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Reader duane asked the following in the “Ask Lucky” forum, regarding how to decide whether to pay for a hotel stay or redeem points:
How do you decide when to pay and when to use SPG points? Case in point: Amman Jordan Le Meridien — 40,000 SPG points vs. US$1300 + earn even MORE points for premium cabin-long haul travel on Etihad/Cathay/Qatar?
I know that to many this will probably seem like a “simple” question, but I think it’s a really fundamental topic which can be applied to many aspects of the hobby, which is why it’s worth covering here.
When trying to decide whether to pay for a hotel stay, here’s what you should factor in:
- The total cost if you paid for the stay in cash, including taxes, service charges, etc. (keep in mind that in many markets those can add an extra 20%+ to the price of a stay compared to the “base” rate)
- Whether you’d earn elite qualifying stays/nights by paying with cash but not with points, and whether that matters to you (in the case of SPG it’s a moot point since you get elite qualifying credit even for award stays, but that’s not the case with all hotel chains)
- How many points you’d be giving up by redeeming points rather than paying cash, including any promotions or other bonuses you might be forgoing, as well as the points you’d earn through credit card spend
- How much you value a points currency at, which is admittedly highly subjective
So in the above case, the choice is between redeeming 40,000 Starpoints or paying $1,300. I value Starpoints at 2.2 cents each, so to me 40,000 Starpoints are worth ~$880. Since this is Starwood:
- You’d earn the same number of elite qualifying stays/nights regardless of whether you paid cash or redeemed points
- Starwood offers 2x Starpoints per dollar spent for non-elites, and 3x Starpoints per dollar spent for elites; therefore you’d be forgoing 2,600 Starpoints as a non-elite member, or 3,900 Starpoints as an elite member
- If redeeming points you wouldn’t be spending $1,300 on your credit card, which means you’re forgoing 2,600 Starpoints on either the Starwood Preferred Guest® Credit Card from American Express or Starwood Preferred Guest® Business Credit Card from American Express, or would be forgoing 3,900 ThankYou points by not using the Citi Prestige® Card and Citi ThankYou® Premier Card
- We don’t know when Duane is staying, so he would also want to factor in any other promotions, if applicable
Based on the above, Duane would be redeeming 40,000 Starpoints, and on top of that potentially forgoing ~5,200 Starpoints (or ~6,500 Starpoints if he’s an SPG elite member). Assuming he’s an elite member, that raises the “real” cost of the redemption to 46,500 Starpoints. At a value of 2.2 cents each, that’s like a cost of ~$1,020… which is still considerably better than spending $1,300. So I think redeeming points is the better option here, by far.
Again, this is based on my valuation of 2.2 cents per point. If you value Starpoints considerably differently, you may come to a different conclusion.
Hopefully this is a useful general framework for deciding whether to redeem points or pay cash for a hotel stay. The general method should work regardless of which chain we’re talking about.
The big variable will be how much you value a given points currency. Travis outlined the framework for deciding on that in a previous series.
Does anyone have a different way of approaching whether to redeem points or pay cash?