New Four Seasons Timeshare on Disney Property and Value Oriented West Side

[EUROPACL]

Most importantly to me--the Disney offerings that I enjoy (largely WDW and the film business) continue to engage and entertain me.

Well since we've pointed out some of the more horrible offerings from Disney over the last few years, I'd love to hear about the films that Disney has made recently that you enjoyed and continue to engage and entertain you.

( We can leave out Pixar and POTC)

 

[Another Voice]

Thank you for your reply. I would like to ask some follow-up questions based on your posting. These really are questions, there are no points trying to be made here.

Would you consider the inclusion of non-Disney brands at WDW, i.e. Four Seasons Hotel, an example of increasing the number of service points (e.g., offering full spa facilities at WDW) or an attempt by Disney to expand its markets (e.g. capturing a higher end that would have stayed off property)? How would you handle the “Four Seasons at WDW” vs. “Disney’s Four Season Resort” brand interactions?

Do you think that the Four Seasons / Western Gateway projects are a financial decision designed to protect Disney’s capital? If so, does this mean there is an issue with Disney’s largest core business – theme parks.

Would you support the “Tokyo” WDW approach – where Disney does not own or operate various elements of WDW but instead manages them under a license agreement?

If it had to be one way or the other (say the FCC reversed a lot of its ownership rulings of the last decade) – do you think it would be better for Disney to be a content producer (Disney Studios) or a distribution/licensee operation (ABC, Disney Channel)?


I ask the questions because I think they're at the core of most disagreements around here. There are some people, and I’ll admit I’m one, that like Disney when it was a smaller, niche company that produced a products with a specific “flavor”. There are others that enjoy Disney for offering a much broader range of product with the same general level of quality.

 

[raidermatt]

Over the last five years they've had very good luck.

What could you possibly understand about my skills as a manager? You don't like the views I express about Disney and so I'm a crappy manager. I think I finally understand how you folks reach the conclusions that you offer up.

Valuable insight.

Yes, you get what you give.

You came in attacking, looking to tick people off, making assumptions, and ignoring any real discusssion points. This was pointed out to you, with specifics. If you can't handle that, and consider that a "personal attack", then yes, it is very valuable insight.

But, if you are finally ready to actually discuss the topic...

I think increases in the number of service points, increases the number of repeat service points, protective diversification (to insulate against downturns in any particular service offering), improvements to revenue and EBITDA are all very positve.

Even if we agree that expanding into this higher end market is a positive, the main point of contention continues to be how Disney is going about that.

Certainly many of the larger questions surrounding that point are laid out in AV's post. If you do see Disney as merely a middle-man, a distributor, then coceptually there may not be a problem with leasing and selling land to competitors. Reduce the risk and split the profits.

But if you see Disney as a creative company, at least in the parks and resorts division, you have to at least question the wisdom of expanding in this manner. WDW is a unique animal, and comparing this type of partnership with partnerships in other industries is a mistake.

In WDW, Disney has a set-up any other company would kill for. Certainly they have the resources to make this expansion without bringing in a competitor. We aren't talking about a venture into a new industry. It's merely a step up in the industry Disney has vast amounts of experience in. By doing this themselves, they can maintain the control they worked so hard to build, and they can keep their fantastical world that is so important to it's guests largely intact.

And, most importantly for those focused only on the bottom line and not how we get there, Disney would keep all the profits for themselves, just as they have for the vast majority of what exists in WDW. That does, however, require a long term view.

This deal is the same type of thinking that brought reliance on the Pixar deal instead of internal investment. The luxury market is a little different from what they have done in the past, but there are far more similarities than differences. Just as CGI had some differences but at it's heart, was still simply making animated features. No the analogy is not perfect, but the idea of limiting investment by partnering with another brand that already does it, even though it's still essentially your core business, is the same.

The only real long term justification for this deal over investing internally is if Disney is simply not capable of executing something like this on their own, despite the resources at their disposal.

 

[MassJester]

Well since we've pointed out some of the more horrible offerings from Disney over the last few years, I'd love to hear about the films that Disney has made recently that you enjoyed and continue to engage and entertain you.

( We can leave out Pixar and POTC)

In fairness, in the last four years my movie going has been curtailed, as I work during the day and go to school at night, but I've managed to catch a few.

