Why hotel points give me more of a headache than airline miles

I’m an equal opportunity miles/points collector. I love airline miles and I love hotel points. Together, they can form the perfect vacation. However, while I’ve loved getting more into collecting hotel points over the past couple of years, they do give me a headache compared to airline miles. Let me explain.

When it comes to flights, I find it incredibly easy to decide whether I will use miles or pay for a ticket. I have a simple policy: I pay for domestic tickets and redeem miles for international tickets. Why? Because my upgrades domestically clear over 99% of the time, not to mention I travel entirely for leisure, meaning I can go wherever the low fares will take me. While I also travel exclusively for leisure internationally, I far prefer the comfort of first class (or business class), though I’m not willing to pay $25,000 for a ticket. Therefore, I obviously end up using miles.

At the same time, when it comes to valuing airline miles it’s important to keep in mind that the “value” of an award ticket shouldn’t be equal to the revenue cost of an airline ticket. In other words, if I redeem 125,000 miles for a ticket that would cost $25,000, I wouldn’t for a second claim that I’m getting 20 cents of “value” out of each mile, because I wouldn’t in a million years spend $25,000 on a ticket. Instead I might say that I’m reasonably getting two cents of “value” per mile (by my standard), since I would be willing to pay $2,500 for that ticket. So in other words, I rarely have a need to actually value miles. If I can find an international premium cabin ticket to a destination I want to visit, I’m getting a good value.

Now let’s talk about hotel points and what makes them “special.” As I mentioned above, I would never actually pay for a normally priced premium cabin international ticket. The cost is just too high. Hotels are a different story though. There are some nice hotels I would instinctively use points for (for example, any hotel beginning with the words “Park” and “Hyatt”), even if it’s not entirely rational.

Here’s an example: I’m thinking of staying at a Park Hyatt hotel which would cost 15,000 points per night, or has a revenue rate of $290USD per night. Before reading on, ask yourself, would you use points or pay for the stay?

I’m guessing most of you said, “use points.” Why pay nearly $300 per night when you can have the stay for “free?”

And that was my initial reaction as well — “of course I’m going to use points, I don’t want to pay nearly $300 per night for a hotel.” Well, based on what I’ve read, typically Hyatt points are considered to be worth anywhere from 1.5 to 2.0 cents each, which seems like a fair valuation. I realize just how tough it is to apply that standard, though, when actually making a reservation. At 2.0 cents per point a hotel room would need to cost at least $300 per night for one to logically use points in this situation. Let’s even take the value of 1.5 cents per point. At that rate, we’re valuing this at $225 (15,000 points x 1.5 cents each), meaning using points is $65 per night cheaper than paying for the room. But I’m conveniently forgetting to include the points I’m not earning for the stay (at least 2,000 points per night, though probably much more if there’s a promotion), the stay and night credit I’m not earning for the stay, not to mention the fact that I could use a confirmed suite upgrade for my reservation on a revenue stay, while I couldn’t for an award stay.

But again, going back to the “big picture,” why would I spend $290 per night on a hotel when I could just use points? I guess the decision making process is a bit easier for those of you that travel for work, since you don’t directly “pay” for accruing points. But like many others, I often mattress run. A mattress run that costs me $90 or so nets me about 6,000 points, which is right on the cusp of the value above.

And while I’m on the subject, I think redeeming for very high end properties (think hotels like the Park Hyatt Paris) isn’t that easy of a decision either. A night costs 22,000 points, which are “worth” anywhere from $330 to $440 depending on how much you value Hyatt points at. At that point I would probably just say “screw it, I’m staying at the Holiday Inn Express.”

Ah, the complex world of miles and points. Where do you stand? In the above example of $290 vs. 15,000 Hyatt points, which would you do, and why? Am curious to hear some other perspectives on this…

Comments

  1. > But I’m conveniently forgetting to include the points I’m not earning for the stay….

    The term you are looking for is ‘opportunity cost’.

