Points & Cash - MASTER THREAD
 

[Seems to me a sticky or general Cash and Points thread might be a good idea, but in the meantime, here's a tidbit about this new program.]

Many of the bloggers are posting charts showing the cost per point of using cash and points instead of just points. The idea is that you are effectively buying your own points by using cash instead of the extra points you'd need to book the reservation on points.

So, for example, suppose you have decided to book a room at the Park Hyatt Vendome. The best all cash rate you can find is $900. You decide this is a good use of points. Now, you must decide whether to use all points, or, if cash and points is available, instead to use cash and points. The conventional wisdom is you simply take the difference between the all points rate and the points component of cash and points, and then divide that into the cash component to get the "cost" of the points you'd save by using cash and points instead of points.

So, for example, most of the bloggers have a chart that looks something like this, with the "cost" you're paying for the points you have saved:

Cat 1 -- 2 cents per point. Cat 2 -- 1.38 cents per point. Cat 3 -- 1.25 cents per point. Cat 4 1.33 cents per point. Cat 5 -- 1.25 cents per point. Cat 6 -- 1.20 cents per point. Cat 7 -- 2.0 cents per point. (Example: http://boardingarea.com/viewfromthewing/). I think these are helpful charts, to get a sense of where the sweet spots are, relatively among categories, for using cash v. points. For example, a person that values Hyatt points at 1.7 cents per point gets a good sense this way.

It seems to me, however, that some refinements are perhaps in order as a result of the fact that one actually earns points on the cash component of a cash and points rate. For example, a standard member gets 5 points per dollar. A diamond member gets 6.5 cents per point. Missing out on these points is an extra cost of using an all points, instead of cash and points, booking. So, here's a more refined chart for diamonds. The first number is the true savings of using cash and points. It has two components -- the number of points you preserve in your account by using C&P instead of all points. The second component is the points you will earn by virtue of the co-pay. For example, for a category 7, your co pay of $300 saves you 15,000 points. It also earns you 1950 points. The second number below is the cents per point you are effectively paying to preserve and gain these points. I think this is a truer number when comparing an all points booking to a cash and points booking.

Cat 1 2827 points saved and earned for $50. 1.76 cents per point.
Cat 2 4412 points saved and earned for $55. 1.24 cents per point.
Cat 3 6488 points saved and earned for $75. 1.15 cents per point.
Cat 4 8150 points saved and earned for $100. 1.22 cents per point.
Cat 5 10812 points saved and earned for $125. 1.16 cents per point.
Cat 6 13475 points saved and earned for $150. 1.11 cents per point.
Cat 7 16950 points saved and earned for $300. 1.77 cents per point.

What I think cannot be generalized is the taxes that must be paid on the cash co-pay, which will differ by hotel. These costs need to be added back in, so the numbers above are the baseline.

Taxes are usually a non-trivial amount and I think they need to be considered. A quick online check suggests that (at least in the US) taxes average about 14% of the room rate. As an example, that makes the $50 really $57 at Cat 1, 2.016 cents per point.

But then I need to consider the points I earn (through my credit card) on $57. If I use a Hyatt card, I'll get 3* 57 = 171 points. So, a Diamond recovers 2998 points for $57, 1.90 cents per point.

But then I'm a Platinum! My numbers change a little.

and how do I value a stay credit? It might be worth zero or it might be worth $70, the cost of a mattress run.

This gets complicated. It wouldn't be too hard to build a web form for this calculation (except for the stay credit part) and would be a nice blog addition. But how does that earn credit card referrals?

Points are not earned on taxes, so you only get the points on the $50, not $57.

I meant the points through my credit card. I'll edit that to make it more clear.

Doesn't include amenity points
 

Thanks for the time you've spent to come up with this. As noted, this does not take into consideration the additional 3 pts. per $ spent if you have the Hyatt CC, nor does it include the 1000 or 500 (depending on property) additional points you "recover" if you choose points instead of amenity.

