First of all, it completely depends on your personal utility curve. There is no such thing as a SPG point value that applies to all people. The same is true for airline mile values.

Example: For people who like to use their airline miles on first class travel, valuations of 4, 5, 6 cents per mile are common. For people who would never consider spending their miles on first-class and would rather take three economy trips for the same amount, a 6 cent valuation is pretty much impossible to get to. However, it isn't as if they are getting "less out of their miles". For the same reason that you would not be "getting more out of your miles" if there was a deal to buy a piece of dog poop from some famous dog that was "worth" $10 million dollars for 100,000 points. Sure, you could brag that you got a valuation of of $100 per point, but in reality, you got nothing.

Anyway, the same is true for SPG points. Would you, if you had to pay with cash, take yourself/your family to a $200/night hotel? Would you pay for $300/night? $500/night? $1000/night? Point redemption is not about what that specific Starwood room costs, but what you would pay for a room if you had to pay cash.

In my opinion, the minimum value for SPG points, regardless of how much you like to spend for hotel rooms when paying, is your valuation of your favorite airline miles + 25%, since you can always convert points to miles with a 25% bonus. For me, my favorite airline miles are worth at least 2 cents per mile, so I would not consider spending SPG points for less than 2.5 cents per mile.

That said, if in a pinch and if I need a room last minute for one night, I do not hesitate before dropping 10K SPG points and just booking it without doing any analysis. But then again I have lots and lots of points that I hardly ever use. If I had a lower amount, I would probably only spend them when the valuation criteria was met.

Hope that helps somewhat.