It seems bloggers all over are calculating the value of hotel points and airline miles with regard to Haiti donations – P.Ling in Uptake Blog, Gary Leff in View from the Wing, and Nicholas Kralev in the Washington Times.
I am not going to debate the issue of cash or points for Haiti except to offer one hotel loyalty member consideration for the points v. cash debate. Saving points for a hotel stay and donating cash, with the exception of HHonors or Choice who give award stay elite qualification credit, disregards the traveler who struggles to reach sufficient hotel stays for elite status during the calendar year.
For example, 4,000 Starpoints gives $100 to Red Cross ($50 from member donation and $50 from Starwood matching donation). $100 donated to Red Cross and using the 4,000 points for a hotel stay earns fewer or no points, no Starwood promotion credit, and no elite credit. The tax deduction for a cash donation might be a relevant consideration for some members.
$100 spent for a hotel stay gives the member elite credit for a paid stay and the opportunity to earn a substantial portion of those hotel points back through the paid stay.
Determining the Value of Hotel Points
I want to discuss the value of hotel points. There are so many variables to consider and many assumptions to make when trying to place a dollar value on hotel points. My interest is analyzing the value of hotel rooms a member can get for hotel points.
P. Ling in the Uptake.com travel industry blog cited several hotel points valuation analyses in this statement “If you think it’s too simplistic to peg each Hilton HHonors point at $0.0025 just because a donation of 10,000 Hilton HHonors points results in a $25 cash donation, I agree. So read this and this. The study for Starwood is here and the one for Marriott is here.”
The analyses cited by P.Ling for Hilton, Starwood, and Marriott reference articles by a website PlasticIQ that published hotel loyalty point value articles in September 2009. PlasticIQ employed more mathematical variables than I do in my analyses, but I do not think the PlasticIQ analysis adequately reflects real travel patterns for the vast majority of travelers and makes the calculations unncessarily complex.
Plastic IQ assigned the following hotel points value when redeemed for hotel stays:
Starwood Preferred Guest = $21.50/1,000 points
Marriott Rewards = $8.30/1,000 points
Hilton HHonors = $4.30/1,000 points
Hearts of the Gods blog gave a value for HHonors = $3.77/1,000 points
PlasticIQ created the hotel loyalty program analyses to assist credit card holders with choosing a card. Here are areas I find faulty in the PlasticIQ assumptions for hotel stay redemption used as a basis for determining the value of hotel points.
Plastic IQ assumptions for SPG
a. 20% of hotel stays will be 5 nights
b. Most hotel stays will be 3 nights
c. Hotel stays will be spread out among different category levels (Category 1 = 0% [due to few hotels in this category]; 15% hotel stays at Category 2; 25% at category 3; 25% at category 4, 25% at category 5; 5% at category 6, and 5% at category 7 hotels.)
These are major assumptions that will probably not correlate to the hotel points redemption pattern for 99%+ of travelers in my opinion.
The PlasticIQ analysis when applied to an individual SPG member requires a minimum 20 stays on points to complete this traveler profile. Since 20% of stays are five nights and others are average of 3 nights, the PlasticIQ scenario is based on a Starwood Preferred Guest member with over 700,000 points for free hotel night redemptions. That is a highly exclusive group of hotel loyalty program members.
The average Starwood Preferred Guest credit card member probably earns well shy of 50,000 Starpoints per year. Perhaps the SPG member earns another 50,000 points from hotel stays if the member is Platinum level elite with 30+ hotel stays per year and fulfills multiple promotion offers.
Loyalty Traveler typically looks at one hotel stay redemption at a time. I write my blog for the traveler who is trying to place value on their points for that next vacation.
In the PlasticIQ HHonors analysis the value of hotel loyalty points is reduced 25% by the Priceline factor. The fact that a Priceline room might be available for less in the city I am staying is no relevance to me as a loyalty traveler. I am focused on hotel loyalty elite credit, promotion bonuses, and complimentary upgrades at hotels. Priceline tosses out all those considerations.
