Disney in Hawaii: More Than Meets the Mouse?

Tucked away in yesterday's business news was Disney's (NYSE: DIS) announcement of plans to open a standalone resort on the Hawaiian island of Oahu, as part of a broader strategy of building "niche" resorts. The idea is to have a sort of megahotel property without an accompanying theme park nearby.

Given that Disney already has countless business lines -- film, television, and branded products -- alongside its hospitality properties, it's easy to view the company's $144 million price tag for the 21-acre piece of beachfront property as just another day at the office. But look a little deeper into this transaction, and it's clear that Disney has more on the line than just the rise or fall of this one resort.

From a fiscal standpoint, the failure of this venture would probably register as somewhat of a blip on the screen of Disney's vast empire. But what worries me more are the potential effects in terms of brand dilution.

One of my fellow Fool contributors is certainly all for the company's expansion into non-theme-park-connected properties. He believes that these properties could fit nicely into a potential play to spread the Disney empire through a multiproperty, high-end, destination-club strategy. While it certainly may do that, Disney still needs to overcome several near-term obstacles with regard to its yet-unnamed Hawaiian resort.

The first hurdle is unfamiliarity with the Hawaiian market, especially stacked up against hotel giants such as Marriot (NYSE: MAR) and Starwood (NYSE: HOT). I had to chuckle a bit when I read this line in a Wall Street Journal story: "The company noted, however, that it has tapped the Hawaiian theme for several projects over the years, from the 1937 Mickey Mouse animated short Hawaiian Holiday to the 2002 animated film Lilo & Stitch."

If that's all Disney's got, I'm going to go out on a limb and say that the company has a lack of local market experience working against it. And lack of experience in new markets has clipped the company before. I hear that just hearing the name "Euro Disney" is enough to make Michael Eisner break out in hives.

Further, Hawaii can be a fickle mistress for the hotel industry -- and for megaresorts in particular. Hilton Hotels (NYSE: HLT) specializes in non-themed hotels and resorts and is familiar with the Hawaiian market, but even it has had some struggles with its Waikoloa Resort. Does Disney really think it can do better than a company that, despite specializing in the market, still faces a few struggles?

Disney's existing hotels have always had the protection of the major draw of a theme park. After all, even when times are tough, parents are going to dig deep into their pockets to give their children the "Disney experience." But without that theme-park insurance policy, its Hawaiian property is less likely to draw visitors in down times.

So is this a genius move, or a totally goofy idea? The company's checkered history with non-core theme-park hospitality enterprises provides little assurance for shareholders. Though the company has been successful with cruise lines, indoor theme park DisneyQuest was shuttered in 2001 after the Chicago-area property drew meager crowds.

My initial feeling is that while the company will probably find a way to make this work, the potential risks of overextending the brand are not worth any potential earnings bump that its non-theme-park resorts might provide. It all makes me think that the mouse's hands may be a little shaky come ribbon-cutting time in 2011.

Further Foolishness:

• Disney's Next Stop
• Fool on the Street: Disney's Growth Model