MilesBuzz! - how to figure out what points are worth

People are always talking about how points are worth .0125 cents each, or whatever, based on which points they are, and what reward they are getting. Do you just divide the price of the reward by the number of points to get this figure?

What about a hotel room that is available for points plus cash?
for example, one I was looking at was $122.00 per night, or 25,000 points, or 12,500 points plus $40. What's the formula to figure out which is the best deal?

Thanks!
JoAnne

Welcome to Flyertalk!

The basic formula for determining the value of an air or hotel reward is:

($ Saved - Award taxes & fees)/(miles&pts spent + miles&pts foregone)

For example, I want to fly round trip from HNL to SEA. The ticket on AS costs $605 in coach and would earn me 5,000 miles. I decide to book using BA miles which costs me 25,000 miles and $5 in taxes. Thus the value of my BA miles for this trip is:

($605-$5)/(25,000+5,000) = $0.02/mi or 2 cpm

Besides that basic calculation, there are several things I keep in mind when determining the relative value of the points I have.

1. Relative ease of obtaining pts
2. If I wouldn't pay $10,000 for a first class ticket or $1,000 for a hotel night, I don't use those figures in my valuation.
3. Relative ease to book awards, ie I place more value on UA miles than DL as DL are harder to spend at low levels.

Of course there is no single correct answer to your question.

There are dozens of variables that affect the value of miles......and most of those variables are subjective.

When deciding whether to pay cash or redeem miles, I value most of my airline miles at approximately 1.5-2 cents each. Others value their miles differently (but most are in the same ballpark).

It is difficult to say what points/miles are "worth" because it depends on what you use them for. The same mile that gets you .03 can get the next person .01.

A rough estimate I like to use is $.02 per mile/point. This is because I could be using a 2% cash back card instead of my miles earning card. This is also helpful because I can then use that as a price floor when I get ready to redeem points. I don't have unlimited points, so I'd rather get the most value from them. If a redemption is less than .02 I'll usually just pay with cash.

Don't forget to include the miles you would earn from paying with cash when you calculate out your CPM! saacman's formula takes this into account.

($ Saved - Award taxes & fees)/(miles&pts spent + miles&pts foregone)

2. If I wouldn't pay $10,000 for a first class ticket or $1,000 for a hotel night, I don't use those figures in my valuation.


Correct, use the amount you "saved", not the nominal price of the flight or room for which you redeemed. This means you need to know what you otherwise would have spent. There are many reasons to do this, one is that if you are not a regular buyer of business or first class flights or suites at high end hotels you cannot know the real market price. You may know that the full list price of a particular flight is $14,000, but you do not know the real price.

People are always talking about how points are worth .0125 cents each, or whatever, based on which points they are, and what reward they are getting. Do you just divide the price of the reward by the number of points to get this figure?

What about a hotel room that is available for points plus cash?
for example, one I was looking at was $122.00 per night, or 25,000 points, or 12,500 points plus $40. What's the formula to figure out which is the best deal?

Thanks!
JoAnne

You may want to spend some time reading this series of write-ups.

http://boardingarea.com/blogs/onemileatatime/2012/06/11/my-updated-analysis-on-what-a-milepoint-is-worth-hotel-points/

keep in mind, attach a "value" to a mile/point of various programs is much more like an "art" than a "science". There is no cut-and-dry fast rule to do such - it largely depends on a person's travel pattern and personal preference, as well as which program works best for him/her.

However personally I feel Lucky's write up serves a framework to help people understand the topic.

As others already pointed out, it is the money you saved, or put it another way, the money you would have spent, that matters in valuating the "value" of your miles and points. Though I would still take into account of the quality - i.e. you should not use a motel room to compare to a hotel room that is at a centrally located, city center hotel, though you probably would opt to stay at the edge of a city in a motel room... However you would save a lot of time and transportation cost by staying in a city center hotel - such are the intangible quality you should also keep in mind when doing the evaluation - the "premium" you would/should be paying for certain desired quailties.

I find that I can buy points from co-workers for 1.25 cents each. I have the advantage of working for a company with thousands of professionals on the same campus, and a company bulletin board I can advertise on.

