Valuing miles and points is a futile effort

Gary’s initial post
My response
Gary’s response

Let me start by saying this, which renders this whole exercise futile — there really isn’t a way to fairly value miles and points for everyone. So before I respond to Gary’s post, let me share my thought process on valuing miles and points.

First, points are only worth what you’d otherwise pay for a product, and not the retail cost. All the time you hear people bragging that they used 120,000 miles to book a first class ticket that would have cost $24,000. That’s great, but would you actually have paid $24,000 for the ticket? If not then that’s not really a fair valuation, is it? In my previous post I listed the cost of paid stays at many aspirational properties at which I would redeem Hilton points. I listed the revenue cost purely to point out the “aspirational” properties you can stay at with Hilton points. At no point did I say “hey look, you can use 36,250 Hilton points to stay at a hotel that would cost $725. Therefore a Hilton point is worth two cents.” My point was simply that there are some amazing hotels you can redeem points at, and I should have focused more on what I’d otherwise be willing to pay for those stays.

Second, when valuing points you have to view them as a commodity of sorts. I say “of sorts” because at the end of the day points can’t be traded or sold, and for that matter don’t even belong to the consumer, but rather the company that’s issuing them. I made a series of posts a few months ago valuing airline, hotel, and credit card points. I didn’t suggest they should be everyone’s valuations, though I thought they were fair, objective valuations. My point is this — if you ask someone that’s homeless whether they’d prefer $10 or 10,000 Starpoints, they’d probably go with the former. Does that mean Starpoints are suddenly objectively “worth” less than 0.1 cents per point?

All the time people give me scenarios and ask if they should use points or pay cash for a redemption. “Hey, I can book a ticket for either 25,000 miles or $500 — what should I do?” Well, that depends. Do you have 2.5 million miles in your mileage account and $250 in your bank account, or do you have 25,000 miles in your mileage account and $2.5 million in your bank account? That would kind of impact the answer, and that’s why it’s important to think of points on some ways as a currency when valuing them. In the previous post someone had pointed out that 145,000 Hilton points are worth a lot more than 144,000 Hilton points, since it gets you over the threshold for an AXON award. And that’s a great point.

I do mattress runs to maintain hotel status and earn points, and with every stay I crunch the numbers. If it doesn’t make sense I don’t do it. But at the end of the day there’s a cost to me of earning those points, so when I redeem points I always crunch the numbers. For example, I love Park Hyatt hotels, and the most expensive ones are 22,000 Gold Passport points per night. I value Hyatt points at 1.6 cents each. That means I’m “paying” $352 per night worth of points for a redemption at a Park Hyatt. As crazy as it might be, I’ve paid $300 per night for a hotel before when I could have used points, simply because it wasn’t a good value and the numbers didn’t work out. But to me it makes sense, and I’ll expand on that below in response to Gary’s post.

The fact is, this analysis is only useful to those that eat, sleep, and drink miles. For many people miles are a “free” reward. If they sign-up for a credit card and the sign-up bonus gets them a roundtrip between Los Angeles and San Francisco that would have cost them $120, they’re on cloud nine. I’ve had friends sign-up for cards with 50,000 mile sign-up bonuses, and they’re ecstatic that they can get two free coach roundtrips to New York. When I tell them they could instead get a one-way ticket in business class to Europe they say “business class, what’s that? Europe, what’s that?” So for people that don’t “invest” in their points portfolio, a good award redemption is just whatever makes you happy.

Now, let’s talk Gary’s most recent post:

I may be able to get 1.6 cents of ‘value’ for a Hilton point at the Conrad Koh Samui. But unless I was actually going to spend $800 per night to stay there, I haven’t ‘saved’ myself $800 and therefore my Hilton points spent on the room weren’t really ‘worth’ $800 (or 1.6 cents a point).

Instead, the value of a loyalty program point, expressed in dollars (cents), is the amount at which you are indifferent between holding points and holding cash.

It isn’t that I can’t do better. I can and I do. The reason I spend 5 nights at the Conrad Koh Samui paying 200,000 points is because I calculated my stay ‘cost me’ $1000 or $200 per night. I was willing to spend $200 a night to stay there, I wasn’t going to spend $800 to do so.

And I completely agree, and maybe this is where we differ. In my post where I valued hotel points I said the following:

To provide a really rough explanation of my thought process, my points valuation is somewhat based on the assumption that one values a free night at a top hotel around $300-350. Ultimately I’m all about the “aspirational” award, so I think one important aspect in valuing points is comparing how many points are needed for a redemption at a top hotel. The “base” value of $300 goes up for me when hotels honor elite benefits on award stays (free breakfast, internet, room upgrades, etc.), count them towards elite status, etc., which can add a lot of value to a stay.