Most recently I liked:
Chronicles of Narnia -- I thought it was a creative retelling of an old favorite story of mine. I'm looking forward to Prince Caspian.
Both Pirates movies were fun - I liked them and would see them again
Invincible -- I love stories like that (and Titans years before-I'll still sit on the couch and enjoy that one)
Ladder 49 -- good story, and I thought VERY well shot
Wild Hogs -- just caught this-great fun

 

[MassJester]

Would you consider the inclusion of non-Disney brands at WDW, i.e. Four Seasons Hotel, an example of increasing the number of service points (e.g., offering full spa facilities at WDW) or an attempt by Disney to expand its markets (e.g. capturing a higher end that would have stayed off property)? How would you handle the “Four Seasons at WDW” vs. “Disney’s Four Season Resort” brand interactions?

I would only consider the inclsuion of brands to be an expansion of service points if they were revenue, profit producing, and even then only if customers identified the service point with the Disney experience.

My preference is for DFSR rahter than FS@WDW. That said, I've always thought that WDW is trying to accomplish too much, and in doing so it cannot do so efficiently (or if you like, at a reasonable cost).

Do you think that the Four Seasons / Western Gateway projects are a financial decision designed to protect Disney’s capital? If so, does this mean there is an issue with Disney’s largest core business – theme parks.

No, I think they are attempts to streamline service delivery models and improve the cost/value ratio for customers.

Would you support the “Tokyo” WDW approach – where Disney does not own or operate various elements of WDW but instead manages them under a license agreement?

It's an interesting question, but I don't know enough about the model to evaluate it. My initial reaction is I would rather that Disney own it lock, stock and barrel--but that's a gut reaction rather than a sober evaluation.

If it had to be one way or the other (say the FCC reversed a lot of its ownership rulings of the last decade) – do you think it would be better for Disney to be a content producer (Disney Studios) or a distribution/licensee operation (ABC, Disney Channel)?

Well, if the rules were changed (and only if the rules were changed) I like Disney for its content, and so I would be sorry to see them give up that business. That said, absent a rule change, I think it would be foolish to get out of distribution/licensing.

 

[MassJester]

Yes, you get what you give.

You came in attacking, looking to tick people off, making assumptions, and ignoring any real discusssion points. This was pointed out to you, with specifics. If you can't handle that, and consider that a "personal attack", then yes, it is very valuable insight.

But, if you are finally ready to actually discuss the topic...

I didn't percieve any "real discussion points" in that portion of your post, rather just a lot of slogan slinging, pompous pronouncements, and assumptions about my intent (e.g., "looking to tick people off") and so offered you nothing more. We are unlikely to agree on that point.

The only real long term justification for this deal over investing internally is if Disney is simply not capable of executing something like this on their own, despite the resources at their disposal.

As I mentioned above, I just don't agree. WDW Disney tries to serve every level of the hotel market, and in so doing services them inefficiently and in many cases at a low cost/value ratio. Partners that relieve the burden of servicing particular market segments allow for a more efficient service delivery model.

 

[EUROPACL]

In fairness, in the last four years my movie going has been curtailed, as I work during the day and go to school at night, but I've managed to catch a few.

Most recently I liked:
Chronicles of Narnia -- I thought it was a creative retelling of an old favorite story of mine. I'm looking forward to Prince Caspian.
Both Pirates movies were fun - I liked them and would see them again
Invincible -- I love stories like that (and Titans years before-I'll still sit on the couch and enjoy that one)
Ladder 49 -- good story, and I thought VERY well shot
Wild Hogs -- just caught this-great fun

So school/job aside in the last 4 years you got around too "enjoy" a movie not made by Disney, Pirates -(which I already gave you) and 3 other "movies" that I doubt even made a profit and are considered horrible movies.

Ok I think I'm done now...I'm slowly stepping away from this poster like they just pulled a dead cat out of a bag and started to pet it.

 

[MassJester]

Ok I think I'm done now...I'm slowly stepping away from this poster like they just pulled a dead cat out of a bag and started to pet it.

Well, as you can imagine I'm going to miss chatting with you. Perhaps Ambien will allow me to sleep at night after this traumatic rejection.

 

[DisOrBust]

Play nice guys. I love rading the banter,

 

[YoHo]

As I mentioned above, I just don't agree. WDW Disney tries to serve every level of the hotel market, and in so doing services them inefficiently and in many cases at a low cost/value ratio. Partners that relieve the burden of servicing particular market segments allow for a more efficient service delivery model.

So, would you advocate going back to the pre-Eisner model of 1 (two if you count the campground) service and amenity level that represents "Disney" and let others handle the other markets as at the hotel loop?

