What are IHG points worth now that they have dynamic pricing?

For years we have listed IHG points as being worth 0.57 cents each.  This was based on the average redemption value reported in 2017 by a company that no longer exists (Pointimize).  For details about point values for different programs (and how we think about them), see: Reasonable Redemption Values (RRVs).

IHG used to have fixed award prices for each property.  Regardless of the cash price, the free night award price was fixed.  As a result, points were worth more when cash prices were very high and points were worth less when cash prices were low.  This is no longer necessarily true.

In May, IHG introduced dynamic award pricing.  This means that point prices are no longer predictable.  The point price is simply whatever IHG decides it is for any given property on any given date.  In general, when cash prices are high, point prices are high and when cash prices are low, point prices are low.  But there’s no obvious formula that ties the two together.  To figure out what point prices are worth, it was necessary to collect data…

Data Collection

In order to make the data collection manageable, I limited my data set as follows:

• I picked 7 major hotel markets in the United States: Chicago, Denver, Houston, Los Angeles, Miami, New York City, and Seattle
• Within each hotel market, I scanned Trip Advisor for the top 3 IHG hotels based on user ratings.  The idea is that these are hotels that people are most likely to look for and so data collected for them may be a better indicator of what points are worth than if we looked at all hotels, including unpopular ones.
• For each of the hotels identified above, I recorded the cash price and point price for three different dates:
  • Weekday: Wednesday September 16 2020
  • Weekend: Friday October 16 2020
  • Holiday Weekend: Friday November 27 2020 (day after Thanksgiving)
• In the two instances where the hotel wasn’t available for both cash and points, I picked a different date to record both.  For example, for the weekday data, I found the next Wednesday in which both cash and point prices were available.

I realize that the above considerations resulted in a very small data set.  It’s certainly possible that a larger data collection effort would lead to different results.  At some point I hope to create an automated process so that we can get better estimates.  For now, though, this is what we have available…

What are IHG points worth?

Across all of the collected data, I found the following:

• Median Point Value: 0.64 cents per point
• Mean Point Value: 0.67 cents per point

There are good reasons to prefer median or mean depending upon the situation, but these numbers are close enough that I think it’s fair to round the answer towards the middle.  That gives us the following:

IHG points are worth 0.65 cents per point.

This value is significantly higher than our old RRV (Reasonable Redemption Value) of 0.57 cents per point, so we’ve updated the IHG RRV to 0.65.

If you’re interested in checking out different slices of the data, continue on…

Average by city and by day type

There are several interesting data points in the above table:

• In some cities (Chicago, LA, and to a lesser extent, New York), points are worth much more on weekdays than weekends or holidays. This is due to the fact that the hotels charge much more cash-wise, but IHG seems to cap the top point price.
• Seattle appears to be a terrible place to use IHG points.  Maybe this has something to do with the fact that the top three rated IHG hotels in Seattle are Kimpton hotels?

Average by brand

As you can see above, IHG’s Kimpton brand was the most often represented brand in this dataset.  This is because Kimpton hotels tend to be rated very highly in Trip Advisor and, as detailed earlier in this post, I only looked at the top 3 rated hotels in each market.

In the previous section I speculated that Seattle hotels might have offered poor point value because they were all Kimpton hotels, but that theory didn’t pan out.  Across the dataset, Kimpton hotels perform very close to average on the cents per point measure.  Meanwhile, Hotel Indigo looks bad, but with only 2 properties in the data it’s hard to draw conclusions.

We don’t have a lot of data to go on here, but I’m convinced that IHG doesn’t discriminate point values by hotel brand.  I don’t know what magical formula they use, but it doesn’t appear to vary by brand.

Best and Worst Values

Minimum by city

Above are the lowest cents per point values in each city.  I don’t have data to back this up, but I suspect that the minimums were worse before IHG moved to dynamic pricing.  In other words, it’s still possible to get bad value for your points (as low as 0.4 cents per point, for example), but I think that the low-end is better than it used to be.

Maximum by city

Above are the highest cents per point values in each city.  As you can see, it’s possible to get as high as 1.29 cents per point value, but that’s quite an outlier.  It’s much more common to see high watermarks around 0.75 cents per point.  In other words, you can easily do better than the 0.65 average, but you’re not likely to do a lot better except in rare circumstances.

All the data

Here’s the full data set:

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