Originally Posted by
Mr. BoH
This was really well done. I think about this a lot, though not to the degree of detail you put into the model. Ironically, the higher you value Bonvoy points, the harder it is to find good redemption value because you forego earning more points.
This is also a reason why buying points for $$ almost never makes sense. There was a "deal" last year where you could buy points for effectively 0.83 cents each, and I know a bunch of people bought a lot. Even setting aside the risk of accumulating a large number of points in any loyalty program, your model illustrates why getting 0.83 cents per point value is harder than you might think,
Thanks! After re-assessing redemptions with opportunity cost in mind, I have realized it is very difficult to find great redemption value in bookings unless they are in intervals of 5 nights (for the free night). I think I will build up a base of Bonvoy CCs (the Brilliant, Business, and hopefully eventually a product-changed Ritz Carlton Card) for the FNCs to retain for shorter award bookings.
I also wonder if the big points blogs (TPG) are considering opportunity cost on point redemptions when valuing various point currencies. Given that redemption calculation articles do not mention opportunity cost at all, I’m inclined to believe that most people are over-valuing their points.