Calculating the value of points and miles is impossible. I’ve declared this before (Impossible point valuations and the joy of free) and no one has since convinced me otherwise. The argument boils down to this: the value you get from your points and miles depends upon how you use them. You may use your points for maximum value towards a dream vacation, or you may use points for minimal value by redeeming for items, such as that new microwave oven you’ve been eying. Or, maybe you won’t use your points at all… ever. With examples like these, points can be worth a lot, a little, or nothing at all.
Still, people want to know what points are worth. Consider these real world questions:
- I received an offer from Club Carlson for 30,000 points after one stay. Is it worth it for me to check into a cheap Club Carlson hotel just to get the points?
- The Amex Hilton Surpass card has great category bonuses: 6X restaurants, gas stations, and supermarkets; 3X everywhere else. Should I use this card instead of my 2% cash back card?
- I’m about to buy a microwave oven from Sears. My favorite cash back portal is offering 5% cash back at Sears and the Marriott shopping portal is offering 8 bonus points per dollar. Which is better?
Fair Trading Prices
In order to try to answer questions like those above, I developed Fair Trading Prices for points and miles. These are estimates, not of what points are worth, but rather how much people inadvertently “pay” for points by giving up other available rewards. I’ve talked in length about Fair Trading Prices in the past, so I won’t belabor the point here. If interested, please see:
- Fair Trading Prices
- Amex EveryDay cards deflate Fair Trading Prices, Ink Cash outshines Ink Plus, Freedom outshines both, and more…
- Fair trading prices explained
- Fairer hotel trading prices
Hotel Point Values
Another way to estimate the value of points is to compare redemption point prices to actual cash prices. For example, if a hotel charges 10,000 points for a free night and the same hotel charges $200 cash per night, then we can say that redeeming points for a free night at that hotel will give us 2 cents per point value. Of course, that’s just a rough approximation since a reward stay may be less valuable since it doesn’t earn points and may not earn elite stay credits (depending upon the chain). On the other hand, a reward stay may be worth more since taxes aren’t usually included in award stays, and some chains do not charge evil resort fees for award stays.
Also, many will quibble with the term “value” by saying that they personally wouldn’t value the particular hotel in our fictional example as highly as $200 per night. Maybe, for example, there are similar hotels in the area that charge only $125 per night. In that case, it may make sense to estimate value using the best available rate rather than a particular hotel’s rate. Fair enough, but I’m going to ignore that line of thinking for the rest of this analysis because I don’t have any such data and I’m the author — I can write what I want.
With objections swept under the rug, let’s look at a new option for estimating hotel point values: Wandering Aramean’s Hotel Hustle tool. This tool is primarily designed to help you compare paid prices to point prices when searching for hotels. For example, let’s say I’m looking for a hotel near the Atlanta airport. Hotel Hustle shows me both the cash price and the point price of nearby hotels:
Wow, I can get 4.38 cents per point value at the Hyatt Regency Suites Atlanta Northwest! Good stuff. Even better, for the purpose of this post is that Hotel Hustle has a page showing average point values gathered from real world searches like these.
Point acquisition cost vs redemption value
Fair Trading Prices can be considered estimates of the acquisition cost of points and miles. The Hotel Hustle data, meanwhile, can be considered estimates of redemption value.
The ideal rewards program is one in which points are acquired cheaply but redeemed for great value. To see which chains fit that profile, I’ve put the Fair Trading Price data together with a snapshot of Hotel Hustle data. You’ll see below that the Fair Trading Price for most hotel chains is less than the Hotel Hustle median. This means that in 50% of user searches, the observed redemption point value for these hotels is higher than the estimated point acquisition cost (the Fair Trading Price). That’s a good thing! I’d argue that this means that 50% of the time, people can get a “good deal” by using their points instead of cash for these hotels. Hotels with this profile are highlighted in a pale greenish color (not to be confused with the puke-green color in the table header):
|Fair Trading Price||Hotel Hustle Median|
Another way to look at the same data is to pretend that points can really be purchased at the Fair Trading Price, and then estimate the % discount one would get by buying and using points rather than paying cash for hotel stays. This time, I’ve sorted the results from best to worst:
|% Saving(Save this much or more 50% of the time, if you could really buy points at the Fair Trading Price)|
Some interesting results pop out of the above table. First, if it were possible to straight up buy points at Fair Trading Price values, you would get good value from most hotel chains, with Hilton and SPG as lone exceptions. Second, Hyatt is awesome. If you could buy Hyatt points at the current (August 12 2015) Fair Trading Price of 1.11 cents each, you have an excellent chance of getting very large savings.
If you could run out and buy hotel points at the Fair Trading Price rates, the above tables would show you which chains are worth investing in. Unfortunately, you can’t. Sometimes, though, there are sales on points (via Daily Getaways, for example). In those cases, you could do as I did above and compare the point purchase price to the Hotel Hustle Averages to see if those points are a good deal.
The tables above can also help inform point earning through paid hotel stays. If you’re planning paid hotel stays (for work, maybe?), points earned from Hyatt stays are more likely to result in big future savings than, for example, points earned from Starwood stays… all else being equal.
The Fair Trading Prices specifically for Hilton and SPG are calculated by comparing the point earnings available through credit cards (Amex SPG card and Amex Hilton Surpass card) to a no-fee 2% cash back card. The charts above suggest that you would have to cherry pick the best hotel redemption options to do better with those credit cards than with a 2% cash back card. In other words, for hotel stays, putting spend on a 2% cash back card will likely get you more hotel night value than the same amount of spend on the SPG or Hilton cards.
Confusingly, the tables above do not mean that Hyatt points are worth more than SPG points. Not at all! SPG points are much harder to acquire so they have a higher Fair Trading Price. If you can get SPG points cheaply, then do it. However, buying them at the current Fair Trading Price of 2.16 cents each is probably not a good idea.
Back to the point…
I started this post with the assertion that calculating the value of points is impossible, but then went ahead and introduced two options for estimating point values. It’s often important to have a rough idea of what points are worth, so I believe that it’s worth trying to estimate these values even if it’s impossible to get it 100% right. You need to know which portal to use, whether it’s worth going out of your way to accumulate additional points, which credit cards give the best rewards, and whether to use points or cash for a stay (or a flight).
So, which metric should you use? Fair Trading Prices or Hotel Hustle values? My approach is to use Fair Trading Prices anytime I’m concerned with acquiring points: when choosing a shopping portal, for example. I would use Hotel Hustle values to estimate how much value I should get from my points. When using points for a hotel stay, for example, my goal would be to get better value per point than the median Hotel Hustle value.