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Disney Analysis

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Disney Analysis

  1. 1. The Walt Disney Company Disney Vacation Club Sarah Kinser 8/13/2015
  2. 2. 1 | P a g e Table of Contents Company Overview..........................................................................................................................2 Goals.................................................................................................................................................2 External Analysis..............................................................................................................................3 Macroeconomic Environmental Analysis..........................................................................................3 Economic Trends ........................................................................................................................4 Social/Cultural Trends.................................................................................................................4 SWOT Analysis ..............................................................................................................................4 Strengths ....................................................................................................................................4 Weaknesses................................................................................................................................5 Opportunities ..............................................................................................................................6 Threats.......................................................................................................................................7 Internal Analysis...............................................................................................................................7 Asset Analysis ................................................................................................................................7 Core Competences ..........................................................................................................................8 Quality Service ...........................................................................................................................8 Brand.........................................................................................................................................9 Competitive Advantage ...................................................................................................................9 Game Plan........................................................................................................................................9 Ownership Options .........................................................................................................................9 Set Weeks..................................................................................................................................... 10 Purchase Back Program................................................................................................................. 11 Recommendation and Expected Results..........................................................................................11
  3. 3. 2 | P a g e Company Overview “I only hope that we don’t lose sight of one thing – that it was all started by a mouse;” the Walt Disney Company remembers this quote with every development and addition, merger opportunity, new business ventures, and even down to the princesses that greet our guests in our parks (Walt, n.d.). The Disney Vacation Club (DVC) was founded in 1991as a timeshare of a very different nature (Wills, n.d.). Members are not restricted to one single property nor are they forced to take a certain length of vacation. DVC was designed to be user friendly and to be as flexible as its members. The strategy DVC chose to follow is the Focused Differentiation Strategy. DVC focuses on a very small number of guests that visit the different Disney Parks and Resorts. This allows them to provide excellent and memorable service. Each DVC member is treated as part of a big family and are welcomed home with every visit. DVC has 13 different resorts that members call ‘home’. A resort is considered a ‘home resort’ to members that own points at that resort. This does not restrict these members to only this resort or keep other members out. Members receive a few more perks at their ‘home resorts’. One of the major perks is that members can book their vacations as early as 11 months out at their ‘home resorts’. This allows them to stay exactly where they want to during their vacations. The Focused Differentiation Strategy can also be seen when comparing DVC with other timeshares in the area. DVC members do not buy one particular room and have to wait for their week there for their vacation. They have the freedom to book at any resort in either Walt Disney World or Disneyland. Members also get the freedom of deciding how long of a vacation they want and can book as many vacations they want as long as their points hold out. Goals With DVC entering its 25th year in 2016, now is the time for them to consider what is in the future for them. Each ‘home resort’ is purchased for 50 years from the date the resort opened, not from the date of purchase. This means that many locations are getting close to their half-life mark. At the half-life mark, properties start to lose value to the new consumers. Why would they purchase into a ‘home resort’ that is at this point when there are many ‘home resorts’ with longer lives?
  4. 4. 3 | P a g e Another issue that is becoming more apparent is that many members reach a point in their membership when they are looking into sell their points. Currently, DVC does not have a buyback program where they purchases points back from their members. Members have to hunt out a third party that is willing to buy their points at a cheaper price and then sell them at a premium to other individuals. These second owners, however, are not eligible to partake in many of the perks that first owners receive. Some of these perks include discounts on merchandise and food, early booking window, or membership events. DVC is faced with the problem of having a very limited resource (time-shares) that it is allowed to sell for each ‘home resort’. With a limited resource and high demand, the price per point continues to rise with each new ‘home resort’ option. Price is a major reason why many guests are unable to become DVC members. Unlike buying an actual piece of property or building, DVC members are stuck with a ‘home resort’ until their contracts run out at the 50 year mark. This is a major problem because many members feel stuck and that they are missing out on other opportunities that newer members are getting to participant in. External Analysis Macroeconomic EnvironmentalAnalysis Economic Trends DVC membership is greatly affected by members’ disposable income levels. When members have more disposable incomes, they are more likely to want to purchase more points and take longer vacations. On the flip side, when disposable income is low, members are more likely to bank their points. Interest rates and inflation affect annual fees and purchase price every year. This in turn has an effect on how fast members are able to pay back the purchase price and how many points they are willing to purchase in the first place.