Obviously I would not buy them for 1.25 cents if I didn't think they were worth that to me. Chase points must always be worth a penny each, because they can be used to pay your bill.

You can also argue that my Chase points make my Delta points worth more. Why? If I want to get a coach ticket to Europe, and I have Chase points (that I can convert to United), then I don't have to jump if I see a 90,000 mile ticket on Delta. I can perhaps get a 60,000 mile ticket on United and hope that I can get a 60,000 mile ticket on Delta for my next trip.

Saacman's formula is a good one; I would offer some modifications:

a) He only considered redeemable miles you earn on a paid ticket. Elite qualifying miles may have an incremental value.
b) You need to consider the value (not the posted price) of tickets in other cabins. Say I can fly to Europe for 60,000 miles in coach and 100,000 miles in business class, and the cost of such tickets are $1000 and $4000. The (unadjusted) value of miles for the coach ticket is 1.7cpm. How much would I pay for a business class ticket? Not $4000, but maybe I would pay $2000. Now the miles are worth 2cpm.

Then again (I've posted this story before) there was the time I had just started dating someone again that I really liked, and she called me one Friday night and said that she unexpectedly had Monday and Tuesday off. While she was whining about her boss's incompetence at setting the schedule for her days off and not letting her know until the last minute, I was searcing online and found a 25,000-mile ticket that would have cost $2000 to buy. I don't know that I would have paid $2000, but I certainly would have paid $1000 for the chance to have an unexpected four days with her. Sometimes circumstances change the value.

I think it's safe to say that for most types of points, you would be doing very poorly to get less than 1 cent per point in value, and if you get more than 2 cents you are doing pretty well.

People are always talking about how points are worth .0125 cents each, or whatever, based on which points they are, and what reward they are getting. Do you just divide the price of the reward by the number of points to get this figure?

What about a hotel room that is available for points plus cash?
for example, one I was looking at was $122.00 per night, or 25,000 points, or 12,500 points plus $40. What's the formula to figure out which is the best deal?

Thanks!
JoAnne

if the price was $125 you would get 1/2 cent/mi...

for the other, divide $82 by 12,500....a bit over the other, but imho none is a deal....i wouldn't use mi....

i hope thisn't a real example...but if so, i would go for the cash...

if its real, post the type of points...

Thanks for all the great answers. The formula saacman gave is what I was looking for. And that link you gave, happy, was very useful.

I did have the correct general idea, but I was using a bad deal to try and figure it out. Unfortunately, clacko, that $122 dollar hotel is a real example, in Buffalo NY. I kept coming up with my points not being worth very much, and figured I was doing something wrong. But really, it's just not a good deal.

Now I have a much better idea what to look for, so maybe I can figure out a good deal for my trip to Niagara.

Thanks everyone!
JoAnne

Not all hotel points are created equally. Club Carlson, for example I'd be happy if I got $.01 per point.

Frequent Miler has a nice little area with some detail about hotel programs here:

http://boardingarea.com/blogs/frequentmiler/fair-trading-prices/

At the very least use it to see what you can buy miles for directly. Sometimes it is cheaper to buy direct and redeem for a room instead of paying cash.

I also like to keep a spreadsheet of what I paid for miles in the cases where I am indirectly "buying them." For example I spent $200 to get 162,000 CC points this year. In that case I could redeem for .002 and be ahead of the game. On the other side of that I "bought" 20k SPG points for $.011 each in the TD Ameritrade promo. Of course SPG points are easy to get that much value or more out of.

Would help if you post the type of hotel and the type of points for future questions, as each hotel has different award levels, and different point values.

If your main interest is hotels, I suggest you read http://www.flyertalk.com/forum/online-travel-booking-bidding-agencies/1341415-priceline-bidding-primer.html.

