benzguy80

made four TATL's this year so far, all but one (and that just the return) were in J. add demi-MR in DEC to get 9 TATL legs upgraded from paid Y (mostly N). I really appreciate being able to upgrade with miles (once the eVIP's run out) even though it means $350 co-pay.

would I spend $8000 for J TATL? not likely. very happy to upgrade paid Y (whether it's company or self-funded). I will continue to value my miles accordingly. this helps me decide if other things are worth paying for with miles (AAwards, AC memberships, etc.).

if I can't see at least 5 cpm then I'll pay cash and keep the miles in the pocket.

YMMV,
benzguy80

Mountain Trader

Gosh, I hope not. CO has fares of around $3,000 on a regular basis and there are others as well.

Valuing miles on the basis of a $8,000 TATL J fare is like the guy who told his friend he had a $100,000 dog. His friend asked him how a dog could cost that much, and he said he got the dog by trading his two $50,000 cats.

plasticIQ

The focus of many of the valuation discussions here has been on maximizing the value of miles with (apparently) no cash constraints. What about the guy who views flying as a means only, and is interested in getting from point A to point B for the ABSOLUTE MINIMUM CASH outlay possible? A guy or girl like this isn't going to shell out 50K miles AND $700 cash to fly business class. He/she values cash in hand far above amenities and luxury. I argue there is a large segment of the population that falls within this cash constraint which has yet to be considered.

Based on my own analysis of inside-US flights, as well as US to Europe flights, I estimate the value of AA miles at a maximum of $0.018 per mile if you can fly always off-peak from US to Europe on MileSAAver awards. Assuming a more "generalized" model of 1/3 of flights within the US, 1/3 to Europe on peak, and 1/3 to Europe off-peak, all using MileSAAver awards, I arrive at an approximate value of $0.0137 per mile. And again, to emphasize, I believe this is much closer to a true estimate of value for those who value preservation of their bank accounts more than comfy upgrades.

Put another way, I only have $3K in savings...if I can get an upgrade normally valued at $50,000 (exaggeration to drive the point) for only $500 for only 10K miles (wow, a value of $4.50 per mile) would I do it? NO! I'll suck it up in economy and save the $500...and i do believe there are many, many people who would make a similar decision.

So while it is true that AA miles may be worth $0.05 or even $0.10, that is only for folks who are somewhat neutral to cash versus benefits.

benzguy80

as a kid I remember thinking about the expensive prizes awarded on the game shows, only to find out as a teen that MSRP wasn't what people would generally for any of that stuff. I get amused sometimes when I see the prices posted in many hotel rooms. who pays that much?

guess I'm guilty of over-estimating the value of the stuff I get with miles. it's an ego thing I suppose. still want to do a run to Australia in J (or better still F) just to say I got horribly overpriced tix for my miles, achieving a equally overinflated conversion rate (cents/mi).

steve32

My Dad flew coach many times to Europe for work, and paid or did FF awards for my Mom to join him quite a lot too. He was careful with his money too and wouldn't consider paying out for business class. He really didn't like being cooped up like that in such small seats for that long (he wouldn't have considered doing it if it hadn't been for the job), so he also turned down lots of offers to conferences in Asia and Australia over the years.

After retirement, another conference came up in Tokyo. It took my Mom a full year of pestering to get a semi-relenting from my Dad to finally fly that far, which they had just enough FF miles to do to both get coach awards.

Towards the end of this, I had just found FT and started accumulating miles with a vengeance (double FLY3 bonus and AA's 25th Anniversary bonuses). I also knew that where they really wanted to go--their dream trip--was Australia and New Zealand. I offered to cover the FF awards and handle all the routing and arranging of the flights, in international business class, for Tokyo, Hong Kong, Australia (ended up Melbourne and Sydney) and New Zealand (Queenstown and Aukland)[totalled a 33-day trip], if I came along to help as guide and sherpa, and crashed in a roll-away with them. It came to 150k miles and about $200 each for the trip in Fall of 2007.

Awesome deal for me, trip of a lifetime for them. ^

Also, the international business class experience was a huge eye-opening experience for my Dad, who now is no longer reluctant to do those kinds of flight distances if he can do it in upper class.

A great value for the miles, and a watershed change in my Dad's attitude towards long-distance flying. He wants to do another long trip with my Mom for their 50th wedding anniversary. And he's considering doing a photography trip (he's a professional--a hobby turned business to pay for itself) to Asia himself! That would have been unthinkable a few years ago. How do you put a price on that?

Steve

MichaelColey

So if you needed to fly AUS-ORD and the cheapest ticket you could find was $936, you would pay cash rather than use 25k miles? (That's 3.7 cpm.)

dayone

You don't.

Of all of the awards that I've claimed, the best use of my miles was giving my parents an F trip to London. They raved about the service when they got back and talked about that trip for many years.

How do I put a price on that?

IsleSeat

absolutely, 100% agree. Right on!

benzguy80

I don't usually find myself in that situation. I typically plan ahead or look for alternatives.

You do make a good point though, especially now that I've accumulated a fair number of miles. I'd be more apt to accept a lower exchange rate if pressed.

I'm still holding on to the hope of using 250-290k of them for 2 round-trips in J/F to Australia with Mrs Benzguy80.

Thanks for the posting this. It's worth thinking about.

jkearns

It's much easier than you're all making it. The maximum cash value of the miles exactly as I've defined it -- what's the best available option you could trade them for.

But, your personal valuation includes your tastes and preferences. If you prefer domestic travel fine. Interantional upgrades, great. Giving them to charity, excellent. Letting them sit forever, swell.

