What is the value of miles and points by airline, hotel and credit card program? Miles used to be thought to be worth 2 cents. I think that conventional wisdom developed out of the idea that a cross country flight cost about $500… or 25,000 miles. 20 years ago that was generally true, and award availability wasn’t really a problem either.
That was long before:
- Airline alliances opened up huge possibilities for miles.
- Mileage programs increased the cost of many awards.
- Awards became tougher to get with flights full.
Plus the 2 cent number probably wasn’t ever true to begin with.
Many different folks have taken a stab at how much miles are worth. For this post I’m not going to give you a single number. I’m going to share my own rough and ready number for several different programs. And I’m going to explain how I think about the value of miles — why they are different for different people, and for different circumstances of how you plan to use them.
I haven’t published updated valuations in over a year so it seemed like a good time to look at this question.
The Value of Points are Not Actually Fixed
Here’s how to think about the value of miles and points by airline, hotel and credit card program.
It depends on how you redeem them. What value are you going to get for your points? The important thing here is not to use the retail price of a ticket you’re getting, since
- with premium cabin rewards you might not have been willing to spend that much cash.
- Frequent flyer tickets aren’t necessarily worth as much as a paid ticket. They don’t earn miles. They may not be upgradeable. And you can’t necessarily just pick whatever flight you want, you have to be flexible and worry about award availability.
It depends on when you’re going to redeem them. You don’t earn a rate of return on miles and points like you might with cash in a bank or investment account. And you need to discount to present value if you’re going to use the points later. Plus there’s substantial risk of devaluation with many points currencies.
It depends on how many you already have. The value of points at the margin is different than an overall average value. As you approach having enough points for an award, the marginal value of a few more points goes up substantially — since those extra points are what make the award possible. On the other hand, once you have more points than you’ll redeem in the near-term the value of additional points falls since you may not ever use them, or may not use them under current award charts.
We Can Make Some Overall Comparisons
The value of a mile is the amount at which you are indifferent to holding miles versus cash.
If a mile is ‘worth’ 2 cents you should be equally happy with a mile or two pennies, if you’re offered a mile at a price of 1.9 cents you would be a buyer — you’d consider yourself to be earning a 5% margin.
Put another way, when we put a charge on a credit card, that doesn’t earn any bonuses (it earns 1 mile per dollar spent), we’re effectively buying that mile for 2 cents since the opportunity cost is putting the charge on a 2% cash back card. You’re revealing a preference through your behavior that you believe the mile is worth two cents.
My Overall List of Values
Here’s my overall ranking and valuation of several common airline, hotel, and credit card points currencies.
Transferrable Points Currencies Top the List
The most valuable points, at the top of my currency list, are transferrable points. That means Starwood, American Express, and Chase points. You can transfer those into a variety of programs. Earning those gives you tremendous flexibility and optionality.
Starwood lets you transfer 20,000 points into 25,000 miles with the most number of airlines. That means their points are worth at least 25% more than the most valuable currency they transfer into. And they’re worth even more than that because of their option value, the ability to put points into the account you need them in when you need them — to top off an account at the margin (remember, miles at the margin that you need for an award are worth even more). In the past 6 months they’ve added excellent transfer partners in Korean Air (cheap transatlantic Skyteam awards, cheap Hawaii awards, and awesome first class award availability) and Aegean (cheap Star Alliance business class awards).
Meanwhile, Chase transfers to several valuable partners — and unlike Starwood in most cases the transfers happen instantly. I like that Chase transfers to United (no fuel surcharges) and duplicates Amex with British Airways and Singapore. They also have a more valuable transfer partner and ratio in Hyatt than Amex does. That’s why I value their points a bit more highly than American Express Membership Rewards.
Nonetheless, American Express has more transfer partners and many do transfer instantly. Meanwhile, Citibank’s transferrable points are more valuable if you have the Prestige card because you can also use those points to straight-up buy paid American Airlines tickets at 1.6 cents apiece.
The Value of Miles and Points by Airline
Here are airline programs compared.
Alaska Airlines miles are often undervalued — they partner with many airlines in both the oneworld and Skyteam alliances, offer one-way awards (with a stopover), and show availability for most partners on their website. The biggest drawback is that you cannot combine different partners on a single one-way award. I love that they partner with Emirates, whose A380 first class awards have become quite easy to get on several U.S. routes.
United miles get you access to the Star Alliance, which means the best availability between the US and both Europe and Asia in business class. There are no fuel surcharges. But awards are quite expensive when traveling in premium cabins on partner airlines, impossibly so if you want international first class.
