Should Disney outsource its hotel operations?

Edited: October 27, 2018, 12:44 PM

This comes up from time to time whenever we discuss Disney World's hotels, but should Disney outsource their operation, the way that Universal contracts with Loews to run its hotels?

Hard truth, but Disney's hotels simply do not provide the same quality of accommodations and finishes as other hotels in the same price class. That said, Disney's hotels are also located at Disney... so you're paying a premium for that.

Would Disney's hotels provide a better guest experience if they were run by a hotel company, with its efficiencies of scale in procurement, training and management? Perhaps. But Disney's making bank the way things are, so I don't see why the company would wish to change.

Also, Disney has a timeshare business, in addition to traditional hotels, which solidifies the case for keeping operations in house.

My take? Well, given a budget, I think the Universal hotels provide a better deal for the price, so there's that. I'd love to hear what other people think.

Replies (18)

October 27, 2018, 2:45 PM

How about the entire parks and resorts division? And I don’t really mean outsource, I mean Disney spinning of the division into its own company, with Disney still owning a major stake of it. Disney is a film and television company, and also a theme park operator. It made sense when Walt was alive for it to all be one company, but not so much anymore. Oriental Land Company proves Disney theme parks are better when their run by another company. At the very least, Disney needs to treat the theme parks less like a cash cow, and more like a place to build relationships with customers. Instead of the theme parks being the profit source, have the parks encourage people to have a more positive relationship with Disney, and accept reduced profit margins on the parks themselves, but in the long run more profit elsewhere. Of course I don’t mean reduced prices(that will never happen), but more money into the parks to justify those steep prices.

Edited: October 27, 2018, 8:07 PM

Remember Universal owns these hotels jointly with Loews Hotels. Universal and Loews hotels work on these projects together. You could say it’s not really outsourced. Universal and Loews have created a hotel company together to own and operate these in a partnership. Universal does the themeing and marketing while Loews invest in their percentage and also manages the resorts. Loews is more of a specialty hotel company the owns and operates a lot of immersive destinations. They are nothing like Hyatt or Marriott, which make them speacial and very compatible with Universal. They have been doing this since the beginning. Very much a win win for both companies. Since the ownership is shared, both companies can keep the operation moving very smoothly. Universal is very involved with Loews in this operation. I don’t think this would play well with the way Disney runs their business.

October 28, 2018, 11:42 AM

Robert Niles writes: "Hard truth, but Disney's hotels simply do not provide the same quality of accommodations and finishes as other hotels in the same price class."

I Respond: According to whom?

Edited: October 28, 2018, 1:19 PM

TH: According to anyone whose stayed at a Four Seasons, Park Hyatt, Ritz, or comparable brand. Disney prices their deluxe resorts in that category but is a far cry from delivering the product those brands can.

Edited: October 28, 2018, 1:28 PM

Working as long as I have in the customer contact industry, I've never understood how anyone can think outsourcing anything is ever good, unless its a function you do not do at all but want to start doing.

At the end of the day, things have a fixed cost - staff, rent, etc. When you outsource something, you add an extra set of mouths to the trough - another management team, and another set of shareholders, non productive mouths at the trough who add little to anything at all.

The only way for Outsourcing to end up being cost effective is if the outsourcer not only squeezes costs to cover the extra non-productive mouths, but even harder to have the whole operation cost less. That means a drop in quality and service standards to the bear minimum allowed in the contract.

In that case, why not simply cut out those extra non productive mouths and do it yourself, if you can? Net saving already, and you're in control of the quality level.

I think Disney got it right when they started. Partner with an expert to get it off the ground (Marriott I believe) and then get rid of the extra mouths when you're confident in your ability to run the show yourself.

Edited: October 28, 2018, 10:32 PM

/\ The idea is to do it because those other companies whose core business is hotels are better at running hotels.

Personally I think its a bad idea because of how complicated WDW is. The people working at the hotels need to be experts at tickets, fastpass, magic bands, dining reservations, transportation, etc etc. There is just a lot of opportunity for mistakes and miscommunications to happen. Running a WDW resort is not like running a normal hotel.

And regarding the prices being high for the deluxe resorts and not having the service of a Four Seasons or Ritz Carlton...i've paid $400 for one night for a regular room at a Hilton once in Manhatten, and trust me a regular hilton is nowhere near as interesting and doesn't have nearly as much to look at as any cheap WDW resort. Those hotels are always booked out it doesn't make much sense to add free amenities because they want to be nice. I don't think bringing on a Marriott or Hilton would really make the amenities any better.

October 29, 2018, 4:17 AM

Again, where is the crying need for this? If it were to happen it would be a multi-million dollar (or maybe billion dollar) business transaction. This disatisfaction with the Disney project would be rampant and well-known.

Or is this a business decision based in economics -- wherein Disney's business model would benefit but not necessarily the quality of service.

Additionally, which hotel operator would win the contract? Without knowing the specific company assessing how it would perform better isn't possible.

Finally, with the new contract in place, would the outsource model maintain the new CM income and benefit package? If the cost of assuming the role of operator is shouldered by cutting wages and/or benefits, then the answer is "no" Disney should not outsource its hotel operations.

Edited: October 29, 2018, 7:44 AM

I think Disney has literally made their bed here, and would be foolish to ever consider outsourcing unless an outside provider gave them a sweetheart deal. Disney has already established an infrastructure and labor base to support their hotel/resort business, and while companies that solely run hotels for a living could probably do a better job and provide a higher and more competent level of service, it would be a significant outlay to make such a transition, and a benefit to Disney that probably wouldn't be felt for over a decade.