And maybe this is where Gary and I differ. Gary says he essentially “spent” $200 per night worth of points to stay at the Conrad Koh Samui. If that’s truly how much Gary values the stay than I can understand that. In each of the examples I provided in the previous post, I would be willing to spend at least $300 to stay at the likes of the Conrad Koh Samui, Hong Kong, Tokyo, Maldives, Tokyo, etc. The same goes for Park Hyatt’s top hotels, and the same goes for St. Regis’ top hotels. That’s how much I value a stay at that caliber of hotel in an outrageously expensive city, especially after I factor in the elite benefits I get, including free breakfast and free internet, which can easily otherwise cost $50-100 per day depending on the hotel.

So I have three questions for Gary based on that:

  • Do you really only value a free night at a top tier hotel in an expensive city at $200?
  • If so, is that the case at Hyatt and Starwood as well?
  • What do you value Hyatt Gold Passport points at?

If Gary only values a night at a top hotel at $200, then Hyatt Gold Passport points are worth less than a penny each (since a free night is 22,000 points). And I can’t imagine that’s the case, since he planned to stock up on Hyatt points during the Daily Getaways promotion when they were selling them for a cent each.

That just seems low for a true five star hotel with breakfast, internet, etc., especially since many hotels have 15-25% taxes and “service charges,” where there are further savings when using points.

And to answer Gary’s question:

How much have you spent this year on the Starwood American Express and how much have you spent on a Hilton credit card? That’s called revealed preference.

$299 on the Starwood American Express at Le Meridien San Francisco, and $25 for a Starbucks reload on the Hilton Reserve Citi card, as I just got it last week. I actually haven’t at all been motivated to put any spend on the Starwood American Express lately. I love the card for the annual free nights/points it gives me, but my spend goes onto cards that offer me bonus points for dining, travel, gas, and groceries, which is 99% of my expenses. The rest of my spend goes onto whichever card I’m trying to meet the minimum spend on.

One last point I disagree with Gary on is that he seems to suggest it’s unfair to value points based on the best possible redemptions. I think it’s perfectly reasonable to value points based on the best possible redemptions for your travel patterns, based on the value you place on what the points will get you.

What I’m trying to say is that I could make the argument that Starpoints are worth a penny each. The St. Regis Bangkok is a category six hotel, which costs 20,000 Starpoints per night or $150 plus 8,000 Starpoints. But it would be ridiculous to value Starpoints based on that. Instead you should value the points based on the value you would place on the hotels you would most likely redeem them for. Let’s be clear, I’m not just basing my value of Hilton points on one or two aspirational properties. There are over a hundred category 7 hotels, and most of them look very nice, and look like a great use of points. But I do think it’s reasonable for me to value points that way. Valuing them based on a mediocre value seems pointless, since hopefully you’d never actually redeem points for that.

It’s like saying that it’s unreasonable to base valuations of miles on the ability to redeem for premium cabin travel. I suspect 90%+ of people use their miles for “non-aspirational” flights, but that doesn’t stop me from valuing American miles based on the ability to redeem for Cathay Pacific, Etihad, and Qantas first class, for example.

But I guess what this really comes down to is the difference in how Gary and I value luxury hotels. I don’t care which of the three chains it is, I typically value their top category hotels in an expensive city at around $300, especially when breakfast and internet are included. That just seems like a fair value to me, since during peak season that’s probably what you’d pay for a three star hotel in an expensive city. Gary seems to value them at around $200. I guess that’s what accounts for our ~0.25 cent per point spread.

All that being said, I still bow down to Gary and his infinite wisdom!


  1. Very well written post! IMHO, I am just happy to save money when we travel, and do not pay too much attention about the “cpm.” Thanks.

  2. “especially after I factor in the elite benefits I get, including free breakfast and free internet, which can easily otherwise cost $50-100 per day depending on the hotel.”

    right, but would you actually pay $50 for internet and $50 per breakfast if thats what the hotel charged? if they did, i bet you’d go to starbucks, eat for $10 and use the net for free. what would really be the most you’d pay for those two things. thats what you have to value to benefit at

  3. I guess I value them the opposite way. I decided which chain had hotels I wanted to stay in, in the cities I generally travel to – then I checked to make sure that they were not worthless (HotelPesos) and have taken advantage of the promotions. Which got me a stay in a suite at the W Vieques, which was incredibly awesome (the island, notsomuch the hotel). How much was that worth? I dunno – I probably wouldn’t have gone if I had to pay the full rate, or for the airfare down there. Because it was essentially free, I went.

