On my mind: Buying points without a plan

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Every now and then it’s possible to buy hotel points or airline miles cheaply.  For example, Hilton frequently offers their points for a half cent each.  IHG also sometimes makes it possible to indirectly buy points at about a half cent each, or less.  And Avianca regularly offers their LifeMiles miles for about 1.4 cents each or less.  They even offer a subscription in which you can buy points monthly for as little as 1.35 cents per month.

Similarly, transferable points programs often offer transfer bonuses.  At the time of this writing, for example, Amex is offering a 30% transfer bonus to Virgin Atlantic.  That means that every 1,000 Amex Membership Rewards points transferred will result in 1,300 Virgin Atlantic points. You can find current transfer bonus promotions here.  To me, these transfer bonuses are very much like point sales.  While these bonuses are in effect, you can use your transferable points to “buy” airline miles or hotel points more cheaply than usual.

Our standard advice: Don’t buy without a plan

Every time we write about a point sale or a transfer bonus, we write something like “don’t do it unless you have a concrete plan for using the points.”  The reason for this advice is that, without a plan, you might end up getting less value from your purchased points than the amount you paid (in cash or in transferable points).

For example, with one exception that I can think of, Hilton’s top tier properties cost 95,000 points per night when standard rooms are available.  With Hilton’s 5th Night Free awards, a 5 night stay would cost 380,000 points.  If you have plans to go to such a hotel, it can be worth it to buy the points at a half cent each: $1900 for 380,000 points.  That can be a bargain for a 5 night stay considering that some of these top tier properties cost $1,000 or more per night.

But if you buy points without a specific plan for how to use them, you may end up disappointed.  When you’re ready to use your points, you may find that standard rooms are not available at the place you want to stay.  Or, you might find that Hilton has raised award prices.  Or, you may find that cash prices are actually dirt cheap on the dates of your visit and so your $1900 “investment” ends with a poor return.

Pondering new advice…

My recent post about Choice points has me reconsidering the above standard advice.  The trigger point came when I was able to stay in a great little Inn in Princeton for 20,000 points per night instead of $400 per night.  I got 2 cents per point value from Choice points which I had purchased on sale for less than half a cent each.  I didn’t have a plan for those points when I bought them and yet, over time, they’ve consistently led to outsized value.

While I had that reserve of points, I used them opportunistically.  Each time I needed a hotel stay, I checked the Choice website for options.  Most of the time I didn’t like the available options, or the options I did like didn’t offer good value for my points.  But every now and then I struck gold and found that my points were super valuable.  Now I’m eager to replenish my stockpile. Next time there’s a good sale on Choice points, I’m in.

Hilton is a different story.  I already have a large stockpile of Hilton points partly because I bought lots of points during a sale years ago.  That proved to be a mistake: I’ve rarely found uses for those points where I’d get much more value than I paid.  Don’t get me wrong, I know that there are good values to be had in Hilton’s program, but for whatever reason my travel needs haven’t led me to them.  So, with Hilton, I don’t think I would look to replenish my stockpile once it’s spent… unless things change.

Things are even worse for me with Radisson Rewards points.  Back in the day when the program was called Club Carlson, there were easy opportunities to rake in tons of points.  So I raked.  Later, Club Carlson devalued their program when they took away the credit card option to book 2 award nights for the price of one.  Since then, I’ve rarely used my remaining points.  These days, if I find a Radisson hotel I want to say in, I don’t worry about the point value — I just spend the points.  They don’t do me any good sitting around.  At the same time, I still buy Radisson points each year… sort of.  I have both the business and consumer Radisson Rewards cards, each of which gives me 40,000 points per year in exchange for the annual fee ($60 for the business card and $75 for the consumer card).  You can think of this as me buying 80,000 points each year for $135.  That’s a per-point price of only 0.16 cents.  Given that the points are usually worth closer to 0.4 cents each, I’m a buyer even though I don’t have any near term need for those points.

Where does that leave us?  Sometimes it’s good to proactively buy points without a plan and sometimes it’s not.  It’s good when you’re confident that you’ll get significantly more value from the points than what you paid, even if you’re not sure right now how you’ll do that.  It’s bad if there’s a good chance that the points will be used for less value or, worse, not get used at all.  It takes time and experience to get a sense of whether or not you’ll use points to good value.  It also helps to have deep knowledge about the point programs and about your own travel style.  With Hilton, for example, I’d argue that the best values are at the bottom and top end hotels.  If you’re likely to use your points at either extreme, then you might do very well buying points.  If you’re more likely to use points at mid-tier hotels, you might not get good value… unless you tend to book rooms during peak cash price times (New Years eve in New York, for example).

Back to standard advice… with a twist

I don’t think there’s a simple formula to help decide whether or not it makes sense to buy points.  The usual advice “don’t buy without a plan” is about as good as it gets.  However, I think it’s OK if the “plan” is a bit vague.

For example, when I see the opportunity to buy Choice points at a half cent each, or less, I’ll do it.  My “plan” is to continue to do what I’ve done before: opportunistically look for good value uses for my points.  When I find those uses (and history tells me that I will), I’ll spend the points.

Similarly, as I described above, I’ll continue to buy Radisson points for 0.16 cents each even though I rarely find great value in that program.  I’ll do it because, it doesn’t take a great redemption to make 0.16 cents a great deal.  My “plan” is simply to make sure that I use the points for significantly better than 0.16 cents each.  For example, I took a look at pricing for a random night at the Radisson Blu Chicago.  The cash price was $239 and the point price was 70,000.  Each point, then, is worth 0.34 cents towards a room.  That’s hardly an amazing redemption, but given that I bought points at 0.16 cents each, it’s a very good deal: half price.

Final answer: Before buying points make sure you have a plan to get significantly better value than you paid.  The best plans are concrete: your plan is to use the points for a specific award on specific dates where you know that the awards are available.  But vague plans are OK too if you know what you’re doing.

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