If your hotel points are only useful for hotels, well, that's that. Also, hotel points are often worth less than airline points. It depends on the hotel chain. For example, Marriott gives 10 points per dollar spent on Marriotts, and their most expensive rooms are 40,000 points, while for Hyatt the figures are 5 pp$ and 22,000 respectively. Thus, a Hyatt point is clearly worth more than a Marriott point. If you could exchange generic points (i.e. Chase UR or Amex MR) for hotel points, it could be advantageous to exchange them for Hyatt at 1:1 but not for Marriott at the same ratio. (I think Hilton's most expensive rooms are 50,000 points, so Hilton points are worth even less.)

...their most expensive rooms are 40,000 points, ...

Looking only at single night redemption rates, and only at the high end properties, is probably not an ideal way to value hotel points. Many programs offer much better value when redeeming for multi-night stays.

Looking only at single night redemption rates, and only at the high end properties, is probably not an ideal way to value hotel points. Many programs offer much better value when redeeming for multi-night stays.

Wouldn't it be great if all the hotel companies would just show points as another form of currency like Jet Blue has done this year? On JetBlue's site, now you just click [ ] "Fares in: Dollars" OR [ ] "Fares in: TrueBlue Points". Then it would be simple to figure out the value of your points at the corresponding hotel too!

Something that helps me a lot and may help someone else, I value points by the thousand because that's how I collect and spend them. For me hotel points are worth $15/1000 (at most) and airline points/miles at $20/1000. This is most useful when I am deciding if I want to go after some points deal and I am judging if it is worth the time. I place a lot of value in my time. You will see ways to get points that burn a lot of time and if that is a concern it can be easier to multiply 1000's by $20 to see if it pays off for you.

Valuation? Something like:

$0 per $1,000 when estimating value for the taxman
$.69 per $1,000 when minting them in quantity
$17 per $1,000 as a maximum buy rate when short a small amount for a seat
$25 per $1,000 when used for a coast to coast hop
$30 per $1,000 value for an off season hop to Rome
$40 per $1,000 on a rare find or a BA partner fluke

Priceless - when minting them faster than they can be consumed!:D

I think the 'worth' is incredibly subjective. I prefer to look at it a little backwards. I wanted to take my two oldest daughters to Paris so I looked at flights and hotels and determined that for what I wanted to do I needed 270,000 Delta skymiles and 200,000 Marriott points. The flights could have been about $4,500 if I bought them outright so that's 1.7 cents a mile. Almost everyone will tell you that is a $hitty redemption but I didn't look at it that way. I spent about $250 to generate (mint, MO, etc) those miles so it is a great deal for me. The hotel is 699€ a night rack rate and maybe I could have gotten it for about $400 a night so the Marriott points work out to about 1.2 cents a night. these were earned easily with business travel and Marriott has great points bonuses and a 70,000 point signup card. I have a ton on Marriott points so this is a once in a lifetime trip for my daughters.

So to me, the cost of these points was negligible, the cost to pay for this trip would be about $10,000. My cost is under $500 total.

last time I went to Paris it was with my wife and when we checked out of the hotel the bill was 18€ because we ordered coffee to the room one morning. When I went to pay and checkout the guy laughed and didn't want my 18€ - that was priceless.

Wouldn't it be great if all the hotel companies would just show points as another form of currency like Jet Blue has done this year? On JetBlue's site, now you just click [ ] "Fares in: Dollars" OR [ ] "Fares in: TrueBlue Points". Then it would be simple to figure out the value of your points at the corresponding hotel too!

No, that would actually take away all of the fun. This game is fun because of how complicated it can be, and the thrill of actually scoring an expensive room for a reasonable amount of points.

One thing a lot of people fail to factor in when valuing their miles is the relative flexibility necessary when booking award flights vis-a-vis revenue flights. If you get 1.5 cpm in savings by booking an award flight, but have to travel at a time other than the time you optimally desired, you're not truly getting 1.5 cpm in value because you are making a tradeoff (which has a subjective, yet very real value) in order to use those miles. To calculate the actual value of your miles, calculate the real savings, divide by the number of miles spent, then make a downward adjustment for the hassle involved in finding award availability and in bending your travel schedule in order to redeem an award flight.

I actually value my miles at 1 c per mile when I´m acquiring them.

