Walt Disney Company has temporarily stopped sales of time-share units at its new Aulani Resort on Oahu and fired some top mainland executives after discovering it was charging time-share dues here that were not high enough to be profitable, according to the Orlando Sentinel newspaper.
The $850 million Aulani resort is set to open August 29, with 460 Disney Vacation club time share units and another 359 hotel rooms.
The Orlando Sentinel newspaper reported Disney executives in Florida unintentionally underestimated operating costs for the new Hawaii resort, leading to time-share dues that were too low to be profitable. Sources told the Orlando Sentinel newspaper the low time-share fees prompted concerns within the Disney company that Aulani would eventually face a "significant operating shortfall."
Disney worried about the possibility of brand-damaging backlash from state of Hawaii officials who regulate the time-share industry as well as customers, if Disney tried to significantly raised annual time-share dues at the resort to plug a deficit, the newspaper said.
Disney suspended time-share sales at Aulani July 9, but is still taking deposits and reservations from people who want to lock in current prices.
"This was a simple human error and we're making adjustments," said Rena Langley, a spokeswoman for Disney Vacation Club.
Disney will file its higher-priced time-share fees with state officials in the next week or so.
?Time-share maintenance fees and other costs have to be in a disclosure statement that?s given to prospective buyers,? said Lori Beth Van Cantfort, time share administrator for the state Department of Commerce and Consumer Affairs, which regulates the time-share industry in Hawaii.
The Disney spokeswoman said anyone who already purchased time share units at Aulani for the lower rate will be credited the dues increase over the life of the 50-year contract that expires in 2062.
"It's the right thing to do," said Langley.
Cantfort said state law does not require Disney from keeping those lower fees in effect for people who already bought time share units at Aulani. But if Disney chose to raise fees on customers who?ve already made purchases, those customers could file complaints, which the state could investigate and eventually impose fines against the company for anywhere from $500 to $25,000, Cantfort said. The company could have its Hawaii registration revoked or suspended, if there are enough complaints upheld against it.
Last Friday, Disney fired Jim Lewis, president of Disney Vacation Club, which oversees time share operations. The company also dismissed two other Disney executives in Florida because of the time-share snafu, the Orlando Sentinel reported. Langley would only say that the three executives are ?no longer with the company,? but would not confirm that they had been terminated.
Disney officials declined to say how many time-share units have been sold at Aulani so far at the lower-rate that will now be raised and they also refused to say how much they plan to hike time-share prices there.