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The Sainsburys Reward Flight Saver for Golds thread.

The Sainsburys Reward Flight Saver for Golds thread.

Old Jan 29, 2021, 5:28 am
  #16  
 
Join Date: Aug 2019
Posts: 49
The Geek, you are, of course, right. I regard the fomula for Avios valuation in any transaction to be as follows:
V = 100 x (Pc - Pr + E) / (Ac + Ar)
where:
V is the value earned from the Avios spend in pence per avios
Pc is the payment required for a cash ticket (see notes below)
Pr is the payment required for an equivalent reward ticket
E is any additional value (or, if negative, cost) attached to a reward booking compared with a cash booking (see notes below)
Ac is the avios earned on a cash booking
Ar is the avios spent on an equivalent reward booking
Most assessments of avios valuation mistakenly fail to include E and Ac, which can fundamentally change the equation. Also, some judgement needs to be applied in applying value to these figures.

In particular, Pc should be capped at the value you would be prepared to pay for a boradly equivalent cash flight. It's not relevant that the cost of a First return is 5,000 if you only buy First tickets when they fall below 2,000 in the sale, for example. Also, if you are flexible in your dates, you should use the cheapest flight on an altenative convenient date. If you don't mind LCCs or a different airport, you need to reduce Pc accordingly. And, if you just want a holiday but have a range of destinations in mind, you should take the cheapest sensible flight to the cheapest destination as your value.

E is also tricky and requires considerable judgement. You might have uncertain plans, in which case you may put a large monetary value on flexibility. If you are using a 2-4-1, you need to charge something - at a minimum you should use -199, the annual fee for the BA premium card. You might be prepared to pay extra for tier points, too; if so, adjust E downward in accordance with the price you would be prepared to pay if tier points could be bought.

So let's put this together for me, a Silver, on a flight I have booked for a cycling trip to Tenerife on fixed dates using a 2-4-1. Tenerife is too long a flight for me to sit in economy and, by the time I've paid for bike transport and suitcases, most LCCs end up being more expensive in any case. So it has to be Club Europe. I want to cycle, so I'll pay the full cash price. I don't need tier points or flexibility so I don't need to adjust Pc.

Checking current pricing on my dates, Pc is 1,088 (for two); Pr is 100 (for two); E is -199 (my 2-4-1 cost); Ac is 3,575 x 4 = 14,300 (silver earn rate); and Ar is 34,000 (off-peak).

But wait! I would have earned further avios at 3 per by spending cash with BA on my Amex. That means I need to add 3 x (1,088 - 100) = 2,964 to Ac, which makes Ac become 17,264.

So I estimate my valuation at:

V = 100 x (1,088 - 100 - 199) / (17,264 + 34,000) = 1.54p

I'm pretty happy with that result. Much better than going to Sainsbury's. Now I just need to start training properly so I don't bonk half-way up Mount Teide.
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Old Jan 29, 2021, 5:34 am
  #17  
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Originally Posted by willmatt
Admittedly the demand is far from usual and travel is restricted but as an illustration of the principle that The Geek has put forward using an example for a May LHR-LAX-LHR in WT+

The options are:
Pay the Avios RFS Price: 100000 avios + 473.33

Pay the Cash price 622.74

Convert 78000 Avios into 624 in cash to spend in Sainsbury's / Argos and use that value to buy the cash fare

The last option earns 21768 avios for a gold so net spend is 56232 avios + 0 cash and you get 180 tier points which you wouldn't get with the RFS
Which gives you 1.1p per Avios on traditional FF valuations. I suspect that there may be some partner awards that could yield this kind of value too.
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Old Jan 29, 2021, 6:45 am
  #18  
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Originally Posted by aahjnnot
The Geek, you are, of course, right. I regard the fomula for Avios valuation in any transaction to be as follows:
V = 100 x (Pc - Pr + E) / (Ac + Ar)
where:
V is the value earned from the Avios spend in pence per avios
Pc is the payment required for a cash ticket (see notes below)
Pr is the payment required for an equivalent reward ticket
E is any additional value (or, if negative, cost) attached to a reward booking compared with a cash booking (see notes below)
Ac is the avios earned on a cash booking
Ar is the avios spent on an equivalent reward booking
Most assessments of avios valuation mistakenly fail to include E and Ac, which can fundamentally change the equation. Also, some judgement needs to be applied in applying value to these figures.
Ahh a real mathematician, unlike me who just works stuff out step by step in Excel. Agreed that the Ac values are nearly always omitted from the general FF valuations due to the more complex nature of modelling them { Status / Distance / Fare Class }, which is what I'm playing with at the moment. Did make a point in a previous post about "manufacturing value" which ties nicely with your examples on E.
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Old Jan 29, 2021, 7:01 am
  #19  
 
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This is all terribly complicated.

To a simpleton like me, miles are free (therefore zero value) since I get them as I am flying anyway. These calculations all seem rather contrived.
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Old Jan 29, 2021, 7:56 am
  #20  
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Originally Posted by rossmacd
This is all terribly complicated.

To a simpleton like me, miles are free (therefore zero value) since I get them as I am flying anyway. These calculations all seem rather contrived.
They are free(ish) but the FF community in general is built up around the best ways to earn & burn them to maximum effect. Whether that be Coffee, Life Insurance, Hotels, Flights, Newspapers, Credit Cards, Bank Accounts or anything else you may use in your day to day life.

