Everything is very subjective to how YOU are going to redeem these points for YOUR particular travel: e.g.:
- if you mostly travel with domestically and plan your trips well in advance and IF PAID IN CASH FROM YOUR POCKET would prefer to fly economy then redeeming your UA points for 1.5c/point could be a great deal
- if you travel mostly internationally, puchase tickets at a short notice and WILL ACTUALLY PAY CASH IF NOT REDEEMING MILES for a premium cabin, then you may be very well looking at valuing your points at upward 3-4c/point

The only flaw I would warn you (and actually see very frequently on Flyertalk) is basing your valuation on the options for which you would never pay CASH - e.g. if you're visiting Paris and redeeming your points for Park Hyatt Paris Vendome (say 22,000 points/night when the cash price is say $660/night) you should only value your points at 3c/point (66000cents/22000 points) if you would actually pay $990 if not staying on miles. If on the other side you would prefer to stay in a $330 hotel 5 miles down the road if paying cash, the value of your Hyatt points is, well, 1.5c/point. And if staying in Paris suburbs in a $165 hotel is what you'll do if paying cash then your redemption is only worth 0.75c/point

The biggest trap I see Flyertalkers get into from time to time is purchasing (directly or indirectly) points based on the 'inflated' valuation (3c/point above) and thinking they got a great deal when in fact they would never pay the cash equivalent on a paid stay. E.g. say you figured out a way to 'purchase' these 22,000 points for $352 (1.6c/point). You compare it to 3c/point and think you're getting a 47% discount. But if you preferred to stay in a cheaper hotel on a paid stay you in fact overpaid $32 ($362-$330) or even $197 ($362-$330)

but isn't that the point of why we do what we do? To get that F seat or stay at that hotel we never really would (and for a great chunk of us could afford) otherwise?

so then wouldn't the valuation be set not on what you can afford but on what you can't afford?

You can blow 50k avios on a $350 LAX-BOS-LAX ticket ... or you can blow 50k Avios on a $1000+ JFK - MAD - JFK ticket. Same avios, one is more economically feasible than the other, but people would gun for the MAD vs the BOS flight.

Hence my dilemma. I want to value redemption based on high valued items to compare if I should go cash & get status+points or redeem & save a ton.

It's a lot like poker really ... you get dealt a full house holding 3 A's .. do you keep the full house or do you go for 4 deuces? That is the big dilemma. I know what to do in poker, I need to figure out the odds in the point game

Gotta take into account what you would earn if you paid cash.

If the $700 flight is 5,000 miles in distance, my analysis would be that one's true cost to use 40,000 miles is those miles, plus foregone miles earning of 5,000 miles. So, my personal algorythm, when using 40k miles instead of $700 for a flight is that I got 1.55 cents of value.

That's why some do it. If that is your goal then that is what you should focus on. Others are just trying to get the family to Disney World and back for free. That's their aspirational vacation. The kids don't want to fly to Paris in F and stay at the Park Hyatt Paris-Vendôme, they want to go see Mickey. If a young family does not have the cash to get to Disney, then whatever coach to Orlando calculates out to in cents per mile is that families best redemption at this point in their lives. There was a big long thread a few weeks ago about using points for coach vs other classes with folks on both sides of the fence. Not everyone has the same goals. If your goal is save your points for the most expensive rack rate hotels or F flights you can find to maximize your cents per mile, then that is what you will want to focus on using your points for. I think Gary's blog and Lucky's blog will give you inspiration for that sort of thing. So find the blogs of others that have the same travel goals as you and see how they value and use their miles. MilesAbound had a nice Maldives report that mentions miles and points used: http://milesabound.com/miles-to-mald...ale-abu-dhabi/

There was a discussion a few months ago on the EK forum where someone was arguing that anyone who used their miles for anything other than upgrade was stupid. That person was bading it purely on the cash equivalent snd not the value to the individual. I'm saving my miles so that we can afford to turn one of my business trips into a family holiday we wouldn't otherwise be able to afford but if my ticket is paid for by work and we get one redemption ticket then the cost of two more tickets makes the holiday achievable. Only you know what something is worth to you and thst should be the basis for ypur decision.

1) Do you want to spend 4 nights at the Conrad Maldives?

I assume that's a yes.

2) Do you have $5492 in cash that you are willing to spend?

Probably not.

3) Use the damn points. Leave the calculator behind when you go to Maldives.

+1 I tell myself this over and over but I'm am engineer and the calculator is hard to leave behind. CPM analysis isn't everything in This game.

just take advantage of it and never ask the value of hilton points again.

You also need to take into account your capacity for travel. If I only have time and interest in two vacations per year and don't need air travel otherwise, that sets an upper bound on the travel valuation I can count.