Ignoring some of the more innovative ideas that WDI has had prior to the slash and burn through the group of mixing service levels. Ideas that were killed.


A more important question.
Do you think that Walt Disney World represents in any way Walt's original intention to go beyond simple entertainment? Or is it's charter only to entertain profitably for TDC? In other words, do they have a mandate to be something more?



As for the movies mentioned,
5 movies compared to the incredible stinking pile of poodu that the company has put out and of those 5, Narnia was merely financed. No mention of anything on the Television side, no mention of new attractions. That's a small amount of content to judge the health of the company or even the health of the film unit on.

 

[raidermatt]

I didn't percieve any "real discussion points" in
that portion of your post, rather just a lot of slogan slinging, pompous
pronouncements, and assumptions about my intent (e.g., "looking to tick people
off") and so offered you nothing more. We are unlikely to agree on that
point.

Actually the initial statement specifically concerned you inserting the Walt
angle when it had not been mentioned. Your statement also referenced Kool Aid drinking which of course was designed to annoy.

That's when the discussion started getting snippy, because when you were called on it, you became dismissive. Whether you agree or not, its right there in the posts.

As I mentioned above, I just don't agree. WDW Disney tries to serve every level of the hotel market, and in so doing services them inefficiently and in many cases at a low cost/value ratio. Partners that relieve the burden of servicing particular market segments allow for a more efficient service delivery model.

Every level? No. But they do serve multiple levels. Many hotel companies do, though they use different brand names to do so. Disney uses different classifications.

Disney is in the unique position of having somewhere in the neighboorhood of 30,000 hotel rooms in a self-contained resort that is largely self-regulated. What's more, the attractions that draw people to those resorts are also in that self-contained environment, owned by Disney (largely).

When you say cost/value ratio, I assume you mean Disney's costs and not price. Where do you get the info that they are inefficient in this area? I get the annual report too, and I haven't seen resort costs broken out from park costs. Nor have I seen a comparison to industry benchmarks. But me not seeing the analysis does not mean it doesn't exist, so please share where you got the info from.

If we are to assume they are inefficient in this area, and that is the key measure, then as YoHo says, that would indicate further outsourcing or partnerships would be prudent with the current Disney owned resorts.

First, I'm not yet buying that they are ineffiecient. Further, if they are, there is no excuse for that given their setup of so many rooms in their own self contained resort. If that is an issue, they need to address it, and not by simply getting out of the business.

Second, I'm curious as to what you define as value in the ratio you mentioned? Part of the value Disney provides is the "bubble" environment they have the unique opportunity to provide. How was that accounted for in the value equation?

I'm not contending that Disney's value proposition to its guests is at the optimal level for long term growth, but that's a result of a conscious business decision, not costs they have not been able to contain. Perhaps more importantly though, any discussion of Disney's value proposition at its hotels has to include the overall value proposition at WDW as a whole. From a guest perspective, and that's who determines value, they are one.

 

[MassJester]

So, would you advocate going back to the pre-Eisner model of 1 (two if you count the campground) service and amenity level that represents "Disney" and let others handle the other markets as at the hotel loop?

No, and I didn't say anything of the sort.

Ignoring some of the more innovative ideas that WDI has had prior to the slash and burn through the group of mixing service levels. Ideas that were killed.

I'm not sure what you mean.

A more important question.
Do you think that Walt Disney World represents in any way Walt's original intention to go beyond simple entertainment? Or is it's charter only to entertain profitably for TDC? In other words, do they have a mandate to be something more?

Yes I do. In order to do so profitably in the long run they are forced to be something more.

As for the movies mentioned,
5 movies compared to the incredible stinking pile of poodu that the company has put out and of those 5, Narnia was merely financed. No mention of anything on the Television side, no mention of new attractions. That's a small amount of content to judge the health of the company or even the health of the film unit on.

Sorry for only seeing those 5. I was only asked about movies, and so that's all I addressed.

I suppose we could create a list of all movies produced by all studios over the last fiuve years and compare success ratios by studio (if we could agree on what success were to mean--but otherwise we are reduced to swaping "I like these" vs. "I hate those" lists.

 

[MassJester]

That's when the discussion started getting snippy, because when you were called on it, you became dismissive. Whether you agree or not, its right there in the posts.

Actually, I don't agree that the point you single out is when the discussion got snippy -- but is there a point in our trying to come to an agreement? It just seems so unlikely.

Every level? No. But they do serve multiple levels. Many hotel companies do, though they use different brand names to do so. Disney uses different classifications.

