Rumor boards says DVC to be sold!

[CarolAnnC]

BUT...Many a big company knows that the best way to get what you want is to sell your biggest asset. I've seen it happen a lot. You sell off the most profitable to make the most profit.

Well, in that case they would be selling ABC or Touchstone, lol. As evidenced, Disney is into being the purchaser, ie. ESPN and most recently Marvel Comics and Entertainment. I should clarify I was looking at DVC and DCL as part of WDW (thereby the large moneymaker comment). I don't see them as being the seller...JMHO.

 

[Piper260]

It didn't make any sense to me either. But when i asked him why he thought Marriott was going to buy it, he said to manage all of DVC resorts but he really wasn't sure. But he did say Marriott was going to buy DVC. Time wil tell.

 

[tjkraz]

Well let me give you my .02 worth. I was at the Marriott Aruba Surf Club in August and we went on the sale presentation for the 15000 reward points. While talking to the salesman he told us that Marriott was going to buy DVC.

This begs the question of whether competing timeshare salesmen rank higher or lower than bus drivers in the grand hierarchy of rumor mongering.

 

[WolfpackFan]

I could see this happening at say HHI, VB or even OKW and SSR before some of the resorts that are integrated in with an actual WDW resort like VWL, AKV, BWV and BCV. Are you going to split a resort in half and let WDW own half and Marriott own the other half? I think that all kinds of problems would happen.

On the other hand, I've found out over time that usually when you start hearing rumors (especially from multiple sources), there is usually some part of truth in them.

 

[Piper260]

This begs the question of whether competing timeshare salesmen rank higher or lower than bus drivers in the grand hierarchy of rumor mongering.

The thing about this is the saleman is the same guy we have had since we initially purchased our Surf Club membership about 7 years ago and he knows were not there to buy another week, just there to get points and he gives us insight about what Marriott is doing. In the past he gave us other information about what Marriott was doing and he was spot on, like Marriott was attempting to buy the Holiday Inn next to the Surf Club but didn't feel it would go through and he was right it didn't or when Marriott was buying land in Aruba to build a Ritz Carlton they did and they are.

 

[dis-happy]

My first thought was "no way". But the argument has some possible merits. Everything these days is about cost-cutting, and administration of DVC is a very large cost that keeps growing (not to even mention they need to pour a lot more money in to the computer system as it stands now). What if they piggybacked everything into Marriott's already existing structure, with a much smaller Disney support staff kept in place? It's the kind of big outsourcing move you see everywhere these days whether it be banks or cell phone companies. Not sure how the RCI exchange contract would look though, unless the real reason for that change was in anticipation of a DVC-Marriott merger and potential anti-trust complaints.


I'm friends with someone who is very high up in the Marriott TS arena, may have to try and meet up and see what (if anything) that person might say about it.

 

[tjkraz]

Off the top of my head, there are several ways in which a "sale" could go down:

1. Sell the DVC resort ground leases. DVD doesn't actually own the land on which resorts site. It's leased from another Disney entity. Disney could sell that land and the new owner would have to honor the lease at its stated terms.

This is extremely unlikely to happen. Although Disney has sold some land on the fringes of WDW, I cannot see any value in selling large plots in the middle of the resort complex.

2. Sell Disney Vacation Development. This is the business unit which builds and markets the resorts. The buyer would receive any unsold inventory and the rights to the buildings after our current deeds expire. They would probably also get the right to build and sell other resorts on Disney property and perhaps to use the "Disney" name in some form.

Existing timeshare resorts owned by members couldn't be "sold" to another entity because...we own them. At least for the next few decades. In other words, there's not really anything DVD could "sell" of BCV, BWV, Vero, etc. because we owners (members) have deeded rights to the property.

Again this one seems remote due to the expiring leases. Come 2042 / 2054 / 2057 / 2060, DVD will recoup millions of points to sell all over again. Unless the price is extremely high, why give those rights to another entity? And if you're that other entity, there's little reason to pay a high price for a revenue stream you cannot fully realize for 30-50 years.

3. Sell Disney Vacation Club...the management company. IMHO, this is the move that would be most likely to happen, if any. To a timeshare manager, like Marriott there would certainly be value in adding the Disney resorts to their program. Member ownership would continue. We would still have priority booking at our Home resorts as guaranteed by the POS. But most other aspects of the system would be subject to whatever changes the new manager may implement.

Disney Vacation Development would still own unsold points, recapture ownership of existing resorts as contracts expire and build/market new destinations. The new manager of "DVC" would get the 15% annual management fee and be able to market Disney-based resorts as part of their program. As one poster mentioned, integration of cash/points reservations between Disney and an outside manager would be a challenge...but probably not an insurmountable one. (Although it often seems that way with Disney IT.)

