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Understanding cpp value when redeeming points

Understanding cpp value when redeeming points

Old Aug 23, 16, 11:21 pm
  #1  
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Understanding cpp value when redeeming points

TPG currently values Chase UR points at 2.1 cpp. Does that mean if you calculate the redemption value of your points, it should be above 2.1 to be worth redeeming?

Here's an example.

If I transfer 50,000 UR points to Hyatt to redeem at Andaz 5th Ave for 2 nights, the points value is 1.9 cpp. Since TPG currently values these points at 2.1 cpp, does that make this a poor redemption? Or is anything above the standard 1-1.25 cpp that Chase offers a good redemption?

I have the option of redeeming 60,000 at Park Hyatt New York for a value of 3.4 cpp, which is a better value, strictly $peaking... but I heard Andaz 5th Ave is better.

Anyway... what's the consensus? Redeeming for less than the current valuation is or is not a poor choice?

Thanks in advance!
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Old Aug 24, 16, 12:02 am
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Determining what's a good redemption value is a personal thing. Taking a figure from TPG or soliciting opinions from people here can be good guidance, but ultimately you've got to make up your own mind based on personal factors. Among these are how much you can redeem points for given your travel patterns as well as what a particular redemption is worth to you irrespective of its nominal price. See, for example, you opinion that hotel A is more enjoyable than hotel B even though B represents a higher return of cents per point.
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Old Aug 24, 16, 8:38 am
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I would use the CSR 1.5x travel redemption rate as the baseline. So anything above 1.5 cpp would be acceptable to me. The 2.1 cpp value from TPG is an average, so there will be a lot of variance depending on your travel flexibility, location, time of year, etc. 1.9 cpp is nothing to be ashamed of, in my book.
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Old Aug 24, 16, 1:03 pm
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Originally Posted by darthbimmer View Post
Determining what's a good redemption value is a personal thing. Taking a figure from TPG or soliciting opinions from people here can be good guidance, but ultimately you've got to make up your own mind based on personal factors. Among these are how much you can redeem points for given your travel patterns as well as what a particular redemption is worth to you irrespective of its nominal price. See, for example, you opinion that hotel A is more enjoyable than hotel B even though B represents a higher return of cents per point.
+1. I used to value DL Skymiles at 1.25 ccp because that's what my actual redemptions averaged out to. But now that I'm using DL for overseas business class, I value them at around 2.5 ccp. And right now my AA points aren't worth much to me because I'm having trouble using them for convenient flights at low redumption values compared to, say, United. Somebody else will find it easier to use AA points because of the city they live in, their flying patterns, how many AA points they're earning vs. spending, etc.
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Old Aug 24, 16, 1:16 pm
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That average is also based on certain personal preferences, like type of hotel, travel destination, class of service for flight rewards and - most significantly - whether one believes the list price is a good metric to use to start. If you were never going to pay $600 per night for the room and would have likely chosen the $250/night property instead then arguably the value should be based on the $250 number as that's the replacement cost of what the points are buying.

My HotelHustle tool collects thousands of data points for cash and award costs. Looking at the recent data for NYC Hyatt properties I see the following averages:

Code:
	Hotel Name				cpp		count
nycam	Andaz 5th Avenue			1.874429090909	814
nycaw	Andaz Wall Street			1.356387084337	830
nycgh	Grand Hyatt New York			1.355155469369	797
nychh	Hyatt Herald Square New York		1.306899873257	789
nycph	Park Hyatt New York			2.908103591945	399
nycts	Hyatt Times Square New York		1.419548022599	1416
nycus	Hyatt Union Square New York		1.793635829662	681
nycxc	Hyatt House New York/Chelsea		1.100555555556	9
nyczf	Hyatt Place Flushing/LaGuardia Airport	2.865343915211	630
nyczm	Hyatt Place New York/Midtown-South	1.664361147327	767
IIRC the Hyatt Place in Flushing is a higher "value" because it is fewer points while the Park Hyatt is higher because the cash rates are significant.

