Starwood Preferred Guest - Value of SPG Points

Well...Having done a search in the SPG forum...I saw the various discussions that speculated the value of an SPG point. However, I either am having a brain cramp or cannot otherwise compute this out clearly based on the conversion rates I have seen suggested.
My ultimate question is that since I have recently enrolled to get an SPG Amex card with a 12k bonus point offer...However, I get stuck when doing a comparative analysis....
Am I getting better value now that I have the SPG Amex card, or was I getting better value before with a no annual fee AMEX from Costco that payed me a flat 2% rebate on ALL of my purchases?
Any help be appreciated!!!!

Well...Having done a search in the SPG forum...I saw the various discussions that speculated the value of an SPG point. However, I either am having a brain cramp or cannot otherwise compute this out clearly based on the conversion rates I have seen suggested.
My ultimate question is that since I have recently enrolled to get an SPG Amex card with a 12k bonus point offer...However, I get stuck when doing a comparative analysis....
Am I getting better value now that I have the SPG Amex card, or was I getting better value before with a no annual fee AMEX from Costco that payed me a flat 2% rebate on ALL of my purchases?
Any help be appreciated!!!!

What do you use miles or hotel points for (and how much money would you have spent for those same flights/hotels? The value varies so much across different ways of spending them that it's hard to generalize.

As one example, this month I converted 20,000 SPG points into miles on an airline and $1125 of value of it. Much better than 2% on $20,000 of charges. Of course, I wouldn't have been willing to spend that much on the ticket and it's on the high side -- but probably would been willing to spend more than $400.

Well...Having done a search in the SPG forum...I saw the various discussions that speculated the value of an SPG point. However, I either am having a brain cramp or cannot otherwise compute this out clearly based on the conversion rates I have seen suggested.
My ultimate question is that since I have recently enrolled to get an SPG Amex card with a 12k bonus point offer...However, I get stuck when doing a comparative analysis....
Am I getting better value now that I have the SPG Amex card, or was I getting better value before with a no annual fee AMEX from Costco that payed me a flat 2% rebate on ALL of my purchases?
Any help be appreciated!!!!

if you can redeem your points for more than 2 cents a points, then you are better off with the SPG amex card.

for example, a stay at the Royal Hawaiian can be had for 10,000 pts, or $275 a night. including taxes, you would save about $300 by using the 10,000 for an award stay, making it your points worth 3 cents a point. if you had charged 10,000 on the Costco Amex, you would get only $200. which makes you ahead by about $100.

a stay at the Sheraton Princess can be had for 7,000 points, or $125 a night. including taxes, your would save just about $140 by using points for an award stay, making your points worth 2 cents a point. this is a wash compare to the Costco Amex.

There are many calculations that you can make to determine if you are ahead. HOWEVER, these type of analysis only works if you travel a lot, or will look to maximize your point/value equation. as most people know, free cash is pretty hard to beat.

You're asking for a tangible answer but so much of this defies that.

First of all, I'm careful about where I use the points. It's either hotels or the front of the cabin. Just used points in France (Hotel Prince de Galles) and the room I was supposed to get came to 6.4 cents per point (the value of the suite I got upgraded to made the points over 12 cents). The First Class tickets I got with Starpoints were worth over 13 cents per point.

Now I readily agree that the fallacy is that I never would have spend $10,000 for the flight, but boy, did I enjoy it! So to me, the question is really, "do I want some cash back at the end of the year, or do I want some extraordinary experiences that I will remember the rest of my life?"

While I'm still hard at work, I choose the second. Perhaps after retirement, I'll want the cash. But truly, there is no one answer to your question. It's really a matter of what you value more.

You're asking for a tangible answer but so much of this defies that.

First of all, I'm careful about where I use the points. It's either hotels or the front of the cabin. Just used points in France (Hotel Prince de Galles) and the room I was supposed to get came to 6.4 cents per point (the value of the suite I got upgraded to made the points over 12 cents). The First Class tickets I got with Starpoints were worth over 13 cents per point.

Now I readily agree that the fallacy is that I never would have spend $10,000 for the flight, but boy, did I enjoy it! So to me, the question is really, "do I want some cash back at the end of the year, or do I want some extraordinary experiences that I will remember the rest of my life?"

While I'm still hard at work, I choose the second. Perhaps after retirement, I'll want the cash. But truly, there is no one answer to your question. It's really a matter of what you value more.

Well said. I am sitting on my office looking at my wall with pictures of the Concorde trip I took in 2003, courtesy of Randy and Starwood. For those who are new, this was a special where Rand gave 500 Starwood points for each subscription to Inside Flyer. Within 3 hours, there was a post, "Fly the Concorde, courtesy of Randy, for $1,300. So basically, after buying multiple subscriptions and moving points between Starwood and Qantas, I got to fly the Concorde (~$13,000 RT, which I could never afford) for $1,300, or about 10 cents a point, and definitely a memorable experience I would never trade for a few dollars at the end of the year.

I generally value them at 2.6-2.8 cents, based on a model I put together when I was analyzing the same question.

But in terms of actual use, I've received anywhere from 3 to 8 cents in value.

Thanks to all of you for your feedback and insight! ^ ^ ^ :D

Let me amend my answer above with a "it depends". It depends on how much you value optionality.

I can use, and have used, SPG points at a rate of 2.5-5 cents each. But I have a balance of SPG points that means any incremental points I earn will just go in an SPG bank. They don't earn interest and there is a real possibility they will devalue over time, with category increases and the inevitable award increases. I can't do anything with them other than use them for SPG awards or exchange them at reduced rates.

Cash, on the other hand, has many, many other uses. ;)

I can put it in the bank and earn interest, I can pay for a room, pay for a flight, buy dinner, save for college, save for retirement, etc., etc.

So the present value of 1 incremental SPG point that I will never use until the remainder of my current (and future) points are consumed, and I'm forced to use my last incremental point, may be quite low. But if you have a low balance and will consume it in the near future, the value is indeed the 2.5-5 cents range quoted.

The present value of 2 cents that I can invest in the market, a treasury instrument, etc., of the same duration (ignoring the differing risk profile) will probably be quite higher. But if you live paycheck to paycheck and don't save any money, the PV is exactly 2 cents.

So I guess it depends on your SPG/bank balance and when you think you will be consuming that next incremental point/dollar.

Me? I have a large-enough SPG balance and am saving for college educations 10+ years out, so I use my Fidelity 529 card to get 2% back on everything. If I max that out for the year, then I'll use my SPG Amex next. When the first free year is up and I need to start paying an annual fee for the SPG card, I'll need to do some math to see if it's worth continuing (I signed up for the 12K offer and got the 5,000 bonus points from paying my taxes).

One of these days I'll break out my Black-Schoals/Binomial/Real options pricing models and do a proper anaylsis of this oft-asked question.....