4. Farm-out management of the Disney resorts. In this case there probably wouldn't be any ownership changes but Disney would contract with another company to operate the resorts. Instead of our dues paying the salaries of Disney CMs they would pay the salaries of employees of another company. This is basically outsourcing to the max.

This last option is probably within the realm of possibility, but Disney hasn't really given any signs that it is interested in getting out of the business. A few years ago Disney actually signed an agreement to manage hotels in Anahiem's Garden Walk which were to be owned by other entities. That project is stillborn at the moment, but the existence of the agreement suggests that Disney was more interested in expanding its hotel management rather than getting out of the business.

This would likely impact all resorts, DVC and non-DVC alike. Changes to members would be minimal (or nonexistent)...just like when valet parking was outsourced. In fact, conditions could actually improve at resorts if the new company proved to be a more effective hotel manager than Disney.

I'll add that any agreement could include components from multiple options above (i.e. sell both DVD and DVC.)

 

[wildernessDad]

At first, I was going to blow this thread off without reading further, but if a WDW bus driver said it's true...

 

[Goofy DVC]

Thank you to all that posted replies. I had quite a number a good laughs. Keep em coming. By the way Ijust heard that all the disney bus transportation was being farmed out to Mears.

 

[JimMIA]

3. Sell Disney Vacation Club...the management company. IMHO, this is the move that would be most likely to happen, if any. ... Member ownership would continue. We would still have priority booking at our Home resorts as guaranteed by the POS.

If I'm not mistaken, the only things we are guaranteed by the POS is the ability to use our points at our home resort subject to availability, and IF booking at non-home resorts is permitted we are guaranteed a ONE-month booking priority (as opposed to the 4-month advantage we currently enjoy).

Therefore, if Disney hired another management company, they could make major changes to our detriment and still be within the parameters of the POS.

It's not hard to see how a major timeshare company like Marriott could benefit greatly by limiting us to our home resorts only.

 

[Brian Noble]

As for what's in it for Marriott---it turns out that the management contracts can be a nice source of very stable revenue and profit. But, the flip side of that coin is that this is yet another reason why this doesn't pass the sniff test.

Mickey doesn't want other people horning in on his action unless (a) he needs someone's expertise, or (b) he needs someone to finance a deal. Neither seem to be true in this case---except perhaps in the sense that DVD really hasn't managed to develop a non-Orlando resor that you could truly call successful. Marriott does know how to do that.

Edited to add: and whatever does (or doesn't) happen, the one thing you can guarantee is that Disney will never give up control of actual land within RCID borders without de-annexing it first.

 

[tjkraz]

It's not hard to see how a major timeshare company like Marriott could benefit greatly by limiting us to our home resorts only.

I must be missing something because I don't see how a timeshare manager would benefit from limiting DVC members to Home resorts. In doing so, they would also block other members of the same program from accessing each DVC resort.

Legally there are many directions such a transfer-of-duties could go. But if Marriott (for example) were to take over management of the DVC program, their motivation would be to add the DVC properties to Marriott Vacation Club. As such, it stands to reason that DVC members would inherit similar rights as other MVC participants. They COULD create a system separate from MVC, but then there's little value in the acquisition for Marriott.

And it seems highly unlikely that Marriott would try to run roughshod over members as long as they want to continue to grow the program. If Disney retained control of DVD to continue building and selling new properties, they wouldn't let a new manager implement policy changes which would discourage future purchases. If Marriott acquired DVD, they would also avoid any extreme harm to current members in the interest of profiting from future sales.

 

[JimMIA]

I must be missing something because I don't see how a timeshare manager would benefit from limiting DVC members to Home resorts. In doing so, they would also block other members of the same program from accessing each DVC resort.

Legally there are many directions such a transfer-of-duties could go. But if Marriott (for example) were to take over management of the DVC program, their motivation would be to add the DVC properties to Marriott Vacation Club. As such, it stands to reason that DVC members would inherit similar rights as other MVC participants. They COULD create a system separate from MVC, but then there's little value in the acquisition for Marriott.

And it seems highly unlikely that Marriott would try to run roughshod over members as long as they want to continue to grow the program. If Disney retained control of DVD to continue building and selling new properties, they wouldn't let a new manager implement policy changes which would discourage future purchases. If Marriott acquired DVD, they would also avoid any extreme harm to current members in the interest of profiting from future sales.

You're probably right, Tim. However, if they reduced the home-resort booking advantage to one month, that would be a big plus for the non-DVC Marriott owners.

