There have been several threads in which people have asked whether it is better to redeem xxx miles for trip A or whether it is better to just fork out the $$. What I am wondering, is what is the most common way to evaluate miles. I am having a bit of trouble deciding whether to use miles or pay for my next trip

BA (which I am having availability issues with currently, but hopefully should sort itself out) is 66,666 miles (there was a cc promotion) + $469 taxes in Club World.

If I were to buy the ticket, it would be in Economy. $803 on Emirates including taxes.

There is no way I would fork out the $2100 (actually a good deal) to fly Business on BA in this situation - incidentally, BA is the cheapest option.

So in my case, are my miles valued at (803-469)/66 666 = $0.0050 or (2100-469)/66 666 = 0.0244

I am assuming neither is really correct; the first doesn't account for #1 the additional enjoyment I get from flying business and #2 the fact that BA is nonstop vs EK's 1 stop (and the fact that i HATE EK with a passion ) However, I don't think the second is correct because I would never fork out $2100 for the BA J ticket.

Furthermore... if I let the BA miles sit, it is unlikely that I will be able to use them for something useful. MFUs are good in theory, but I rarely fly BA (will start more after my mom had a good experience) as it is and even then it will usually be as part of a multi-city itinerary never purchased from BA.

There are just so many variables that I can't decide how to get a true value.

So, my friends, the question is, how do you value your miles?

Cheers,

I have always been a proponent of valuations based on actual cost of miles earned versus trying to figure out if miles are a good value compared to a 'retail' fare. Admittedly, this approach has become more complicated over the past couple of years with the onslaught of new taxes, fees and now the ever-gobbling surcharges.

Further, the MIX of how one earns miles directly impacts the value of the ACTUAL cost per mile valuation, as the miles earned by flying require a hard cost on airfares whereas miles earned by credit cards are essentially a FREE byproduct of necessary spending anyway. Top-tier status on an airline can result in more RDM bonuses that increase mileage balances. And the strategic selection of a credit card also can result in more miles (ie- the 5K bonus per 20K airline transfer of SPG Amex).

Fictional examples (excludes taxes for clarity, assumes 50K RDMs per $5K airfares):

#1 top tier status; medium credit card spend
Earned:
50K EQMs + 50K Plat elite bonus RDMs= 100K RDM;hard cost:$5000 of airfares
40K SPG Amex = 50K RDM with 10K bonus transfer; hard cost: $0

Redeemed:
150K US-Australia J award

Cost per mile: $5000/150,000 miles= .03 per mile
HARD COST OF MILEAGE AWARD: $5000

#2 no status flying; lots of credit card spend
Earned:
50K EQMs + 0K Plat elite bonus RDMs= 50K RDM;hard cost:$5000 of airfares
80K SPG Amex = 100K RDM with 10K bonus transfer; hard cost: $0

Redeemed:
150K US-Australia J award

Cost per mile: $5000/150,000 miles= .03 per mile
HARD COST OF MILEAGE AWARD: $5000

#3, no flying; lots of credit card spend
Earned:
0K EQMs + 0K elite bonus RDMs= 0K RDM;hard cost:$0 of airfares
120K SPG Amex = 150K RDM with 30K bonus transfer; hard cost: $0

Redeemed:
150K US-Australia J award

Cost per mile: $0/150,000 miles= .00 per mile
HARD COST OF MILEAGE AWARD: $0

#4, lots flying no status; no credit card spend
Earned:
150K EQMs + 0K elite bonus RDMs= 150K RDM;hard cost:$15,000 of airfares
0K SPG Amex = 0K RDM with 0K bonus transfer; hard cost: $0

Redeemed:
150K US-Australia J award

Cost per mile: $15,000/150,000 miles= .10 per mile
HARD COST OF MILEAGE AWARD: $15,000

#5, lots flying with top tier staus; no credit card spend
Earned:
75K EQMs + 75K Plat elite bonus RDMs= 150K RDM;hard cost:$7500 of airfares
0K SPG Amex = 0K RDM with 0K bonus transfer; hard cost: $0

Redeemed:
150K US-Australia J award

Cost per mile: $7500/150,000 miles= .05 per mile
HARD COST OF MILEAGE AWARD: $7500

#6, Strategic Mileage Runner W/ Status Who Earns RDMs at .025
Earned:
75K EQMs + 75K Plat elite bonus RDMs= 150K RDM;hard cost:$3750 of airfares
0K SPG Amex = 0K RDM with 0K bonus transfer; hard cost: $0

Redeemed:
150K US-Australia J award

Cost per mile: $3750/150,000 miles= .025 per mile
HARD COST OF MILEAGE AWARD: $3750




The BIS folks definitely have a far less desirable value proposition than the credit card spendthrifts, no matter how much FFP status!

IMHO one shouldn't calculate the CC spent at ZERO because there are plenty of cash rebate cards around that offer anywhere from 1% to 2% cash rebate.

Anyway there is never going to be a valuation that would fit all.

True. But, people who use credit card points as a means of topping off/supplementing their mileage accounts do not get cash rebates.

