Posted by William Charles on November 5, 2018
Misc

Published on November 5th, 2018 | by William Charles

104

Common Loyalty Points & Miles Valuation Mistakes

At the end of last month there was a incredibly small window of opportunity to redeem Hilton points at Amazon for 0.5¢ per point. One thing I noticed was some people saying the deal was bad because they value Hilton points at X amount per point, some of these valuations were (in my opinion) absurdly high and made me worry that readers weren’t properly valuing their points. After speaking with some of these readers, here are some of the more common valuation mistakes made.

The reason I think points & miles valuations are important is that in many cases it’s possible to effectively cash out your points, whether it be from For the context of this post we will be primarily talking about Hilton points and opportunities, obviously this is equally applicable to other loyalty currencies.

Nobody Pays List Price

When looking at valuations, one common thing people will do is look at how much a certain redemption would cost if you’re paying cash. For example a property might cost 10,000 in points or $150. That’s an easy 1.5¢ per point in valuation. Unfortunately that doesn’t take into account any stackable opportunities. For example with Hilton at minimum you should be getting:

  • 2% cash back when using a rewards credit card
  • 1%+ cash back when going through a portal

In addition to that you’re also earning elite night credits on a paid stay and points. At minimum you’re getting 10 Hilton points per $1 spent. In reality Hilton always has additional promotions you can stack it with. There are frequent American Express offers for different Hilton brands & you can currently get double or triple points. So on that $150 stay you’re actually getting:

  • $4.5 in cash back
  • Elite night credit
  • 3,000 Hilton points

If you use your own valuation of 1.5¢ Hilton per point that’s $45 in Hilton points for a total discount of $50. Even at a 0.5¢ valuation that’s still $15 in Hilton points. You’ll note I’m actually being conservative because if you’re a base member (e.g not silver/gold/diamond) you can actually earn 10% cash back and Hilton frequently lets you stack for even more points.

All of the above also assumes that you’re booking direct. If you’re not booking direct then you have even more options. We’ve talked about how to stack deals with Hotels.com to save 33%+ before. Other online travel agencies will often have sales/special offers as well.

Would You Stay In That Property If You Were Paying Cash?

When I’m not using points I find it rare that I end up booking a cash stay at chain hotel stay (unless there is a lucrative promotion) as other hotels are either cheaper, look nicer or are in better areas. The majority of ‘value’ when it comes to award bookings also usually happens at the low and high end (e.g properties costing 5,000 points or 95,000+ points). If you’d normally never book a hotel costing $600+ per night then it’s important to keep that in mind when valuing points. I find it easiest to think “if this hotel was on sale, how much would I pay in cash” and work backwards from there.

Most Brands Sell Points/Miles

Most loyalty brands now sell points and miles. For example Hilton sometimes has a points sale where you get a 100% point bonus, this means you can effectively purchase points at 0.5¢. I find it strange how many people will value Hilton points at some absurd rate like 1¢ per point, but then not want to purchase any at half that price. Obviously people have limited vacation days and if you already get enough points from other lower cost sources I can somewhat understand the argument but it’s still a stretch and even more so when those same people have cash stays where points could have been used.

Our Verdict

I understand that this sort of min/maxing isn’t for everybody and can ruin some of the enjoyment of this hobby. That being said it’s worth spending a small amount of time on this sort of thing so you make rational rather than irrational decisions. For a lot of people there is a reason they wouldn’t normally take expensive luxury vacations, yes this hobby does give you the ability to do that but would you be better served by spending less points/miles and turning some points into cash (e.g American Express Membership Rewards points into cash at 1.25¢ via Charles Schwab Platinum) to help pay off your mortgage sooner? You might decide that this hobby gives you the financial freedom to take those vacations that are a bit nicer, just make sure it’s a rational decision and that you don’t let lifestyle creep get the better of you.



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Charlie
Charlie

That was interesting, but what I’m really hoping you’ll discuss in a future post is how to value airline miles. The big-name points-and-miles bloggers don’t do a very good job of it, in my opinion.

Aaron
Aaron

OMAAT has done a great, three-part breakdown on how to value miles: https://onemileatatime.com/value-redeemed-miles/

Blue
Blue

That’s really solid content–a bit surprising given the source.

