Strategies for Redeeming Miles/Points

Points and miles are most valuable if you have advance planning and flexibility. If you have strict requirements on destination and/or timing, then your award travel dreams might not work out very well.

For example, you probably will not be able to find a low-priced award flight from San Francisco to Paris in July with only a month’s advance planning. But if you plan well in advance and learn how to devise creative/crazy routings, then the whole world is opened up for you.

How to decide whether to use miles or cash

As a rule, while searching for any given flight or hotel, you should always shop around in all of your award programs, look at your cash options, and do side-by-side comparisons to identify the best value. I evaluate this by placing a cash value on each of my points/miles and calculating the “opportunity cost” of using my miles. Everyone will value different miles or points differently because each person has a different willingness to pay for stuff, and we all have unique travel preferences.

So how should one evaluate if a flight is a good value with miles (or a hotel with points)? First, you need to identify the four holy variables:

  1. The lowest mile/point price for an acceptable flight/hotel in any program
  2. The lowest cash price for an acceptable flight/hotel in any program
  3. The amount of miles/points you would earn for flying the cash flight or staying in the cash hotel.
  4. Your valuation of each mile/point in that program (check here, here and here for thorough explanations and suggestions on mile/point valuations)

 

Now for some examples. First, let’s pretend we are flying one-way from San Francisco to Portland, Oregon and we have two options to get that ticket:

Option A: Redeem 12,500 miles + $5 taxes

Option B: Pay $100 and earn about 500 miles

Now that we have variables #1-3 above, we need to find variable #4, my mile valuation. So let’s say I value the miles at 1.5 cents, or $0.015, per mile. I generally use this reasonable “one size fits all” mile valuation for quick calculations.

So with Option A, the opportunity cost for me to use my 12,500 miles is: (12,500 * $0.015) = $187.50. Adding the $5 taxes, the effective cost is $192.50.

With Option B, the 500 miles I would earn from flying are worth (500 * $0.015) = $7.50. After subtracting that from the $100 cash price, the effective cost is $92.50 (less than half the cost of Option 1).

My decision: Option B.

 

Now for the next example. Same scenario except now we are flying one-way from San Francisco to St. John, Newfoundland.

Option A: Redeem 12,500 miles + $5 taxes

Option B: Pay $400.00 and earn about 3,500 miles

The cost calculation for Option A is the exact same as the last example, with an effective cost of $192.50.

With Option B, the 3,500 miles I would earn from flying are worth (3,500 * $0.015) = $52.50 to me. After subtracting that from the $450 cash price, the effective cost is $397.50 (more than twice the cost of Option 1)

My decision: Option A.

 

Sometimes, however, you’re just broke, and the cash option is not an option. If that is the case, just do it and use the points–chances are you won’t regret it. They’re just points and they are easier to earn than money. Earn and burn, baby.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s