  5. 5. 4 | P a g e Social/Cultural Trends Many families have branched out from the traditional family size of four individuals (mom, dad, daughter, and son). Some vacationers have extended their trips to more than just their one small family unit. Guests invite their in-laws, family friends, and nannies on their family vacation. With these additions, guests are constantly looking for ways to save money even while they are vacation. DVC is designed to be a way for them to save the most money and get the most out of their vacation. Many of the newer resorts have added permanent fifth sleeping spot and reconfigured the space in the rooms to accommodate more individuals. SWOT Analysis S  Cheaper vacation options  Strong advertising for a unique product W  Limited points available  Narrow target market O  Developing new products  Expanding target market T  Other timeshares  Unpredictable success Strengths Cheaper vacation options When DVC members use their points to book their trips, they are actually saving money. Members have their points for a maximum of 50 years and many of them pay off their expenses
  6. 6. 5 | P a g e 10 years into their ownership, except for the annual fees. A good way to look at this is by looking at a current example. The minimum points a first time member can purchase is 100 points and at Disney’s Polynesian Villas & Bungalows each point cost $165.00 (Membership, 2015). This equates to a purchase price of $16,500.00 with an additional $50.14 for annual fees (Membership, 2015). If a member wanted to stay in a Deluxe Studio at the Polynesian for 3 nights in the Magic Season (June 11 – August 15) it would cost them 91 of their 100 points. If a non-member booked this same vacation in cash, it would $3,000 (Disney’s, 2015). If each guest continued taking the exact same trip for 10 years, the member would have already paid off their membership purchase price while the non-member would have spent a minimum of $30,000. Strong advertising for a unique product DVC is not like other timeshares. Points can be used to stay in any of the resorts across Walt Disney World and Disneyland. They can also be used to take trips. These trips can be on through the Disney Cruise Line or through Adventures by Disney. Each of these trips allows the members to visit new places and learn about cultures first-hand in ways they never expected to. Weaknesses Limited points available Each ‘home resort’ has a set number of points that are allowed to be sold and once that number is reached, no more can be created. The number of points available depends on how many rooms have been designated at DVC rooms. Many guests request to be added to waiting lists for their favorite ‘home resorts’ in hopes of a current member releasing their points at some point in the future. Guests can be on these waiting lists for years and still never get their names called.
  7. 7. 6 | P a g e Narrow target market DVC wants to attract guests that plan on going on any type of Disney vacation at least once a year and have enough funds for the different point levels. Potential members must be able to speak and read in either English or Spanish, this is because contract on only available at this time in these two languages. The purchase price is what greatly reduces the number of guests that are willing to become members. Opportunities Developing new products DVC has the opportunity to continue to grow. Disney has plans to open their new resort at Shanghai in 2016 (Smith, 2015). New ‘home resorts’ could be built up around this new park. This would not only be an opportunity for members to have a new ‘home resort’, but also give them a reason to visit a country and get drawn into the culture. Expanding target market With the opening of Shanghai Disneyland, DVC has the chance to gain new members because contracts can be written up in a language these guests easily understand. The people of China have a much easier commute to this new location than to any of the locations in the United States. This allows them to become the biggest purchasing power for DVC in Shanghai Disneyland.
  8. 8. 7 | P a g e Threats Other timeshares This may come as a shock to many of our members, but DVC is not the only timeshare possibility on the market. In Orlando alone, timeshares are abundant. One of the major competitors is Resort Condominiums International (RCI) with over 3 million members (RCI, 2015). Unpredictable success While DVC may be experiencing its highest number of members in its history, there is no certainty that their membership numbers will continue in this fashion in the coming years. Another unpredictable factor is the number of ‘home resorts’ that will be available to future guests looking to become members. Internal Analysis AssetAnalysis The major assets of DVC include the resorts, points, and booking windows. Each of these elements are examined twice; first when DVC is considering building a new ‘home resort’ and second when guests are deciding to make a purchase Each of the DVC ‘home resorts’ go along with a particular theme and everything inside, around, and near the resort follow that theme. The newest addition to the DVC ‘home resorts’ is the Polynesian resort, which follows a South-Pacific theming. Guests are surrounded by tiki statues, Hawaiian music and even Hawaiian food. In most evenings, guests can catch a luau show right off the beach. The rooms keep the theme alive through their décor, including pictures
  9. 9. 8 | P a g e of Lilo and Stitch enjoying their night on the Hawaiian beach. The Bungalows are right off the beach facing the Magic Kingdom, which allows them to have fantastic views of the Magic Kingdom’s firework show, Wishes. The points are the actually product being sold to the members. Depending on how many points the member wishes to purchase will dictate where they can stay and for how long. In the previous example, a member purchasing 100 points a year can only stay at the Polynesian Deluxe Studios for three nights during Magic Season [91 points] (Disney’s, 2015). This member could take their same points over to Disney’s Animal Kingdom Villas and stay for a week during Magic Season [95 points] (Disney’s, 2015). Three years’ worth of points can be used during one transaction. This is done through banking and borrowing points. Members can bank their previous or current year and borrow from the next year. This allows many members to take either bigger or longer vacations. Members are able to book their vacations up to 11 months before their arrival date at their ‘home resort’ and 6 months at any other resort. This 11 month window comes in handy when members are planning vacations around holidays or if their ‘home resort’ is extremely popular and fills up quickly. Members can also be placed on wait list for certain locations for their vacations if they were unable to book their stay where they really wish to be. Core Competences Quality Service DVC stands very firm in making sure their members have the vacation they have been dreaming about, whether that has been just a week of dreaming or two years. This is why the quality of the service is very important. Each DVC Cast Member is put through additional training to insure they are able to provide service that is above and beyond what the members expect. Cast Members are also trained to problem solve and do whatever it takes to turn a bad experience around.