Back to my stock analogy. Based on your investing preference: high/low risk, capital appreciation versus yield, short term versus long term -- you have a private valuation for IBM. And that's absolutely fine -- your valuation must include your preference. Good, it should.

But at the end of yesterday, IBM was worth $109.40 when buyers and sellers (folks with different valuations) had to sit down and place a fair value on it.

If someone has personal reasons for excluding all other options except choices that value miles at $0.02/RDM, fine. If someone insists on getting $0.07, fine.

If I have to define the overall, actually realizable value that anyone could get regardless of their personal utility function -- it is the opportunity cost. I don't know what number that is today -- it varies as airfares, availability, and interest rates, and a host of other things change. I do know that number is consistently higher than most people think.

It's not wrong, stupid or feeble to trade for less than that value. You won't engage in any trade you don't think makes you better off. You are maximizing your happiness.

But it is wrong to assume that your choice to take $0.02/RDM was the best you could do and reflects their value accurately for anybody else.

Want to split the difference and defined "the cash constrained" as a group with knowable preferences, go ahead. But even then the opportunity cost is the right approach. What is the most valuable alternative use of the RDMs that does not require cash? Answer that and you have the value.

At the end of the day, and this rant, I won't try to tell you what anybody else's circumstances are and how they affect their preferences for miles and thus their valuation. You can't know that. You can't average that. Just take an objective valuation and understand why different folks redeem them differently.

brp

Spot on, IMO. We don't use our miles for travel because we want to accumulate for status. We don't use our miles for upgrades because domestic upgrades are free and we have plenty of SWUs.

So, I use it for the AC membership because that makes it free.

Also, my family are not international travelers, but I can get them out here in F (FLL-SJC) for 180K miles for all 4 of them. How much would the ticket be so that I can evaluate the cpm? I have no idea. This is what has value for me, regardless of what the tickets would have cost. Otherwise, they'd just sit there and accumulate;they do that anyway.

Cheers.

MichaelColey

If you use 40k miles for AC membership when you could pay $300 cash for it, you value your miles at 0.75 cents. If you valued them at more than that, you would pay cash. That's the quandry most people who have more miles than they could possibly use have.

One idea for those who value their miles at less than 1 cent each... If you have need for hotel rooms, you can transfer your miles (1:2) to Hilton HHonors and redeem them there. I figure my HH points are worth half a cent each, and from what I've seen I'm on the low end -- most people value them higher. Plus, Hilton counts award redemptions towards elite status.The only valuation that matters is our personal valuation (and that's what the subject of the thread "worth to YOU" asks about). By knowing how we personally value the miles, we know when to pay cash, when to redeem miles, and when it's worthwhile to do a mileage run or other transaction that earns miles. If instead of a personal valuation, we make our decisions based on some contrieved example, we'll make the wrong decisions.

Sure, you can say that some international ugprades may indicate a value of $0.10 per mile or more, but that's meaningless unless you value those upgrades at full price. Are those upgrades really worth full price to you?

How much are you willing to pay for a domestic coach ticket before you'll resort to redeeming it for 25k miles instead? If you won't pay more than $500, you value miles at $0.02. If you are willing to pay $1000 (realy?), you value miles at $0.04.

Once you know how much you value your miles for, it makes it simple to determine how it affects transactions. I value my AA miles at $0.025 per mile. When AA dining has promotions that give a total of about 20 miles per dollar spent, that's equivalent to 50% off, and I don't mind eating at some lousy restaurants for that. If I can do a series of mileage runs for $2000 that will earn 200k miles, that's a good return. For someone who values miles less a penny each, it isn't.

brp

See, that's the point. No, I don't value them that way. It's not an equation that has any relevance to me. You may value my miles that way based on that equation, but I don't. I look at it this way:

What would I do with those 40K miles? Likely nothing.
What can I do with the $300 (is that how much it is now for EXP renewal?). Something.

Well, something beats nothing, although I can't make an analytical relationship out of it, and wouldn't want to.


I also have about 160K Starwood points and a bunch of Hilton points, so I don't need more of those at present, although the hotel option has more bang for the buck than the airline option for us. So, Starwood points never go to miles.

Here's a big difference. We just won't eat at substandard places by choice. I'm signed up for AADining, but I don't know which places participate and which don't. Periodically, miles show up when we dine where want,and I think "cool." But I'd never go out of my way, and certainly not to somewhere lousy, to earn miles. Miles are aside benefit,and not a goal. Others have different priorities.

Cheers.

MichaelColey

If you redeemed 40k miles when you could have spent $300 (yep, those are the amounts for EXP renewals), then yes you did value them that way. Any time you redeem points (or make a decision to not redeem them when you could have), you are making a value comparison, whether you realize it or not. You valued $300 more than those 40k miles, which means your miles are worth less than 0.75 cents each to you. (I'm not saying you won't get more value out of some of them -- obviously you do with business class tickets for family.)

brp

This is getting semantic now, so I'll make one more comment and be done with it. Yes, $300/40,000 = 0.75 cents per mile. And, yes, I have decided that it's worth the 40K miles not to spend $300 in this case. However, this does not mean, in any way, that I value miles at 0.75 cents. I would buy a $300 ticket rather than use 40K miles, for example. So, I am making a value judgment between two assets in a very specific case, but it doesn't equate to a "cents per mile" assessment on my part. So, to me, "value of a mile" has no meaning because it is context sensitive and has little to do with actual numbers.

Cheers.