Why do people regularly use rack rate for break even?

[GoingSince1990]

Nothing makes me feel as good about my DVC purchase as looking at the undiscounted cash rates for 2 and 3 bedroom villas.

 

[crisi]

I have argued that any sort of savings calculations should be done only for fun. When deciding to purchase DVC, leave those aside. Look at if the program works for you - warts and all. Availability, room configuration, cancellation policies, limited mousekeeping, etc. Look at your own travel habits. Then look at if you can afford it - which is a different question than if you'll break even. Affording it looks at what else you'll give up to own - is this college fund or retirement money, or is it "well, if we go out to dinner one less time a week." Is this a "we'll really have to scramble if we loose a job" or "this years bonus check will pay for it outright and there is plenty in the bank to cover us for a few months." If you can afford it and it works for you, you are a good candidate to buy. As Brian said "value is only partly about cost."

Break even calculations fail for a ton of reasons - for example, even the "best" and most honest ones don't address risk. Few people go into a break even calculation with "and then we will treat my family...and in 2025 we will treat your family." There are extra trips, extra points, and the extra spending that is easy to do when you don't have a hotel bill. Bigger rooms. Some people are really disciplined and will save money, but most of us don't.

Break even calculations can be fun - but its a shady sales tactic and not great to convince someone else to buy using them - especially if you make the most beneficial to purchase assumptions - like using rack rate. Once you decide to buy (or not) run all the calculations you want using whatever rate you want.

And we've gotten great VALUE out of our DVC over 20 years - but we haven't saved a cent.

 

[Quiltsndisney]

I track two ways, discount rate at time of booking for the room we booked. This is the fun number. Then AOA family suite -discount rate- at time of booking. This is the realistic savings Based on where would would have saved.

I normally say we have gotten this amount of value based on the fun number. But actual savings is y based on the realistic number.

a lot of this is emotional. We would never have gone to DisneyLand or stayed at GCV - without DVC that would not be possible. Or upcoming Aulani trip. DVC makes things happen.

 

[Brian Noble]

There are extra trips, extra points, and the extra spending that is easy to do when you don't have a hotel bill. Bigger rooms.

I've said this before, but compare "current me" who owns timeshares to two different versions of "alternate universe me" who never bought them. Call them Me, Alternate Version 1, and Me, Alternate Version 2: AV1 and AV2

AV1 took exactly the same trips, staying in exactly the same resorts. AV1 spent more (and probably a lot more) on travel than current me. And, most people are imagining AV1 of themselves when they are thinking about how much money they will save by buying DVC.

But, AV2 of me ended up traveling less, staying in smaller units, or in less luxurious destinations, and consequently spent a lot less on vacation travel than "current me". It's also more likely that "real me" would behave more like AV2 than like AV1. For example, I can guar-un-damn-tee you that no real version of me would ever pay cash for a week-long stay in a 3BR penthouse in Hilton's Lagoon Tower in Waikiki over the kids' summer break.

I am certain that I am spending more money on vacations than I would if I had never bought timeshares. But, I'm also taking more vacations in nicer places than I would have if left to my own devices, and the timeshares are all "fun money" so why not?

 

[drusba]

I am guessing there are many like me where hotel room rack rate or even discounted rate was not an issue considered. I bought BWV shortly after it started in the 1990s and AKV when it was initially offered. Location was a key for BWV (OKW was the only other DVC resort at WDW at the time), and uniqueness of the resort was the key for AKV with the animals added, but the biggest factor was always that we usually wanted a 1BR or 2BR with a w/d and kitchen, which was not something available in the WDW hotel rooms.

 

[crisi]

I am guessing there are many like me where hotel room rack rate or even discounted rate was not an issue considered. I bought BWV shortly after it started in the 1990s and AKV when it was initially offered. Location was a key for BWV (OKW was the only other DVC resort at WDW at the time), and uniqueness of the resort was the key for AKV with the animals added, but the biggest factor was always that we usually wanted a 1BR or 2BR with a w/d and kitchen, which was not something available in the WDW hotel rooms.