I actually agree with Brian more though. None of this seems like it makes any sense from the Mouse's perspective, and certainly not as long as DVD is continuing to build and sell timeshares. And timeshare development has been one of the most profitable entities in the Disney portfolio for a long time.

I also keep going back to something said several years ago by some senior Disney exec -- that they were not going to build any more hotels at WDW, that all future lodging development at WDW would be DVC. They still have LOTS of room for additional timeshare development onsite at WDW.

 

[chalee94]

What if they piggybacked everything into Marriott's already existing structure, with a much smaller Disney support staff kept in place?

except that marriott doesn't have much of an existing structure, from what i understand of their timeshare division.

they are working on an internal exchange program, but right now it's all done through II. also, most marriott timeshares are sold as full weeks, so a points system like DVC would be a nightmare to integrate.

hgvc would have been a much more plausible rumor to start IMO.

 

[hakepb]

As for what's in it for Marriott---it turns out that the management contracts can be a nice source of very stable revenue and profit. But, the flip side of that coin is that this is yet another reason why this doesn't pass the sniff test.

Mickey doesn't want other people horning in on his action unless (a) he needs someone's expertise, or (b) he needs someone to finance a deal. Neither seem to be true in this case---except perhaps in the sense that DVD really hasn't managed to develop a non-Orlando resor that you could truly call successful. Marriott does know how to do that.

Edited to add: and whatever does (or doesn't) happen, the one thing you can guarantee is that Disney will never give up control of actual land within RCID borders without de-annexing it first.

b) DVC can no longer sell its mortgage notes to an outside broker get all money upfront on DVC sales. While it seems Disney is set to eventually make a ton on those higher inerest rates, there has been a cash flow change in the past year. perhaps that change has changed some minds in Disney regarding continuation of DVC....

 

[Sammie]

The thing that would most concern me is this, Disney just bought Marvel and now they announce this huge expansion for Fantasyland.

In this economy where are they getting that money?

 

[hakepb]

I wonder if there is a "thread of truth" in the Mariott rumor... in terms of DVC trading into Mariott, many have thought it would be best if DVC joined with Mariott and a few others instead of RCI and II

 

[tjkraz]

The thing that would most concern me is this, Disney just bought Marvel and now they announce this huge expansion for Fantasyland.

In this economy where are they getting that money?

Fantasyland is hardly a drain on resources. It's a 3-4 year project which (if I had to guess) is probably budgeted in the $300-400 million range. That's probably no different than the combined spending in recent years for things like TSM, American Idol, Nemo stage show, The Seas with Nemo, Space Mountain refurb, etc.

The Marvel deal includes a stock swap in addition to some cash payout. It isn't just $4 billion in cash. And Disney will immediately begin to receive revenues from all of Marvel's licensing agreements and operations.

In 2008 the parks unit alone turned a profit of $1.9 billion and TWDC's cash provided by operating activities was $5.4 billion. 2009 will be lower but these aren't decisions made based upon short-term results. Nor can I see them selling off DVC just for a short term gain which would be a drop in the proverbial bucket.

 

[hakepb]

The thing that would most concern me is this, Disney just bought Marvel and now they announce this huge expansion for Fantasyland.

In this economy where are they getting that money?

I think Disney always had a ton of cash reserves and never got drained like the auto industry, I think, in general movies, are up ("cheap" getaway from reality for many), it's not like the parks are empty, just offering a few more deals. I think Marvel is all licensing revenue (cashflow) with very litle debt and because of the economy, Disney got a good deal compared to a few years ago. Perhaps Disney got a good bids for construction now? It's beter to be closing a few attractions now, than when the economy is back in full swing.

...on the other hand, DVC is not all cashflow (like they used to be when others bought the DVC mortgage notes, and DVC could repay new construction very quickly)...

 

[Brian Noble]

b) DVC can no longer sell its mortgage notes to an outside broker get all money upfront on DVC sales. While it seems Disney is set to eventually make a ton on those higher inerest rates, there has been a cash flow change in the past year. perhaps that change has changed some minds in Disney regarding continuation of DVC....

I don't buy it. The credit market has softened a bit for timeshare developers in the recent three-six months, and it's not any less of a problem for Marriott. Worse, Marriott doesn't have the counter-cyclical business lines that Disney does (specifically, feature film) to counterbalance their own bleeding in the leisure/hotel/resort industry. Why would Marriott be in a stronger cash position than the Mouse?

Edited to add:

I wonder if there is a "thread of truth" in the Mariott rumor... in terms of DVC trading into Mariott, many have thought it would be best if DVC joined with Mariott and a few others instead of RCI and II

There *have* been some rumblings about Marriott starting an internal exchange system, similar to Wyndham's, with a point system layered on top of fixed weeks.