I’ve knocked down the value of American miles with the pending March 22 devaluation and with how tough it’s gotten to find award space on American’s own flights most of the time. It remains best for first class awards though — Cathay Pacific, Etihad, Qatar (limited routes), British Airways (fuel surcharges) as well as somewhat more difficult ‘get’ Qantas.
I value Aeroplan points a little bit below United miles. They’re both members of the Star Alliance, and for many awards their prices in miles are cheaper but they add fuel surcharges onto many of those partners. Here’s how to book Star Alliance awards without fuel surcharges.
Korean Air has a pretty good award chart, does add fuel surcharges to awards, but offers amazing first class award availability. They have great Hawaii awards (Alaska Airlines, Hawaiian) and great Europe awards (80,000 roundtrip in business class). The two challenges are that they’re a member of Skyteam, so their partners aren’t as good and don’t often offer as good award availability as some of their competitors, and also that you have to deal with the idiosyncrasies of Korean – rules like only redeeming your points for family members.
British Airways points are worth still less to me, and I’ve knocked them down in the past year due to a devaluation and the pending end of the 4500 point domestic US award.
Delta takes a bit of a drop with their persistent devaluations, their practice of journey control making it tough to piece together awards, and their lack of transparency with the removal of award charts.
The least value points currency among the major ones often discussed by US frequent flyers has to be Virgin Atlantic’s — fuel surcharges, cannot mix and match partners, partner awards that cannot be booked one-way, and challenging call center agents all rolled up into one. Here are the best uses for Virgin Atlantic’s miles.
Hotel Points Use a Totally Different Scale
Here are my values for hotel program points compared:
Hotel loyalty programs simply use a different ‘scale’ than airlines for the most part. A room with Hilton HHonors might well cost 90,000 points for a single night, and points in many programs can be transferred to airline miles at ratios like 2:1 or even 5:1.
On the other hand they give out points in pretty large denominations. I’ve often assumed that was to make you feel like you were getting a lot especially if you were used to airline miles. Earning 5000 airline miles for a roundtrip flight might make 20,000 points for your hotel stay feel quite rewarding.
The point here is that I am offering the value of a single point — that has nothing to do with how easy it is to earn the points, or an overall earn-burn relationship. It’s a different question entirely to ask which hotel program is the most rewarding for your spending in terms of free nights. They each award and redeem points at different rates, so I created a way to compare them.
Here’s we’re just looking at what 1 point is worth in each program. At the high end Hyatt points can be worth quite a bit, especially for category 5 and 6 properties during high season and even more so when cash and points awards are available. Still, the airline transfers aren’t as lucrative as Starwood’s and if you’re looking at an ability to trade in Hyatt points for a hotel stay where you’d otherwise use cash I find that most of the time you can do a bit better than 1.5 cents. I value the cash more than the points at the margin, though, so I’m not actually a buyer at 1.5 cents.. I downgrade them slightly plus I would choose Aeroplan or Korean points over Hyatt points 1:1.
Hilton points are worth a little less than a half cent apiece, the average redemption I find hovers somewhere just above that half cent mark. And IHG Rewards points are worth only a little bit less than what you can buy them for through the back door.
How to Use These Valuations
Since valuation here is the amount at which you are indifferent to holding miles versus cash this figure is useful for:
- Comparing when to spend miles or cash. Should I spend 50,000 miles for an award ticket or $700?
- Comparing when to spend on airline’s miles versus another for the same award. Should I spend 25,000 United miles or 35,000 Delta miles?
- Comparing the value of different credit card signup bonuses. Is an 80,000 point offer from Marriott better than a 75,000 point offer from Hilton? In fact, I view a 50,000 point offer from Chase Sapphire Preferred better than both (and that’s without the 5000 extra points for adding an authorized user to the account).
- Determining which hotel chain offers the better value reward when you’re considering staying at two different hotels. Should you spend 12,000 Starwood points or 35,000 Hilton points?
- Deciding whether to buy points when there’s a big bonus promotion.
- Figuring out how much extra you might be willing to spend to earn points through a bonus promotion, or figure out whether a hotel promotion should influence your decision about where to stay
But since these valuations aren’t precise I won’t actually pay 1.6 cents for an American mile. I want to accumulate American miles when they’re substantially less costly than 1.6 cents apiece. And I know I am clearly not a buyer at 2.5 cents.
In practice these are fairly blunt tools that tell me “1 cent a point for American miles is a really good deal” but that I’m not going to spend 2 cents unless there’s a very specific scenario — like a few points at the margin to top off an account for an award I’ve put on hold — where it makes sense (and in that scenario, my valuation of each point is higher since they’re helping me to save with a real redemption).
How Do You Value Your Miles?
What is your value of miles and points by airline, hotel and credit card program?
Let me know if you think I’m off base on any of my valuations!