For us, our kids were young and we wanted regular and easy vacations - and staying in a multi room unit made that much more relaxing - the "nookie tax" - along with a washer and dryer that is invaluable when traveling with little ones. Its value - not savings, that makes DVC work for most people. Savings is the red herring.

 

[Anthony1971]

People do pay rack rate.
Years ago and again and again and…..
From what I recall most conclude break even occurs around 10 years.
so after 20 with dues and buy in (you can throw some money in for time use of money if you want being we paid cash) We are still a little under 10 a point. So I think we are good unless you normally stay in the Hojo 10 or so miles away.
I hope everyone here will be in a similar boat years from now but most important realize memories of a luxury vacation or a tent in your yard can not be purchased and that is what a timeshare is about not break even or…. Also assuming these are the type of memories you cherish as others preferences can and do differ.

 

[chuff88]

I paid rack rate for a trip in 2021. It wasn't super close to reopening, but it was close enough that they weren't offering discounts. I think I actually paid rack for both my trips that year.

The big thing for me is that without DVC I can't realistically stay at the Deluxe resorts for every trip, and now I can while paying about the same amount per year for my WDW travel. Having DVC also allowed me to get the Sorcerer's Pass AP, which I wouldn't have been able to get otherwise, which is also saving me money on park tickets. I haven't done the real math on breakeven because ultimately it doesn't matter to me - I know that over time I'm not losing money and I appreciate the convenience and other perks (discounted event tickets and merch, access to the AP, etc.) enough to make it worthwhile for me.

 

[chuff88]

For us, our kids were young and we wanted regular and easy vacations - and staying in a multi room unit made that much more relaxing - the "nookie tax" - along with a washer and dryer that is invaluable when traveling with little ones. Its value - not savings, that makes DVC work for most people. Savings is the red herring.

Had to laugh at the "nookie tax"

 

[Lumpy1106]

We based our break even analysis on what we were actually paying for the moderate rooms we usually stayed in. That is the ONLY correct way to do it IMO - compare it against what you would have paid for real world trips, if DVC did not exist.

^THIS
The trip we decided to take the DVC plunge we had moved from a CBR studio that we HATED, to an AoA 1br suite that we LOVED. That sold it for us - we really weren't comfortable in a studio with our family of 5. DVC opens a lot of options. BUT...in deciding we did not compare to a 1br DVC, but the AoA suite that we just couldn't live without. We applied an estimated regular inflation rate to the maintenance fees, and a "Disney Inflation" to the AoA rate. Both have been pretty spot-on, especially after the Skyliner opened and the Skyliner resort rates went up.

Buy DVC where you want to stay, but compare to the resort that you would settle on if you did not buy DVC. I don't think for many that would be a 2br GFV suite, but if it is, lucky you, the math works out in a quick minute.

 

[crisi]

But, AV2 of me ended up traveling less, staying in smaller units, or in less luxurious destinations, and consequently spent a lot less on vacation travel than "current me". It's also more likely that "real me" would behave more like AV2 than like AV1. For example, I can guar-un-damn-tee you that no real version of me would ever pay cash for a week-long stay in a 3BR penthouse in Hilton's Lagoon Tower in Waikiki over the kids' summer break.

AV2 of me probably spent as much on vacations - but wasn't as restricted in vacation time to where we could use our timeshare. One of the biggest advantages of DVC is that it gets you on Disney property reliably. One of the biggest disadvantages is that's pretty much all its really effective at. Since we only bought for every other year, it wasn't a huge deal and worked pretty well. Other timeshares (I know you own another timeshare) are better at bringing variety to travel, but few timeshares are going to be good for a week in Prague. Timeshare travel revolves around staying where there are timeshares you can access.

 

[JulieBeeRN]

We initially compared how much we usually paid for a hotel room (including any possible discounts) with the cost of the DVC rooms (usually a 1 bedroom) that we liked to stay in.

Then decided that we really didn’t care and just wanted the flexibility to stay in rooms that typically weren’t available to the public. But we also came into some money that allowed us to go a little crazy with buying points.

 

[wilkeliza]

I’m tracking our trips since purchasing in May and am comparing our total out of pocket costs to pay cash vs. whatever the current discount for the same room and same dates would be.