I can use the value of the tickets for those trips, but if I earn enough miles every year for a 3rd or 4th trip, I am not going to use those miles for airfare, so I can't value those miles as if I was redeeming them for tickets. In almost every case, the next best alternative after paying for your travel (airfare and possibly hotel) is cash. 2 Cents back per dollar on a cash back card is better than you're going to do trying to extract value from airlines miles for anything other than airfare, so I think you always get cash back after you've earned enough miles to cover your trips.

Is there a master thread on FT that discusses optimal/options for cashing in rewards for each program (UR, MR, etc.)?

The maldives was a basic example to see if I was calculating things correctly.

Obviously that & Bora Bora are no brainers. What I want is a method to evaluate my not-so-glorious redemptions, like a US domestic flight.

For example ... if I can get a better valuation transferring MR points to Delta vs using MR as cash option, things like that

Moderator action
 

stupidzbu's question has been appended to a very recent discussion of the topic.

The only way to compare across options is to come up with your own, personal subjective value of what each point is worth. And, in my view, the only way to decide what a point is worth, is to ask a simple question: What is the dollar value at which I would be ambivalent between being given cash and being given the point?

So, using that formula, here are some values you might assign. (I'm just throwing these out there):

SPG: 2.2 cents
Amex MR: 1.6 cents
Chase UR: 1.9 cents
Hilton: .5 cents
British Airways: 1.25 cents

These values do not always remain static -- sometimes you may be very low on a certain currency and want to build it back up. Let's say you're shooting for a redemption on SQ, and the only way to get it is with SQ miles, so you want Amex and so your value goes up. But, in general, let's just stick with those numbers so the process make sense.

These values help for two things: (1) how should I accumulate, and (2) how should I spend?

Let's say you have a purchase to make for $1,000. It can be manufactured spend, or a real purchase, etc. Let's say you have a variety of different cards to make the spend. Which should you use? Just apply your values.

Let's say you can get 2x Amex on this purchase, plus be 1/30th of the way toward the spending cap of 30k, which nets you 15k extra miles (which you intend to hit). I would say that for this purchase, you will get 2,000 Amex, plus the .5 bonus, for a total of 2,500 Amex. (Put it another way, this is 1/30th of your spent toward the 15k. 1/30 x 15k = 500.) So, now, what value are you reaping if you use your Amex card on this purchase? 2500 x 1.6 cents per point = 4000 cents, or $40.

Is this the best option? With 2 percent cash back, you would have gotten $20 in value. Let's say the best you can do on any other card (SPG, for example) is 1x, so that you'd get 1,000 SPG points. Do the math? 1,000 SPG points x 2.2 cents per point = 2200 cents, or $22. Etc.

Now, use the same process for redeeming points. Suppose there's a British Airways flight you want for 25,000 points. You could use 25,000 amex, which is a cost to you of 25,000 x 1.25 cents -- or $375 in value. You could use 20,000 SPG, which transfers to 25,000 BA, so that's 20,000 x 2.2 cents -- or $440 in value. So, the Amex is better. Etc.

The key is that everything requires, at the outset, a rudimentary understanding of your personal, subjective value of your points.

In your account, travel program miles/points are worth zero, and bank program points are worth whatever you can get in the form of a statement credit or usable gift card.
When you redeem them for travel you would paid cash for, they are worth the price you would have paid minus 1% of what you had to spend to get them (the statement credit you could have easily gotten from any number of credit cards).
When you redeem them for travel you would have otherwise not taken (or not been able to afford), they are worth (financially) what you would have otherwise spent on less interesting travel, and you have a really cool inexpensive hobby!

But you're overpaying for the room. If you had purchased Hilton points outright, and used the points for the exact same AXON award, the cost would be much less.

Good point. Hilton Points are purchaseable at 10k for 100$, so 145k points would cost $1450. That's the upper bound on what the 4 nights in the room would cost. It's just like you wouldn't compare it to a full price room if there was a 50% off coupon that you would have used if paying cash.

Exactly, and that goes back to my first comment. Even if you have millions, you can't value the full price of the room if you can get it for cheaper.

You imply that your 'internal' value of the trip is simply the function of the cash price and thus 'people would gun for the MAD'. And from this point of view F class redemptions on certain carriers is hard to compete with in terms of points valuation. If I were to choose between MAD and BOS though there's a good chance BOS would win regardless of the ticket being 1/3 the price the MAD one.

Take for example my own experience - last summer I wanted to visit Yellowstone. It cost me 60,000 miles RT ticket to get there from DFW. Following your logic I should have used these 60,000 miles to fly somewhere in Europe to get a better value. The only challenge is I didn't care for Europe. Or for Hawaii. Or Alaska. I wanted to see Yellowstone, not Iceland with a creative routing including stopovers in Europe. I saw what I wanted and have never regretted a single mile I redeemed for this trip regardless of the value.