If Disney was having trouble keeping their occupancy rates up or were unable to hire and maintain competent staff, then it might make sense for them to look at a 3rd Party model like Universal and other theme parks have done, but ultimately, the Disney hotels and resorts are highly profitable with extremely high occupancy rates, even at premium rates compared to similar quality hotels.

FWIW, the Dolphin and Swan are not mentioned here, but show that Disney has farmed out hotel operations to 3rd Parties in the past, and I'd say the end result has been a positive for everyone involved. There are WDW visitors that swear by the "Swolphin" because not only are the accommodations on par with Deluxe Resorts with prices more comparable to the Moderates, but they can use their Marriott points to get free nights and upgrades, something that you can't do at any other hotel on Disney property.

Disney has also extended FP+ and Magic Hour perks to off-site hotels near Downtown Disney that are owned by 3rd Parties. Like the "Swolphin", these hotels have accommodations that are on par with on-site Deluxe resorts with prices closer to on-site Values and Moderates.

The bottom line is that the Drones are willing to pay the premiums to stay at on-site hotels that are a step below what similar-class competitor hotels provide. Until Disney sees a decline in what guests are willing to pay for the on-site experience, there's really little reason for Disney to even consider outsourcing their management or to improve the amenities to match off-site competitors.

October 29, 2018, 11:41 AM

TH, you basically pay less than a moderate Disney hotel at UO to stay at a hotel almost as good as a Deluxe, and you get to skip every line at the park. That is a complete no-brainer to me. That being said, there is no way that Disney will ever out source, as the hotels are still filling up even with the prices. One thing the Disney hotels have over the Universal ones is better food and, in many cases, swimming pools. None of that gets over the Unlimited Express Pass which beats the FP+ in every way imaginable.

October 29, 2018, 7:32 PM

Disney is well known. What makes them special (Magic) is their Guest Relations. Take that away, and I'll find another hotel outside the Disney system.

When Disney has too many guests in the parks, they raise prices and build more resort hotels. There's something wrong with that thinking. They need to get people through the rides faster. They need more attractions. They need more activities for the guests to see and do.

I can't argue that the Ritz may be a higher class hotel, but why do people go to Disney? For the Hotels, or for the parks? (or both?) I think they need more things to do (rides, shows, etc) first. Then they need more value resort rooms.

Outsource? Absoluteely no!

Edited: October 30, 2018, 1:50 PM

If these parks are doing such a lousy job while raising prices, then the net result would be a declining amount of guests, right?

Right?

The only reason why Disney would want to outsource anything would be because it had publicly promised a high minimum wage to its own workers. An outsourced company wouldn't be beholden to that.

October 30, 2018, 2:52 PM

It strikes me how much I'd prefer to stay in a Disney owned and operated hotel. I also realize I'd feel betrayed if they sold the Contemporary, the Poly, and the GF off to Sheraton (or whatever). I wonder if this is how the people who bought into Celebration felt when Disney sold off that endeavor.

November 1, 2018, 8:11 AM

Well, isn't Swan and Dolphin in this category.

I am not sure if I am reading this correctly, but if Robert's main thesis is that it is a better deal to stay at Universal, we all know and nobody too much cares at this point.

Disney is far top the king of FL. They can charge nearly whatever they want and people will come. It is up to Universal to come in second and block out the likes of Seaworld (so far, so good).

Edited: November 2, 2018, 7:11 PM

In 2017 we spent two weeks at Disney's All Star Music resort, but we decided to pay for a night away at Universal's Loews Pacific Hotel. We booked Disney as part of an package from the UK and the rooms roughly worked out about about $75-$85 per night. Lowes cost us $295 for the night.

I have to be honest to say, whilst we enjoyed our stay at Loews and it is nicely designed, we found it somewhat lacking in atmosphere and by 10pm just about everything (bars & restaurants) were shut. We also had a couple of frustrating issues with the service which I wont bore you with here.

We had much more fun at All Star Music. If you offered me 7 nights there or 7 nights at Lowes I'd definitely choose Disney. Yes, the All Star rooms are basicish and maybe even getting a tad dated, but I didn't feel the Lowes rooms were anything that more special tbh - certainly not worth 4 times the price (or even 2 or 3 times for that matter, if we had paid the regular Disney rate for All Star)

So in my experience, Disney was a far better deal (even if we had paid the regular room rate - half the cost of lowes)

I guess, for me, rating the value and quality isn't just about the furnishings of the room, it is also about the overall experience and atmosphere.

Just my feelings and opinion :-)

November 2, 2018, 11:53 AM

I would note that a reservation at the Royal Pacific includes Unlimited Universal Express. Depending upon the number of guests in the room, the increased room price is more than validated by the FOTL access in the theme parks.

Edited: November 2, 2018, 7:13 PM

Fair comment Russell, however to be honest we didn’t really need the express pass for maybe 95% of the rides we went on ( it was September and queues were not long - we didn’t gain anything using express on gringots even) so I guess there was little perceived value for us. The only thing we needed express for was Halloween horror night, but that’s not included of course, so we had to pay extra for that. My main issues with the Loews was the less than Disney service and just a total lack of atmosphere - it felt too much like a smart business hotel to me.

November 3, 2018, 5:26 PM

Plus, with Disney announcing wage increases for all CMs there should be no doubt that the superior WDW service will continue.

November 6, 2018, 1:34 PM

>>>The only reason why Disney would want to outsource anything would be because it had publicly promised a high minimum wage to its own workers. An outsourced company wouldn't be beholden to that

In which case you can avoid it by outsourcing the department “our workers get a living wage, cleaning staff doesn’t work for us, call the contractor for a comment”


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