John
John

It’s hard. The best cash alternative may be with a different airline or during a flash sale. In addition, Krisflyer miles is always cited as highly valuable but they have terrible availability. So they’re incredibly valuable for certain days but worthless most of the year.

Darv
Darv

I don’t like it when people value miles based on hypothetical flash sales rates. Flash sales have a lot of conditions. Most importantly, you have to be willing to travel very soon. I don’t ever see myself as someone who will take advantage of a flash sale. Too, these flash sales don’t often apply during peak times which is when I travel.

Claiborn M Peterson
Claiborn M Peterson

That’s primarily because people value airline miles on aspirational J bookings of 10-12hours or more. In a situation where you are ok with a T fare class travel on overseas trips, now miles are now “worth” less to you. Yet this is overlooked because the rack rate for a J ticket is eleventy billion dollars.

Mike
Mike

Conceptually, everything in the post transfers to airlines. How much would your best care earn on airfare? How many redeemable and elite qualifying miles would you have earned? How much would you have been willing to pay out of pocket for the “$14,000” F ticket?

Chucks
Chucks

OMAAT has done a good job as mentioned. It’s not terribly difficult to value miles if you have a couple data points and are willing to walk through and honestly ask yourself some questions. YMMV, but given how often you go places and where should be possible to assess.

lenin1991
lenin1991

I’d ask the same core question posed above: if the airline were selling miles for X cents each, what’s the most I would I buy them for? As a personal example, I’d maybe buy UA miles at 1.2 cents, and DL miles at 1 cent — that’s my valuation. (Yes, this wi generally result in a much lower number than if you start with booking prices, but those are meaningless.)

Charlie
Charlie

If I had 58,000 United miles on the books, and I needed only 2,000 more for a 60,000 economy fare to Europe, I would pay 3 cents a mile for those final 2,000 miles. But that doesn’t make United miles worth 3 cents a mile in general.

lenin1991
lenin1991

The question isn’t what you’d pay in a constrained, specific scenario like that, but what you’d pay in a general case: a sale is announced today, you must buy today, and you have no specific redemption in mind. That price is what you value the miles at.

vince
vince

put differently how much would you sell 50000 united miles for

Avi
Avi

Yes, yes, 100 times yes.

Justin
Justin

Great post, Doc. My thoughts exactly. It is easy to get wrapped up in 10cpp valuations but taking a step back and thinking about how much you would have paid for that flight/booking is extremely important.

Tall T
Tall T

Does anyone actually value even the most valuable points currency anywhere close to 10cpp? I understand that people can sometimes “get 10cpp” on a redemption but that means people would theoretically also get 10% unbonused spend if they had that credit card…

Chucks
Chucks

10 cpp isn’t what people expect to get, but they’ll still claim they’ve gotten redemptions worth that much and as a result value the currency as an average is much higher.

CD
CD

Excellent post, 100% agree. I would that add devaluation risk and time value of money (immediate cash back vs. holding points for future use) also reduce the value of points.

Nick B
Nick B

I like this post a lot. As someone who usually stays in low end hotels and flies economy, the valuations used by a lot of blogs do not make a lot of sense to me as they are usually on the high end.

Yoni
Yoni

Nick B have to agree with you, I tend to be frugal, with MS changed so much and with building a war chest of points or miles becoming more of a challenge it’s hard to splurge on Intl 1st class seats (unless it is an insane value).

Although I will pay for business/prem economy on flights longer than 10 hours.

Unless it is the Hotel is for Vacation where the destination Is a resort and you doing more than sleeping and showering in the room I’m like you and would rather use points for 3-4 nights than a single night in a Suite or higher tier hotel.

Harold
Harold

I usually use the cheapest price in the same trip (but suitable time and reasonable transportation overlay) to value the airline miles I redeemed. I did feel curious how some people can redeem miles with some incredible values. For me, it’s normally around 1.5 cents to 2.4 cents per mile. But I like the first point you mentioned is that we can stack with some offers when paying cash for the trip (I personally never considered this). Thanks, DoC.

Chucks
Chucks

Your approach is very rational. People claiming incredible values are redeeming for cabins they’d have paid only a fraction of that for.

Mimi
Mimi

I had orphaned Hilton pts <10K and I was pleasantly surprised when I bought Sunrise VGCs that it offered the pts as partial payment so I used all of it and the rest paid with my IT card.

