craigthemif

With other bloggers, one can discuss how much of a bona fide effort was made to value points currencies appropriately. With TPG you can be 100% sure that the objectiive is to attract more credit card signups and to keep their customers (i.e. banks and travel companies) happy.

It's also worth noting that it is really quite difficult to explain opportunity cost - not to mention Kacee 's excellent point - to anybody other than business / economics graduates and other numerically-minded people. For everybody else their eyes glaze over and they don't read your blog again...

WasKnown

Thanks for the comment. I agree things can get complicated but I don't think factoring in time value has much impact on redemptions. Regardless, opportunity cost has a concrete impact on redemption value IMO so it is worthy of considering. I understand if that approach is not for everyone.

Also, I really respect what you said about not hoarding points for the sake of hoarding them. I agree completely that all unused point balances should be discounted until an actual redemption is made (which is why I focused everything on redemptions). I started this hobby to chase after that 400,000 point Christmas Maldives trip. On paper, it’s 108% return on spend but subjectively it is probably less.

Edit: just to add onto this, the opportunity cost we are paying with redemptions is quite concrete.

Example using the STR point redemption from my video-

Let’s say my points balance is an even 400,000. The point difference between redeeming that vacation and paying for that vacation is in excess of 800,000 and not merely 400,000. If we are going to say the 400,000 points being spent have value then the 400,000 points we are giving up the opportunity to earn absolutely have value as well. In my opinion, this is much more impactful than any marginal value difference from time value inflation especially in the context of real redemptions (not idle point balances).

WasKnown

That makes perfect sense. Frankly, I do not fault TPG for their approach and respect the fact that they need to make money like any other business. I will simply choose not to use their valuations. I just wish more content online would consider this because these valuations do impact optimization for max return on spend strategies.

CPRich

"Points value" often depends on how hard you work at finding good deals, how far in advance you plan, what type of properties are involved, etc. I've redeemed at well over one cent and as low as 1/2 cent since I have a boatload of points that will only depreciate over time.

In the spirit of FT's "airline miles are worth xxx based on a peak, last-minute F flight to Tokyo", I present "Marriott points are worth 5.6 cents."

Kacee

One of the issues that we'll bump into is that many here who would redeem at StR Maldives would not ever pay those rates in cash. So in that scenario, the opportunity cost analysis rests on an incorrect assumption, i.e., that the value foregone is accrual of points on a $2k+ per night hotel room. Example: This weekend I'm redeeming 60,000 at Santa Monica Proper, for a room that retails for $499. There's no way I'd actually spend that to stay there, the alternative is not paying the cash rate, but rather redeeming at a different property or in a different program.

I agree though that if you're considering redeeming in lieu of shelling out that kind of cash, it makes sense to consider opportunity cost. Particularly if redeeming during a 2x (or similar) promo.

rny321

Also, Marriott occasionally sells gift cards at a discount. Last year, I bought gift cards for 80% of face value. For a Titanium member who could earn 17.5 points per dollar paying with gift cards, the actual value of points may be much lower than some might expect.

WasKnown

That is a fair point. In that case, we would need to calculate the points you could earned based off of what you would actually be willing to pay, even if it would be for a worse property. I can build that into the model this weekend. Thank you for the discussion. I actually created this model for my specific St. Regis Maldives redemption in mind. While I would not be willing to pay $22K+ on that Villa, I would be willing to be pay $14k (which is what it would effectively cost me) and I would still be earning points on that $22K+ spend (400,000+ Bonvoy Points). I still think STR Maldives is a good redemption but it is just not as lucrative as most people think.

The original model had a section to put in my own cost for the calculation while still using the market price to calculate the points opportunity cost. I removed it when sharing the file around because it messed up with some of the hidden columns that do not impact ARV but can still be helpful for others.

I agree with the idea that people should ultimately just redeem points for the trips they care about. The reason why I care about point valuations is because I want to optimize the return on my relatively high spend. The point valuations impact my strategy a lot so I am trying to be careful.

Kacee

And that is exactly the scenario where a thorough economic analysis makes best sense.