  4. A friend earns roughly 200k+ points at Hyatt through work every year – so when you didn’t spend a dime of your own money on redeeeming the points, then this obviously brings the value down substantially because even a poor redeeming ratio essentially gets you something really for free – no matter how poor the ratio.

  5. Ultimately. Its a matter of personal preference. Besides, the real debate is, who’s dad is stronger? Ben’s or Gary’s? 😉

  6. yeah, I’ve always thought this whole valuation thing was a bit silly. And usually skip over posts when bloggers start doing a lot of math.

    Personally I don’t see anything wrong with saying, “I used 100K points for this flight that the airline charges $6000 for”. While I might not be willing to spend that much cash for the seat, I still feel like I am getting a bargain as a result. I tend to look at it more as a function of what can these points get for me and how many more do I need for what I really want to do.

    Chasing “valuation” seems like a silly game to me.

  7. Well, flo, it doesn’t bring the value down because you didn’t spend real money to obtain the points: there are some things you can get in exchange for 200,000 Hyatt points, and some you can’t. So, clearly, the points have value equivalent to whatever value you place on the things you can get with those points.

    Of course, valuing those things is subjective. To my mind it’s pointless to argue about whose system of subjective valuation is correct: by definition, subjective valuation is specific to the individual *subject*. It is *not* the same as monetary value, which is defined by trade among multiple people happening in an economy. Indeed, some people subjectively value money very highly, and others (monks? nuns? carefree spirits?) value it less. Just like some people value a lie-flat bed on an overnight flight very highly, and others are not that excited by it.

  8. Thanks for the explanation. Obviously everyone values points and miles differently and even that can change with circumstance. In my case given my meager budget and frugality, I’d never pay over $200 to stay a night in a hotel. I have a hard time even thinking about paying over $150. I’d either look for somewhere else or not go at all. The real valuation for me is what can I get for the points I have or can obtain? If my points will get me a stay in 5-star hotel “worth” $900 a night, then cool. If I didn’t have those points, I’ll be staying somewhere that is less nice for sure.

    But even your strategy can change depending on circumstance. In May I had an overnight layover at HKG and had been planning all along on redeeming for a downtown hotel, but then remembered mid-trip that UR points transfer to Marriott, so I spent that layover night at the mediocre Sky City property next to the airport. Was it the best fiscal value of my UR points? Nope, but in that circumstance with short time, lack of funds, and fatigue factoring in, it made the most sense and value for me.

  9. “Hey, I can book a ticket for either 25,000 miles or $500 — what should I do?” Well, that depends. Do you have 2.5 million miles in your mileage account and $250 in your bank account, or do you have 25,000 miles in your mileage account and $2.5 million in your bank account?”

    This is how I think too. I guess it also depends on how hard it is to earn those points. With credit card sign up bonuses, I will probably be more carefree and use the points more freely, but if I had to spend $25,000 to earn 25,000 miles, I would be very stingy finding the best deal out there.

  10. We may never reach agreement on the ‘value’ of points by looking at the value of the hotel room they can be redeemed for. If you treat your point collection as inventory, you should value it with the COST instead, i.e. how much it costed you to get them (actual cost), or how much it will cost you if you need to replenish it (replacement cost). Then you can use that cost value to determine whether the redemption (Sell) makes sense, not the other around.

    That’s why I value the skymiles at 1c each as Delta have a sell at that price almost every year. So I will happily redeem it for 1.1/1.2c.

    The cost for HH and SPG points may be harder to determine. Maybe we can look at the difference between cash+point and all-point price to see how much the cash portion can be translated to points and use that to estimate?

  11. This basically comes down to market value vs. investment value. Investment value of the points takes into account each individual’s motivations in using points whereas determining the market value indicates all guest’s purchasing decisions. If you are going to peg an “average” market value to hotel points, you need to know the average daily rate for the hotel over the entire course of the year and not just the rate on a given day. This ADR reflects what all users of the hotel were willing to pay on average in a given year. As a hotel consultant I am fortunate to have this information available to me but cannot disclose individual properties due to confidentiality. Using year-end 2011 ADR’s in New York City based on standard award rates, Starwood points are worth 2.2 CPP, Hyatt points worth 1.5 CPP, Hilton points worth 0.6 CPP and Marriott points worth 0.8 CPP. If you consider alternative redemptions such as cash and points, fifth night free, AXON awards, etc, than Starwood points would be worth 3.1 CPP, Hilton 0.8 CPP and Marriott 1.0 CPP. While this only represents one market, at least it is a glipse into actual numbers.