Justin
Justin

Great post! I also hate how people will say they traveled for free when spending points. If someone spent, 100,000 Ultimate Rewards for a flight, they are at the minimum spending the $1000 that they could have cashed those points put for. That doesn’t even take into account the opportunity cost of earning those UR instead of cashback on a higher earning card.

Ado
Ado

Thats what makes this hobby great. I have friends who only care about getting cash back, while i use most of my points for travel. Since i travel few times a year to Japan, i will always use my miles for business/1st class tickes due to 13+ hrs flights. Paying 60k to 90k amex rewards points for the above tickets is a no brainer for me.

MrDioji
MrDioji

Right… But that $1,000 is also “free”. So you can choose free travel or free money. They chose free travel. “Free” breaks down a little when you consider fees : AF, MS, $5.60, etc

Justin
Justin

I consider it all currency earned. I earn my UR and MR through churning and MS. I also earn other money in other ways.

MrDioji
MrDioji

I also earn my points and miles, since I spend a lot of time and energy keeping up with everything in the hobby. However, for many, like my sisters who spent just 3 minutes signing up for the CSR and getting an easy 100k UR (at my advice), it is free money/travel.

Abey
Abey

Well said MrDioji

Alan Apar
Alan Apar

And that’s the difference between making economic decisions emotionally and making them rationally – emotionally it is ‘free’, rationally it cost you $1000 to use the points on travel.

Nobody says you need to be rational when making decisions – particularly marginal decisions like how you spend your travel budget (and if this isn’t a marginal decision for you give your actual income/assets then you have bigger problems to address) – but it is healthy to recognize when you are being emotional instead of rational and understand how you could go about making the decision rationally instead.

Darv
Darv

Here again, it’s true you can cash out UR for 1 cpp. Or last week, Hilton points for 0.5 cpp. Whatever. Although, for Hilton, since I can buy Amazon gift cards for 5% off (or 7.5% if redeemed for travel), it’s less.

We could use cash to pay for…anything. Yes, I could make a principal only payment on my mortgage. Of course, at this point almost all my mortgage payments are principal anyhow since the front end of the mortgage is almost all interest. We could slice and dice this argument a few ways too.

Or I could take the cash and put it into my retirement account. And then maybe I can retire one month earlier.

But am I going to be able to walk and hike around all these places when I’m 65 or 70? No. Am I even going to be alive? Probably, but no guarantees.

I imagine most of us here are responsible with saving for retirement or keeping out debt at responsible levels.

Isn’t there a difference between acquiring points from a Hilton signup bonus and buying them at 0.5 cpp? I’m not following the logic in the main post. Now IHG points on the other hand, yes I’ll buy those but they have better sales and fourth nights free.

Tall T
Tall T

You have a good point, this bloomberg article touches on your thought process. Sure you could save extra money and retire early but you could also spend some of that money now and enjoy you life just a little more right now. https://www.bloomberg.com/opinion/articles/2018-11-04/retiring-early-sounds-appealing-but-is-impractical

Obviously there are varying degrees to this thought process but if your financially responsible you can have your cake and eat it to.

Darv
Darv

Just read it–saw a similar one in the WSJ last week.

We’re already an extreme group of people. If we’re here on this board, we’re awfully savvy people. I’m trying to find the balance of getting almost all the rewards of this hobby without being consumed by it. Honestly DoC makes my life so much better and easier, and helps me cut down on not having to read the threads at Reddit as much.

This hobby takes a lot of discipline. It takes similar discipline to be aggressive saving for retirement and making good decisions about major purchases or avoiding debt. Debt can be good. Our mortgage is great debt. After inflation it’s nearly free cash flow for another 20 years.

Yeah I think balance is the key. Hedging bets. Hopefully save enough so retirement can be comfortable or even occasionally luxurious. Keep everything else at healthy levels. But live a little–now and again down the road (before retirement).

Alan Apar
Alan Apar

“Isn’t there a difference between acquiring points from a Hilton signup bonus and buying them at 0.5 cpp?”

Not rationally there isn’t, once you have the points it doesn’t matter how you got it- if you wouldn’t pay .5 cpp then it isn’t worth that much to you (at least the next marginal point isn’t worth that much to you).