Disney is in the unique position of having somewhere in the neighboorhood of 30,000 hotel rooms in a self-contained resort that is largely self-regulated. What's more, the attractions that draw people to those resorts are also in that self-contained environment, owned by Disney (largely).

None of those things are in dispute--how is that pertinent to the decision to outsource two extreme levels?

When you say cost/value ratio, I assume you mean Disney's costs and not price. Where do you get the info that they are inefficient in this area? I get the annual report too, and I haven't seen resort costs broken out from park costs. Nor have I seen a comparison to industry benchmarks. But me not seeing the analysis does not mean it doesn't exist, so please share where you got the info from.

No I mean cost to the consumer vs value received.

Of course that misunderstanding impacts the balance of your line of questioning, but I'll see what I can do.

If we are to assume they are inefficient in this area, and that is the key measure, then as YoHo says, that would indicate further outsourcing or partnerships would be prudent with the current Disney owned resorts.

Could very well be.

First, I'm not yet buying that they are ineffiecient. Further, if they are, there is no excuse for that given their setup of so many rooms in their own self contained resort. If that is an issue, they need to address it, and not by simply getting out of the business.

They did address it. They outsourced two opposite ends of the spectrum. That's very effective.

I'm not contending that Disney's value proposition to its guests is at the optimal level for long term growth, but that's a result of a conscious business decision, not costs they have not been able to contain. Perhaps more importantly though, any discussion of Disney's value proposition at its hotels has to include the overall value proposition at WDW as a whole. From a guest perspective, and that's who determines value, they are one.

I agree, but what's the point in contention?

 

[raidermatt]

None of those things are in dispute--how is that pertinent to the decision to outsource two extreme levels?

Partly because you brought them up the services points and markets as being a cause for Disney's inability to provide value, and partly because understanding Disney's unique position is critical to any discussion that involves business practices.

No I mean cost to the consumer vs value received.

Of course that misunderstanding impacts the balance of your line of questioning, but I'll see what I can do.

Well, yes, that does change things siginficantly.

Price is a component of value, not a separate variable. Provide a bounce house for free and most will say that's a great value. Charge $100 a minute and its a horrible value.

Value is very subjective, but I'll agree that on the basis of objective, standard hotel amenities, Disney does fall short in many ways. However, that is not out of any inability on their part. Its a conscious business decision to rely on the value guests find in the Disney brand, and the unique environment and location. In other words, they make up for the lack of standard hotel amenities in other areas.

While I may not agree with that part of their business model, outsourcing hotel rooms does not address the issue any moreso than Disney simply altering the current business model. You referenced a more efficient service model, but efficiency has nothing to do with it. Through the economies of scale created by having so many rooms in the self-contained and self regulated environment, Disney can be far more efficient than an outside brand with any model they choose.

With efficiency not an issue, we are back to investment and ability. Is Disney willing to make the investment themselves and therefore keep the returns for themselves? Does Disney have the ability to service the market in question? (The Western Beltway development is different in some key ways, so I'm leaving that out of this discussion)

Further, bringing outside brands into WDW's bubble in this manner is likely to have a detrimental impact to the value guests perceive in that area. Not only is Disney forgoing the long term rewards of this potential investment, they may very well be damaging their existing hotels at the same time. Or at least not enhancing them as they could.

Could very well be.

Outsource the current hotels? All of the above points apply here as well, only to a far greater degree. That would be a short term money grab, pure and simple.

They did address it. They outsourced two opposite ends of the spectrum. That's very effective.

No, this does not address Disney's business model for providing value in its current resorts at all. If you have a problem with Disney's value proposition at the BW, for example, this won't change that.

Further, even though efficiencey is not a factor in that value, it isn't going to help that either. Building another Disney resort on the other hand, even a higher end one, actually WOULD help with efficiency as it would further increase the economies of scale benefits.

 

[MassJester]

Partly because you brought them up the services points and markets as being a cause for Disney's inability to provide value, and partly because understanding Disney's unique position is critical to any discussion that involves business practices.

I'm not sure what that paragraph means.

While I may not agree with that part of their business model, outsourcing hotel rooms does not address the issue any moreso than Disney simply altering the current business model. You referenced a more efficient service model, but efficiency has nothing to do with it. Through the economies of scale created by having so many rooms in the self-contained and self regulated environment, Disney can be far more efficient than an outside brand with any model they choose.

On this we don't agree at all. In fact, I think you have hit our point of fundamental disagreement square on the head.

