The Walt Disney Company has achieved many seemingly impossible tasks over the nearly 100 years of its existence. It crafted the world’s first animated classic, Snow White and the Seven Dwarfs; it constructed the Happiest and Most Magical Places on Earth from orange groves and swampland; and it has become the universal leader in all phases of family storytelling and merchandising. Whenever there’s a chance for them to extend their presence in the family vacation industry, they’ll do so. That’s true even when a potential market seems a bit shady.
Everyone knows about timeshares. Some of them are seedy, and most are terrible business ventures. In fact, in the wake of the early 2000s recession, people could buy hundreds of timeshares on eBay for a dollar. They were still a bad deal. The original purchasers discovered that the benefits of timeshare ownership were few and far between. Conversely, the annual expenses of maintenance fees were crippling enough to negate any perceived value in the timeshare contract. And that was an issue as recently as 2012.
Amazingly, timeshares stood as an even worse investment during the 1980s. Scam artists abounded, some of whom had hilarious nicknames such as Goldfinger. Nothing was funny about their activities, though. These people ran cons to trick people into spending thousands of dollars of their hard-earned money to own at least in theory a vacation home in paradise. Alas, many of these properties turned out to be decrepit buildings in desperate need of repair, and some of them didn’t even exist. People spoke the word timeshare as if it were a derisive term and for good reason. Dave Ramsay named them one of the worst five moneymaking mistakes of the decade.
An underlying fact was undeniable, though. The sheer volume of money people spent on timeshares indicated something important. Folks WANT to own a vacation home, even if they can’t afford it. The idea of sharing this space with virtual strangers isn’t a deterrent to such consumers. The concept of the timeshare is a good one. It’s always been the execution of it that caused people to lose faith in the process.
A company could succeed and thereby earn a ton of additional, virtually bonus revenue if they could just build a trustworthy system. Alas, few businesses enjoy that sort of sterling reputation. Disney knew that they had built enough customer loyalty over the years that if they started a timeshare program, people would give them the benefit of the doubt. As this program celebrates its 25th year in existence, it’s the perfect time to look back to the beginning. This is the story of how and why the Disney Vacation Club came into existence as well as an examination of the key events that built it into the strongest juggernaut in the history of timeshares.
A piece of the pie
Developers invented the concept of the timeshare for usage at a 13-property resort in Switzerland in 1963. A company named Hapimag quickly sold all available units at Sut Baselgia, making the initial offering somewhat of a proof of concept. The world’s first timeshare entitled buyers with the right to stay at resorts and holiday properties across Europe. Hapimag didn’t tie ownership to Sut Baselgia. Customers bought their “vacation home” there, but they could exchange rental privileges at several attractive facilities. That’s not the standard practice today, nor was it during the early days of timeshare sales. Notably, it’s the one Disney eventually adopted and repurposed for their own needs, though.
By 1970, the idea of the timeshare spread across the globe. Almost immediately, the underlying philosophy of the timeshare struck a chord with potential customers. A quarter century after World War II, affluent citizens of many countries combined the new premise with the ascension of jet plane air travel to enjoy the privileges of wealth. These world travelers seeking exotic vacation destinations relished the thought of having a home away from home. Owning such a property meant that they’d be able to visit their favorite vacation destination whenever they wanted. Such real estate purchases were cleaner than buying an actual second home for vacation purposes.
In 1970, the first American land ownership group held a conference to discuss the nascent timeshare market. Two years previously, Congress had passed the Interstate Lands Disclosure Act, thereby providing some regulations for the industry. The American Land Development Association (ALDA) convened for the first time. This organization still functions as the primary trade association for timeshare ownership today. Their goals were modest back then, though.
Image: Disney
Land owners and real estate developers all loved the timeshare as a concept. It allowed them to sell the same developed land and buildings on a repeated basis. Who wouldn’t want to pick up numerous paychecks for the same amount of work? It was one of the most viable business ventures of the 1970s.
By 1974, Resort Condominiums International (RCI) entered the marketplace. Founders Jon and Christel DeHaan realized the vast potential for a holiday exchange service; it eventually evolved into the premier timeshare brokerage in the industry. RCI remains popular to this day due to the clever nature of its business strategy.
RCI doesn’t sell any property per se. Instead, they provide developers with the ability to join RCI for a fee. In exchange, the developments become a part of the RCI exchange system, which currently claims over 6,300 properties across the world. Simply by owning points in the RCI database, a timeshare owner enjoys the ability to stay virtually anywhere on the planet.
