The future of DVC, regardless of Comcast.

[DisneyKidds]

There are Marriott Vacation Club properties that have studios, although I don't think all do. I stayed in a studio unit at the Marriott property in Breckenridge, CO. It was very nice.

 

[YoHo]

Could be worse. Could be picked up by Trendswest.

 

[KNWVIKING]

Or Westgate.

 

[Another Voice]

Marriott and Disney right now are very much just a rumor. There have been lots of rumors in the past, and Eisner himself has often said it's time to "reap the benefits of ten years of investments in the parks". This line has already been used to justify selling off the cast member housing, Crossroads, and even the complete abandonment of Celebration.

Given his need for money now it's, shall we say, not unlikely he is taking a fresh look at options that have already been explored.

There are three ways Disney intended to make money from DVC. First – the basic premise is that you get a whole bunch of guests to pre-pay for fifty years worth of hotel stays. That's a lot of cash in one chunk. The financial concept is that you invest all that money and collect lots of interest – enough to cover the construction loan and then some. The key, of course, is to find places to invest the cash that returns more than the loans cost (not difficult to do, but Disney has some problems).

Second is of course they've locked in a whole lot of people for the next fifty years. All those tickets, all those meals, all that plush really adds up. And since the guests have already paid, there's very little incentive for anyone to say "let's go to Miami instead!". DVC is a giant sized version of a Starbuck's card. You more or less get locked into a place because they already have your money.

Third is from maintenance fees and other charges that passed on to the "owners". Sure, the costs are just supposed to cover maintenance – but when the plumbers are Disney, the gardeners are Disney, the staff is Disney, the electricity and the water are Disney and even the property taxes go to Disney – gets which company ends up with all those fees?

On the Marriott or other potential buyer's side – the key to success for a time share is the variety of units in the plan. Most people veiw these "clubs" as prepaid vacation plans, not a specific real estate deals. Marriott's biggest selling point is the vast number of quality units they have. There are certainly vastly more people the would like to choose from Paris, New York, Vail, Cancun and WDW for their annual vacation than just go to WDW year-in, year-out.

Marriott would also be able to sell unused rooms as hotel stays, collect all kinds of nice fees, probably invent a few new ones and otherwise up the revenue. Plus, Marriott runs many times more hotel rooms that Disney does. One would think they probably get a better deal on little bottles of shampoo than the mouse, so Marriott's cost of operation is going to be significantly lower than Disney's (meaning more profit for M.).

Yes, Marriott would miss out on that big chunk of cash from the initial sale – but they have plenty of other new units going in around the world and they can factor in how much adding WDW would boost their sales.

 

[vernon]

There are three ways Disney intended to make money from DVC. First – the basic premise is that you get a whole bunch of guests to pre-pay for fifty years worth of hotel stays. That's a lot of cash in one chunk. The financial concept is that you invest all that money and collect lots of interest – enough to cover the construction loan and then some. The key, of course, is to find places to invest the cash that returns more than the loans cost (not difficult to do, but Disney has some problems

Disney has alreasy taken all the meat out of this aspect, next tranche isn't due until 2042. IMHO it's almost impossible to quantify the value accurately and because of that I can't see any buying company committing themselves to the high side of a valuation.

Second is of course they've locked in a whole lot of people for the next fifty years. All those tickets, all those meals, all that plush really adds up. And since the guests have already paid, there's very little incentive for anyone to say "let's go to Miami instead!". DVC is a giant sized version of a Starbuck's card. You more or less get locked into a place because they already have your money.

I agree, but any managing company isn't going to make much off just selling themepark tickets to Disney through DVC. The number of DVC members that use the UMP is a minority of members, most buy APs or hoppers. Disney makes money from selling tickets, Mariotte would not make much. Only the restaunts on DVC exclusive properties ( Olivia's and SSR's offerings) would be "money makers" to Mariotte and they wouldn't contribute much ( if anything)

Third is from maintenance fees and other charges that passed on to the "owners". Sure, the costs are just supposed to cover maintenance – but when the plumbers are Disney, the gardeners are Disney, the staff is Disney, the electricity and the water are Disney and even the property taxes go to Disney – gets which company ends up with all those fees?

As has been pointed out maintenance fees are not a profit making area. The board of DVC have a legally binding duty to ensure that the work is done in a cost effective manner. It simply wouldn't be possible to make a huge killing from maintenence fees. Also Disney makes savings of numbers because they employ plumbers, gardeners and electricians for ALL WDW. If Marriotte were to have only two main resorts and a few "half or share" resorts they wouldn't be able to spread those costs over as large a number of resorts as Disney.