The data above is based on a check-in date on/after 1 Aug 16 in an effort to ensure more recent search results and a better representation of what the values are today.
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Old Aug 29, 16, 9:37 am
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I think estimating UR at 2.1 cpp is VERY high. But of course, TPG will overestimate the value of points/miles to sell his credit cards. He says 100K signup offer will be worth $2.1K to you, much better than, say, $1.5K or $1.4K.

People like pointing to premium flights and aspiration travel to justify high cpp value. I understand this, I've done many first and business class flights. But just because I redeemed 60K miles for a $6K flight itinerary doesn't mean I got 10 cpp. After all, it took a lot of work to find that flight and I had to be flexible and work my schedule around the available dates for that award. I would've never paid $6K cash for that flight. Now if I could book that flight ANYTIME, that would be different. But that's just not the case.

For hotels, I find myself having a hard time getting anywhere close to 2 cpp consistently. Yes, I've done Bora Bora and I'm going to the Maldives in February. But those are special redemptions, but something I can do on a regular basis. I can't use my Hyatt points at a hotel in Chicago or Cleveland and consistently get 2 cpp. But I'm not one always looking to maximize value to the expense of my schedule. I know some people will intentionally look for the most expensive redemption even if it's not what they would've chosen if it weren't for this reason. That's not me.

The other thing that's almost never mentioned is that award redemptions don't earn points/miles. So a 25K Hyatt redemption for a $500 hotel isn't really worth 2 cpp, because I would be missing out on the points earned for a cash stay.

All that aside, I value my UR at 1.5 cpp. If I don't get that or more, I usually pay cash, especially with deals like Citi's 4th night free.
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Old Aug 29, 16, 7:32 pm
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Originally Posted by DaveInLA View Post
But just because I redeemed 60K miles for a $6K flight itinerary doesn't mean I got 10 cpp. After all, it took a lot of work to find that flight and I had to be flexible and work my schedule around the available dates for that award. I would've never paid $6K cash for that flight. Now if I could book that flight ANYTIME, that would be different. But that's just not the case.
Sure it is available anytime. At several legacy airlines, if you're flying the airline's own metal, you can redeem about double the miles for "anytime" awards. So in this example, 120k miles for $6k flight may be bookable anytime, so by your logic that is 5 cpp, which is still way more than 2.1 cpp.

But your fallacy is that not everyone's time spend figuring out award booking is costing them money. If it comes purely out of their own time, it may only cost TV watching, or golfing time, or whatever. But I don't see why you devalue UR for that.

I think a reasonable valuation might be what it would cost in the next class down (which on many airlines today is premium economy, not ordinary coach), if that's what you might consider buying if you couldn't use miles. And that is still likely to yield a bit more than 2.1 cpp, isn't it?

At any rate, if you feel that the value of a 60k redemption is "priceless", and you wouldn't have taken the trip at all if you hadn't had the miles/points, then you can't establish exact cpp, but who cares what cpp is in that case, as long you feel you got "good enough" value out of it?
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Old Aug 29, 16, 8:08 pm
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Originally Posted by sdsearch View Post
Sure it is available anytime. At several legacy airlines, if you're flying the airline's own metal, you can redeem about double the miles for "anytime" awards. So in this example, 120k miles for $6k flight may be bookable anytime, so by your logic that is 5 cpp, which is still way more than 2.1 cpp.

But your fallacy is that not everyone's time spend figuring out award booking is costing them money. If it comes purely out of their own time, it may only cost TV watching, or golfing time, or whatever. But I don't see why you devalue UR for that.

I think a reasonable valuation might be what it would cost in the next class down (which on many airlines today is premium economy, not ordinary coach), if that's what you might consider buying if you couldn't use miles. And that is still likely to yield a bit more than 2.1 cpp, isn't it?

