrenewal."
(pulled from DVC @ HHI Owners Association document)

I could see new management happening more so with HHI and assuming the same clauses are in for VB and AUL.

 

[Brianstl]

I could see Disney hiring a management company - ex. Marriott is a managing company- but I don't see them selling. They'd never let go of property they own that close to the parks assuming the new buyers would also want the land those resorts sit on.

DVD/DVC doesn’t own the land. The land is leased from a separate Disney legal entity.

 

[Chuck S]

As DVC owners, do we have a say in who manages DVC?
I own HHI and I read DVCMC has a 3 year agreement that expires on 9/15/2022.

"thereafter, the management agreement automatically renews for successive periods of 3 years, upon its expiration, unless either party gives the other written notice of nonrenewal."
(pulled from DVC @ HHI Owners Association document)

Technically, yes. But it would be a very expensive right to exercise. Each member would have to be contacted, and have a chance to vote. Those votes would need to be tallied. And remember that Disney themselves owns a substantial number of points. Lawyers and accounting firms would likely be needed for certification of the votes.

And any Disney related "perks," including transportation, would need to be re-negotiated, likely at an even higher price, unless we go private with Mears, like Swan/Dolphin. And again, what's in it for Disney? We pay them for everything, including transportation, where I'm sure they make a profit. The food services and resort stores would be contracted out to a 3rd party, especially at SSR and OKW, and I just don't see the Cash/DVC blended resorts being run by two separate entities, unless Disney contracts out ALL hotel operations to a third parties. Do you really see Disney being willing to give up that kind of control and cashflow? Remember, breakage rooms are provided to Disney for a small percentage of the rental income, so a very low cost, low maintenance additional revenue stream. And what would be in it for the new management company, especially considering that many resort properties will be returned to Disney in 2042, and the new company would need to renegotiate or simply walk away in 20 years?

 

[RoseGold]

The more I think about it, the more I think it makes sense to sell Aulani. I’m surprised we don’t have some Aulani owners in here with a lot of matata.

Bob never really discounted all the Aulani points they are holding the bag on, but he could discount and sell them all at once to take the revenue now. Assuming those DVC owners really wanted Disney and not national chain timeshare, they’ll have to buy back in. If I owned Aulani, I would be very nervous.

 

[hhisc16]

The more I think about it, the more I think it makes sense to sell Aulani. I’m surprised we don’t have some Aulani owners in here with a lot of matata.

Bob never really discounted all the Aulani points they are holding the bag on, but he could discount and sell them all at once to take the revenue now. Assuming those DVC owners really wanted Disney and not national chain timeshare, they’ll have to buy back in. If I owned Aulani, I would be very nervous.

I own HHI and I am nervous for this rumor.
Resale value?
Losing Disney as the manager?
DHHIR without Disney at the resort is just another timeshare on HHI.

 

[Airb330]

This rumor is a good cure for addonitis!

This and all of the negative (for us) park changes cured of us of addonitis for GFV2.

 

[jimim]

Are you suggesting all people who gamble on sporting events are degenerates, or just the ones that go to Disney? I'd quit but it's too lucrative.....

it's a joke. neither. i have bet on games before. . . i have zero luck. . .