Time-shares becoming bigger part of Disney's lodging portfolio

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Time-shares becoming bigger part of Disney's lodging portfolio

Disney timeshares

George Skene, Orlando Sentinel

By Sandra Pedicini
Orlando Sentinel
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Walt Disney World Resort,
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Time-shares a growing part of Disney's lodging options
December 29, 2014

Time-share suites are becoming a larger part of Walt Disney World's lodging portfolio..

The resort's number of hotel rooms has shrunk as its Polynesian Village Resort converts rooms in three of its buildings into 360 new time-share villas. It's the resort's largest-ever conversion of hotel rooms into units for its growing Disney Vacation Club.

Disney said in a statement it will continue to offer a wide variety of both hotel and vacation-club accommodations "to meet guest and market demand for expanded options."

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Disney's move can help it get more use out of its rooms while growing its time-share business more quickly and inexpensively than building from scratch. It also gives Disney flexibility, since units that aren't being used for time-share can still be rented out as typical hotel accommodations.

"When you look at the financial model, time-share is the way to go," said Scott Smith, a hospitality instructor at the University of South Carolina. "It's a big moneymaker for the industry."

Other companies such as Hilton also have converted hotel rooms.

Disney World now has about 23,000 hotel rooms, according to its SEC filings. It has about 3,000 time-share units in eight resorts throughout Disney World that are considered deluxe properties.

Disney Vacation Club, which started in 1991, has properties in Vero Beach; Hilton Head Island, S.C.; Hawaii; and Disneyland.

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@bclomptwihm_ (Purchase or...Rent!) Indeed; our family purchased 300 points at Old Key West in 1994 and had a great great time (including a cruise for 8 days), then sold them in 2003 (I moved back to Orlando, and needed the cash for a house.) We ended up selling the points for $13,000 MORE than...

VancouverJeemer143

at 2:06 PM December 29, 2014

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The time-share division had a rough few years as the industry slumped during the economic downturn and Disney struggled with fallout from financial miscalculations made for its Hawaiian Aulani resort. In 2013, though, Disney highlighted its time-share business for contributing to profit growth " for the first time in more than five years. In its last quarter, Disney said sales decreased from the prior year, attributing that to the high bar set by Villas at the Grand Floridian Resort & Spa in 2013. That project was new construction.

Disney time-shares also meet growing demand for amenities such as kitchens, washers and dryers that time-shares typically provide. The apartmentlike lodging is popular with multigenerational families vacationing together, and experts say international travelers could also be driving growing demand.

Many of Disney World's time-shares were newly constructed. Disney has converted some hotel rooms, including part of the Animal Kingdom Lodge a few years ago, but not to the extent seen at the Polynesian. Converting rooms, Disney said, helps offer the popular time-shares more quickly and inexpensively.

It can also boost occupancy.

Average time-share-resort occupancy last year was 77 percent, compared with 62 percent for hotels, according to the American Resort Development Association.

"It comes down to that highest and best use of the real estate," said Amy Gregory, an assistant professor at the University of Central Florida's Rosen College of Hospitality Management whose specialties include resorts and time-share.

Since the units are owned, Gregory said, people consider using the rooms "kind of like a 'free vacation.'?" And that increased occupancy means more people spending money at restaurants, shops and theme parks throughout the resort.

"It makes sense to put money into a resort where your guests are repeats," Smith said.

Disney could be deciding to make better use of rooms in hotels where it is seeing or expects to see lower occupancy levels as new competition opens, said Tim Krasniewski, publisher of DVCNews.com, an independent website that covers Disney Vacation Club.

When building new time-shares, "you're taking business away from your hotels, unless you're really in a growth mode," Krasniewski said. "I don't think they would be converting all these rooms if there were people paying $500 a night to stay in them."

Disney's overall domestic hotel-occupancy rate was last year was 83 percent, compared with its peak of 90 percent in 2008. The recession took a toll, but the occupancy rate also has been affected by additional rooms created as new hotel properties have opened.

Disney said it is adding time-share to diversify, not to offset a decline in hotel-rental revenue, and its decisions are being made on guest preference and long-term growth potential. Disney pointed out the Polynesian " which will still have several hundred traditional hotel rooms " remains particularly popular because it is on the monorail route. Disney has also added time-share villas at its other monorail-route hotels " Grand Floridian and Contemporary " as well.

Disney World's last new hotel, the lower-priced Art of Animation, opened in 2012. New budget hotels are under construction at Flamingo Crossings, on the western edge of the resort, but Disney is not operating those.

Krasniewski said he would not be surprised to see other hotel-room conversions at the Grand Floridian and Wilderness Lodge. Both already have separate buildings dedicated to time-shares on the property.

But though the time-share industry is strong, Gregory said, "I don't necessarily see them [Disney] taking down a whole bunch of hotels all of a sudden and turning them into time-share."

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