Different people have different attitude - some with choose a destination and then try to minimize the miles to get there while some don't care about the destination as long as they get a mind-blowing c/point value. There's simply not a right answer to the original OP question.

I also have access to airline buddy passes, which many times can be a curse. Nevertheless, in my head the value I assign to a mile is more than what I would pay in service charges to use a buddy pass but less than I would otherwise pay for a full fare ticket.

Example:

ORD-PVG-ORD is about $850RT flying as a buddy pass
ORD-PVG-ORD takes 135,000 miles to fly RT in F

There is a value to me to not have to fly standby and worry about getting on or getting stuck in Y. Let's say I'd pay double, so $1700.

That means, to me, that 135,000 miles are worth $1700ish or about $0.0125/mile. I won't go much higher than that because I'd just break down and fly on a buddy pass if it cost more.

Another example:

I just jumped on the recent LAN C class deal and bought JFK-SCL for $927RT. A buddy pass in C would have cost me around $650RT. It's totally worth it to me to pay the extra $275 and fly confirmed.

JFK-SCL RT in C using AADV is 100,000 miles, so I got those 100,000 miles at $0.00927. So if my value sits at around $0.0125, then I got a great deal (to me).

The value of miles to you is the lower of:
- how much it costs you to obtain them
- how much value you ascribe to free stuff you cvan get with them

Exactly.

Plus I often don't want to be captive at a resort either paying ludicrous prices for things ($10 cokes), or taking a bunch of meals in a hotel lounge to save cash. The Maldives don't appeal to me because they're the ne plus ultra of captive resorts for people waaaaaaay richer than I am, with corresponding prices.

Why would it be the lower of those values, rather than the higher?

I love the discussion that is summed up with "it is a subjective valuation," however when people who continue on this premise use what IMO is correct for CPM or CPP valuation which is the cash price, they get flamed relentlessly. You can't have it both ways. Either it is subjective or objective. If it is subjective as it most certainly is IMO, then the debate is only personal preference and there is no rulebook of laws for valuations. I don't see how anyone can get around the real world price of using the cash price which is set by the market as what you judge your CPM or CPP valuation off of. I always do and will, this is why I am savvy about miles/points, to enjoy luxuries I can't afford or too cheap to spend my own money on. Live the millionaire lifestyle, on the FTer budget.

I don't think it's the first. I value my miles considerably higher than the cost at which I acquired them. Unless you are importing some pretty sophisticated opportunity cost issues.

If what you mean by number 1 is "the cost at which you can easily acquire an unlimited number," then maybe it's closer. But I can acquire 6k Hilton for $3.95. I value them at much more than 6 1/1000ths of a cent.

I also don't really agree with "how much value you ascribe to the free stuff you can get with them" as the value either. It's too abstract and there's a timing issue.

I really don't understand what is wrong with the most basic formulation: the price at which you would be ambivalent between taking the money or taking the points. This may well, for some, be the value they ascribe to "free" stuff they can get with the points at a particular instant in time, but not always.

Ask yourself at what price you would sell your points. Ask yourself at what price you would buy more. If those numbers are different, figure out why. Either way, they bracket your value of the points.

I agree it is entirely subjective and personal, and that is the hard part. What I value now (subjectively) may not be what i value in the future (subjectively) which makes the decision hard. Additionally, as someone who tries to look at things objectively or rationally there is a desire to have some numeric value that i can use to help make a decision.

Those two are generally at odds, and that is where i feel most people have problems with this decision.

I have less trouble with the decision of when you use points. As echoed by other here, I feel I either found a good deal (CPM wise) or not using cash is more important. Where the real trouble i find is on the earning side (eg, credit card spend or bonus mile promotions). With so many options we all have a desire for an objective measure to decide the value of each currency. Would i rather earn 1 UR, 1 MR, 1 SPG, 2% cash for this purchase and it becomes more complicated when you bring in bonuses categories and a desire for either concentration or diversification.

Sure, one could say they desire hotel rewards more than air or cash, but even then they need a yard stick between different programs. What I value is likely not what you value so our measures are going to be different, and that is the personal conflict.

On the redemption side, I use the cash price. I do not believe you can ignore the cash price set by the market no matter how stupid it is. I'll generally use the lower of the equivalent cash price in my calc (e.g. the lowest business class fare to my destination even if that in not on the carrier the award is on) that way it is a more objective valuation (I also will exclude the C fare as that is not realistic). I am not a big fan of the subjective approach of "how much of a premium" i would put on the economy fare (adds too much subjectivity) and is not actually achievable in the real world.