Darv
Darv

It comes down to whether or not I want $1000 in Amazon balance or 200k Hilton points. My personal situation is that I have $500 Amazon balance and have 525k Hilton points. I am fortunate to have many currencies. I am choosing to diversify. I’ll hold the Hilton points for now. It’s important to me to have a good lodging experience where I go. Sometimes it’s a Marriott, sometimes a Hilton, sometimes an IHG, and sometimes there isn’t any major chain with a great property. It doesn’t make sense to me to liquidate my Hilton points and have them sit in Amazon. I buy things from Amazon but I spend at Target, Menard’s, Walmart too. Bottom line for me the Hilton points I have are keeping my options open. I wouldn’t buy Hilton points at 0.5 cpp but I will hold them expecting to get at least 0.6 cpp. I got all mine from sign up bonuses.

Alan Apar
Alan Apar

“I wouldn’t buy Hilton points at 0.5 cpp but I will hold them expecting to get at least 0.6 cpp. I got all mine from sign up bonuses”

And again, that is all well and good but it is still not rational (you could introduce other circumstances to maybe make it rational but as stated it isn’t). From a purely financial stand point it is irrelevant how you obtained the points in the first place and if you expect to use them for 0.6 cpp you should be willing to pay 0.5 cpp for them. Not everything is life is about pure financial decision making – but I do believe it is important to be honest with oneself when they are drifting from financial optimization and not trick themselves into thinking it is.

Darv
Darv

Here’s a real world example. We need to stay five nights in London. There is a Hilton property that works for us and there is an IHG property that works for us–both have amenities we’re looking for and don’t break the bank/are good points redemptions cpp. Let’s say I liquidate (not “cash” out because it isn’t cash) my Hilton points into Amazon balance. Now my option is to buy Hotels.com gift cards. Chances are good there are many hotels available that accept Hotels.com gift cards, but no guarantees. So if the IHG property is blacked out or otherwise not available and if I can’t find a property that suits us with my Hotels.com gift cards, then I need to pay cash to stay somewhere in London. I will never pay cash for the type of hotel I can stay in with my Hilton points. You would probably argue that I should stay at another place and keep that balance in Amazon. But then I wouldn’t go to London because I’m only going there once and if it comes down to it, will go somewhere else that has the lodging experience I’m looking for. Like I’ve said before, Amazon balance isn’t cash. It requires extraordinary discipline to not overspend when having a gift card balance. This assumes that everything I buy on Amazon with this balance is the best possible deal, which it’s often times not (which is why I said I shop at those other places). So you do what works for you, I’ll do what works for me. I’ll keep the Hilton points for now. I might end up liquidating them, but after two opportunities, probably not.

Alan Apar
Alan Apar

“It requires extraordinary discipline to not overspend when having a gift card balance. ”

It does, it also requires discipline to not overspend when you have ‘points’ instead of dollars. Your entire logic here is predicated on treating the ‘points’ as worth something different than the monetary value you can turn them into – which is the whole point, you are free to do so and maybe it does allow you to get over a hurdle and spend more on travel experiences than you otherwise would (but which you still value) – but it is just a form of mental accounting and not rational.

Darv
Darv

I also still don’t understand your logic of valuing the Hilton points if I got them through a signup bonus versus buying them. I would never buy Hilton points at 0.5 cpp. I need at least a 20% discount on my valuation of the currency to do that, and sometimes that happens with IHG because of the discount offered and leveraging with Premier 4th night free, which puts the discount in the range of 25-30% off .05 cpp. However I have never seen this opportunity to buy Hilton points, at best it would be 20% due to fifth night free. There is also no opportunity to cash out Hilton points, they are not worth 0.5 cpp to liquidate. So far there have been two opportunities, narrow windows to liquidate Hilton points with Amazon. But even if those are available again, it isn’t fair to value those points at 0.5 cpp. That balance is captive to Amazon. I would need to direct a lot of spending to Amazon to use that up, which would mean I’m paying a premium to shop at Amazon. So again, is it better for me to keep the option open of redeeming them at 0.6 or better with Hilton or should I lock myself into the Amazon balance? You already know my answer.

Alan Apar
Alan Apar

“I also still don’t understand your logic of valuing the Hilton points if I got them through a signup bonus versus buying them.”

The Hilton points don’t care how you got them and neither should you – they are worth exactly the same amount regardless. If you would never buy them for .5 cpp than they aren’t worth that much to you (at least the next marginal point isn’t worth that much to you if you wouldn’t buy it for that much).

