Hi all,

I was wondering if anyone has any advice they can lend (or provide any decent links) in working out the ‘value’ or miles and points?

At the moment I work out value based on what the cost of the flight would be, minus the tax I have to pay which gives me a value for however many BA miles I am using for the flight.

That is all well and good, but I’ve been looking at mileage runs and also other rewards programs (SPG, MR etc) and want to try and calculate the value – i.e would 10k spend save me more money on BA flights, or more money in hotel savings?

Is a mileage run worth it? Would Ł600 quid on flights pay off in terms of extra miles earned, and the status? Do other airline match the status regularly?

Are paying xxx amounts for credit cards worth it in terms of value?

Does anyone have any decent spreadsheets they use for working this stuff out, as I’m getting a bit stuck with it all….

Thanks

Well, the short answer would however much you're willing to pay for it. For a 100K mile business class redemption, how many miles would you have paid for a revenue ticket? $2000? Then 100K miles are worth $2000 to you, or 2 cents per mile. Also, you need to deduct the potential mileage earned from a revenue ticket. A 100000 mile award redemption may have earned as much as 20000 additional miles on a revenue fare, making the "true" cost of the ticket 120000 miles.

Whatever you do, remember that the asking price for a ticket/room/etc is nothing more than a relative indicator of supply and demand; it does *not* represent the value of an item. The item's value is precisely what you are *willing to actually pay for it*. Therefore, the value of a particular stash of points/miles is what you'd be *willing to actually pay* for the items they can obtain, if you weren't in possession of the points/miles.

To illustrate this point, presume are weighing two trips next week: a domestic trip to visit your brother, whom you've been dying to see, or an international trip to London to do some sight seeing. You find that 25K miles will get you to your brother's place and back, replacing a coach ticket that would cost you $500 otherwise, and you'd be *willing to actually pay* that $500 to see him if you didn't have the miles. Also, 100K miles will get you to London and back, replacing a first class ticket that would cost you $2,500 otherwise. However, if you didn't have the miles, you'd be *willing to actually pay* no more than $1,000 for the ticket, as it's a vacation you'd enjoy but is quite discretionary. Reasoning that the international first class ticket gets you a better value ($2,500/100K miles = 2.5 cents per mile) than the domestic one ($500/25K miles = 2 cents per mile) is *incorrect*, as the miles wouldn't actually be replacing $2,500 in the first case; they'd be replacing $1,000 (what you'd be *willing to actually pay*, and therefore worth just 1 cent per mile to you. You're better value is the trip that earns the lower CPM rate according to the asking price of the airline. Your neighbor, looking at these exact same flights, however, might have a completely different take. Perhaps he *must* fly to London next week for his consulting business, and would be shelling out $2,500 if he didn't have miles. For him, the better value might be the higher CPM. This example demonstrates why it is silly for people to argue what the value of a particular mile/point is to them, as it inherently varies by individual needs, desires, patterns, etc.

But at the same time it's still important to have a guideline. The inherent flaw in the "willing to pay' argument is that the airline is not "willing to sell" at the same price you're "willing to pay". So yes, while F on UA from SFO-SYD is worth nowhere near $25000, it would be silly also to say that since you're only willing to pay $1000, the flight is in reality worth $1000 as the flight is worth quite a bit more than $1000. Therefore, we can also say that the real value of a ticket is both a combination of what you're willing to pay, and what other customers of the same (or very similar) product are willing to pay- then we can effectively gauge the market value of the ticket, in contrast to your personal value, and what the airline prices it as.

Feel free to correct me if I'm wrong though- this is all from my basic knowledge of high school economics.

Here is the Airline Status Match Thread

I do not know any comparative spreadsheets of the rewards program, Just ones that track your flights.

Mileage Runs I only do if I NEED to reach a milestone and I would not achieve it without one. I can not speak on the ease of mr across the pond but stateside if you find the right flight at the right time with a big bonus offer they can definitely be a good value. You should look at the mileage run deals thread for more info.

As the previous two posters tried to say, but I think they got a little sidetracked, mileage is personal. You have to decide what you want out of your miles;Upgrades, Elite status, free flights? What type of spending and travel habits do you have? Always use the same hotel, same credit cards, do you pay off your credit card debt?

Answering these will tell you if you should focus on one program, churn credit cards, sign up for hotel programs, etc.

Hope this helped.

I calculate the value using the price of the ticket I would otherwise purchase, not the price of the flight for which I am redeeming. I adjust for fuel surcharges, because some airlines apply those to award tickets while others do not, but I do not adjust (for example) for UK Air Passenger Duty because this is paid on both revenue and award tickets.

However, when you purchase a revenue ticket you are buying transportation plus a discount on future travel in the form of frequent flyer miles. I increase the number of miles redeemed to reflect the miles I would have earned on the revenue ticket I would have otherwise purchased. For example, if I redeem 100,000 MIA-LHR-MIA in business I divide the money I saved by (about) 122,000 because the revenue ticket would have earned 22,000 miles.