Ready player one
Image: Disney
Almost a decade later, a major corporation entered the marketplace. John Willard Marriott opened his first hotel in 1957, and he’d built a juggernaut chain of properties by the early 1980s. He too loved the premise of selling the same property to multiple buyers. They researched a popular timeshare in Hilton Head, South Carolina. This resort, Monarch at Sea Pines was the signature property for a company called American Resorts Corporation (ARC). They’d calculated brilliant strategies to maximize profits at one of the most expensive tourist destinations on the east coast.
Rather than shamelessly mimic ARC’s business tactics, Marriott chose the path of least resistance. They acquired ARC, thereby purchasing their first timeshare in the process, and it was a great one. Monarch at Sea Pines stood apart as one of the most successful timeshares in the early days of the enterprise. This resort won four different national awards during 1982 and 1983 for everything from dutiful management to hospitality to development design. It was one of the crown jewels of the American timeshare industry when Marriott bought it. The following year, 1984, the corporation unveiled an entire timeshare division, Marriott Ownership Resorts Inc. They were going all-in on the fledgling industry.
The Mouse was all ears
Image: Disney
The presence of a major international conglomerate in the timeshare industry provided it with newfound credibility. While still largely unregulated by the American government, timeshares were becoming more reliable in the eyes of consumers. Disney watched with profound interest while Marriott’s reputation and business savvy almost single-handedly elevated timeshares to respectability.
A trio of other major advances in the industry added further incentive for Disney. The first one was the ratification of the Model Timeshare Act (MTA) in 1983. This legislation achieved two goals at once. It curtailed the ability of scam artists to function without repercussions, and it added straightforward laws that eased the restrictions on reputable developers to build timeshares. The MTA also directly led to the formation of ARDA-Florida.
The other important timeshare enhancements were the introduction of the concepts of fractional ownership and floating time. Fractional ownership only indirectly impacted Disney since DVC doesn’t employ the practice. It’s a buyer program wherein the customer acquires ownership of somewhere between a month and a quarter of an entire year. People who possess fractional timeshares enjoy exponentially better amenities. What’s important about fractionals is that they boosted customer satisfaction to unprecedented heights for the timeshare industry, a field that had historically claimed dreadful scores in this category. Fractionals elevated the reputation of timeshares even more, causing the industry to seem that much more attractive to Disney.
Floating time is a staple of timeshares today, but it was revolutionary in the 1980s. It’s when you own an indefinite week during a certain season of the year. For example, people who own a timeshare at a ski resort would find it much less valuable in July than in January. So, they can pick winter ownership, which will obviously cost more since it’s more in demand. They don’t have a set week during the winter, though. Instead, that’ll change from year to year depending on when the timeshare owner wants to enjoy a week of vacation. The season doesn’t change, but the floating time includes several weeks, one of which should satisfy the customer.
Conversely, bargain hunters can purchase offseason ownership for less money. Then, they can either enjoy a relatively empty resort during this down period on the calendar, or they can exchange their “points” to stay at a different condominium for a shorter period of time during their peak season. That’s the benefit of resorts participating in the RCI program. They garner additional benefits beyond their ownership location.
The above is the strict definition of floating time ownership. In execution, most timeshare systems provide owners with the ability to stay at any point during the year. Anyone who possesses an ownership interest in the property can stay for a week during the year. The only caveat is that the resort must have availability when the owner wants to stay. Timeshares do sell out, just like any other hotel or condominium.
People are always keeping score
Image: Disney
Notably, the floating time concept originally didn’t include points. That premise came later, and it’s crucial to the discussion since it’s the backbone of the Disney Vacation Club. Over time, timeshare strategists deduced something obvious from the above. Since some resorts such as those in Hawaii are in greater demand than, say, timeshares in Pigeon Forge, Tennessee, the vested interest isn’t the same. Similarly, selling a floating time week isn’t always effective for the reason above. Virtually everywhere in the world, a resort has a high season and a down season. Weeks during the former timeframe are much more valuable.
That’s where the idea of points comes into play. Since 70 percent of all timeshares are floating time in structure, it’s imperative that every customer feels satisfied. The people who pay the same amount but get less for their money become unhappy over time. That’s why the format gradually evolved from weeks to points. In this manner, everyone can keep score of what they own as well as what it’s worth. Everyone understands that summer months and national holidays are in greater demand since that’s when people have more vacation time. Those points should and do cost more. Conversely, people travel less once the school year begins, devaluing the months of January and September at most (non-ski resort) locations.