Darv
Darv

How do I cash out Hilton points? Where do I do this? What is the valuation?

Brian C
Brian C

Very good post. Thanks!

Darv
Darv

It’s all about balance. Valuations are subjective. Be informed, but not to the nth degree. Use this hobby to get 95% of the benefits but don’t spend the time necessary to squeeze that last 5% value–because at that point it’s not value. “Some time” is relative. I probably have more time than most here since I work only 40 hours a week. I’m trying to cut down on the time I spend researching this hobby–both the earning and burning aspects.

Ryan
Ryan

True. I generally ballpark it and don’t worry about pricing out every little thing. Life’s too short to spend too much time and stress on it.

And also, some trips it’s more about reserving my cash budget for that trip for other parts of the trip (activity costs for example) by using miles/points for hotel and/or airfare, rather than a CPP concern. Of course, you still have to think strategically as there will be other trips where the value of the points/miles will be more important.

I collect and use hotel points very little anymore. Airbnb is a better option in many instances, at least for us. And other times we tend to favor smaller local properties and B&Bs/guesthouses…both for the experience, and often the better overall value in terms of amenities and service.

Good article though, DoC – food for thought!

Darv
Darv

I cashed out all my MR from Schwab. But I wouldn’t have done that if I didn’t have a mountain of AA miles. Now that I’ve been traveling thanks to this hobby, I found out that travel is an amazing experience and worth a lot of money–as in cash (to me). I would now spend a lot more on trips in cash than I would have had I never discovered this hobby. I tried traveling extensively and I love it!

Yeah William has great points above. I can find great use for my Hilton points. I need a great property in London and I need one for at least five nights. The cash price is over $2,000 for five nights, closer to $2,500 last I checked–Hilton London Bankside. I have Marriott, IHG, Wyndham, and flexible currencies.

I could go on. I have carefully researched hotel properties, read people’s experiences of Airbnb-type properties. I’ve spent a lot of time.

Sure, I could have cashed out those Hilton points to Amazon for $1,500 Amazon money. But Amazon money isn’t 100 cents on the dollar either.

Analysis paralysis is a big problem. But this is what I’m getting at…get good value from your points and call it a day. Don’t obsess. Some of what William is talking about above requires a degree of awareness that is obsession to me (clearly not to him). Maybe when I run out of points I will start stacking this and that, buy discounted hotel gift cards, whatnot. I’ll see. I don’t like holding gift cards long either though.

Chucks
Chucks

Valuations are subjective, but having a personal valuation helps in optimal decision making. I have a personal valuation on all the points I use, so if I’m on the fence about a card and offered another, say, 10k in points to keep it I can immediately assign a dollar value to that and know if I’m comfortably in the green taking the offer or not.

Darv
Darv

They’re subjective but what I meant by that is when to redeem at above/below the objective valuations. The Points Guy’s valuations, if slightly discounted, are objective. A person can consistently research possible redemptions and on average, get those valuations. What I mean is maybe like my situation. I could use 280,000 Hilton points to stay at a property that would cost $2,100 in cash if I paid for it with my Hilton Amex card. Or I could redeem those 280,000 Hilton points for $1,400 in Amazon money. To me it’s a no brainer to use the Hilton points for a stay rather than Amazon money because if I’m going to London I’m going to stay in a nice place and those properties cost a lot of money. I’m not the type who is going to stay on the margins of the metro or in a hostel or BnB. I want a hotel room and I like to stay in nice places in the heart of the city. But my example here is an opportunity to cash out for the objective rate of 0.5 cpp. However I just checked the property again that I’m looking at and it’s 0.73 cpp over five nights. I am making a subjective valuation that these points are worth more to me for lodging than to spend on groceries at Amazon. And we could analyze this more and more. Like if I have $1,400 in Amazon gift card balance, am I more likely to spend there than shop around for the best prices? Yes. Could I have gotten that $1,400 gift card balance another way for less? Yes. And on and on. The point is, I need a nice property in London and I’ve researched the cost per night it’s going to take for me to be happy staying there. So I know what it will cost whether I’m using any one of four hotel currencies or flexible currencies. In my case the Hilton redemption I have in mind is the best option. And this isn’t factoring in stacking or paying cash with a Hilton Amex card and whatever points I would get from those…which of course I would then cash out? I think I just did what I said I wouldn’t do in my original post which was analyze this to death. But I guess I wanted to prove that it’s okay to use Hilton… Read more »

Blue
Blue

On the cash booking, though you’ll probably end up with between 10-15 percent back as a rebate in points in addition to any other things you could stack like Amex Offers.

