Sentinel on Risky DVC Growth

On the eve of Disney Vacation Club opening its Treehouse Villas at Disney's Saratoga Springs Resort & Spa, the Orlando Sentinel takes a look at Disney's somewhat risky timeshare expansion during a period of economic uncertainty.

According to the Sentinel, the recently completed 2nd quarter of the 2009 fiscal year saw the first decline in Disney Vacation Club revenue in more than 3 1/2 years.  Nevertheless Disney is moving foward with no fewer than four resort openings in 2009 and at least one more on the books for 2011. 

In addition to lagging sales, DVC is also faced with an inability to securitize mortgages in today's credit market.  This process of bundling debt and selling it off to investors has generated over $42 million  in the same quarter of 2008. The Sentinel notes that Disney is also building more upscale resorts than in years past which adds to the construction overhead.

Meanwhile construction is already underway on Disney's Ko Olina resort in Hawaii which will add nearly 500 additional villas to the program by 2011.  And Disney's recent land purchase in Maryland's National Harbor development seems ripe for the inclusion of still more timeshare accommodations.  

Still some analysts believe Disney has the right idea.

'It's probably going to be challenging in the current environment. But are you building them for this cycle or are you building them for the next cycle?' said David Bank, an analyst with RBC Capital Markets. 'It makes a lot of sense for long-term growth.'

Visit the website of the Orlando Sentinel to view the complete article.

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