Originally Posted By AutoPost This topic is for Discussion of: <a href="http://www.LaughingPlace.com/Blogs/Maletic/View-202.asp" target="_blank"><b>6/23/08 Sell Disney World if Oil Hits $160-a-Barrel? Who Makes This Up? (True-Life Adventureland)</b></a>
Originally Posted By Mrs ElderP I do agree that with expensive oil it's going to be harder to make a profit, but I'm with you: sell WDW, good grief!
Originally Posted By cheesybaby <<sell the resort to a third party>> What would be the asking price? Who could afford it?
Originally Posted By Elderp Miceage is really going over the top. WDW may have some cut backs, but they are not going to sell off.
Originally Posted By Disneymom443 The first thing I thought was what the heck is he talking about. Then I relized that he was just to far feched that it was crazy. To think about how much Disney owns and if that fell, how many other things would fall too. Just crazy.
Originally Posted By trekkeruss <<What would be the asking price? Who could afford it?>> I can think of one person who would be interested: the Oracle of Omaha, Warren Buffett.
Originally Posted By fkurucz Maybe OLC would buy it? There is a strong tendency in modern American business to not be a "bagholder", which is to say, the owner of a depreciating or isky asset. This is why all the subprime and other junky mortgages were securitized and sold to investors. The banks collected huge commisions and someone else was left holding the bag. Now I'm not saying that WDW is the equivalent of a subprime mortgage, but if Disney management does not believe that they can continue to earn an acceptable return on investment on the resort, then it could make sense to divest, especially of they can get a royalty income stream as part of the deal.
Originally Posted By gmaletic >if Disney management does not believe that they can continue to earn an acceptable return on investment on the resort, then it could make sense to divest, especially of they can get a royalty income stream as part of the deal. But divest to whom? Disney should be able to accept lower returns on the resort than any other prospective owner, given the synergistic effects on sales of other Disney assets. Considering any other owner wouldn't get those synergistic effects -and- they'd have to pay license fees...how in the world could this deal happen? I can't imagine who would think they could make this scenario work.
Originally Posted By fkurucz <<But divest to whom?>> A greater fool? Granted, with the global credit cruch it would be hard for a prospective buyer to raise the cash. <<I can't imagine who would think they could make this scenario work.>> One would think that this would be the case. Yet history is rife with questionable acquisitions. Like when Daimler bought Chrysler. I recall wondering "what are they thinking?". And when Cerberus took off Daimler's hands (for a song) I again wondered "what are they thinking?".
Originally Posted By gmaletic And none of this is to mention the enormous negative effect of having the resort tank under the aegis of another manager. Disney couldn't let it happen. All of which goes to show: this idea is insane. To be clear, I'm not attacking this from the perspective of, "wouldn't it be terrible if Disney didn't own the resort." I'm saying, "this makes no business sense whatsoever," which makes me wonder where this rumor came from, and why anyone bothers to repeat it.
Originally Posted By gmaletic >I'm saying, "this makes no business sense whatsoever," which makes me wonder where this rumor came from, and why anyone bothers to repeat it. Of course, I'm repeating it. What I mean to say is, "why anyone bothers to give this any credence."
Originally Posted By fkurucz <<And none of this is to mention the enormous negative effect of having the resort tank under the aegis of another manager. Disney couldn't let it happen.>> The risk to the brand would indeed be the greatest danger. Of course, they already have this arrangement with OLC. << What I mean to say is, "why anyone bothers to give this any credence.">> I agree that the probability is very low. But what might Disney do if WDW became chronically unprofitable? Shutter it and sell off the land? Or maybe partially shutter it? WDW's business model is predicated upon upper middle class Americans (and some foreigners) dropping a bundle on a vacation. I know that they have been courting the Joe 6 Pack demographic lately, but that demographic will certainly be under economic duress into the foreseeable future. The fixed costs are huge. What happens if they can't get the breakeven number of guests to come? Perhaps the exit costs are astronomical and Disney will have no choice but to limp along, cutting costs wherever possible.
Originally Posted By gmaletic >The risk to the brand would indeed be the greatest danger. Of course, they already have this arrangement with OLC. You're right; I'm not sure how Disney handles the situation if OLC falters or handles the Disney properties in a way that reflects badly on Disney. >But what might Disney do if WDW became chronically unprofitable? Shutter it and sell off the land? Or maybe partially shutter it? Perhaps the exit costs are astronomical and Disney will have no choice but to limp along, cutting costs wherever possible. I think you're right; they'll keep it open, no matter what the conditions. (Shuttering underperforming portions of it would certainly be possible, as it would be under any circumstance.) That said, the economic conditions we're facing now are the very same ones that were faced when the park opened in 1971 (today's are probably not as severe, though we don't know that for sure), and the park performed well.
Originally Posted By jvanostenbridge While there are economic realities that Disney Parks and Resorts has to deal with, I would have to agree with most of the perceptions here that selling the parks would be a disastrous option to pursue. I strongly disagree with the notion of selling the parks based on an arbitrary mark in the price of oil because the condition is at best temporary and at worst backward-looking. It might be some time, but I think it’s fair to expect that the dollar will bounce back. Also, I presume if OPEC offers any further encouragement, there will be slews of alternative energy solutions on the market before long. Just look around. It’s already happening. That said, there might be some great opportunities for Disney Parks and Resorts to partner more overtly with green energy solution providers to better manage energy-related operating costs and, possibly, provide a strong public example of what energy looks like in an achievable and not-too-distant future with technologies that are available today. Sure, revenue will be needed to transition from the Parks’ current oil-consuming infrastructure and fleet of vehicles, but where there is a combination of interest and motivation, solutions can be found. Perhaps it is really time to take further action on the premise of Epcot. From my point of view, I expect the Walt Disney Company has too strong a reputation of innovation and leadership, even in difficult times, to give up such revered properties as the parks. Presented with a challenging problem, I would expect Disney to be proactive in finding a solution rather than running in fear from a barrel of oil. Will we follow where Disney leads? I bet we will if they choose to lead.
Originally Posted By barboy ///I'm not sure how Disney handles the situation if OLC falters or handles the Disney properties in a way that reflects badly on Disney./// Oh I would be shocked if there was no clause granting Disney the option to revoke the licensing. I remember years ago working for a very well known pizza chain franchise. The franchisee wasn't playing by the rules(we employees concluded that the franchisee was not paying royalties to the head office around the great lakes area, honoring advertised discounts, tarnishing the name with sex and drug episodes inside and outside the store) and guess what? The corporates came in one day and audited the books and took the store back.
Originally Posted By gmaletic >Oh I would be shocked if there was no clause granting Disney the option to revoke the licensing. Agreed in principle...but how is that actually supposed to work? The next day, the park has to be called "Oriental Land Company Land?" The Winnie the Pooh ride has to be ripped out? The simple idea of "revoking a license" doesn't seem to be sufficient in this case. My completely uninformed guess is that Disney might be allowed to buy the property off of OLC at a discount, but only if certain, very specific conditions are met.
Originally Posted By SuperDry <<< ///I'm not sure how Disney handles the situation if OLC falters or handles the Disney properties in a way that reflects badly on Disney./// Oh I would be shocked if there was no clause granting Disney the option to revoke the licensing. >>> Disney has over 100 people back stage at TDR to oversee every aspect of the operation. OLC owns and manages the park, but everything they do must pass muster with Disney. So, there's no risk of things not being done the "Disney way." There's no reason that another Disney resort (existing or new) couldn't be run the same way if someone other than Disney were to own or manage it, with no risk to quality standards.
