When we start traveling again, what is the best use of frequent flyer miles and hotel points?
Apr 29, 2020 10:44 AM
How much is a hotel point or airline mile worth anyway? I needed to figure that out.A while ago (before the COVID-19 outbreak), I was booking a trip for spring break with the family. I found myself asking should I book that hotel using cash or points? Since all travel has been put on hold for the time being, I figured this was a good time to think about the best way to use airline miles or hotel points.
I realized that I do not have any idea of the value of hotel points. Until the last couple of months, my job required a fair amount of travel, which leads to accruing lots of hotel points and airline miles. I use these for personal travel from time to time, but I don’t know if I have been using these points wisely. I decided to phone a friend. My colleague Chris has been traveling for years, so I thought he might have some insight.
Me: “Hey, Chris. Do you know how much hotel points are worth? I am trying to decide if I should spend 30,000 Hilton points or pay $137 a night.”
Chris: “Hey that is a good question. I don’t know, but that does seem like a lot of points.”
Me: “Yeah, at that rate, each point would be worth about .46 cents.”
Chris: “You know we should write a blog post about this and also look at airline miles.”
Me: “Great idea!”
We both started to dig into the data. I started with hotel points, and Chris began with airline miles.
I investigated two of the larger hotel chains, Marriott and Hilton. My first task was simple: to find out what the hotel chains set as the value of the points. To do this, you can look at the cash and points options. For Marriott, this very easy. Looking at the tables on the page, you can calculate the average value is for each category and overall. This is calculated by looking at the cash and points option compared to the points option.
The values vary between ¾ of a cent to 2.2 cents. The average value is about 1.2 cents by Marriott’s table. There are a lot of sources of variability when looking at booking a hotel completely on points. I found 20,000 points could be worth anywhere between $141 and $295 or 0.7 cents and 1.5 cents for the same city on the same night. It seems like 1.2 cents is a good estimate of value for a Marriott point.
For Hilton, the process is not as straightforward, as you must use a tool on the website and calculate from there. Perhaps Hilton makes it difficult to figure out as they have lower-value points, with the average value being ~0.5 cents. Again, this can have a good amount of variability. Looking at the same city on the same night as I did with Marriott, I found 40,000 points could be worth between $162 and $351 or 0.4 cents and 0.9 cents. The estimate of 0.5 cents seems to be a good value for Hilton points. This is a little disheartening as I have accrued 187,000 Hilton points. Maybe I need to change hotel chains. Back to my original question: Should I book a hotel for $137 or with 30,000 Hilton points? That is a value of 0.46 cents per point, so this is not great, even for Hilton points.
Chris suggested we look at taking trips to different places using points and miles to determine if we could find the ideal use of points. We looked at booking trips with differing lead times between two weeks and 11 months. We both live in Denver, so that is where our trips originate. We picked three destinations around the world that are nice to visit year-round. For the domestic trips, we chose San Diego. For Europe, we selected Rome, and for Asia, we picked Singapore. Chris investigated United or Star Alliance airlines for frequent flyer miles. Below is the average frequent flyer mile cost by advance purchase for different destinations. Also, the minimum amount of frequent flyer miles required to travel.
It appears that purchasing a ticket in advance for travel is beneficial for domestic travel and travel to Asia, but not so much to Europe. A couple of other factors are in play here that are probably confounding the results. One is the season of travel as the springtime (two weeks and one month) is less peak season than summer (three months) at least for Europe. Another big factor specifically for this year is the COVID-19 outbreak that is greatly reducing travel.
Chris also found that a United Miles varied quite a bit in value from ¾ of a cent to 3 cents a mile. The median value for a United point was ~1.2 cents. The chart of values is shown below.
Chris noticed another thing about the flights: The longer-duration flights tended to be less expensive in terms of miles. If travel time is not a big concern, you can save some miles.
For those same destinations, the table below shows the hotel points. I limited the hotels to category 6-8 for Hilton and category 5-6 for Marriott. These are upper-middle of the road hotels with typical rates from around $150-400 a night; some were a little higher in peak season. As you can see from the table below, the number of points spent can vary dramatically. The number of points you spend for a week's stay at a Hilton can vary from under 200,000 points to almost 2,000,000. Marriott is much more consistent with a range of 180,000-420,000. The largest variation of point prices seems to be in Europe, for both hotel chains and flight prices.
So what did we learn? The average Hilton point is worth ½ a cent. The average Marriott point is worth 1.2 cents, and the average United mile is worth 1.2 cents. If you can beat that, you can get more mileage out of your mileage and points. I'll be ready to use my points and miles wisely once it's time to travel with the family again.