  12. Ben,

    Your first post brought up good points. Same for your second. Gary had some constructive comments, but worded them in a way I wouldn’t have.

    The interesting thing about blogs is that everyone has an opinion! Hopefully I won’t need any popcorn.

  13. It’s easier for me to calculate a value on SPG points, because I actually have to check and see if I would rather pay cash instead of using points. Sometimes I really do end up paying cash at SPG properties — usually when there is an upgraded room at a good price.

    OTOH, for as much as I value HHonors points at around 1 cpp, this number is less “real.” Why? Because I never would pay the asking price for Category 7 hotels, which is what I save them for. For a random city hotel, $200 is about my limit for out of pocket costs. But I know that a decent hotel in Manhattan, London, and Tokyo costs more than that. If I couldn’t stay on points, I wouldn’t go. I don’t know how to put a value on that.

    The “how much would you pay” question gets really interesting when it comes to upgrades from J->F. How much would I pay for an upgrade on UA or CX from J to F? No more than $100 one-way on an overseas flight. Ridiculous, I’m sure, but there’s just no practical value in anything more than that. OTOH, if I’ve got enough miles to cover my next trip, I’ll dip into my stash and pay for the upgrade.

  14. In the end of the day, it depends on your valuation and that is based on “opportunity cost.” It makes total sense you would value it based on your redemption style. Although as a blogger, a reader should make his own valuation, and read your opinions knowing how his travel/point redemption patterns match yours.

    Also neither one of you pointed out one great benefit of points, which is many times in large cities, the point value for 2+ hotel is actually the same, so using points can get you a “higher” value even if you aren’t willing to pay cash for that value. Or sometimes the more expensive hotel actually requires fewer points.

    How does one “value” this? It should still be objectivity valued at how much you were willing to pay for a hotel in that city/time/date. There is an extra valuation here, which is, sure you were willing to spend $x, and that translates into y points, but y points get z in luxury/quality/safety/MONEY SAVINGS. You can’t “value” points at a direct dollar value. You can only do this if it is easily purchasable at a given rate (like Priority Club). Money savings/quality increase is a different sort of “value” that really depends on your preferences.

  15. “I actually haven’t at all been motivated to put any spend on the Starwood American Express lately. I love the card for the annual free nights/points it gives me, but my spend goes onto cards that offer me bonus points for dining, travel, gas, and groceries, which is 99% of my expenses.”

    Starwood card gives us annual free nights??

  16. @ frank — Sorry, I should have been clear. It gives you elite qualifying stays/nights towards status. You get two elite qualifying stays and five elite qualifying nights annually per card.

  17. Like you said, Lucky, static point valuations are really only apply to people who travel constantly and have to make decisions on whether or not to pay cash or points numerous times per week/month/year.

    For casual travelers like me, the value of points is this nebulous thing that is somewhere around 1 cent but could be much more. For instance, I have to travel to vancouver from the east coast on short notice and flights are around $625, but still 25,000 miles for coach. That saves me a good chunk of cash, and at the point of transaction, I surely thought they were worth 2.5 cents each since I would have been forced to buy that ticket anyway even if I didn’t have any points.

  18. I think it is good to have a “baseline” idea of how much they are worth, as sometimes you need to make a quick decision – do I buy or use points.

    Also don’t forget that points are sometimes worth $0 as there is no availability – even for experts like yourself who really know the routes and tricks in finding availability.

    Also sometimes the Conrad Koh Samui is 315,000 hhonors per night ie. December to Mid January.

  19. Great analysis, both you and Gary (though Gary worded it a little bit with “i’m better” kind of way). But whatever.

    For those of us including myself who earn each year endless tons and tons of points/miles (and the status associated) through weekly work trips/hotel stays, it doesn’t matter how much cpm or ROI on points redemption. They were given to me without me paying a cent to begin with. I just redeemed flights/rooms however high or low the points rate are for the places/seats I wish to experience. No need to think too hard about “saving” the points for later use.

    I’m in this game not for investment. I’m in it to enjoy what was given to me for free. I love my job! I think many of the FFers are in this position thanks to their great work gigs! Yah that’s right, education and intelligence do pay off!

  20. This discussion reminds me of the joke about the guy who runs after the bus to save money, so his friend tells him he could save more money by running after a taxi.

  21. I suggest you and Gary should fly off in 1st class to some “aspirational” place and duke it our there in private. 🙂

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