  2. @ hobo13 — Yes, though I do feel “opportunity cost” has broader implications, since there are more things I could spend my money on than just the hotel when traveling. That $290 could be spent on a $90/night hotel and about 16 hours of massages (in Bangkok, at least… not that my stay is in Bangkok)!

  3. Amen to hotel points giving me headaches! I know airline points fairly well and I know their value instinctively, but hotel points are so insanely different across the board. Airline miles are like comparing USD, CAD, and AUD (with perhaps the occasional GBP and EUR thrown in) with their relatively equal values. OTOH, hotel points are like comparing USD (SPG points I understand the best because they have a simple 1:1.25 SPG/airline ratio; I’m tempted to stick with them as much as possible simply because their points are understandable!), CNY, THB, and JPY. It’s eerily like keeping those currency exchange rates in your head because they’re constantly shifting and changing both earning rates and redemption rates! Insanity!

  4. In your Park Hyatt Paris vs Holiday Inn Express decision, you’ve left out the most important part of the equation-the overall experience. That has to factor in for something. The treatment you receive at the PH will be far superior to the HIExp. What is the value of that difference?

    Also, if you’ve accumulated miles by getting double/triple bonuses, what is your real cost or value per point? That 22k could be in reality 10 or 12k, and then (at least to me) it’s an no-brainer.

  5. I value my points in the Starwood program much more highly than any airline currency – and I would almost never exchange Starwood points for airline miles. The reason is that, most of the time, availability is not an issue with Starwood – I can get the nights I want at the hotel I want without any hassles, and it’s common to get an “honest” exchange rate of 2 to 4 cents per point or more (example – 10 days at the Westin Times Square for 96,000 points – would have cost me $4,000 in cash). Getting premium class international air travel often involves lots of compromises, such as inconvenient dates or routings.

  6. Not to mention the free might awards thrown around at various times of the year – I’ve got 2 Marriott nights (cat 1-4); two IHG nights, 1 Hilton night and 1 Hyatt night to burn by 5/31 – all from promotions airlines wouldn’t dare run. Use these earned nights in conjunction with points redeemed night and watch you point-per-spend come down dramatically.

  7. I usually like to use my hotel points as ‘stay extenders’ rather than as complete replacements for paying; make the first night paid and the next on points. That way you don’t lose out on the accrual of points and most of the time a suite upgrade on the paid night will be extended to the following ‘free’ night.

    It’s also important when comparing programs to consider both redemption value and collection cost for the points, to calculate the effective rebate percentage.

  8. To answer your question Lucky, would probably use for a higher end resort property that is $1,000/night rather than the property type you are describing, which is more affordable. Granted, such a property would require more points, so the arithmetic is still necessary. Ultimately your instincts will prevail and either choice is valid due to the inexact valuation of points, as long as you are not using your points for toaster ovens.

    But your dilemma is why I prefer Starwood. I rarely use them for pure rewards, due to the Cash/Points option being pretty much a good deal all around without having to do a lot of arithmetic. And the airline transfers at 125% are what I mostly use the program for anyway. That is how I am taking my dad to South Africa first class on Cathay with a stopover in Hong Kong using the Alaska Airlines deal of the century that you and Gary have written about.

  9. In your example I would not use point; but rather pay. Why:

    – Your cost to earn points is 1.5 cents/point
    – The value of your miles on that redemption is ($290 – (2000 * 1.5)) / 15000 = 1.7 cents per point.

    Meaning the ‘savings’ are only 0.2 cents per mile, or $30 a night. While, when using points, you also have a chance to lose much more than the 2000 miles per night…which makes the savings even less than 0.2 cents/mile.

    So I do think that paying in this case would be a better choice. On the other hand, I personally would find a cheaper property real quick at $300 a night. Basically I would only spend the miles when there is a real savings to be made; and spend money on the lower priced properties only.

  10. One thing I usually watch out for is different rates per night at the nicer hotels.
    For example, my wife and I spent a few days in New Orleans at the Marriott (Weds-Sun) earlier this month. Cost for the room was $259 for the first two days and $139 for the last two (average after a 2-night weekend special rate) I used points (30K) for half and paid for the other half.