At any rate, if you feel that the value of a 60k redemption is "priceless", and you wouldn't have taken the trip at all if you hadn't had the miles/points, then you can't establish exact cpp, but who cares what cpp is in that case, as long you feel you got "good enough" value out of it?
Many of us do "aspirational" travel (hotels and flights) when possible. For most of us, that's not AA or UA metal. We like at CX, EK, etc. Let me put it this way. If you value UR at 2.1 cpp, would you buy 1 UR for 2.1 (or even 2.0) cents? I wouldn't.

Regarding the last point, I generally am content to get "good enough" value out of my points. I don't calculate down to the fraction of a cent all the time. But many do. The reason is they compare the cost of a point to the opportunity cost of, say, a cash back card. The standard for most is 2 cents, as that is what a card like Citi DoubleCash gets.
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Old Aug 30, 16, 5:02 am
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Given that many credit cards now offer 1-2% cashback, if you're not getting at least 1-2cpp for your redemption compared to the actual cash equivalent, you're not redeeming for good value.

Many people also forget the opportunity cost of award redemptions vs paid hotel stays/flights: you also lose out on award points and status points earned. (NB: some hotel programs also count award stays as qualifying)

Many people also forget the often very restrictive inventory of award tickets in booking flights, especially in premium cabins or on popular routes or on popular seasons/days.

Let's compare award seats to a special sale. For example, take a business class fare sale on oneworld, YYZ-LHR roundtrip, for $2000 all in. AAdvantage would cost you 57500 miles each way, before taxes. That's 115000 miles. Redeeming 115000 miles for YYZ-LHR would be bad value since that's spending about $1150-2300 in points (a valuation between 1-2cpm) for a flight that would cost $2000 to begin with, on top of giving you award and elite miles (YYZ-LHR is around 3500 miles each way). That's ignoring all taxes, potential YQ, and the extremely high LHR UK luxury tax.

Now compare award seats to a normal business class fare price: redeeming for the flights on Cathay business. YYZ-HKG on CX would be about $4500. At 140000 AA miles roundtrip, you nearly doubled your redemption value. But of course, award inventory for Cathay is hardly anything but reliable compared to the normal $4500 cash tickets that are wide open and available until end of schedule, even during peak holiday periods.

That's why with every program devaluation, it becomes more of a fool's game. Understandably, miles are "free" for many people, especially churners who rotate credit card signup bonuses. Banks don't give you free cash for just signing up for a credit card, but they will give you various points.

But the math is definitely changing and more and more people are better off just getting a cashback card, or even using a revenue-based point airline like Southwest or JetBlue.

Because if you're redeeming miles from legacy carriers like UA, AA, DL, for award tickets on economy flights, domestic flights, short-haul flights, flights on their own metal, chances are you are not getting good value compared to outright buying the ticket with cash. It's no better than spending those miles on a toaster under their shopping portals.

Last edited by keitherson; Aug 30, 16 at 5:07 am
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Old Aug 30, 16, 5:38 am
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There's value in flexibility.

Suppose you value points in XX at 1.3, YY at 1.8, and ZZ at 1.9, and you have some CC flexible points that transfer 1:1 to each. CC must be valued at a minimum of 1.9, since they can become ZZ points. But the flexibility to also transfer them to YY adds some value, since there may be times you need YY points; you'd rather hold CC points than ZZ points for that reason. So maybe you then decide that CC is worth 2.0, for that reason.

In other words, flexible points must always worth a little more than the valuation of the highest currency you may transfer them to.