With the legal set up of DVC I'd be interested to see if an outside company could crash through and enforce DVC members to accept allowing Mariotte members from non DVC resorts access at say 7 months. I think there would,could and should be a huge legal argument that while Marriotte ( or anyone else) could buy DVC, they could only do so if they continued to run it under the current legal commitment that Disney undertook with the members when they bought in.

In reality all you're left with is Mariotte making money from boat rentals, housekeeping, Olivias (and SSR restaurants) and a small commission from some UMP tickets. The only major "profit" will have to wait until 2042. Any potential "marketting" upside is offset by a potential class action lawsuit, unless Mariotte could convince the majority of members that their interests were better served by being in the "Mariotte" fold, but if that were the case we'd have bought into Mariotte in the first place.

Mikey's on shakey enough ground as it is, if he were to propose to sell off DVC as a cut down price the investment company shareholders would chop the ground out from underneath him. JMHO. Celebration and even Crossroads you can make an argument that they were land investments, separate from WDW ( or at the very least on the periphery). WDW hotels are an integral part of WDW, to sell off things in the heart of the development would be a much harder "sell" and I don't think Mikey has the support or power to carry it off at the moment.

I know it makes a nice "scare story" but IMHO it just doesn't hold water.

 

[KNWVIKING]

The only way I see a Marriott buying DVC is if they are allowed to continue building new units, well beyond the completion of SSR. Without the big up-front cash from initial sales, I just don't see a potential buyer willing to part with a few billion dollars just to collect fees and rent boats.

 

[Another Voice]

"Disney has alreasy taken all the meat out of this aspect."

Yes - but all of that can be factored into the purchase price. Plus that exactly why Disney has a massive incentive to sell. Nakes Mike has already milked the properties - why keep them around. People are still going to WDW and drop their money there, why not pick up a few bucks more by selling off something they've already bought.

DVC is exactly like Celebration - stick around to sell off the property than dump all the overhead.


"The board of DVC have a legally binding duty to ensure that the work is done in a cost effective manner. "

Does DVC bid out its maintenance contracts? Who defines "cost effective". Certainly Marriott already has rather large staff to handle their timeshare and hotels in Orlando already, let along all their other properties. And besides, Marriott doesn't have to cut their maintenance budget to pay off the debt for 'The Power Rangers'. It's even very possible that DVC members would see their charges go down if someone else took over.


"current legal commitment that Disney undertook with the members when they bought in.."

Jeffry Kaztzenberg, Peggy Lee, Mike Ovitiz, Roy Disney, the 'Pooh' rights holders and a long, long, long, long line other others might have a word or two with you about how Disney views "legal commitment". When it comes to money, you might as well take your contract and use it as a coffee filter.


"The only major "profit" will have to wait until 2042."

Nope - the profit comes from that couple looking in Maui and the wife goes "ooohhhh - we can go to Disney World too!!!!!!". Timeshares compete on the size of the network. Adding DVC adds a lot of valuable rooms to the Marriott Club, hence increasing the value of all Marriott timeshares. Besides, who says Marriott woun't be able to build at WDW, or Disneyland or Paris or Hong Kong?

Besides, the purchase price isn't going to be a few billion dollars. Right now Naked Mike will take what he can get, and Marriott isn't run by idiots.


"if he were to propose to sell off DVC as a cut down price the investment company shareholders would chop the ground out from underneath him."

The DVC is such a tiny. tiny. tiny part of Naked Mike's empire that no one would care. He sold Celebration - which was a third of the land of WDW - and no one batted an eye. How is selling some resorts going to compare?

But DVC does represent a bit more cash he can play with. He can tout that he's fully realized the investment in DVC and now cashing in, the money to be used for more magical investments.


In the end all the arguements against selling the DVC are just the same as for not selling the Anaheim Angels - somehow only Disney can magically make money and no one else can. Sorry, but Marriott is a lot better at the resort/timeshare game and Naked Mike wants a little more glitter on his parachute.

 

[raidermatt]

Without the big up-front cash from initial sales, I just don't see a potential buyer willing to part with a few billion dollars just to collect fees and rent boats.

As AV said, the purchase price wouldn't be above what the purchaser felt they could get return on...

Its simple really... if there is no profit in running DVC, then Disney wants out.

However, there is profit. (isn't there a "management" fee?)