When in Amsterdam, I know the points value if I redeem 48,000 Starpoints for 5 nights at the Starwood’s Luxury Collection Hotel Pulitzer. I simply take the paid cost for five nights and divide that cost by 48,000 points to come up with a value for Starpoints.
I have bid my way to a cheaper stay at the Golden Tulip Amsterdam Art hotel in the past. Priceline can get me a room for $100 per night. But the Golden Tulip is not a hotel in the same league or location as the Pulitzer Hotel. So is there any reason to even factor in Priceline in a hotel points valuation? A traveler who devalues their points by comparing Priceline rates to hotel loyalty program redemption rates should probably not even bother with hotel loyalty programs.
In all fairness, I certainly turn to Priceline when the cost for my hotel loyalty is too high to pay for a hotel room and the points value is too low to justify spending my points. Given the choice between spending $100 per night through Priceline or 12,000 Starpoints per night depends on my travel purpose (business, transit, or leisure) and the necessity of being in a specific location. Priceline is an entirely separate transaction from the value I place on my hotel points. I don’t reduce the value of my points based on the option that I can get a different hotel in the same city for less money.
PlasticIQ uses an allocation of HHonors stays between VIP awards, Pointstretcher stays, Priceline deductions, cash value deductions, and estimated hotel rates. This is far too many variables with unnecessary complexity in reaching a points value. I am not saying the final result is inaccurate, but the hotel loyalty program member can’t replicate the PlasticIQ hotel points value analysis at home.
Loyalty Traveler has shown a simple way to calculate hotel points value for your next vacation and a qualitative chart to give you an idea of what you can realistically be looking for when trying to get the most value for hotel stays from your hotel points balance. Depending on where you travel, the chart numbers may need adjustment, but the overall process is a simple way to determine the value of your points.
My Loyalty Traveler analyses of hotel points valuation is subjective and the math is simple. Here are the valuations I have placed on hotel loyalty points in articles from the past few months.
Hilton $6-9/1,000 points
Hyatt $15-$20/1,000 points
IHG Priority Club $7-$10/1,000 points
Marriott Rewards $7-10/1,000 points
Starwood Preferred Guest $35-$50/1,000 points
Related Loyalty Traveler posts with qualitative tables for points redemption value:
Last October I created HHonors qualitative charts for hotel points value based on HHonors 7 category system now in place. In my analysis I gave a redemption value of $7.00 per 1,000 points as excellent. Based on recent analyses for San Francisco and New York I may have to lower this range. I will wait until I complete a couple of international city comparisons to see if Hilton HHonors members can realistically find redemption values of $9/1,000 points these days.
Loyalty program members have the choice when and where to use points. Anyone settling for redemption values under $5.00 per 1,000 HHonors points is not being selective about when and where to use points for free nights.
In my hotel points valuations for Loyalty Traveler I try to focus on what is potentially the high end of points redemption value. There is no requirement to spend your points for poor value hotel stays. My goal with Loyalty Traveler is to show what kind of value can be achieved with hotel points. The objective for the traveler collecting hotel points should be to earn points by spending low and redeem points for high value. When it comes to donating points to Haiti I tossed out consideration of this objective.
New York City and San Francisco are two cities where I did comparative redemption value across hotel chains. I picked a stay date and compared the actual hotel rates for different chains to the cost for a free night using points and came up with the following values available. The range shows the low value for one particular hotel stay redemption up to the high value for another specific hotel redemption choice.
Value of 1,000 points redeemed for a hotel
Hyatt Gold Passport $19.21 to 20.83
Starwood Preferred Guest $14.40 to $34.92
Marriott Rewards $5.97 to $8.63
Hilton HHonors $4.30-$8.78
IHG Priority Club $7.00 to $17.00
Marriott $3.17 to $13.90
Hilton HHonors $1.86 to $6.30
Just because a hotel has a high redemption value does not necessarily make it an excellent overall value. The hotel could be way overpriced for a paid stay. But when it comes down to any specific hotel where you want to stay, the simple choice becomes pay cash or pay with points.
The range of hotel points redemption values shown here indicates a need to be selective when redeeming points. Points have no value until they are redeemed for something tangible. Choosing an acceptable value to receive when spending your hotel points is a personal choice.