    As for points’ value … I earn them on reimbursable business travel. Same with miles. (both in-seat and Amex). I use them when we can find time to get away. My priority is first maximizing time, then minimizing cost. Everyone’s formula for “good value” is likely to differ a bit.

  11. On hotel nights it depends a lot more what my plans are for the stay. If I travel on business or travel alone without a free weekend in between I stay at a Hampton Inn or Holiday Inn Express with no problems since I won’t be much at the hotel in the first place or use the amenities.
    When travelling with my family I stay in higher end properties because then we tend to use the hotel amenities a lot more or stay at the room during day time.
    So it really depends also what your plans are at your destination if you want to use points for a high end property.

  12. You “hinted” at my answer. Points allow me to sample a lifestyle that is exciting and fun but that is beyond my means. I’m reasonably successful (dentist) but I would NEVER pay $15,000 for RT to Europe in First nor would I have paid $900 per night – the rate when we were at the Park Hyatt Paris. Points have been a gas for me and my wife.

    It will be a sad, sad day when I retire (which my wife hopes will be never!). Back of the plane and Motel 6!

  13. US$290 vs 15000 points is a borderline case. As others have noted, you also have to consider taxes and earned points. If you were in the US, you’d have to add taxes to the $290, often 12-15%. But there are no Category 4 Park Hyatts in the US, so taxes may not apply.
    You’d earn about 1800 points on a paid stay. That makes the real cost $290 vs 16800 points, 1.72 cents per point. If there’s a booking promo – like a G2 – it would be $290/18800, 1.54 cents per point.
    As you note, 1.5 to 2.0 is the questioning range. I’d make the decision based on your personal cash situation. Personally, I’d probably look for a less expensive decent property in the city. For one night in a tourist area, hotels are often just sleep points. Multiple nights increase the value of a luxury hotel, because you can use more of it.

  14. 8.Carl, on January 30th, 2011 at 3:12 am Said:

    That is how I am taking my dad to South Africa first class on Cathay with a stopover in Hong Kong using the Alaska Airlines deal of the century that you and Gary have written about.

    What is the “Alaska Airlines deal of the century?” I search on it but could not figure it out?

  15. Sorry, I’m an inappropriate a-hole, and I shouldn’t have posted here. I’m going to eat some more poo now.

  16. I’d probably pay. I think you can get a better value of hyatt points. Some park hyatts are $500-$1k per night…and still only 15-22k points.

  17. In my case I would spend the points. I’d rather spend $290 or so doing 5 mattress run nights at various Hyatts where I’d earn 3-6k points per night simply for the extra stay credits.

  18. In this case, I would pay cash since I plan my qualifying stays to come out just at/over the requirement for Diamond re-qualification. Using the points means another paid stay later somewhere else.

    You can definitely get better value at another Park Hyatt.

  19. I have a similar dilemma for a trip in April.

    Tokyo – 3 nights; currently booked 3 nights on points in Park Hyatt. Alternative is to pay 1 night (US$500), use upgrade cert (am Diamond), and points for the remaining 2 nights hoping they’ll allow us to stay in the suite. Now leaning towards paying first night.

    Singapore – 4 nights; currently booked 1 night 12k points + 3 nights C&P @St Regis (Corp Preferred Member; i.e. no status) Alternative is stay at Hyatt Singapore, pay 1 night (SGD$420), use upgrade cert, and points for the remaining 3 nights hoping they’ll allow us to stay in the suite. Leaning towards switching to Hyatt.

  20. Under no circumstances would I pay $290 for any hotel room anywhere. I slept in my rental car one night rather than spend $250 for a hotel room on my honeymoon! If someone held a gun to my head, I would use the points rather than pay. But really I would stay in a HIX or below every time. I want to stretch my points and cash to the max. Although I could afford it, I consider expensive hotel rooms unnecessary. I do want to retire someday ;-).

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