With the right knowledge and a little time, it is possible to extract 000's in real value from them rather than just ignoring them or throwing them at the first thing that comes along.
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Old Jan 29, 2021, 8:11 am
  #21  
 
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Originally Posted by rossmacd
This is all terribly complicated.

To a simpleton like me, miles are free (therefore zero value) since I get them as I am flying anyway. These calculations all seem rather contrived.
Do you give them all to charity, since they have zero value to you?
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Old Jan 29, 2021, 8:20 am
  #22  
 
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Also, there is an important issue in this discussion that relates to the psychology of spending. We aren't rational creatures, so the pleasure that we get from 1 of expenditure varies widely with the circumstances.

To take the negaitve side, I suspect that I'm not alone in feeling ripped off when a restaurant overcharges me by a few . if I were to find the same sum in an unexpected surcharge when I took delivery of a new car, I would ,irrationally, care much less.

On the other hand, I get very little pleasure from chocolate or biscuits and haven't bought either from my own cash for decades. But when, as happended last week, my mum gives me some homemade flapjacks, her act of generosity actually gives me pleasure from eating something that I would not normally eat.

So the circumstances under which something is experienced can significantly affect the level of utility experienced by an individual.

Applying this to avios is interesting. Rationally, I could swap my avios for Nectar points, buy some loo roll in Sainsbury's, and spend the money saved on my weekly shop on something nice. But that doesn't give me much pleasure. I probably have enought money to buy the nice thing anyway, and I don't really look forward to free loo roll with with any great excitement.

On the other hand, seeing an avios balance gradually increase while I imagine a great trip abroad gives me double pleasure. I get utility from planning and anticipating the trip, and I get further utility when I actually tavel. Some researchers have even suggested that many people get more pleasure from planning a holiday than they do from actually going away.

That's why I switched from a cashback credit card to an avios one: the cashback was never big enough to generate more than a shrug of indifference when I looked at it; in fact, I got to the point where I never knew when or how much cashback would be paid..On the other hand, the thought of a holiday as a reward is enough to keep me interested. With cashback, I know I could have spent the cash on a holiday - but that never felt the same. And, as a result, the value was objectively lower.

Your Psychology May Vary (YPMV), of course.
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Old Jan 29, 2021, 8:23 am
  #23  
 
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Originally Posted by willmatt
Convert 78000 Avios into 624 in cash to spend in Sainsbury's / Argos and use that value to buy the cash fare
It would take you 2 months to convert those Avios with the 50,000 per month limit. Not a huge issue but someone might want to do this and forget to factor in the time delay element due to the conversion cap.
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Old Jan 29, 2021, 8:55 am
  #24  
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Originally Posted by stuart_f
It would take you 2 months to convert those Avios with the 50,000 per month limit. Not a huge issue but someone might want to do this and forget to factor in the time delay element due to the conversion cap.
Not really an argument unless you are completely cash strapped as you can transfer / spend the following month.

But specific logistics aside, this is really about the value to be extracted in switching Avios to Nectar points based upon differing real life circumstances.

Last edited by The Geek; Jan 29, 2021 at 9:01 am
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Old Jan 29, 2021, 10:19 am
  #25  
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Originally Posted by aahjnnot
Now I just need to start training properly so I don't bonk half-way up Mount Teide.
Ignoring the boring bit, what on earth does that mean?

I think bonk may mean something else to you than it does to me.
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Old Jan 29, 2021, 10:36 am
  #26  
 
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Originally Posted by aahjnnot
On the other hand, I get very little pleasure from chocolate or biscuits .....
Originally Posted by aahjnnot
......so I don't bonk half-way up Mount Teide.
I think you will find that a bonk half way up Mount Teide is quite nice, and exceeds the pleasure component of even a Jaffa cake! Go ahead, behind a rock perhaps?
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Old Jan 29, 2021, 10:39 am
  #27  
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Originally Posted by DYKWIA
Ignoring the boring bit, what on earth does that mean?

I think bonk may mean something else to you than it does to me.
I'm hoping Nob means something else to you as it does to me.
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Old Jan 29, 2021, 10:49 am
  #28  
 
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I've also had a geeky half hour with this and added a few Avios value reports to the lowest fare finder (other details in this thread).

I added reports that show the cost of an Avios earned through flying (separated for Blue, Bronze, Silver, Gold) as well as reports that show the lowest net prices (i.e. fare minus value of the Avios) - also separated for various status levels.

There are actually quite decent routes: Lanzarote as a Gold gets Avios for 0.03 each...
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Old Jan 29, 2021, 10:50 am
  #29  
 
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Originally Posted by Greenpen
I think you will find that a bonk half way up Mount Teide is quite nice, and exceeds the pleasure component of even a Jaffa cake! Go ahead, behind a rock perhaps?
Actually, stopping for a Jaffa cake when in the middle of a bonk can work out quite well.
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Old Jan 29, 2021, 12:43 pm
  #30  
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I shall also put it in the context of a pure status chaser needing 320 Tier points to get over the line for Gold renewal with a 50k+ Avios surplus.

If they find 2 nested back to back CE returns to Sofia in the region of 200 each which is possible ATM they can effectively do it for a net 36860 Avios. { The Sainsburys spend of circa 346 / 43,250 Avios + 6000 PP Avios - 12660 earned. }

The cost of this is just over 115 Avios a tier point.
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