Those cards tend to have their own internal 'mileage' programs like Capitol One or Thank You Points whereby a 'free' ticket is actually purchased by card company on behalf of member, with no bearing on member's FFP account balances.

I think the point holtju2 is trying to make is that people are choosing to take miles/points (such as with the SPG AMEX card) instead of getting cashback. Thus, the cost of the miles/points is actually the lost opportunity to take the cash. Since 1% cashback cards are the defacto standard, 1 cent per mile/point should be the minimum cost you are assigning in any of your calculations. I would further argue that credit card spend for things like gas & grocery purchases should use 3 cents per mile as the cost since that is the going rate on the Chase Freedom card.

I like the idea of valuing miles based on "cost to acquire", even if that method is imperfect.

One big issue I have with those who think their miles as worth some high number-10 or 15 cents each, for example-because they took (or could have taken) a high cost trip for those miles. The problems with this method are:

1. Using readily available airfares to value miles, the use of which is geatly restricted. For example, using FC fares to Europe to value miles even though you can buy the FC tickets on a walk-up basis, while using miles means you have to plan a long way ahead, and often can't go when you prefer.

2. Ignoring cheaper fares. Example: You could use $7,000 as the cost of business class to Europe since that's the fare on several airlines. But a 50 day advance ticket on CO is less than half of that. Miles would save you the cheaper fare, as that's the one any savvy customer would buy.

3. Present value. Building those miles takes time, and the cash in the bank you could have had would earn interest.

4. Miles devaluation-That risk is there until you get the award.

5. Unused miles-like those green stampes in the kitchen drawer, scattered miles may never be used.

Valuing cc purchases at 1 cent per mile is certainly an option.

My only concern with opportuinty cost, is, where does it end?

One could argue that people fly connections instead of nonstops to generate more RDMs, but at the opportunity cost of their being more productive with their time. At $15 per hour, someone who elects a connection trip at 4 hrs. vs. a nonstop at 1.5 hrs. should theoretically add $37 per one way connection to their 'cost to acquire' miles.

For the sake of simplifying an admittedly not so simple issue, it's definitely objective to determine how much money one HAD to spend for the express purpose of earning miles. Airfares MUST be purchased to generate RDMs, credit card spend (for non-airfare purchases) that generates RDMs is a pure byproduct of that spend and does not have a hard cost...only an opportunity cost.

sorry, hit the wrong button before it's time...

I value my miles very differently. Given the choice between paying for a ticket or using miles: I generally pay for the ticket, since I want to accumulate the miles. The only exception has been a SCL-IPC flight in business class for me and my aunt.

To me, miles are the result of my quest for status on AA. Status to me means fewer hassles when I travel.

The actual use of my miles has generally been tickets for my family. The comment from my grandmother (who flew business PTY-LAX for the first time in the life) in front of everyone at our family's gathering was more valuable to me than the cost of the ticket itself. Or, the thanks that I got from my sister and her husband when I surprised them with an upgrade on SAN-BDA was also far more valuable to me than the cost of the ticket. Or, getting family members into the Admiral's Club while we wait for the next flight, etc, etc... I think that you get the idea.

Granted, my approach is not easily quantifiable in dollars and cents. I could probably use my miles better (from a strictly financial point of view). However, the personal enjoyment that I get from using them far outweights financial considerations.

In today's market one should put a value of ZERO on every mile they earn because tomorrow your legacy may be history.

Spend them as fast as you bank them.

That is my philosophy as well. I know its akin to heresy on the board but having tons of miles stored away waiting for the perfect storm is crazy nowdays IMHO. I am loyal to AA and OW for the perks I get, not the miles. The day they take away my perks, ta ta, bye for now!!!

I have always said that it is not wise to "bank" the miles and "save" them for retirement. I have more than million miles/points currently on AA/UA/BD/NW/VS and planning on burning 600K to 700K this summer. Always try to burn them at approximately the same speed I earn them.

[QUOTE=beaubo;9757329]Valuing cc purchases at 1 cent per mile is certainly an option.

My only concern with opportuinty cost, is, where does it end?

The opportunity cost of working instead of reading FT?

Very foolish if you have good uses for miles. (Diversification is wise for major earners as it reduces risk of complete loss). GM stock is worth more than $0 even though it might become worthless. Only on the day I know GM is bankrupt does their stock become worth $0.
Agreed!

There are two categories of miles earners: those who have good uses for the miles they earn and those to let them pile up. Those who use them as fast as they earn them would be quite foolish to value miles at ZERO!

That is valid for the true mileage whore.

I would go with your method, but only include the marginal spend that was done specifically to earn miles.

For example, I'm going to Australia on Saturday. I'll get around 20000 miles in my AC account for the round trip. But I would have gone anyway, probably on the same airplanes, so it's not like I (rather, my employer) really spent anything to get the miles. They were just given to me.

Sometimes I'll buy up to get a miles earning fare, or buy a more expensive *A ticket to consolidate miles. So sometimes there is a marginal cost for miles, over and above the actual travel.