Remember, we're talking about determining the value of the item the miles obtain *to you*, for comparative purposes. Therefore, what the airlines sell for isn't relevant. If the ticket asking price for a trip you couldn't care less about was $10,000 and it was available for 25K miles, you wouldn't redeem just because of the insane 40 cpm. You should think, "how much would I be willing to atually pay for this trip in cash?" Mia had a better choice of words, "would otherwise purchase". If the ticket you'd otherwise purchase isn't available at the price you'd be willing to pay, then buying it isn't an option, but using your miles is, so valuing it at the price you'd be willing to pay is still purposeful. Mia also correctly points out that other factors should be considered when determining the price you'd be willing to (or "otherwise") pay, including but not limited to the value of miles earned, status and other perks earns, and tax consequences.

Interesting.

I see what you're saying about the price of a ticket that 'I would otherwise purchase', but the reality of it is, I would NEVER pay for a business class / first flight - thus why I've decided to collect miles.

It basically means I can afford something that I could never usually afford - I'm just 'paying for it' over 12 months by means of credit card spend etc.

Thanks for the comments anyway - useful as always

Andrew

To complicate your thinking further - you need to consider whether the desired ticket would be available when you need it. Poor availability reduces the value of the miles. Also, if you have someone (e.g. a family member) joining you on your trip and you only have enough miles for one award ticket, how much would it cost to buy the same second ticket for cash (assuming you want the companion to be on the same flights as you)? If that is a requirement and the second ticket is costly, that too will reduce the value of the miles. This may sound nitpicky, but that's exactly the kind of analysis that drove me nuts with certain award programs.

With 3 small kids it will be a long time before I will travel too far outside of the US (Mexico, etc is about as far as I will go).

So right now for me I will at times use miles for a 1 to 1 value but no lower than that for domestic flights. I shoot for 2 cents per mile but that's difficult to find these days but programs can and do change so I don't want to hold them forever either.

As stated above it's really the value you want to get out of them. Would you fly coach to Europe for less miles which are worth less but you could go somewhere else in coach as well instead of that single trip in Business class (not quite but you get my point). Some value their miles in bulk, some value them for upgrades on longer flights. That's really a personaly decision...

I actually just wrote a blog post on the topic here

Basically, I think there are two main ways to do it. The true FTer way is to scheme up some grand trip you might go on at a later point, calculate the costs in currency, then compare that to what it would cost you in miles/points using each appropriate program. You should also deduct the loss of miles and any taxes/fess for the redemption (especially if redeeming on BA!). Throwing this in a spreadsheet comparing each program should allow you to see the relative value.

That will give you a very high value which is probably not reflective of what you would actually spend, but allows you quite the trip! If you have a surplus of miles sitting around reccomend looking at past redemptions and the value your received out of that. For evaluating new programs, just look at what that past trip would have cost you in their program. There a lot more details and examples in my blog if you want to check it out.

There are tons of threads discussing the value of miles, but my personal favorite is this older thread.

There are two other ways to look at this situation: (for simplicity, using US$ scenarios)

(a) What would you have done with the miles otherwise? For example, if you would have redeemed 100k miles for four domestic US round trips, each worth $350, then you are "spending" $1400 on the first class ticket, because that's what you would have gotten from the points otherwise. (You will end up spending that $1400 in cash in lieu of using those points.)

(b) What did you give up to earn those miles? If you would have otherwise used a 2% cashback card for $100k in spend, rather than a card that earns 1 mile/$, your "cost" for the flight is $2000 in cash you gave up to earn those miles.

These two methods will tell you what your ticket "cost". Either way, you are giving up some sort of alternate value to earn that ticket you wouldn't otherwise buy.

An interesting thread, and an interesting topic. Some excellent points have been made. A few of my own (which repeat some of the previous points).

-it is absurd to conclude that your points are worth more than the program is willing to sell them for. I'm not saying it's impossible to redeem them for a greater value, but it is unwise to give up more valuable earning potential in exchange for miles/points that can be purchased for less. A good example of this is my main program, Alaska Airlines. You have the option of purchasing 10K AS miles for $190 each time you book a ticket; thus 1.9 cpm. Therefore, if you are using the AS credit card at a rate of 1 mile/$ in preference for say a 2% cashback card, you are overvaluing your miles, and losing out.

-as others have pointed out, it is important to consider what you'd have been willing to pay for a ticket; i.e. if you were spending your own money to get to Europe, and that means you'd pay $700 for an economy ticket, it's a bit of a stretch to claim that you got a $5000 value out of your 100K miles that you booked for a F award. Granted, you got an experience you would not have otherwise had, but you didn't really get a $5000 value unless you would, indeed, have been willing to pay $5000 in the absense of miles.

-lastly, it is important to factor in the lost earning potential of any given ticket, both for RDM's and EQM's...including any online booking bonuses and credit card earning bonuses you may have gained by purchasing or lost by redeeming miles. For me, I've determined that EQM's earned on my primary carrier are worth twice as much as RDM's (totally arbitrary, and possibly incorrect), because those EQM's count towards status, which gives me upgrades, waives baggage fees, etc. You then have to evaluate the relative cost of each ticket including RDM's/EQM's to determine if purchasing it or using miles for it is a better value for you...

I don't follow this point. What if an airline has a promo whereby you can purchase miles for, say 1 CPM, and you have an upcoming flight that you are expecting/willing to pay $2,000 for but you can redeem 100K miles for it (getting 2 CPM). In this example, wouldn't the points be worth more to you than the program is willing to sell them for (albeit within a promo)?