Disney's vision of standalone hotels fades for now
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  1. #1
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    Disney's vision of standalone hotels fades for now

    Disney's vision of standalone hotels fades for now




    Nearly five years after it outlined an ambitious vision of standalone hotels, niche parks and retail centers built in outposts far beyond its world-famous theme-park resorts, the Walt Disney Co. today has no such projects in its public development pipeline.

    That's the case after the company late last week abandoned plans to build a roughly 500-room, Disney-branded hotel near Washington, D.C. Disney, which spent $11 million to buy land in the area in early 2009, said the timing simply wasn't right for the project.

    The move follows an early stumble at Disney's first big foray into standalone resorts: Aulani, the roughly $850 million hotel and time share that opened Aug. 29 on the Hawaiian island of Oahu. Disney was forced to suspend sales in the project for two months this summer after it realized it had underestimated the annual fees needed to cover the resort's operating costs; Disney will now have to subsidize the fees paid by early time-share buyers for the next 50 years.

    The Walt Disney Co. At the same time, Disney Co. executives have pledged to investors to reduce capital spending once the company completes a current slate of projects that includes the Hawaiian resort, two new cruise ships, and park expansions around the world. Capital spending at Disney's theme-park division nearly doubled during the company's 2011 fiscal year from $1.5 billion to $2.7 billion and is expected to approach $3 billion in 2012.

    "They have more than enough to chew on for the next three to four years," said Tony Wible, a media-and-entertainment equities analyst at Janney Capital Markets. "And the early headwinds in Hawaii to put it politely probably lead them to be less confident."

    Disney says it may yet build more hotels outside of Central Florida and Southern California, where it operates its massive Walt Disney World and Disneyland resorts.
    "We have seen tremendous enthusiasm for Aulani, and all of our key sales locations for Aulani are performing well.

    Based on our experience to date, additional standalone resorts in the future are a very real possibility," Disney spokeswoman Tasia Filippatos said Tuesday.
    Disney said the decision to back out of Washington was entirely unrelated to Aulani's time-share problems; the company says it never planned to include a time-share component in the D.C. project.

    To be sure, there was always an element of uncertainty for Disney's presence in Washington. Even when the company announced it had bought 15 acres along the Potomac River in May 2009, it said only that it was "considering" using the site for a hotel.

    And other, more-pressing projects subsequently supplanted it on Disney's priority list. For instance, seven months after buying the Washington property, Disney, after years of negotiations, signed a framework deal to build its first theme-park resort on mainland China. The first phase of Shanghai Disneyland, along with two hotels and a retail district, will cost roughly $4.4 billion, though more than half of that pricetag will be borne by the Chinese government.

    In addition, Disney this fall acquired the theme-park rights to James Cameron's "Avatar" film franchise. As part of the deal, Disney will build Avatar-themed "lands" in multiple theme parks around the world, beginning with a roughly $500 million project in Disney's Animal Kingdom at Walt Disney World.

    But analysts say the decision to scrap the Washington project also reflects just how challenging it could be for Disney to sustain standalone hotels, which, after all, can't bank on theme-park visitors to drive occupancy. They are a particularly heavy lift in a still-moribund real-estate environment in which Disney can't bank on quick time-share sales to help sustain a resort.

    Disney doesn't expect Aulani to achieve sustained occupancy levels until January 2015, according to documents submitted to state time-share regulators in Hawaii. The project is expected to be fully built by 2013.
    "When they started planning these one-off hotels and other projects, it was a different environment," said Hal Vogel, a stock analyst who follows the leisure industry. "My guess is that this will not be revived anytime soon."

    Also worth noting: Several senior managers in place when Disney first articulated the standalone-resort strategy are no longer with the company's parks division.

    Former parks Chairman Jay Rasulo, the executive most closely associated with the strategy, is now the Disney Co.'s chief financial officer, having swapped jobs with current parks chief Tom Staggs. Meanwhile, Al Weiss, the parks division's former president of worldwide operations, retired this fall. And Jim Lewis, the former president of Disney's time-share business, was fired because of the Aulani error.

    In what Disney calls a bullish sign, the company plans to raise its time-share prices at Aulani next week. And Wible said he still thinks the standalone-hotel concept could become a viable growth business for Disney eventually.

    "I really think about Disney as being a brand more than just a place. And that brand can be portable it doesn't just have to exist in a handful of locations around the globe," he said. "It's just a question of when. And right now, I don't think it's the best time."


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    Rick
    "Our greatest natural resource is the minds of our childen"
    Walt Disney
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  2. #2
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    Re: Disney's vision of standalone hotels fades for now

    I think it's a good idea for Disney to focus on its core busineeses for now. I still can't imagine the standalone hotels thing going too well, this isn't to be too negative but their hotel management segment is probably one of the weaker things they do at WDW compared to other properties in Central Florida.
    Go Noles! Ryan

  3. #3
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    Re: Disney's vision of standalone hotels fades for now

    I tend to agree with you Ryan. Best to keep on the parks and the movies at the moment.

    More rides!!!!!!
    Rick
    "Our greatest natural resource is the minds of our childen"
    Walt Disney
    Talk Disney Administrator

  4. #4
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    Re: Disney's vision of standalone hotels fades for now

    I agree.

    Less spent on hotels equals more spent in the parks - and I'm all for that!!

    There's a great big beautiful tomorrow
    Just a dream away!

    TALK DISNEY ADMINISTRATOR


  5. #5
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    Re: Disney's vision of standalone hotels fades for now

    I like the idea of a stanalone hotel, but I would rather see my rides and improvemnst at the parks.

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