Genesis of DVC
Image: Disney
The economics of timeshares are particularly important in the history of DVC since this is the system that enticed Disney to participate. In 1990, the corporation had seen enough. The entire industry was grossing $1.2 billion annually by that point. Disney also knew that Marriott’s new timeshare division was doing great. Research suggested that they’d reach 50,000 owners by the start of 1993.
Also, a key distinction existed between Disney and other hoteliers. Whereas other corporations would only receive revenue that transpired at the resort itself, Disney could empty the pockets of all their tourists. People staying at hotel properties near their theme parks would spend most of their disposable income onsite. The financials were so obvious by this point that internally, Disney execs were speaking in terms of when, not if, with regards to timeshare development.
In truth, Disney CEO Michael Eisner had already decided on this path in 1989. He saved the announcement for 1990 since he wanted to include it as an integral part of a new marketing strategy. The 1990s would become the self-professed Disney Decade. As part of the 10-year plan to expand the company in totality, paying particular attention to the theme parks division, Eisner introduced Disney Vacation Development, Inc. In terms of corporate structure, it was subordinate to Walt Disney Parks and Resorts and remains so to this day.
In January of 1990, Eisner stated that this new division would include 500 units at an undisclosed location. He carefully danced around the subject of preconceived notions about timeshares. Here were his words as transcribed by United Press International:
“’We didn’t use the word time share, not that we’re afraid to use it,’ Eisner said. ‘We’ve hired the best people in the industry to work for us,’ he said. ‘We feel that we can do it in a really attractive, honest and capable way, and we’re very excited about it,’ he told reporters.”
Image: Disney
Clearly, the stigma of timeshares concerned Disney enough to tiptoe around the subject. To wit, none of their early sales brochures or press releases about their upcoming project ever mentioned the word timeshare. This was in stark contrast to what Eisner was telling the media.
Disney was trying to have it both ways with their early attempt. Their delicate balance was understandable. The central Florida timeshare industry was tallying $400 million annually by 1990. The central draw of these extended vacation resorts was Walt Disney World yet The Walt Disney Company wasn’t getting any of the accommodations revenue. In fact, it was operating as significant competition to their onsite properties. Sure, Disney enjoyed all the revenue from these theme park tourists once they reached the three gates open at the time. Their accountants realized the savage financial losses the company was accruing in terms of opportunity cost, though. Disney HAD to get a piece of that pie. After all, it was their ingredients baking the pie.
The resort at the golf course
Image: Disney
A developer cannot build 500 units near Walt Disney World in a short period of time. Well, they couldn’t in 1990. Disney accepted bids for this critical project under their other new umbrella, Disney Vacation Development, Inc. Once they settled on the perfect builders, they broke ground fairly quickly, announcing that 190 villas would come available soon.
These new rooms would spread across multiple buildings at a Disney resort that they were selling as a condominium. You know it as Old Key West, but people at the time referred to it as the hotel interspersed around Holes 2 and 8 of the Lake Buena Vista Golf Course. Each of the villas offered at the hotel would offer convenient, free transportation to Walt Disney World plus a hotel room view of the golf course below. Disney accomplished all of these plans during the first half of 1991.
By October, Disney was ready to open their Disney Vacation Club Welcome Center, which eventually became known as the Commodore House. Two months later, the first DVC property debuted to the public. It was less than ambitiously named Disney’s Vacation Club Resort during the first four years of its existence. Still, the actual building process revealed a great deal about Disney’s immediate and long term plans for their new endeavor.
First of all, only 50 of the villas would be ready at the start. The first DVC property would remain under construction for its first two years of existence, a familiar refrain over the years with regards to new DVC resorts. More important, Disney had requirements and incentives for their new enterprise, the one they were officially calling the Disney Vacation Club prior to its opening.
A points club, not a timeshare
The requirements to join involved the precise implementation of the new “club.” Disney eschewed conventional timeshare practices while accepting the genius of the basic premise. They too were selling a small set of short term condominium apartments to a large volume of customers.
The key difference is that Disney chose to place a time limit on their deeded properties. People who invested at Disney’s Vacation Club Resort would enjoy an ownership stake for 50 years. At that point, their rights and privileges would cease to exist. Yes, their titles were deed-able, passed down in wills, but they also came with an expiration date.
Through this tactic, Disney wasn’t ceding their coveted property near Walt Disney World forever. Instead, they were building a gigantic new resort while simultaneously guaranteeing high occupancy rates. Most cleverly of all, they’d have their new DVC participants foot the bill for the development. It was a business practice so perfect in design that Walt Disney would’ve felt tremendous pride if he’d lived to see it.
