Originally Posted by MileKing
Would you have paid $10K from your pocket for a business class seat? Would you have paid $2500 from your pocket for a coach seat? If not, it's very hard to make the argument that miles are worth 8 cents each ($10K / 130K miles).
You managed to snag two business class tickets in high season to Australia with your miles.....that's excellent. Do you think the next person who wants to travel the same route, same times as you will be able to use his/her miles to do so? Very doubtful.....but coach and business class tickets will still be available for sale at the quoted prices. How would you value your miles if you were in that situation since you wouldn't be able to claim an award? Zero? How many others are shut out of claiming an award to Australia at that time since no award seats are left? If you average your 8 cents per mile with their zero, you only need 7 other people who couldn't claim that award before the true value of a mile in this instance drops to 1 cent. It is the luck of the draw in many instances.
Given the reduction in award seat availability and all the restrictions airlines have placed on award tickets over the past few year, it is "old think" to value miles at anything above 2 cents each, and even that would be high. Even Randy doesn't value them at 2 cents any more.
Valuation is part art and part science. The science part of it is looking up published fares. The art part of it is quite flexible.
Take life insurance for example. If you buy a $1,000 death benefit, what is the value of that contract to you? Is it $1,000 because that is the benefit if you die? Or is it the premium of $100? There's a big difference between those two figures, and which one you look at depends on the purpose of the calculation.
With award tickets, simply taking the published fare divided by the miles you redeemed to obtain it is one method. If you paid less than that for the miles (e.g., flew at 5 cents per mile and redeem at 8 cents per mile), you are ahead of the game in one respect. Complicating this is business travel -- should you count total expenses or only your out-of-pocket expenses (e.g., out-of-pocket being 0.5 cents per mile if most of your travel is business; zero if all is business).
This type of analysis is not one-dimensional. One thing is for sure, if you are contemplating a mileage run, you must calculate your cost per mile of the mileage run and compare that to the cost you
would be willing to pay (not necessarily the published fare) of the trip on which you would probably use the miles.