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CORE ARTICLE

"You gotta know when to hold 'em, know when to fold 'em, know when to walk away, know when to run..." Kenny Rogers, The Gambler

What are points worth, and why do you care?

The question of what a point, in a particular loyalty program, is worth is fairly central to the whole concept of collecting points and using them for travel, upgrades, hotels or even cash-back programs. And because there are multiple ways to obtain points, and so many ways to use them, it can be difficult to value them - to be fair, the value differs from person to person, based on their circumstances. There might be points that are hugely valuable to you because you often travel to a particular destination and those points provide a lot there, but for me, if I don't go there or somewhere with similar characteristics, I wouldn't pursue points in that loyalty program at all. That being said, the biggest loyalty programs (the major airline alliances and the biggest hotel chains, Hilton and Marriot) tend to have SOME value across most geographic locations, just because they typically have a way to trade points for travel almost anywhere. A program like Hyatt though has points that may be very valuable in first world big cities but less valuable in the third world, as Hyatt only has I believe 300 hotels worldwide in its network. If you stay in the big cities, these points have more value to you then to some who gets further off the beaten path.

The chart below is from a blog, and is just that blogger's interpretation of what the value is of a point in each program. It's based on what the points can be traded for (e.g., if 10000 points can be traded for a $50 hotel room, then the points would be worth .02 cents each). Still keeping in mind that points can often have vastly different values depending on what you use them for, but what this chart and valuations like this are useful for is telling you when to make the trade, or when not to make the trade (as a buyer of points, or as a user of points). Hence, if the estimated value of your Starwood points is 2.6 cents per point, typically its a bad deal for you to cash them in on a hotel room where you're actualizing less than 2.6 cents for point, and a good deal if you're actualizing more than 2.6 cents per point. (I'll provide some detailed examples later of what the hell this means). Similarly, if a loyalty program offers the opportunity to buy points, either normally or as a part of a promotion, then you don't want to buy them in most cases (or at least not buy a large amount of them) for a price that is more than the estimated value per point. Of course, you may want to buy a few sometimes, to top off an account where you can get to a redemption level (i.e., the level needed to trade the points balance for a flight, hotel room, etc.) even if the value isn't quite exceeding the cost of the points.




The blogger's comments are the reasons he's altered the value of the points from last month to this month. For example, during june, Starwood is giving a 20 percent bonus on mileage transfers to American Airlines and US Air. They also always give a 25 percent bonus for transfers in blocks of 20,000 Starwood points, and these bonuses "Stack" which mean you get the bonus on the bonus.

So this month, if you had 20,000 starwood points to transfer to AA, you'd get a 5,000 bonus for a transfer of these points to any airline. You could alternatively use these points to stay or upgrade in Starwood hotels (Sheraton, W, Aloft, etc.) but the best use of starwood points is typically to transfer them in blocks of 20,000 and get the bonus. On top of this bonus, during July, an additional bonus would apply for transfers to USAir and AA, meaning if you transfer the 20,000 to AA, e.g., you'd get 20,000 x 1.25 = 25,000 x 1.2 = 30,000 miles, which is truly a great deal. I'm in vegas right now for work staying at a Starwood property, checking out Friday, and I'm hoping all of my miles from my stay (more on this in a future post on Starwood) hit my account by the 31st so that I can transfer to AA and get the double bonus (I should have 20000 after my stay is done).

So lets consider some recent examples from my own life. In May, I bought miles from USAir. They offered an open to the public promotion whereby if you bought a full 50,000 miles, you could get a 50,000 bonus for free. The total price for 100,000 miles was 1,855 USD or thereabouts. I bought it, and if you look at the chart, you'll see that its pretty much buying at "par" or the value of the points, at least by this bloggers estimate. But remember, you have to consider your own situation. Mine is that I live in south China and Cathay is my home airport carrier back to the USA. Also, my client pays for 4 trips minimum back to the US per year at least in premium economy class. So in my situation I have the #1 Airline in the world (just won again, 4th time in the last 11 years or so), which is part of an alliance with USAirways. They also generally have decent availability in business class for flights to the US, and a biz class flight is 110,000 miles (a bit more than I bought). Finally, and most importantly, I can use my US Air miles to book a Cathay ticket, because they are part of the same Alliance (and this very very important general rule holds true within most partners within a single alliance). I normally pay around 1700 one way for a preferred economy flight from HK to NYC or LA, and now, I'll basically have in excess of 90 percent of the mileage I need by spending 1855 for a round trip, business class. Since that ticket is normally around $6,000, that means I'm getting about 6000/110000 or 5.4 cents per point. If I booked economy instead, at 70,000 miles roundtrip, with a ticket price generally around 1700 (not on cathay but on an inferior airline with a lower ticket price), the value would per mile/point would be about 1700/70000 or 2.4 cents per mile. In first class (I'll skip the math lesson) the value exceeds 12 cents per mile. So again, it depends on your circumstances, but with my work paying, I'll gladly arb from 1.8 cents on purchase to 5 cents on redemption (rounding down since I still have to find the other 10,000 miles for the total 110,000 necessary for biz class). Totally worth it, and so for me, with my desire to fly the worlds best airline business class for a really long fucking flight, those points are worth 5 cents each to me.

I guess the point of this is that the more you know how to use points, and understand whats available given where you need to go and how long you need to stay, you'll vary from the points charts like these. But for starters, until you know that, or understand a bit better the options, these charts are decent tools for figuring out when to buy, and when to hold, and when to trade (and when to walk away/run away).

Most importantly, keep in mind that a point you never use because its stranded in a program without enough miles ever to redeem for anything, or because it expires, is worth NOTHING. When you fly one time on Cathay Airways, if you don't expect to aggregate a lot of flights on that airline or to be often traveling where you'd want a Cathay award flight, don't give them your Cathay frequent flier number. Given them a British Airways, US Airways, or American Airways, or whatever other OneWorld alliance partner makes sense for you (be careful of those that charge fuel surcharges on many flights, British Airways does but there tends to be ways around it). Alternatively, you could collect a large number of miles in your Cathay account and then redeem those on any OneWorld alliance airline. But what you don't ever want to do is bank a single flights miles in an airline account and then decide later than you're going to aggregate miles for that alliance in a different account. Generally, those miles might buy you some magazine subscriptions or other crap but otherwise will be stranded. Value = 0.