Eliminating the extremes of service provision allow for a much more efficient support structure as the end result is more homogenous, and can be supported by the same resources without the comparatively expensive modifications in support that a less homogenous model would demand.

Prof. Jim Heskett at Harvard Business School has done some exceptional research in the service-profit chain that I think you would enjoy reading, and would certainly more capably articulate the point I am shooting for. I believe he has retired, but still retains an office there and his research is still available.

With efficiency not an issue, we are back to investment and ability. Is Disney willing to make the investment themselves and therefore keep the returns for themselves? Does Disney have the ability to service the market in question? (The Western Beltway development is different in some key ways, so I'm leaving that out of this discussion)

As I think efficiency is the threshold issue, I cannot accept the premise.

No, this does not address Disney's business model for providing value in its current resorts at all. If you have a problem with Disney's value proposition at the BW, for example, this won't change that.

It might change it substantially, and I would suggest that this is precisely the point of these moves.

 

[raidermatt]

Eliminating the extremes of service provision allow for a much more efficient support structure as the end result is more homogenous, and can be supported by the same resources without the comparatively expensive modifications in support that a less homogenous model would demand.

There are far more similarities between the support structures than there are differences. Yes, some inefficiencies due to the differences would be eliminated, but these don't make up for the many efficiencies gained from the similarities.

If the resorts were in different locations, or weren't surrounded by other significant products from the same brand, that would change the dynamics significantly. But we have already established that WDW features many unique advantages that change the playing field significantly.

As I think efficiency is the threshold issue, I cannot accept the premise.

That's unfortunate, as efficiency is not what's inhibiting Disney's ineadequate (in your eyes) value proposition. Understanding that point is critical to understanding Disney's business model.

 

[raidermatt]

Something else that's important to note if we are going to bring service models into the discussion is that Disney is first and foremost an entertaiment company, at least with respect to the parks and resorts.

The service provided is a necessary component of the overall entertainment experience at WDW, but it is still just that, a component.

 

[MassJester]

Absolutely they are an entertainment company. I've no argument with that point.

Additionally, I think you understanding of the benefits of volume vs. the costs of service diversity is flawed. At the very least, out differing understanding will keep us from agreeing on the "outsourcing" issue.

It is not a small point of disagreement either. The difficulties I have seen in effectively managing a multi-tiered offering of resorts built upon a single infra-structure have been glaring for many years (most obvious to me since the opening of the Grand Floridian and the Pop Century resorts). I have long believed that this wide spread has caused most of the resorts to be more expensive than they otherwise might be, and the top tier resorts to offer less service than similarly situated resort facilities in other vacation destinations.

Contracting out the extremes allows the support systems to be operated more smoothly, efficiently, and perhaps even with better results.

I have managed in the service industry for almost 25 years, the last ten of which I have been in a position to design service offerings--the more variety in the offerings, the more disproportionate strain is placed on the support structure, and the less efficiently the entire organization performs.

 

[YoHo]

You're assuming that the current pricing represents no change in required profits for the resorts. Resort profits are buried deep within layers and layers of management and are set to offset other business lines.
More importantly, the management arrangement of the specific Hotels drastically changed under Eisner.

Under the original scheme, there was an entity called WDW and it's management from Hotels to theme parks to mini golf was one. That is no longer the case.

Further, under the original scheme, support services was entirely provided by Disney they provided the power, the sewer, the garbage service. That is not true of Eisner era construction. It was cheaper to handle it via traditional methods.

So, significant efficiencies were lost there.

And finally, one of the primary purposes of Walt Disney World was to experiment in new technologies and urban planning. Wouldn't efficiencies of the multi-tiered resort complex fit under that umbrella?

 

[raidermatt]

I'm sure you have a strong understanding of how your company operates in its sector of the service industry. All I can say is your experience with varied service offerings is not universal across all service industries, and certainly isn't applicable to all service companies.

There are many circumstances where the benefits of more varied service offerings outweigh the disadvantages of going in the opposite direction. There is no magic formula to this. Trying to dogmatically apply principles from one company to the next can be disasterous, never mind when going from security or fianncial services to the entertainment industry.

I have long believed that this wide spread has caused most of the resorts to be more expensive than they otherwise might be, and the top tier resorts to offer less service than similarly situated resort facilities in other vacation destinations.

I wish it were that simple. Disney offers what they do for the prices they charge because they can. They are generally satisfied with their occupancy rates, so why offer more for the same price?

Mind you, I'm not saying I agree with everything Disney is doing here, but we are talking about why they do what they do.