For example, I'll sit in Y on a transcon/Hawaii if the price is right. It's not that bad. But i likely will not sit in Y on any ~7+ hour flight. There about is my line. As a result, the cash price becomes relevant.

Obviously, each person has to decide what they value.

Biz ticket to many places are > $3000. It would cost me roughly 120k miles so using this approach the CPM valuation is 2.5. This yields a highly inflated value when you are thinking about acquiring them. Given that miles/points are all about arbitrage, how does this approach help? You probably keep different values for acquiring and redeemping?

Precisely. Value is in the eye of beholder. I redeemed 50k miles for Yellowstone last year, only got 1 CPM but the trip was worth it. I'd have paid if cash flow wasn't tight.

If you have the ability to rack up points left and right, CPP analysis helps you optimize your strategy for earning and burning. One can find a good use for each type of points currencies given the number of destinations in the world. How much you can optimize depends on your constraints/flexibility. If you have too many constraints then there is not much to optimize. My vacation time constraints mean I really value direct flights, so I find value in programs like WN and VX, most FTers don't.

When I was single I didn't care for Europe, I was all about national parks. After marriage, Europe seems to bring a lot of value ;)

All CPM calculations are wrong but some are more useful than others. Definitely need a baseline to work with although reality might differ.

I always find this debate topic interesting. For individual redemptions the following seem to be the standard options for valuing your award value.

1. Value of points is based on market prices of tickets.
2. Value of points based on max price an individual would otherwise pay.

I wouldn’t presume to tell others how they should value their miles, but I tend to use a blend of the above. I fly almost exclusively in coach as I prefer quantity over quality of flights. Thus I will typically use the lowest convenient coach fare in calculating my redemption values. The problem I have with using method #1 exclusively is that it would dictate that the “smart” choice is always booking J or F tickets with miles. That said, I can’t use method #2 exclusively either as many of the trips I take with miles, I would not have otherwise paid for even in coach. My latest vacation certainly had a value greater than $0 even though I might have otherwise opted for a camping trip near home had I not had the miles/points.

This is probably a good way to put a standard value on points, but it’s something I generally ignore. I have only ever bought miles once and selling miles is not necessarily a valid option. I prefer to think of average valuation as either an average of previous redemptions or a lower end of such redemptions.

Actually, if done right, it would probably cost you way way less than $1,450 AND I had never ever considered that an option.

Up until the devaluation was announced, I'm surprised anyone would pay full price for 4 nights when they can get it at less than 25% of full value like this.

Hell, that is even less of an effort than spending $1500 for a 50k bonus...

I guess that thought never crossed my mind because I never wanted to pay for points :)

It's a two-way market on points. Most people here, myself included, would only buy them at .01 or less, but would only redeem points for .02 or higher.

It's hard to find a market-clearing price for points since there's no fair, centralized market for selling them directly other than back to the issuers, more or less.

And it's further complicated by the fact that opportunities to buy points straight up in bulk are limited, to protect pricing of F/J revenue tickets.

I think you are reading choice #2 wrong. Its how much you would be willing to pay for the ticket. That amount is not zero just because you would not have gone on the trip if it were not for miles. When I went to Greece I used 60K miles plus $100 taxes instead of $1400. If it were $1400 I probably would not have gone. But I probably would have paid $1000. So the value I got for my miles was $1000-$100 taxes/60K miles or 1.5 cpm.

I was just providing a very extreme example. The vacation I was referencing was a trip to northern MN for a wilderness canoeing and camping trip that were it not for miles and Cap1 points, I may not have been able to convince my wife to spend any amount of money on. In fact, she would probably joke that the value of that trip was $0 as she now refers to it as the ONCE in a lifetime trip. :)

I can see your point of view, but there have certainly been trips I have taken where, had it not been for miles/points, the amount I would have paid would indeed have been quite close to $0.

Again, not trying to say my perspective works for anyone else, but it works for me.

I think that's why there are two definitions of "value" here. Both of them are fair valuations!

Yes so it should be a bracket. the max value is 1.45 cents or whatever it costs to buy and the minimum value is what it costs to redeem.

So for me, on an Aeroplan mini-RTW J @ 125k, my value is cheapest economy ticket minus cashback/miles/etc (~15%).
Max value is 2.4 cents because that's why you buy it at, and minimum value for ME is around say, 1.5 cents if airfare costs around 2k cash.

how would you guys value a program like Lifemiles where the cost of obtaining the miles is far less than the potential redeem value of the miles?

Well I value any potential airline redemption as cheaper economy ticket, so not necessarily. Either the lower of that or the cost of buying the miles.