In today`s cloudy financial climate, Disney`s new real estate venture could be risky-much riskier than Mr. Toad`s Wild Ride or the Pirates of the Caribbean.
But if anyone can conjure up a happy ending, it will be Mickey Mouse & Co.
Putting its squeaky clean image on the line, Disney is taking the plunge into time sharing, an industry with a less than Snow White reputation.
Time sharing was tarnished, especially in the late 1970s and early `80s, by the high-pressure sales tactics and bad-faith promotions employed by some fast-buck operators. But 10 years ago Florida passed one of the nation`s first and toughest laws to regulate time sharing, and other states have followed suit.
Now, Disney`s entry into the field may inject new credibility into an industry that sells vacation properties by the slice.
”We`re thrilled to see Disney in the business,” said Tom Franks, president of the American Resort and Residential Development Association, a time-share industry trade group based in Washington. ”We see it as evidence of the maturity and acceptance of the time-share concept.”
Disney promises to transform time-sharing with a unique approach. And it prefers to call time sharing ”vacation ownership.”
”We`re going to do it differently,” said Mark Pacala, general manager of Walt Disney World Resort, which officially opened Friday with 51 completed accommodations. The new development is on the grounds of 28,000-acre Walt Disney World in Orlando, which has become the time-share capital of the nation.
”The Disney name is on it, and it would be very serious to tarnish that,” Pacala said. ”While it has sprung from time sharing, it is the next generation.”
Starting at a minimum price of $11,730, vacationers can purchase a real estate interest in the resort.
A total of 197 units are planned to be built overlooking the Lake Buena Vista Golf Course. A Florida Keys motif has been chosen, including tin roofs and gingerbread pastel exteriors for the studios, and one-, two-, and three-bedroom lodgings. If the planned units sell out, the resort will be expanded to 501 units, according to Pacala.
Disney`s time-share resort, which is just down the road from Disney-MGM Studios, the newest major attraction at the park, offers a wide range of amenities, including a clubhouse, restaurant, swimming pool, tennis courts, a health club and a marina on a canal.
Most time shares are sold by the week for a specific time each year, but the Disney product is based on a point system that offers greater flexibility. For $11,730, members of the Disney Vacation Club receive 230 points, which can be used for a one-week stay in a two-bedroom unit during the mid-season (May, June, September and October). But if you want to go in the busy season, you`ll have to buy 310 points, which costs $15,600.
Pacala points out, though, that there are innumerable options. Instead of a one-week stay, members can split their time into a series of short getaways, even as short as one day.
Another variable is the size of the unit used. For example, 230 points will pay for three weeks in a studio in the off-season, or three to four days in a three-bedroom villa in the busy season.
”The flexibility is what sets the Disney Vacation Club apart from similar plans,” Pacala said. ”The point system allows members to select the type of vacation best suited to their needs, particularly as those needs change from year to year.”
Members don`t even have to visit Disney World each year. They can use their points to vacation at domestic and foreign resorts offered through an agreement with Resorts Condominiums International (RCI).
Based in Indianapolis, RCI is the world`s largest vacation ownership exchange company. Switching to a one-week stay at an RCI resort costs $75 and can be made through the Disney reservations service.
Bill McConnell, senior vice president and chief operating officer at RCI, said Disney owners can exchange for the top 125 resorts out of the 2,000 worldwide in RCI`s inventory.
”It (Disney`s project) is an exciting development for time sharing,”
McConnell said. ”It will cause everybody to take notice and shows Disney believes time sharing is a viable product.”
John Reinhardt, RCI`s vice president of resort services, said the new Disney development should add increased luster to the Orlando time-share market, which has been one of the bright spots during the current downturn in the economy.
”There has been continued growth and development in Orlando, even though no lending money is available for time-share projects in other parts of the state,” Reinhardt said. He added that time-share sales in Orlando amount to about $250 million a year.
Disney`s purpose in launching a time-share resort was to capture some of that cash.
”We watched the time-share market explode in the Orlando area, and finally we said, `There`s business out there that we`re missing,` ” Pacala said.
So far, the time-share resort has not been advertised outside of Disney World, but Pacala says he has been elated with the initial response from the public.
He said he expects buyers at the new resort to be people ”who enjoy Disney, predominantly families with an upper-middle income level who consistently take vacations.”
A major sales campaign won`t begin until the resort is registered in more states. So far, it is registered in Connecticut, Georgia, Indiana, New Jersey, Massachusetts and Pennsylvania as well as Florida. ”Illinois is one of the more important states we`re working on,” Pacala said.
Despite the aura of good will that surrounds the Disney name, the new project is not without its critics.
Clinton Burr, a consumer advocate and director of Northbrook-based Resort Property Owners Association, believes the new Disney time-share resort is overpriced.
”Disney had an opportunity to give time sharing a new life, to spearhead a reform of the industry, but they wasted it. There is no reason for such an apparently outrageous profit margin except greed,” Burr said.
The average time-share unit in Orlando costs about $10,000, and as much as 50 percent of the sales price is for marketing expenditures, he estimated. ”Disney is getting a free ride as far as marketing. Because of the presold Disney reputation, their marketing costs are going to be negligible,” Burr charged.
He acknowledged that Disney`s entry into time sharing will enhance the image of the industry, but ”it might encourage other developers into selling overpriced time shares instead of providing the consumer with a more reasonably priced vacation product at $3,000, $4,000 or $5,000.”
Burr noted, though, that some of the finest accommodations in Orlando are in its 33 time-share resorts.
”Florida is where the time-share concept is most firmly rooted, and Orlando is leading the way. Time sharing has been successful in Orlando because one-week ownership fits the needs of many consumers who come to the year-round vacation area to visit Disney World and the other tourist attractions,” Burr said.
Pacala answers the charge that Disney`s time shares are overpriced by listing the benefits available to members of the Disney Vacation Club, including complimentary passes to the theme parks-the Magic Kingdom, Epcot Center and Disney-MGM Studios-for the next eight years.
Another benefit is free transportation to the theme parks, water parks and golf courses.
”I think we`re very competitive in price. People are paying for Disney quality,” Pacala said.
He said the club`s studio units, which sleep as many as four people, are comparable to hotel rooms at Disney World that cost from $150 to $200 a night, while the two-bedroom units are comparable to accommodations that cost from $275 to $300 a night.
”Also, there`s a real value in being able to customize your vacation using our full-service, one-stop reservation service,” Pacala said.
Michael Burns, director of sales and marketing for the club, said financing can be handled through Disney. In addition to the purchase price, owners pay annual dues starting at $500.
For buyers who later want to resell, Burns said that Disney won`t be in the resale business until the whole project is sold out, but individual members can resell on their own, though Disney retains the right of first refusal for 30 days in order to match the offer.
Disney isn`t the only well-known firm to enter the Orlando time-share market. Marriott Ownership Resorts Inc., a subsidiary of the hotel chain, has three properties in Orlando: Sabal Palms and Royal Palms, both at Marriott`s Orlando World Center, a 192-acre mixed-use complex; and Cypress Harbour, a new 500-unit resort with a private lake on 50 acres within walking distance of Sea World.