The key variance from standard Central Florida timeshares is that people wouldn’t possess fixed weeks of ownership. Instead, Disney added a clever flexibility to their real estate proposition, one they learned from the floating week concept. People could purchase as many “points” as they wanted in lieu of fixed weeks. This way, DVC members had the ability to stay onsite as much as they wanted for a set purchase price.
Those guests who wanted to stay more days, thereby visiting Walt Disney World more often, could buy a larger point amount at the start. Alternately, they could add on to their current total at a later date. This particular business practice was a savvy one for Disney since DVC members jokingly refer to their accumulating points obsession as Addonitis. Through this tactic, Disney keeps selling the same land to the same people. It’s a masterstroke of ingenuity.
The high cost of vacation
Image: Disney
The set rules were somewhat restrictive at first. For starters, Disney required a minimum buy-in of $11,730, the equivalent of $20,412.70 today. Amusingly, Disney has gone in an entirely different direction since then. Today, a person can actually buy into DVC for less than what they would’ve had to pay in 1991, and that’s not including inflation or the DVC resale market. A 50-point purchase at Disney’s Hilton Head Resort currently costs only $5,500.
Why did Disney soften their stance on DVC point requirements? They started high. Initially, the corporation looked at what Marriott had accomplished with a fair amount of envy. Disney appreciated that as they sat on the sidelines, debating whether to participate in the timeshare marketplace, Marriott jumped in with both feet. They quickly proved that a reputable company could make inroads in an industry perceived as shady.
While planning the Disney version of the timeshare concept, execs meticulously examined Marriott’s tactics. They even hired a couple of Marriott employees with experience in the timeshare side. What Disney learned from their workers is that people preferred villas over basic hotel rooms. The explanation is that they felt more like a home away from home, a notion Disney has since emphasized in their program. Every person staying at a DVC resort enjoys the same greeting, “Welcome home.” It’s oddly soothing and re-assuring, causing people to feel as if a massive Disney property capable of hosting thousands of guests is oddly personal and intimate.
A house is not a home
Image: Disney
Disney actually misfired a bit with their early sales attempts due to this knowledge. They believed that guests would expect, possibly even demand, resort accommodations capable of hosting several people at once. These villas should include kitchenettes so that guests could cook at “home” if so inclined. Disney predicated the original DVC pricing model on this belief. All their sales brochures noted this strategy of living large at Walt Disney World. Guests who purchased enough points have the opportunity to spend a week at a two-bedroom villa.
Current DVC members are likely scratching their heads a bit at this. Spending a week at a two-bedroom villa usually requires more than 230 points these days. It can actually cost as much as 398 points now, which reflects the fact that Disney modified their points chart over time, something the DVC charter gives them the authority to do. In a nicely nostalgic touch, they do still offer two phases of the calendar, Choice Season and Dream Season, wherein 230 points is either enough or almost enough (232 points being the magic number) to stay in the two-bedroom villa that was originally key to Disney’s marketing campaign.
Where Disney erred was in believing that people wanted/needed a two-bedroom villa during their visit. They trumpeted the availability of these large new apartments offering 1,395 square feet of space. Some of the pamphlets noted that one-bedroom villas and studio rooms were also included in DVC. Those weren’t part of the primary marketing push, though. Disney felt confident that people wanted to enjoy all the benefits of home while vacationing in Orlando, Florida. That meant multiple bedrooms, a kitchen, a living room area, and then all the amenities of a timeshare complex.
Over time, the company learned that while a portion of the base loved those larger hotel rooms, many people were just as happy in a studio room. After all, the ones at Old Key West offered 390 square feet, much larger than the average Disney resort room. People weren’t as concerned about the features of their hotel room as early research suggested. That’s because diehard Disney fans weren’t joining DVC to stay in their rooms. They wanted to be where the action was, the three Walt Disney World gates open at the time.
A movie and some ice cream
While Disney got a few things wrong in the beginning, they got much more right. Their spacious hotel rooms sold well initially. The corporation gained $50 million in revenue during the first year of the Disney Vacation Club. This number was toward the upper boundary of expectations, but there was plenty of reason why.
For starters, the constant fear of timeshare stigmas caused Disney to protect their brand ferociously. The new Disney Vacation Club would include 50 sales agents, all of whom already owned licenses to sell such real estate in Florida. Yes, these employees had previously worked in timeshare sales; however, Disney’s vetting process in picking the right employees was zealously meticulous. For every 50 people interviewed, one sales agent was hired. The initial 30 employees in the DVC sales department were undeniably the best of the best at their craft.