Darv
Darv

No doubt, there is opportunity cost. Or pay with a 2% cash back card.

I can’t afford to travel internationally if I pay cash. For me to get there I need miles and points from signup bonuses.

Until I run out of points I won’t consider paying cash.

tro
tro

I don’t think everyone said to cash out. What happens in a post like that is that people who are excited to cash out post a lot to try to figure out how to make it work, especially when there’s a suspicion that the opportunity might not last. People who do not want to cash out move on as they don’t want to read a bunch of posts about syncing accounts and how long it’s taking gift cards to arrive and whether it’s going to be clawed back.

So if 90% of the posts sound like they are in favor of cashing out that doesn’t mean that 90% of people would or should do that. It doesn’t mean that all those people think YOU should cash out.

Personally, I agree with the thrust of this post’s point, in that I don’t value at list price either, but I’m fine if you do so because I think part of what you are valuing (if I’m understanding you correctly) is the simplicity of having a straightforward number close to what most people actually pay, for attributes you actually value. It save you time in both the decision making and the redemption (because portals etc. also take time) and that’s important too, especially if you don’t particularly enjoy the process of analyzing itself.

Matt Katakis
Matt Katakis

This. You obviously don’t want to receive poor value on your points and miles. But it’s also not worth trying to squeeze out that little bit extra that you’ll waste in time and sanity in most cases. I made this mistake earlier on. Everyone wants the best value they can get, as they should, but unless you have unlimited time and resources you’re better off knowing your limits.

Jags
Jags

It’s to the bloggers advantage to say points are worth $0.015, $0.02, or even more per point. It makes points cards which I’m sure pay a big commission seem more valuable than they are.

That said I have a hard time comparing a points redemption to a “perfect” cash redemption because it’s so difficult to remember every single possible savings avenue you can stack. Either I forget to book with a portal, I forget about an AMEX offer, I forget about a target short term spend bonus, etc. I also value points because I do spend them. Cashback gets deposited into my checking account and then I’m reluctant to spend that money on vacations. There is a usability factor to points that I keep in the back of my mind.

David
David

+1

John
John

My personal valuation:
UR = 1.5 cpp (travel portal redemption)
MR = 1.26 cpp (Schwab redemption plus some minimal interest)
TY = 1.25 cpp (travel portal redemption)
Hotel points = 0.2 cpp (non-hotel redemption because I can always find a better cash deal for stays)

MickeyMouse
MickeyMouse

You lumped all Hotels info “Hotel Points”, but not all hotel points are the same.

In my experience:

Hilton is roughly 0.23 cpp
IHG is roughly 0.6 cpp (which can be increased during PointsBreak and with 4th night free, but I don’t consider it to be a true value with those which is why I say 0.6 cpp).
Hyatt is roughly 2cpp this week I booked a $206 Hyatt for 8k Points which is over 2.5cpp.

Another note to keep in mind is when paying in points you pay no taxes which in major cities can be up to 18%.

Ado
Ado

To add to your great post, when using hilton points you do not pay “resort fees” as well.

Mar
Mar

I agree with those valuations but even then you have to consider the fact you may have been able to find a cheaper option (or even the same option for less sometimes) not going through the travel portal for UR/TY points

Chucks
Chucks

Sounds reasonable. If you flew JetBlue with any regularity I’d expect TY and MR to be a bit better, especially with transfer bonuses coming around regularly. But YMMV obviously.

vipul
vipul

You should also take into account the 4.5% credit card cashback you lose when you book using points. So I would value UR points e.g. at only 1.43 cpp.

John
John

Good point. I hadn’t thought about that though it doesn’t change my strategy.

Mar
Mar

100% agree. Most people wouldn’t pay for first class or a super expensive hotel in the first place. If those things are your goals then points/miles make sense but for the vast majority of people cash back is the way to go with much less headache.