Its just a question of who wants to be in that business. If Disney decides they don't want to be in it (and many have presented wonderful cases for why they wouldn't), why on earth would they not consider a sale? Further, as I've said, we KNOW Marriott wants to be in it, plus they have a much larger network to reap the benefits from.

So if the price is right, there is no reason for them not to jump all over it.

As for legal committment... there is really very little Disney is actually legally committed to with DVC, beyond basic timeshare laws, and the DVC point system.

Is the ability to book at our "non-home" resort in any window even in the contract? I didn't think so, but I could be wrong.

 

[KNWVIKING]

All the up-front cash has been made by Disney. Now all that remains is a few points profit on the dues.

Why wouldn't it be a good idea to sell DVC for X dollars to someone like Marriott? I'm sure Marriott would be required to pay "rent" or some other pure profit fees to Disney. Disney could lay off how many thousands on workers. Disney would still have the resorts full of paying guests. Basically Disney would recieve another huge chunk of cash and nothing else would really change other then the name of the resort.

And who's to say that Disney doesn't start DVC 2, and starts all over again.

So from the time I started this thread till now I've been convinced that ME could and probably will sell off DVC. I'm now convinced it's not a bad BUSINESS decision for Disney. The only thing I'm not convinced of is why it's a good deal for Marriott. Sure, being able to offer Disney resorts to your portfolio can be a positive, but are Marriott's traditional buyers "Disney" type people ? As AV said, the world has more people more interested in Paris then WDW.

If you were Marriott, what would have to be included in the deal to make the up-front purchae price worth it ?

 

[Lewisc]

The purchase price isn't a set number. The price will be set based on what's included in the deal. The more that's included (the right to build more units for example) the more Marriott will pay.

There was a rumor that DVC was going to build a new complex next to one of the golf courses. I'd think Marriott would be willing to pay for the right to develop that.

Originally posted by KNWVIKING
If you were Marriott, what would have to be included in the deal to make the up-front purchae price worth it ?

 

[raidermatt]

And who's to say that Disney doesn't start DVC 2, and starts all over again.

I'm sure who has the right to build what would be addresed in the contract.

...I've been convinced that ME could and probably will sell off DVC.

For what its worth, I don't have a very good read on the probability. If I had to guess at a simple yes or no, I'd still say no. I'm just saying its not beyond something he would do, and the deal could work, if both are truly interested.

Sure, being able to offer Disney resorts to your portfolio can be a positive, but are Marriott's traditional buyers "Disney" type people ?

There are two types of timeshare people... one is those who go only where they buy. The others are those who want variety and choices. I don't know enough about the industry to know what the breakdown is, but I know variety and choice are a big selling point. Even Disney promotes this to the folks who buy DVC. Certainly if there is benefit to Disney in providing options to Disney fans, there is benefit to Marriott in having options, especially exclusive options like WDW.

 

[KNWVIKING]

***Even Disney promotes this to the folks who buy DVC. Certainly if there is benefit to Disney in providing options to Disney fans, ***

We have options within our membership for outside resorts, but the economy of the DVC system is to use those points at DVC resorts. Marriott's system - from what I recall - didn't penalize as badly for staying outside certain locations.

***There was a rumor that DVC was going to build a new complex next to one of the golf courses. I'd think Marriott would be willing to pay for the right to develop that.***

That was the Eagle Pines location. It was more then a rumor,though as DVC had actually started doing the land survey's. It was put on hold when they decided it was better to tear down DI and build there.

 

[Lewisc]

Originally posted by KNWVIKING
[BThat was the Eagle Pines location. It was more then a rumor,though as DVC had actually started doing the land survey's. It was put on hold when they decided it was better to tear down DI and build there. [/B]

I think they decided it was cheaper to build DI since the infrastructure (roads and utilities) were already in place. My point is Disney already has another location ready to go. The can either get $$$ for it in a few years when it's developed or sell the rights to Marriot and get the $ now.

 

[vernon]

I think they decided it was cheaper to build DI since the infrastructure (roads and utilities) were already in place. My point is Disney already has another location ready to go .The can either get $$$ for it in a few years when it's developed or sell the rights to Marriot and get the $ now.

True, but this wouldn't need to be linked to "selling off" DVC , it would be selling off land for Mariotte to build it's own timeshare on Disney property. It wouldn't alter the status of DVC members, their points system or the ability to switch within that system. I can see why that would be attractive to Mariotte, but they wouldn't need to buy the on going DVC set up. As it isn't a "cost" to Disney, and it isn't a big profit maker to another company if it were outsourced it's one of the "lose lose" situations that few companies would bother with.