The corporate policy for their sales pitch was precise. In order to avoid any perception of falling victim to predatory timeshare practices, Disney disallowed shady sales tactics at the start. Industry standard practices such as a claim of a limited time price offer weren’t a part of Disney’s pitch. In fact, they performed surveys after each presentation to verify that guests felt that their sales representative had treated them honestly and respectably.
Confident in their product, Disney let their new vacation club sell itself. They offered an introductory movie and a pair of accompanying videos to interested customers. Of course, before the movie started, the potential clients enjoyed a bit of celebrity. Employees at Old Key West transported guests to the Commodore House, the locale of the DVC pitch.
Image: Disney
The ride was unforgettable. You can see a picture of it here. Yes, the most popular vehicle at Walt Disney World was this odd combination of Jeep, 1930s classic Dodge, and a stretch Humvee limo. It left an impression on guests who saw it, much less enjoyed the honor of riding in it. My vote is for Disney to bring back a fleet of these cars for all its non-monorail transportation needs.
Dazzled by their ride, excited guests arrived at the Commodore House, their moods already optimal. Nobody sets a tone better than Disney. Once someone curious about DVC entered the pitch room, they enjoyed a 90-minute presentation unlike any other timeshare. You’ve undoubtedly heard stories about exhibitions so lengthy that their sole purpose seems to be breaking the spirit of the resistant person enduring it. Disney went a different way. They identified prior to the movie that the viewer could ask for it to end at any point. They also mentioned the survey, verifying that the customer would get the last word if they weren’t satisfied.
At the end of the show, the sales agent offered the only initial reward for potential DVC clients. They had a bowl of ice cream, a rather modest incentive for a 90-minute show. DVC offered a much better incentive for people who chose to buy during those early days, though. People staying at DVC didn’t have to pay for park admission through the body of the 1990s, the Disney Decade. That was part of the hook for joining the club.
Disney4Life
Image: Disney
These buyers didn’t receive season tickets or the like. A much more structured system was in place. Guests staying in studios and one-bedroom villas earned two free park tickets, no matter how many people actually stayed in the room. Anyone in a two-bedroom villa received four free park tickets, and DVC members who went all out by spending points on the grand villa gained six free park tickets.
This practice remained in place until New Year’s Eve of 1999. It gave Disney a way to entice people to buy more points. More of them meant the ability to stay in a larger villa, thereby acquiring additional park tickets. It might not seem like a big deal on the surface, but a family of four could actually save money by purchasing enough points to qualify for four free park tickets each visit. Sure, they’d have to visit Walt Disney World a great deal from 1991 to 1999 to justify the additional purchase yet many did.
In fact, Disney quickly deduced that the real estate laws of the state weren’t working in their favor. Guests who purchased too many points could become a weird sort of liability during the free tickets phase of DVC. As such, they capped ownership points at 2,000. That might seem impossibly high. There was good reason for it, though. Several clever corporate buyers acquired the maximum 2,000 points in order to use them as rewards for loyal employees and important clients. They saw the intrinsic value of DVC and treated the transaction like any other commodity. These investors bought low on something they felt was undervalued.
Image: Disney
Shockingly, they were right. The standard belief about timeshares is that they’re always terrible investments. The Disney Vacation Club continues to fly in the face of this belief. That $11,730 price in 1991 earned the buyer 230 points at Old Key West, so the transaction cost was $51 per point in 1991. Today, Disney sells those same points at the same resort for $135 per point.
Of course, if you wanted to see your purchase after 25 years of use, understanding that your ownership is now halfway finished, you wouldn’t be able to get $135 per point on the resale market. You could, however, sell it in this fashion for about $80 per point. That’s $18,400. Yes, an investment of $11,730 in 1991 would’ve increased in value over the life of the ownership interest. As I’ve already established, it wouldn’t quite match the rate of inflation of the American dollar over that time, falling about $2,000 short. Still, you’d have earned money while vacationing at Walt Disney World as much as you wanted during the 1990s without paying park admission.
That’s how Disney did the impossible. They deduced a way to alter the premise of the timeshare to make it unmistakably Mouse-ish. In an industry fraught with ill behavior and even some criminal behavior, the Disney Vacation Club has stood out as a beacon of quality family vacation time. They developed a brilliant system that synthesized many diverse elements of the Disney tourism experience into a method that works effectively for the corporation as well as its guests.
Most amazingly of all, the people who bought at the beginning actually own a deeded property that is 57 percent more valuable today than it was at the time of purchase in 1991. DVC is the perfect embodiment of why Disney is the most trusted, reliable brand in the family vacation industry.
