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Reader Paul emailed to ask if I could explain where I come up with my valuation of Starpoints at 2.2 cents each. I figured I’d provide a bit of background on how I come up with my valuation of points, and then explain specifically why I value Starpoints the way I do.
How to value points
Aside from fixed value points currencies (where each point is worth a certain dollar value), there’s no scientific way to value points. Everyone will have different valuations based on their redemption patterns, so the best I can do is share how I value them, and then everyone can crunch their own numbers.
Last year Travis wrote a series explaining how to value points based on your earning and redemption patterns. He’s much more of a scientific thinker than I am, so check out his series:
- Miles Aren’t Free: How To Value Your Redemptions
- Miles Aren’t Free: How To Value What You Earn
- Miles Aren’t Free: Establishing An Overall Value
The simplest way to explain it is that points are worth some amount between your acquisition cost and your redemption value. Where in that range your valuation falls depends entirely on how you choose to redeem points.
In a simple diagram, here’s how he explained his methodology for valuing miles (it’s the same concept for hotel points):
In other words, in the instance of Starpoints, someone could easily value them anywhere between one cent and five cents each, depending on how they earn and redeem them.
Why I value Starpoints at 2.2 cents each
So how do I arrive at my valuation of 2.2 cents per Starpoint? What makes Starpoints so valuable is how versatile they are:
- Starpoints can efficiently be redeemed for hotel stays, in the form of several types of redemptions, including Fifth Night Free, Nights & Flights, Cash & Points, etc.
- Starpoints can efficiently be converted into airline miles in over two dozen programs, with a 5,000 point bonus for every 20,000 points transferred; to me this means that each Starpoint is worth 1.25 airline miles
Converting Starpoints into airline miles
|AeroMexico Club Premier||ANA Mileage Club||Emirates Skywards||Qatar Airways Privileges Club|
|Air Canada Aeroplan||American Airlines AAdvantage||Etihad Airways Guest||Saudi Arabian Airlines Alfursan|
|airberlin Top Bonus||Asiana Airlines Asiana Club||Gol Smiles||Singapore Airlines KrisFlyer|
|Air China Companion||British Airways Executive Club||Hawaiian Airlines HawaiianMiles||Thai Airways Royal Orchid Plus|
|Air France/KLM FlyingBlue||Cathay Pacific Asia Miles||Japan Airlines (JAL) Mileage Bank||United Mileage Plus|
|Air New Zealand Air Points||China Eastern Airlines Eastern Club||Korean Air Skypass||Virgin Atlantic Flying Club|
|Alaska Airlines Mileage Plan||China Southern Airlines' Sky Pearl Club||LAN Airlines LANPASS Kms||Virgin Australia Velocity|
|Alitalia MilleMiglia||Delta Air Lines SkyMiles||Lufthansa Miles & More|
I’ve purchased Alaska miles in the past for ~2.1 cents each, so should that mean that each Starpoint is worth ~2.6 cents? While that argument could be made, I’d say no. The reason is that I’ve purchased Alaska miles in the past for ~2.1 cents each with a specific redemption in mind. I wouldn’t speculatively buy them at that cost, since there’s a holding cost to miles due to the risk of devaluation. In other words, given the choice between an equal “value” of cash and miles, I’d always take cash.
Using a valuation of ~2.2 cents per Starpoint, I’m basically saying that I value my choice of airline miles at ~1.76 cents per mile (given the 25% bonus). I’d be willing to speculatively buy Alaska Mileage Plan miles, Japan Airlines miles, etc., at that cost.
Redeeming Starpoints for hotel stays
Similarly, 2.2 cents per Starpoint is also a rate which I’ve found checks out pretty well for hotel redemptions I’d consider making. How do I calculate the redemption value for a hotel stay when using Starpoints?
- You have to factor in the points you’re forgoing by redeeming Starpoints rather than booking a paid stay
- You shouldn’t just compare the number of points required to what a stay would otherwise cost, but rather should compare it to what you’d be willing to pay for that stay
In other words, I can redeem 20,000 Starpoints for a stay at the Westin Times Square over New Years, which would cost $1,449 per night for a similarly flexible rate.
Does that mean each Starpoint is worth over seven cents each? No, because I’d never be willing to pay that much to stay there.
Instead I’d base the value more on redemptions I’d realistically make. For example, I’ll be spending New Years in India, and have booked the St. Regis Mumbai. The paid rate is ~$240 per night, which I’d be willing to pay. But I can also redeem 7,000 Starpoints for a free night redemption, which is a better value. After I factor in the points I’m forgoing by not booking a paid rate, I’m still getting over three cents per point of value.
Similarly, last week I redeemed 20,000 Starpoints to spend a night at the St. Regis Mauritius, which would have cost 542EUR (~$610).
This is where the valuation of points gets a bit tricky. I couldn’t have justified spending that much for a one night stay, though it somehow felt better if I was redeeming points. 20,000 Starpoints are worth ~$440 to me, which is probably a tad more than I would have been willing to pay in cash.
But still, it was an aspirational redemption and it allowed me to stay somewhere I really wanted to stay. Given that, redeeming Starpoints was my best option.
Ultimatly there’s no right or wrong way to value points, as long as you’re valuing them at more than your acquisition cost and at less than your redemption value.
My valuation of 2.2 cents per Starpoint is based on the ability to transfer those points to airline partners with a 25% bonus, and also based on the ability to redeem them efficiently for some hotel stays based on that valuation.
Is a valuation of 2.2 cents per Starpoint fairer than 2.1 cents or 2.3 cents? Probably not. But to me that’s the number which just feels right.
What is a Starpoint worth to you?