That stay/night credit would be worth even more during a promo.

But as a comparison for whether to use all pts, all cash, or P+C, the amenity pts are irreverent, since they are available on any type of stay.

Apples to apples when comparing base rate for cash and points to cash base full paid rate prior to taxes.. as taxes are applied only to the cash paid in both scenarios.

When comparing the two rates, more taxes are paid in cash base full paid rate, so perhaps if we work the taxes in addition to base rates for cash and points, we should reduce the tax benefit amount difference between base rate and cash rate by deducting the difference after adding the taxes on the base rate.

Gets more complicated when we also deduct the tax benefit when a DSU is involved.

On second thought, let's just leave the taxes out of it.:)

I've thought about questions like whether you include the points earned from the credit card used to pay the cash component before. I find I'm not smart enough to decide whether that counts. It's probably a theoretical question that economists would debate.

If I used points instead of a $75 co-pay, presumably that's 75 more dollars I have in my life to spend on other stuff. What do I use it for? Perhaps, since I've used 6,000 more Hyatt points than I would have if I had used the cash, I run out of Hyatt points more quickly, and so that $75 ultimately goes to hotel stays anyway when I run out of or run so low on points I can't or won't use them. In which case, I earn the same points with the spend that I would have, just later. Maybe there's a time-value of points/cash component here. Or maybe I spend the money on additional travel, where I only get 2x on my Sapphire card instead of 3x Hyatt points on my Hyatt card. Or maybe I give it to charity and get a deduction. I dunno. It seems too slippery for me to figure out, so I leave it out.

Foreign Properties C&P
 

Just another data point that I will add to the Wiki. If you make a C&P reservation at a foreign property, the US dollar co-pay is converted to the foreign currency at the time the reservation is made (at the current exchange rate determined by Hyatt). For example, I made a C&P reservation yesterday at the Hyatt Regency Tokyo (6,000 points + $75 per night). That $75 was converted to 7702 yen, and that's the rate that appears on my confirmation. Also, not sure about other currencies, but in this case, the exchange rate was slightly more favorable than the market rate. 7702 yen is actually about USD $73.47 at the present exchange rate.

Excellent -- done.

Anyone should feel free to change the wiki. I just had some time today and got it started while I was thinking about it.

[Edit -- you beat me to it. Great.]

Thanks, that exchange rate info is important.

So it is converted at the time of the res, at the central exchange rate rather than the front desk cash exchange rate ^. Just as if you were making an all-cash reservation.

Just changed my reservation at Park Hyatt Vendome to P+C . My exchange rate was just a tiny bit unfavourable vs the central bank rate, due to rounding I expect.

But the rate is now quoted in euro, so I don't have to worry about the front desk cash exchange rate.

AND


The hotel tax (VAT) is included in the rate, not added on to the converted $300. This may only be for hotels that display their rates with taxes/service included (UK, France, Germany, Osaka (but not Tokyo) are some that I have experience with).

The non-added-tax is another big plus ^

Unfortunately in my case it seems like tax is added onto the cash portion of the C&P rate as with any other cash only stay. For my stay at the Hyatt Regency Tokyo it says on my reservation:

Nightly Rate per Room:
7,702.00 JAPANESE YEN
Type of Rate: POINTS PLUS CASH
Rate Information: HYATT GOLD PASSPORT POINTS PLUS CASH AWARD - Standard guarantee/cancel policy applies.
CANCELLATION POLICY:
CANCEL BY 2PM 24 HOURS PRIOR TO ARRIVAL
Additional Tax & Service Charges
5.50% tax + 10.00% Service Charge
Other Charges 200JPY OCC TAX PER PERSON PER NIGHT

Thanks for this. I decided with suite upgrades working on C&P and with the points cost for cat 5 being relatively low, I'd give the Hotel du Louvre a shot and see if it's really as bad as the reviews. I was quoted 92.00 euros per night, which is 4 euro cents off the central bank rate -- pretty awesome.