I’m curious why most people always seem to say they compare rack rate…(including the numerous and unashamed DVC podcast that exist as nothing more than advertisements for resale)?

No one in their right mind pays rack rate so my assumption is it helps people mentally justify their purchase by “breaking even” quicker.
Even using a basic 20% discount vs rack rate seems more logical.

To each their own, but the podcasts and “trusted” agents seem to be completely misleading people into when you can break even. Granted buyer beware and do your research but I’m curious for thoughts from others.

So a discount isn't guaranteed so rack rate is the easiest. Of course then they give a % of price increase even though that isn't accurate either. I actually walked away from DVC because I crunched the numbers and it takes longer than I would like to break even if you don't stay rack rate deluxe every single year. I have done off property, value, and moderate more then rack rate deluxe so just not easy for me personally to break even.

 

[Robbie Cottam]

Depending on the point I want to make at the time, and my audience, I used Rack, Rental cost, and some times the hotel room at the same resort....

To make a point to my wife, when I booked our first trip to Riviera, I got the cash price for the same room about 5 minutes after I book the room via the DVC website.... The cash price was about 45 percent of what my entire contract purchase price was.

 

[KAT4DISNEY]

Because it's the easy "disney" math.

Why people buy DVC is often more complicated though.

 

[zavandor]

Because it's the easy "disney" math.

Why people buy DVC is often more complicated though.

Ah, so very true. Even if I investigated DVC a lot before buying, the decision at the end was an emotional purchase. It worked out great at the end.

 

[bumbershoot]

No one in their right mind pays rack rate so my assumption is it helps people mentally justify their purchase by “breaking even” quicker.
Even using a basic 20% discount vs rack rate seems more logical.

Discounts aren't always around.
In my experience whatever discount there is...is ON the website when you go to book. So I've casually used whatever price pops up when I check the resort for the time I'm going. If I were going to use cash that's the price I'd pay for that trip. I think that's what people mean when they say "rack rate" since, as far as I know, what you see is what you get unless you can change your dates/wishes based on what discounts might be available at different times.

For instance, right now in December there's a deal. If I were going then, I'd see this when booking.


But I'm not going then. I'm going in February. So this is all I get.



Rack rate is all there is.

 

[mgarbowski]

I use the amount it would cost me to rent the points for each reservation. I do this because it is non-aggressive and specifically ties the assumed cost to DVC rooms using points. For me it makes sense even though, without DVC, we would go to Disney less often, and probably not stay at DVC properties if we did. Every assumed cost is imperfect. You have to pick something.

I also account for time value of money using an assumed rate of return as an imputed interest cost, plus dues, and factor the dues into the time value calculation when they are paid. Honestly I think these are more important than which assumed hotel rate you pick. If you don't factor in time value and ongoing dues the entire exercise tells you nothing, IMO.

But at the end of it all, it's just a mental exercise that allows me to point to something specific in weighing value. As others have said, what really matters is if you use the points, and get enjoyment from that use.

 

[RoseGold]

Because if you use the Dolphin's rate for next weekend, 216 including resort fee, you'll never break even.

The room I used was the Cars AoA suite, which went up way more than I expected. The room that didn't was Swolphin.

 

[TeamRiley]

Its not really worth calculating. Long term, maintenance fees are the primary cost. Buy in is just a smaller piece of the pie.

Without knowing what the rate hike will be, it is next to impossible to guess what the long term costs will be.
Even when you factor in precise inflation rates etc, the fee bump does not always follow that trend.

For example. If you bought a 200 point contract at Animal Kingdom today for $125 per point, and held it until 2057, the buy in would be $25000 without closing costs .

Long term cost per year will vary from $4450 ($1620 in todays dollars) per year to $6350 ($2325 in todays dollars) per year depending on if the maintenance fees stay at a 4% increase per year average, or creep up to 6% increase per year average.

Long term total cost at 4% average fee increase per year is $155712 ($57000 in todays dollars). Long term total cost at 6% average fee increase per year is $222285 ($81370 in todays dollars).

We bought because we love 1 bedrooms and love the location (we stay primarily at VGC). It is true that we stay in much nicer accomodations, but we still spend more now that we would if we hadn't bought into DVC. It is still worth every penny.