Here’s How I Come Up With My Valuation Of Starpoints

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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:

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):

redeeming and earning combined 3

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

SPG has some great transfer partners, including Alaska Mileage Plan, American AAdvantage, Japan Airlines Mileage Bank, Korean Air SkyPass, Singapore KrisFlyer, etc.

AeroMexico Club PremierANA Mileage ClubEmirates SkywardsQatar Airways Privileges Club
Air Canada AeroplanAmerican Airlines AAdvantageEtihad Airways GuestSaudi Arabian Airlines Alfursan
airberlin Top BonusAsiana Airlines Asiana ClubGol SmilesSingapore Airlines KrisFlyer
Air China CompanionBritish Airways Executive ClubHawaiian Airlines HawaiianMilesThai Airways Royal Orchid Plus
Air France/KLM FlyingBlueCathay Pacific Asia MilesJapan Airlines (JAL) Mileage BankUnited Mileage Plus
Air New Zealand Air PointsChina Eastern Airlines Eastern ClubKorean Air SkypassVirgin Atlantic Flying Club
Alaska Airlines Mileage PlanChina Southern Airlines' Sky Pearl ClubLAN Airlines LANPASS KmsVirgin Australia Velocity
Alitalia MilleMigliaDelta Air Lines SkyMilesLufthansa 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.

Emirates-First-Class-A380-Singapore-02
Alaska and Japan Airlines miles are great for Emirates first class redemptions

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.

SPG-Redemption

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.

St-Regis-Mumbai

Similarly, last week I redeemed 20,000 Starpoints to spend a night at the St. Regis Mauritius, which would have cost 542EUR (~$610).

St-Regis-Mauritius

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.

St-Regis-Mauritius
Beach at the St. Regis Mauritius

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.

Bottom line

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?

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Comments

  1. @ ABC — But that’s the whole point, you should never buy points at the same cost you value them. Acquisition cost needs to be lower than your valuation.

  2. Are you including the added tax costs that are avoided when points are used? The money saved in state and local hotel taxes adds significantly to the value of starpoints (and other hotel points).

  3. I currently have a SPG business credit card. Am I eligible to apply for another one for a different business and get the sign up bonus again?

  4. I think your values (and your blog in general) have a very single-traveler slant. When you only need one seat, 1.76 cents per airline mile seems not unreasonable. But when you need multiple seats, the non-instant transferability of starpoints makes them borderline unusable. If you transfer 60k starpoints to Alaska, you will be able to use them. Even if that seat you see right now goes away, you can always feel be a seat on an Emirates flight you want. But if you need four seats, starpoints do you no good. The four seats you see 330 days out will be long gone by the time the transfer is completed, and then you’re stuck with 220k Aeroplan miles when you wish you could have Delta instead. For starpoints in particular, nonistant transfers dramatically affect both their flexibility and their value for a large subset of travelers.

  5. I’m a foreigner living in Mumbai for 2.5 years. Though I doubt I’ll be in Mumbai at that time, I’d be happy to recommend stuff to do/where to eat! I’ve also frankly heard mixed reviews about the st. Regis so I hope it’s good by the time you get to review it!! Hope you’re using the Colombo trick to get a cheap business class far from New York that’s a great idea you gave me!! I’m trying to use it the next time I go home.

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