  10. 10. 9 | P a g e Brand The DVC brand stands out from other timeshares because of its association with the Walt Disney Company and the product it is known for. Members associate DVC with the experiences they have. When they share their experiences with friends and family, the DVC brand grows. The brand of DVC thrives on excellent customer experiences and the values of the company as a whole. Competitive Advantage DVC has a leg up on the competition thanks to the Walt Disney Company. Guests will gravitate towards DVC over another timeshare if they plan on using the timeshare to go on a vacation to any of the Disney parks. By staying at one of the Disney resorts, guests are given free transportation to and from the Orlando International Airport and to all of the parks on property. Guests are also allowed to visit and dine at any of the resorts. DVC members also enjoy discounts at a majority of the restaurants, on tickets, and at many of the resorts if they are not using their points. No other timeshare in the area can boost these advantages. Game Plan Ownership Options One option that DVC should consider to give their members a better overall experience is to offer different lengths of membership. Currently, the only option is the 50 years since the opening day of the specific ‘home resort’. Many potential members may see this length of time as too long of a commitment. Additional length options for these guests to consider can be broken down to 10 years, 15 years, 25 years, and then 50 years. All of these plans would start from the date of purchase, including the 50 years. This would give guests five different plans they could join, depending on which fit their lives the best at the time of purchase. These different options would allow guests to no longer feel trapped by a timeshare and that they are free to vacation in more than just Disney approved locations. Another advantage is
  11. 11. 10 | P a g e that guests might be more willing to purchase a timeshare if they do not feel like they are adding on another mortgage. While the guests might like more length options, this plan has the potential to hinder DVC. Guests that take shorter times will not bring in as much money to DVC and their bottom line could end up getting hurt the most. Another disadvantage is that DVC will have to keep track of individual contracts’ end dates instead of knowing that all contracts for one ‘home resort’ end on the same day. DVC will not have an easy time knowing when they are able to sell these points again to other guests or members. Set Weeks A second option for improvement for DVC is to add a set week option to contracts. This would allow guests to only take vacations in the specific window they purchased their points for. DVC will be able to judge better when their rooms will be filled and who will be filling them. This will help them predict if they are free to open DVC rooms up to guests willing to pay for them in cash. Having set weeks, DVC has the potential to double or triple sell points/room space. With this added feature, DVC will have the opportunity to gain more for the available rooms. Even more guests will be able to call resorts their ‘home resort’ than ever before. This will also reduce the need of a wait list and will allow many more guests to become members. This plan will work out very well, until a member wants to either change their set weeks to a different time or wish to use it once in a different window. The potential to run out of space is great with this plan. In order for this plan to work effectively, DVC has to rely on each member to only take their vacations during the times they signed up for. Guests run into the risk of losing their weeks if they are unable to use them. Some of the more common reasons guests will be unable to use their weeks include: not being able to get the time off, having to make up sick days, deciding to vacation at a different vacation, or school calendars changing from year to year.