PHLGovFlyer

I currently have 2 points reservations booked and 9 cash reservations booked.

The first points reservation is 274,000 points for a 5 night stay with a current all-in cash price of about $3350, for a gross value of about 1.22 cents per point. Yes, I know that there's an opportunity cost in not earning points on the $3350 spend, but the valuation comparisons from program to program typically don't consider this.

The second points reservation is 100,000 points for a 2 night stay with a current all-in cash price of about $1495. Granted the points stay carries fees and taxes of $85, but even factoring that gives a gross value of over 1.3 cents per point.

Both of those properties are "aspirational" places where I'd be very unlikely to pay cash out of pocket, but am happy to pay points for an elevated experience. The other nine cash reservations are all at properties where the points redemption value is nowhere near 1.0 cents per point. They also are not nearly as high-end as the other two.

So yes, there are very good values to be found using points, and they can definitely return better than 1.0 cpp value. However, these are increasingly hard to find, and there are plenty of properties where these kinds of values are simply unheard of. Are points gradually devaluing over time? Absolutely. Am I going to continue to use points judiciously where the value is well above average? Absolutely.

conde

I agree with you on TPG's point valuations; I don't use them either. I appreciate any business that works hard to provide a valuable product or service. As most avid travelers-on-points enthusiasts would likely attest, it is pretty clear that point valuations have lowered since the beginning of the pandemic. Partly due to bottomed out pricing for flights and hotel rooms, and partly due to devaluations themselves (mostly airlines). For TPG, no point currency valuation adjustments? Their point valuations were suspect at best before the pandemic, now the joke isn't funny anymore. The business aspect has impacted the integrity of information TPG provides. I cannot respect that.

finarg

.6 is probably a good overall valuation. I have used millions of them and
hard to go over that value except perhaps in Level 1 and 2

7Continents

For those of us who don't have unlimited amounts of money - Will the use of points get you a stay you might not otherwise be able to pay for or save you money you would use on real life? Also, will not using the points mean they sit and collect dust which effectively means you're getting $0.00 per point, in perpetuity waiting for the highest value?
Just sayin....

pinniped

My two main uses for points are 5-night stays, usually at pretty aspirational places, and 1-night stays in low categories. Sometimes I'll redeem the larger stays with Alaska miles (Travel Package), other times not.

I still look for about a penny a point on redemptions. All programs have leaked value in recent years, but Marriott is still a decent play. For now... I don't worry too much about the exact cents-per-point on every redemption (it often looks artificially high on very expensive and sometimes overpriced hotels), but even on mundane airport hotel stays that might have otherwise set you back a couple hundred dollars/euros/pounds, you can get solid value.

The OP referenced one of the worst places on the planet to spend travel rewards - Orlando. There, all of the hotels will be two categories too high because they know that's where novice users spend points. We used to have family in Orlando and visit twice a year...we'd just aim for the most off-peak times and pay cash. We actually hit upon sweet deals for the MVCI properties a few times.

Jon Maiman

I agree with your sentiment in your post. I had posted further up in this thread about supply and demand of points as a metric to use for value. Expanding that further, if you're at a time where you are relatively flush with points and low on cash, then using points to enable you to have a stay you couldn't do otherwise makes sense. Having a cents per point threshold as general guidance to help in making the decision on redemptions also makes sense. 0.6 cents per point is a reasonable threshold to me. Earn/Demand ratio for points and/or limited/lack of cash trump cents per point threshold every time. Use'em before they devalue to essentially zero cents per point over time. Holding points for extended periods of time holding out for the best value per point typically doesn't work due to periodic devaluations. Saving for an aspirational trip a year or so out is a potential exception to that rule. Each to their own and YMMV.....

--Jon

nicoyano

A better perspective. I appreciate the finer aspects of the infinite calculations so many use. Bless them. Yet, I’m sure there are many like me who were fortunate to travel some for work and allow the points to accumulate. Now, in retirement, with limited resources, it is about what I can do with my points that would otherwise not be possible. I don’t know what my points calculated out to be; but I had some memorable stays.