David
David

Honestly, I mean unless I can cash out the points for more cash than the flight/hotel/tour costs then it’s all the same to me. After doing this for 10+ years – I just love traveling and not having to budget my paycheck to pay for it! If I can open another credit card (or 5) and the points from that will cover my wife and I’s flights and hotel somewhere amazing – I’m stoked! I don’t know what kind of value to put on that bc many of the trips I would probably never take bc it would just cost too much. We did 14 nights in Hawaii on our honeymoon in Hyatt, Sheraton, & Hilton. Also covered flights, 14 days rental car, and a couple tours from points saved. Even staying at a super cheap yet decent 2-3 star hotel + an economy car and cheapest flight would’ve cost us minimum $2,700+! But we didn’t stay in a 2 star hotel, we stayed in 4 star hotels and were spoiled! The experience value for me is super high. We got a giant corner suite at the Hilton that sells for $750/nt. Of course I would never pay that unless my salary quadrupled but it was amazing nonetheless and we’ll never forget it!

Or I think of my round trip flights to the Middle East in business class. Sleeping and eating the 16+ hour flights away. I couldn’t ever pay $8k+ for it but 135k AA miles had a pretty priceless value for me. Or when in dubai (for free) I got a 64th floor suite upgrade at the tallest hotel in the world at the time (JW Marriot Marquis). Room was selling for over $500/nt and had a perfect Dubai skyline and Burj Khalifa view! Priceless experience again. All I had to do was click redeem on Marriott points I earned by putting my bills on my cc and paying no interest.

Most of those points redeemed couldn’t have been cashed out. Even if they could – I’d much rather make memories in a far away place than get some “hot new gadget” or new cups on a Amazon. Just about everyone in America can pay their bills and buy groceries, but not many people get to have international and luxury experiences that this hobby provides. I’ll choose the experience.

Darv
Darv

I agree 100%. This is pretty much how I operate with my points/miles.

Blue
Blue

Then the way to value the redemption is not what it is nominally priced at but what YOU would pay for it if given the option. So for example, I value one way flights to Europe in J at $1,000 because I would willingly purchase a flight for that amount if given the chance. The list price of the flight is irrelevant.

beat2def
beat2def

I agree with you completely. I went to the Cayman Islands and stayed at the Seafire Resort (IHG property) and it was incredible. I would never spend $700 a night on a hotel but with points I only paid the resort fair which was $64.00 a night. I use the points to vacation lavishly.
Though, I think what is being said with respect to the Hilton points is that by the time you factor in the portal, cashback (or points or both) on the credit card, hotel.com discounts etc you’ll likely only pay like .45 or .4 cents to stay at Hilton SO cash them out at Amazon for .50 cent THEN use the money from the cashout to pay your credit card when you use it to pay for the room. That way, you will have saved even more. Basically, when it’s cheaper to use cash then points, cash them out for the higher amount and pay cash (actually your credit card to get the points.)

more info
more info

Missing the point – You’re not analyzing all the cash back you would earn and what you could have done with that money. I travel all the time and I don’t hold back and I pay with cash, coming out ahead of most points people. A close relative of mine is a points guru and she comes out way ahead of most people with exotic travels, but we both have opposite approaches and come out somewhat evenly.

A guru on both points and cash back will show that cash back is better for most people and only the more flexible of travellers would benefit way ahead of cash back folks. The difference I’d look to is life happens and cash is fungible and points aren’t very fungible at a reasonable price. Also, appreciate that if you’re reading this and you are a points person, you’re likely in the top 10% of points experts – which means you may very well beat out the cash back approach, but >75% of your friends you get to use points won’t be as savvy and are way worse off for getting on the points system.

I just booked my first Airbnb trip and got a fantastic deal (1/8th the price it should have been in cash) across the street from the most luxurious hotel in the country I’m travelling to and I’ve stayed at before. The deal showed up because of a quirk – those quirks is how my relative finds 1st class flights around the globe for very few points. There are just as many quirks or opportunities in the cash market as there are in the points market. Become a guru in anything and you will exploit tremendous value.

Ferris
Ferris

Spoken like a true humble servant – I very much appreciate this post. You guys are great about not promoting a lavish lifestyle that places like TPG does, but instead one of simplicity, frugalness and honesty.

Sure, maybe some can get 2.5-3 cpp on a luxury flight, but what good is it if you could’ve spent 1/3 of the points on economy and still gotten from point A to B without a little free food and nap? It’s just consumerism and materialism wrapped up in ones ego.

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