The contradiction here, though, is that if flexible points are always worth a little more than the valuation of the highest currency you may transfer them to, then any transfer will be from a higher value point to a lower value point, and will seem like a "bad deal". That's why you don't transfer speculatively.
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Old Aug 31, 16, 1:06 am
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Originally Posted by sbm12 View Post

My HotelHustle tool collects thousands of data points for cash and award costs. Looking at the recent data for NYC Hyatt properties I see the following averages:
Do you have a calculator for award ticket redemptions?
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Old Aug 31, 16, 2:09 pm
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Originally Posted by wco81 View Post
Do you have a calculator for award ticket redemptions?
Did you try the www.hotelhustle.com link in the post you were replying to? That site calculates the cpp on each of the results from your search! (It shows the cash cost, the points cost, and the calculated cpp. It also shows the points + cash cost in some programs when available, but there's no sane unambiguous way to compute cpp for those, of course; you just have to use common sense to know when they're a good value.)
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Old Sep 12, 16, 6:38 pm
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Originally Posted by keitherson View Post
Given that many credit cards now offer 1-2% cashback, if you're not getting at least 1-2cpp for your redemption compared to the actual cash equivalent, you're not redeeming for good value.
With a CSR, regular spending earns 1 point per dollar. And 1 point is worth 1.5 cent when redeeming for travel. So, the baseline is 1.5% when redeemed for travel. Which is less than 2% cashback, but still not too bad. And the 2% cashback cards that I know (Fidelity VISA, Citi doublecash) both have 3% foreign transaction fees.

Dining/travel spending with the CSR earns 3 points per dollar and can be redeemed which is 4.5% back when redeeming towards travel.

I have yet to see anything that makes sense in terms of the Chase UR points really being worth more than the base 1.5 cents. It does not appear to be the case when transferring to partners and redeeming for economy tickets. And those awards' availability tend to have limited inventory and blackout dates.
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Old Sep 12, 16, 7:18 pm
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Originally Posted by madbrain View Post
I have yet to see anything that makes sense in terms of the Chase UR points really being worth more than the base 1.5 cents. It does not appear to be the case when transferring to partners and redeeming for economy tickets. And those awards' availability tend to have limited inventory and blackout dates.
Doesn't UR transfer 1:1 to United?

So when I booked a business class round trip to Alesund Norway from LAX with 140k UA miles (originally reserved as AC via Toronto both ways across the pond, but a day out I was able to change the outbound to an LH nonstop to FRA), when I was considering a $3000ish LH premium economy ticket as an alternate backup in case I couldn't get it with miles, how is that not worth at least 2+ cents?

(Now, I didn't transfer UR to UA, I already had more than enough UA miles. But if UR:UA is 1:1, what's the difference whether I had actually transferred or not?)

I generally don't use miles for economy flights, so I doubt I see cpp worse than that on my typical redemptions. Though the cpp is harder to calculate for most of my travels where if I couldn't get a business class redemption with miles, I simply wouldn't go on that trip at that time (because I can't afford to pay cash prices for most of the business class trips that I fly). So how exactly do you value "priceless" in cpp?
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Old Sep 12, 16, 7:50 pm
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Originally Posted by sdsearch View Post
Doesn't UR transfer 1:1 to United?

So when I booked a business class round trip to Alesund Norway from LAX with 140k UA miles (originally reserved as AC via Toronto both ways across the pond, but a day out I was able to change the outbound to an LH nonstop to FRA), when I was considering a $3000ish LH premium economy ticket as an alternate backup in case I couldn't get it with miles, how is that not worth at least 2+ cents?

(Now, I didn't transfer UR to UA, I already had more than enough UA miles. But if UR:UA is 1:1, what's the difference whether I had actually transferred or not?)

I generally don't use miles for economy flights, so I doubt I see cpp worse than that on my typical redemptions. Though the cpp is harder to calculate for most of my travels where if I couldn't get a business class redemption with miles, I simply wouldn't go on that trip at that time (because I can't afford to pay cash prices for most of the business class trips that I fly). So how exactly do you value "priceless" in cpp?
I'm the opposite. I have never booked a business or 1st class ticket. I'm not interested in paying extra for them, whether in $ or in points/miles.

Transferring UR to United at 1:1 seems to get <= 1.5 cpp for economy tickets. Assuming an award flight is even available, which, so far, they are not, on the dates I checked, making them worth 0 cpp to me when transferring to United.

I'm just not seeing the estimated 2.1 cpp value for UR points.
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