  12. 12. 11 | P a g e Purchase Back Program This recommendation is to add a feature to the contracts that DVC will directly purchase points back from members, at a lower price than their purchase price, if members no longer wish to have them. This option is only available to members that have not paid off their purchase price. This would be a good add-on because many guests are unsure about their financial stable in the future. If they knew that they would be able to sell their points back if they are unable to continue paying for them, they might feel more secure in their purchase. The members would be given the information about this program while they are considering their purchase. With this added security, members might be willing to purchase more points or even add more one as they see fit in the coming years as opposed to buying at the lowest level to start. DVC does not have to buy-back from every member that wishes to resell their points. As previously stated, members cannot sell back their points if they have finished paying off their points. DVC can examine the history of each member and how they used their points and attempt to predict how well those points could be used in the future by other members. If DVC does not feel like it would be a sound investment to repurchase the points, then the member is free to search for another opportunity to sell their points. While this is a sound addition to the timeshare idea, DVC may start to see a rush of members wanting to sell their points back. This would in turn flood the market and make points worth very little to other members. DVC will also see a lot more of their profits heading back out the door when they have to buy-back from a member. However, if DVC is lucky, their buying back of points will coincide with guests or members who are willing to purchase these points. If this occurs, then DVC has the potential to make even more money on the points than they would have if the first owners had kept them. Recommendation and Expected Results The recommendation with the highest potential is the Purchase Back Program. This program has the biggest chance to make DVC more profitably and to make their members the happiest.
  13. 13. 12 | P a g e In the short run, DVC will have the potential to gain more revenue for the current fiscal year (October 1st to September 30th). This additional revenue can be put to either buying back even more points from members or it can be used to developing more DVC resorts which in turn make their own revenue. In the long run, DVC can start to predict which ‘home resorts’ are not as well liked. This information is helpful in deciding which ‘home resorts’ need to be redesigned. DVC has already noticed that many of their members are larger than the traditional four people. The Polynesian, Boardwalk, Grand Floridian, and Aulani all have a murphy style bed in the rooms to accommodate for a fifth family member. These members no longer have to request a roll-away bed for this family member. Repurchased points can be sold to new members for the current price per point. Current points are being repurchased for $75 to 90 per point from members (Cotton, 2015). If Disney were to purchase these points and turn around and sell them for the current rate of $165 per point, DVC stands to make a profit of anywhere from $75 to 90 per point (Membership, 2015). With every repurchase, DVC runs the risk of those points not being resold. DVC does not want to have unsold product in their inventory. They lose money not only on the points themselves but there is a chance of fewer guests staying at that particular resort. Before each repurchase, DVC should fully examine the potential of those points. Overall, DVC has a very high chance of making a substantial profit on buying back points directly from its members. That is why this is the best possible recommendation for the Disney Vacation Club.
  14. 14. 13 | P a g e References Cotton, N. (2015). Disney Vacation Club Raising the ROFR Bar? Retrieved August 13, 2015, from http://www.dvcresalemarket.com/blog/is-disney-vacation-club-raising-the-rofr-bar/ Disney's Polynesian Villas & Bungalows. (2015). Retrieved August 13, 2015, from https://disneyworld.disney.go.com/resorts/polynesian-villas-bungalows/rates-rooms/ Gingerich, T. (2012). Walt Disney Company. Retrieved August 8, 2015, from https://prezi.com/vniyr6g37-g2/walt-disney-company/ Membership Costs & Pricing | Disney Vacation Club. (2015). Retrieved August 13, 2015, from https://disneyvacationclub.disney.go.com/membership/costs/ RCI.com | RCI.com. (2015). Retrieved August 13, 2015, from http://www.rci.com/pre-rci- en_US/explore-rci/about-rci/overview/rci- milestones.page?promo=Caro19S2CARenUSPreAbtrcixC19S22RCIHISTORY Smith, T. (2015). Disney Parks Blog Weekly Recap. Retrieved August 13, 2015, from http://disneyparks.disney.go.com/blog/category/shanghai-disney-resort/ Thompson, A.A. (2015). Strategy Core Concepts and Analytical Approaches. The Business Strategy Game, 3rd edition. Retrieved from https://www.bsg-online.com/Book2014/# Walt Disney company and Comcast corporation announce a long-term, comprehensive distribution agreement that advances the successful multichannel business model, the. (2012). Retrieved August 10, 2015, from https://thewaltdisneycompany.com/disney- news/press-releases/2012/01/walt-disney-company-and-comcast-corporation-announce- long-term Walt Disney quote. (n.d.). Retrieved August 7, 2015, from http://www.brainyquote.com/quotes/quotes/w/waltdisney131655.html Wills, D. (n.d.). Disney Vacation Club A Primer. Retrieved August 13, 2015, from http://allears.net/acc/dvc.htm

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