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One of the posts that I’m most proud of is this one: Fair Trading Prices for Points and Miles. In that post, I pointed out that if you’re thinking of buying points or miles (directly or indirectly), it is helpful to know the usual cost of acquiring them. With airline miles, for example, people buy miles everyday by using miles-earning credit cards. If you use a card that awards you with 1 mile per dollar, for example, then you are in effect buying miles for 2 cents each because you could have used a 2% cash back credit card. With that idea in mind, I put together the Fair Trading Prices page to show the usual cost of acquiring points and miles.
It’s important to understand that Fair Trading Prices are not estimates of redemption value. That is, when you redeem your points you may get more or less value than the Fair Trading Price. Also, when one trading price is higher than another, it does not mean that the former has higher redemption value than the latter. For example, the fact that the chart shows a higher Fair Trading Price for American Airlines miles than for United Airlines miles does not mean that American Airlines miles are more valuable for redemptions. It just means that using credit cards to acquire American Airlines miles is more expensive than using credit cards (such as the Sapphire Preferred) to earn United Airlines miles. The fact that many people prefer United Airlines miles over American Airlines miles just shows what a great deal it is to use the right card to acquire United miles.
The Big Fail
With respect to airline miles, I think the Fair Trading Price chart has worked out very well. It’s great to have a benchmark to use before jumping into a scheme for buying miles. It’s also a great benchmark to help decide whether to use miles or cash for purchasing airline tickets (See: When is an award flight a good deal?).
The problem with the chart was with the hotel trading prices:
|
Values in bold represent fair trading prices |
Cost to Acquire |
|||
|
Awards Program |
Buy Direct |
Credit Card |
Transfer from: |
|
|
Flexible Points |
Starwood Preferred Guest (SPG) |
3.5 |
1.95 |
N/A |
|
Hotel Points |
Club Carlson |
0.7 |
N/A |
N/A |
|
Hilton |
1 |
0.48 |
** |
|
|
Hyatt |
2.4 |
1.31 |
UR |
|
|
Marriott |
1.25 |
1.31 |
UR |
|
|
Priority Club |
1.15 |
1.29 |
MR |
|
** Based on the blended point earning rate of the Hilton HHonors Surpass card from American Express
Marriott at 1.25 cents per point? Priority Club at 1.15 cents per point? Some of these “fair trading prices” were way too high! I would never pay that much for these points because it would be difficult to redeem the points for that much value. The only hotel valuations that looked right to me were SPG at 1.95 cents per point and Hilton at .48 cents per point. In both cases, I believe it is quite reasonable to buy points at those rates.
Why hotel points break the mold
With airline miles, I believe earning miles through credit card spend has become the norm rather than the exception. With hotels, though, I believe that people tend to earn points through hotel stays rather than through credit card spend. This isn’t universally true of course, and may not be true at all for you. Instead, I just believe it to be the prevailing direction in which these things go. As a result, basing hotel point prices on credit cards didn’t work as well as I had hoped.
Fixing the chart
It’s very difficult to come up with a straightforward way in which to estimate the cost of hotel points earned through hotel stays. The new approach I took was to look at the two hotel chains for which credit card estimates did work (SPG and Hilton), and use those as benchmarks. Here is an example:
Non elites staying at SPG properties earn 2 SPG points per dollar. At most Marriott properties, though, non elites earn 10 points per dollar. Therefore, the fair trading price of Marriott points is estimated to be 2/10 the fair trading price of SPG points. 1.95 X 2/10 = .39. At most Hilton properties, non elites earn 15 points per dollar. So, using this benchmark, Marriott points are worth 1.5 times (15/10) as much as Hilton points. .48 X 1.5 = .72. There is a big difference between the SPG benchmark result of .39 and the Hilton benchmark result of .72 so I think of these as the fair trading price range. The mean, .56, is the new Fair Trading Price for Marriott points.
The new chart
Below is the new chart calculated as described above. Note that I’ve added Wyndham and Best Western to the mix:
|
Prices are |
Points |
Low |
High |
Fair |
Buy |
|
SPG |
2 |
1.95 |
N/A |
1.95 |
3.5 |
|
Hilton |
15 |
N/A |
0.48 |
0.48 |
1 |
|
Best Western |
10 |
0.39 |
0.72 |
0.56 |
1 |
|
Club Carlson |
20 |
0.195 |
0.36 |
0.28 |
0.7 |
|
Hyatt |
5 |
0.78 |
1.44 |
1.11 |
2.4 |
|
Marriott |
10 |
0.39 |
0.72 |
0.56 |
1.25 |
|
Priority Club |
10 |
0.39 |
0.72 |
0.56 |
1.15 |
|
Wyndham |
10 |
0.39 |
0.72 |
0.56 |
N/A |
This chart will be updated in the future, as needed, on the Fair Trading Prices page that can be found in the Resources tab at the top of every Frequent Miler page.
Note that I’ve updated the page “When is an award night a good deal?” to reflect the updated hotel chart.
What do you think? Will the new improved chart be useful?
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[…] miles, but fell short for estimating hotel points. I revised the hotel estimates in the post “Fairer hotel trading prices”. You can always find my latest estimates in the “Fair Trading Prices” page which can be […]
[…] Fair Trading Prices for SPG and Hilton are computed from credit card earnings with the same methodology as bank and airline miles above. The rest of the hotel values are computed relative to SPG and Hilton. The idea is that the usual way to earn other types of hotel points is through hotel stays rather than through credit card spend. And, therefore, we can calculate the cost of earning hotel points through stays by comparing to the points that would have been earned if one had stayed at SPG or Hilton properties instead. For example, if a hotel offers 5 times as many points for a stay as with SPG, then the fair trade price for that hotel using the SPG index is the SPG fair trading price divided by 5. For each hotel chain, two Fair Trading prices are calculated: the SPG Index and the Hilton Index. The chain’s Fair Trade Price, then, is the average of the two. For more details about this approach, please see this post. […]
[…] Fairer hotel trading prices […]
Though I might use some additional adjustments for some of the values, I think your numbers likely provide a good rule of thumb for the average traveler earning most of their points from hotel stays. I’m not sure that I tend to believe the idea that most people earn their hotel points mostly from stays, but I guess its tough to say without one or more of the programs providing some data.