Disney’s Vacation Club – A 1.5 Billion Dollar Idea – How Disney Insured Their Own Future

Oma H. Barnett

After Squawk’s 2008 annual board meeting in Walt Disney World in Orlando Florida this past week, we have decided to highlight the Walt Disney Company and bring to light some of the lesser known plans of action Disney has in store for the future. The Walt Disney Company (dis) is the third largest media and entertainment corporation in the world, after Time Warner and News Corporation. Founded on October 16, 1923 by brothers Walt and Roy Disney as an animation studio, it has become one of the biggest Hollywood studios, and owner of eleven theme parks and several television networks, including ABC and ESPN.

Disney’s corporate headquarters and primary production facilities are located at The Walt Disney Studios in Burbank, California. The company has had great advancements in its time. On December 20, 1991, upon opening Old Key West, their newest resort on the Orlando property, Disney began the DVC or Disney Vacation Club. The Vacation Club is a company, entirely-owned by Disney, that operates as a vacation timeshare, allowing families to purchase a real estate interest in one of the DVC resorts. Operations of DVC and its resorts are managed by Disney Vacation Development. This Club revolutionized the concept of timeshares and is one of the fastest growing “clubs” in the industry. Different form the typical timeshare investment plan, Disney actually sells ownership to the vacationer and signs over a property deed. In a nut shell the real estate interest is represented by “vacation points”.

A customer purchases a number of vacation points as a one-time purchase, becoming a “member” of the “club”. The price as of March 5th, 2007 was $16640.00 ($104 per vacation point with the minimum purchase being 160 vacation points). After the initial purchase members are charged annual dues based on the number of vacation points they own. Members receive a yearly allotment of these vacation points. Vacation Club members can then use these points to make reservations at one of the Vacation Club resorts or any number of other resorts all over the world. The number of points needed depends on the room type, resort, and time of year selected. Points can be saved, or “banked”, for use the following year. Points can also be borrowed from the upcoming year. The magic of the vacation club is the sheer mountain of money Disney rakes in that they would not otherwise be getting upfront.

They are securing three things: 1) 16 thousand dollars per package from every person who initially buys in, 2) A guarantee that the people will be coming back to Disney World on vacation for the next 50 year, and 3) A nice supply of annul fees for upkeep on the buildings they sell out. This is Disney’s little gold machine. They currently have 3282 Vacation Club rooms that have sold and are currently building an estimated 1500 more rooms which will be available for sale within the next two to three years. Each room is divided into between 20 and 50 deeds. The newest project is the addition to their centrally located Contemporary Resort. Construction is underway launching a $110 million, 15-story tower next to its iconic Contemporary Resort that likely will feature Vacation Club rooms bringing the units closer to the Magic Kingdom than ever before. Disney will say little publicly about the fast-rising Contemporary addition. The new tower already stands 12 stories on 14 acres just to the north of the resort’s signature A-frame main building, which was just the second hotel at Disney World when it opened a few months after the park itself first welcomed guests on Oct. 1, 1971. But there is ample evidence Disney plans to use the tower for Vacation Club units. Building-permit applications filed with Reedy Creek Improvement District identify the owner of the property as a company called JMSRM Inc.

State records show that is a fictitious name created in August 2006 by Celebration-based Disney Vacation Development, parent company of the Disney Vacation Club time-share arm. A very modest calculation of the net revenue brought in by the unique vacationing experience brings the total to approximately 1.5 billion dollars raked in upfront and in advance by the corporation. With this money, Disney has plans to expand their parks, resorts, entertainment businesses, and develop new ideas and concepts to keep the people coming. Disney has come a long way from the weekly Carousel of Progress programs and the Mickey Mouse Club. They are among the finest companies in the World today and will only continue to grow. To quote Walt Disney himself, “I only hope we don’t lose site of one thing, that it was all started by a mouse.”

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