IHG retreats from devaluation!

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Good news!  In the recent post “What are IHG points worth now that the gloves are off?” I detailed an analysis showing that IHG had devalued their points and free night certificates.  Now, thanks to reports of IHG rolling back the devaluation, I’ve found that IHG point values have largely recovered!

I was in the fortunate position of being able to reproduce a detailed analysis that I conducted only 5 days ago so that I could objectively compare IHG point values now vs. then.  Even better, I was also able to compare to a nearly identical analysis conducted in June 2020.  This gives us a good picture of how point values have changed over time.  For full details about how the analysis was conducted, please see my previous post on this topic.  In this post, I’ll present only the results…

Mean and Median Results

June 2020 4/4/21 4/9/21
Point Value (Median) 0.64 cents 0.43 cents 0.64 cents
Point Value (Mean) 0.67 cents 0.54 cents 0.58 cents
Cash Price (Median) $213 $238 $238
Cash Price (Mean) $229 $237 $233
Point Price (Median) 35,000 47,000 40,000
Point Price (Mean) 34,603 48,952 45,286

A different story is told whether you look at the median or mean results.  The median is the halfway point: half of the awards offered equal or better value and half offered equal or less value per IHG point.  As you can see, the median point value has completely recovered from last weekend’s devaluation.  Last year (before the devaluation), I had observed a median value of 0.64 cents per point and now I see the same.  The mean point value (sum of values divided by count of values), though, is still way down from last year.  This makes sense: there continue to be some properties where the point price is far too high.  The mean calculation is heavily influenced by outliers like these whereas the median calculation is not.

40K Certificate Results

June 2020 4/4/21 4/9/21
Percent Usable 63% 41% 51%
Mean Room Rate $177 $176 $194

IHG credit cards offer cardholders annual free night certificates good for hotel nights that cost 40,000 points or less.  For each of my analyses, I calculated the percent of data points in which a 40K certificate could have been used.  In June 2020, I found that 40K certificates could be used 63% of the time.  This dropped to 41% on April 4th but then rebounded to 51% on April 9th.  The April 9th percentage is considerably lower than the June 2020 percentage, but I believe that can be explained entirely by hotel pricing.  The median cash price of hotels between then and now jumped from $213 to $238.  And since IHG charges points roughly in relation to cash prices, we would expect some of those hotels to no longer be available at 40K or less.

New Reasonable Redemption Value

With hotels, I like to use average observed values as our Reasonable Redemption Value for points.  Prior to last year’s analysis, we used a very old observed average of 0.57 cents per point.  Last year’s analysis popped the RRV up to 0.65 cents per point.  And our April 4th analysis crashed the RRV down to 0.5 cents per point [which was my “thumb in the air” consensus number between the observed median (0.43) and observed mean (0.54)].

While I could easily argue that the RRV should be put back to 0.64 cents per point, the fact that the mean is so low compared to last year gives me pause (previously 0.67 and now 0.58).  Also, given the recent volatility in point values, I’m hesitant to return our IHG to the previous 0.64 cent per point high.  Instead, I’m once again going with a “thumb in the air” consensus number between the observed median (0.64) and observed mean (0.58).  Our new IHG Reasonable Redemption Value = 0.60 cents per point.

As I wrote last time, I realize that this is a weird time to assign hotel point values.  The pandemic has led to unusual travel patterns.  What we observe today may not correlate at all to what we see in the future.  That said, with IHG changing things left and right, the best we can do is use the latest bits of information to get a “good enough” result.  We’ll continue to re-analyze IHG point values as needed going forward.

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