joannelj

People are always talking about how points are worth .0125 cents each, or whatever, based on which points they are, and what reward they are getting. Do you just divide the price of the reward by the number of points to get this figure?

What about a hotel room that is available for points plus cash?
for example, one I was looking at was $122.00 per night, or 25,000 points, or 12,500 points plus $40. What's the formula to figure out which is the best deal?

Thanks!
JoAnne

saacman5033

Welcome to Flyertalk!

The basic formula for determining the value of an air or hotel reward is:

($ Saved - Award taxes & fees)/(miles&pts spent + miles&pts foregone)

For example, I want to fly round trip from HNL to SEA. The ticket on AS costs $605 in coach and would earn me 5,000 miles. I decide to book using BA miles which costs me 25,000 miles and $5 in taxes. Thus the value of my BA miles for this trip is:

($605-$5)/(25,000+5,000) = $0.02/mi or 2 cpm

Besides that basic calculation, there are several things I keep in mind when determining the relative value of the points I have.

1. Relative ease of obtaining pts
2. If I wouldn't pay $10,000 for a first class ticket or $1,000 for a hotel night, I don't use those figures in my valuation.
3. Relative ease to book awards, ie I place more value on UA miles than DL as DL are harder to spend at low levels.

yojimbo

Of course there is no single correct answer to your question.

There are dozens of variables that affect the value of miles......and most of those variables are subjective.

When deciding whether to pay cash or redeem miles, I value most of my airline miles at approximately 1.5-2 cents each. Others value their miles differently (but most are in the same ballpark).

Stubtify

It is difficult to say what points/miles are "worth" because it depends on what you use them for. The same mile that gets you .03 can get the next person .01.

A rough estimate I like to use is $.02 per mile/point. This is because I could be using a 2% cash back card instead of my miles earning card. This is also helpful because I can then use that as a price floor when I get ready to redeem points. I don't have unlimited points, so I'd rather get the most value from them. If a redemption is less than .02 I'll usually just pay with cash.

Don't forget to include the miles you would earn from paying with cash when you calculate out your CPM! saacman's formula takes this into account.

mia

Correct, use the amount you "saved", not the nominal price of the flight or room for which you redeemed. This means you need to know what you otherwise would have spent. There are many reasons to do this, one is that if you are not a regular buyer of business or first class flights or suites at high end hotels you cannot know the real market price. You may know that the full list price of a particular flight is $14,000, but you do not know the real price.

Happy

You may want to spend some time reading this series of write-ups.

http://boardingarea.com/blogs/onemil...-hotel-points/

keep in mind, attach a "value" to a mile/point of various programs is much more like an "art" than a "science". There is no cut-and-dry fast rule to do such - it largely depends on a person's travel pattern and personal preference, as well as which program works best for him/her.

However personally I feel Lucky's write up serves a framework to help people understand the topic.

As others already pointed out, it is the money you saved, or put it another way, the money you would have spent, that matters in valuating the "value" of your miles and points. Though I would still take into account of the quality - i.e. you should not use a motel room to compare to a hotel room that is at a centrally located, city center hotel, though you probably would opt to stay at the edge of a city in a motel room... However you would save a lot of time and transportation cost by staying in a city center hotel - such are the intangible quality you should also keep in mind when doing the evaluation - the "premium" you would/should be paying for certain desired quailties.

redtop43

I find that I can buy points from co-workers for 1.25 cents each. I have the advantage of working for a company with thousands of professionals on the same campus, and a company bulletin board I can advertise on.

Obviously I would not buy them for 1.25 cents if I didn't think they were worth that to me. Chase points must always be worth a penny each, because they can be used to pay your bill.

You can also argue that my Chase points make my Delta points worth more. Why? If I want to get a coach ticket to Europe, and I have Chase points (that I can convert to United), then I don't have to jump if I see a 90,000 mile ticket on Delta. I can perhaps get a 60,000 mile ticket on United and hope that I can get a 60,000 mile ticket on Delta for my next trip.

Saacman's formula is a good one; I would offer some modifications:

a) He only considered redeemable miles you earn on a paid ticket. Elite qualifying miles may have an incremental value.
b) You need to consider the value (not the posted price) of tickets in other cabins. Say I can fly to Europe for 60,000 miles in coach and 100,000 miles in business class, and the cost of such tickets are $1000 and $4000. The (unadjusted) value of miles for the coach ticket is 1.7cpm. How much would I pay for a business class ticket? Not $4000, but maybe I would pay $2000. Now the miles are worth 2cpm.