For example, RT HEL - HKG 11920 miles. Ticket is worth 700€, miles are worth 119€. Total cost 581 € for RT in HKG.

When I´m spending (yes, it is money at this stage), I value them at orginal value.

For example:
RT HEL - ZRH 2200 Miles, value 310 EUR - 22 EUR (Miles on Y) = 288 EUR. 288 EUR / 40000 Miles (OW award) = 0.72 c per mile.

Then I start to look for good deals to accomodate my hobbies:
Diving, for example monopoly routes and places I would not visit otherwise due high costs. NRT - ROR (Palau) 600€ and UIO - GPS (Galapagos) 400€.

These combined with OW RTW award can push up the valuation of 160000 miles to 2 c per mile.

One thing a lot of people fail to factor in when valuing their miles is the relative flexibility necessary when booking award flights vis-a-vis revenue flights.

This is offset by the fact that in many programs award tickets are more flexible than discounted paid fares. If you need to cancel an international business class trip a discounted fare is typically nonrefundable, and there is a $400+ change fee to reschedule the flights. However, if you need to cancel an award trip there is often only a small redeposit fee.

One thing a lot of people fail to factor in when valuing their miles is the relative flexibility necessary when booking award flights vis-a-vis revenue flights. If you get 1.5 cpm in savings by booking an award flight, but have to travel at a time other than the time you optimally desired, you're not truly getting 1.5 cpm in value because you are making a tradeoff (which has a subjective, yet very real value) in order to use those miles. To calculate the actual value of your miles, calculate the real savings, divide by the number of miles spent, then make a downward adjustment for the hassle involved in finding award availability and in bending your travel schedule in order to redeem an award flight.

On the flip side of the coin, award ticket often can be changed without fee or reasonable fee in many programs versus a paid ticket unless a full fare refundable ticket, often carries $150 to $400 change fee.

Personally I feel just the free change feature alone, makes award ticket much more flexible and valuable than the discounted paid ticket.

EDIT:

mia beats me to it on the very same argument. ;)

One thing a lot of people fail to factor in when valuing their miles is the relative flexibility necessary when booking award flights vis-a-vis revenue flights. If you get 1.5 cpm in savings by booking an award flight, but have to travel at a time other than the time you optimally desired, you're not truly getting 1.5 cpm in value because you are making a tradeoff (which has a subjective, yet very real value) in order to use those miles. To calculate the actual value of your miles, calculate the real savings, divide by the number of miles spent, then make a downward adjustment for the hassle involved in finding award availability and in bending your travel schedule in order to redeem an award flight.

For my international trips, which I've been planning 6 months to 1 year out, my optimal time is whenever there are saver award seats available :) Point is, I can be flexible for my multi-week trips abroad.

I do think you are right that if people are just fine flying in a coach seat, and must leave on X and return on Y, then the award game probably isn't one they ought to play.

This is offset by the fact that in many programs award tickets are more flexible than discounted paid fares. If you need to cancel an international business class trip a discounted fare is typically nonrefundable, and there is a $400+ change fee to reschedule the flights. However, if you need to cancel an award trip there is often only a small redeposit fee.

Not to mention that actual changes can be free or just a token change fee.

I think the 'worth' is incredibly subjective. I prefer to look at it a little backwards. I wanted to take my two oldest daughters to Paris so I looked at flights and hotels and determined that for what I wanted to do I needed 270,000 Delta skymiles and 200,000 Marriott points. The flights could have been about $4,500 if I bought them outright so that's 1.7 cents a mile. Almost everyone will tell you that is a $hitty redemption but I didn't look at it that way. I spent about $250 to generate (mint, MO, etc) those miles so it is a great deal for me. The hotel is 699€ a night rack rate and maybe I could have gotten it for about $400 a night so the Marriott points work out to about 1.2 cents a night. these were earned easily with business travel and Marriott has great points bonuses and a 70,000 point signup card. I have a ton on Marriott points so this is a once in a lifetime trip for my daughters.



I hope you looked at the Marriott Travel Package redemption. Miles plus hotel for one slug of Marriott points.