Then again (I've posted this story before) there was the time I had just started dating someone again that I really liked, and she called me one Friday night and said that she unexpectedly had Monday and Tuesday off. While she was whining about her boss's incompetence at setting the schedule for her days off and not letting her know until the last minute, I was searcing online and found a 25,000-mile ticket that would have cost $2000 to buy. I don't know that I would have paid $2000, but I certainly would have paid $1000 for the chance to have an unexpected four days with her. Sometimes circumstances change the value.

I think it's safe to say that for most types of points, you would be doing very poorly to get less than 1 cent per point in value, and if you get more than 2 cents you are doing pretty well.

clacko

if the price was $125 you would get 1/2 cent/mi...

for the other, divide $82 by 12,500....a bit over the other, but imho none is a deal....i wouldn't use mi....

i hope thisn't a real example...but if so, i would go for the cash...

if its real, post the type of points...

joannelj

Thanks for all the great answers. The formula saacman gave is what I was looking for. And that link you gave, happy, was very useful.

I did have the correct general idea, but I was using a bad deal to try and figure it out. Unfortunately, clacko, that $122 dollar hotel is a real example, in Buffalo NY. I kept coming up with my points not being worth very much, and figured I was doing something wrong. But really, it's just not a good deal.

Now I have a much better idea what to look for, so maybe I can figure out a good deal for my trip to Niagara.

Thanks everyone!
JoAnne

Stubtify

Not all hotel points are created equally. Club Carlson, for example I'd be happy if I got $.01 per point.

Frequent Miler has a nice little area with some detail about hotel programs here:

http://boardingarea.com/blogs/freque...rading-prices/

At the very least use it to see what you can buy miles for directly. Sometimes it is cheaper to buy direct and redeem for a room instead of paying cash.

I also like to keep a spreadsheet of what I paid for miles in the cases where I am indirectly "buying them." For example I spent $200 to get 162,000 CC points this year. In that case I could redeem for .002 and be ahead of the game. On the other side of that I "bought" 20k SPG points for $.011 each in the TD Ameritrade promo. Of course SPG points are easy to get that much value or more out of.

Would help if you post the type of hotel and the type of points for future questions, as each hotel has different award levels, and different point values.

redtop43

If your main interest is hotels, I suggest you read http://www.flyertalk.com/forum/onlin...ng-primer.html.

If your hotel points are only useful for hotels, well, that's that. Also, hotel points are often worth less than airline points. It depends on the hotel chain. For example, Marriott gives 10 points per dollar spent on Marriotts, and their most expensive rooms are 40,000 points, while for Hyatt the figures are 5 pp$ and 22,000 respectively. Thus, a Hyatt point is clearly worth more than a Marriott point. If you could exchange generic points (i.e. Chase UR or Amex MR) for hotel points, it could be advantageous to exchange them for Hyatt at 1:1 but not for Marriott at the same ratio. (I think Hilton's most expensive rooms are 50,000 points, so Hilton points are worth even less.)

mia

Looking only at single night redemption rates, and only at the high end properties, is probably not an ideal way to value hotel points. Many programs offer much better value when redeeming for multi-night stays.

thargwobbly

Wouldn't it be great if all the hotel companies would just show points as another form of currency like Jet Blue has done this year? On JetBlue's site, now you just click [ ] "Fares in: Dollars" OR [ ] "Fares in: TrueBlue Points". Then it would be simple to figure out the value of your points at the corresponding hotel too!

vulgarboatman

Something that helps me a lot and may help someone else, I value points by the thousand because that's how I collect and spend them. For me hotel points are worth $15/1000 (at most) and airline points/miles at $20/1000. This is most useful when I am deciding if I want to go after some points deal and I am judging if it is worth the time. I place a lot of value in my time. You will see ways to get points that burn a lot of time and if that is a concern it can be easier to multiply 1000's by $20 to see if it pays off for you.

AlohaDaveKennedy

Valuation? Something like:

$0 per $1,000 when estimating value for the taxman
$.69 per $1,000 when minting them in quantity
$17 per $1,000 as a maximum buy rate when short a small amount for a seat
$25 per $1,000 when used for a coast to coast hop
$30 per $1,000 value for an off season hop to Rome
$40 per $1,000 on a rare find or a BA partner fluke

Priceless - when minting them faster than they can be consumed!