Types of Award Programs

The award program guides in this section give advanced tips on how to get the most out of each airline, hotel and bank rewards program. But they all have different values and redemption structures, and it can be a bit confusing at first. Below I have laid out a guide to the different types of award programs.

Hotel Award Programs: They all have the same basic redemption structure and strategy. They are categorized by tier, generally from tier 1-7, from least to most points required to redeem an award night. For example, a Category 1 Hilton hotel costs 7,500 points, and a Category 7 Hilton costs 50,000 points. However, this category system leaves room for big disparities in quality within each category, so it is important to look at the cash value of the hotels you are looking at. For example, if you were to book any given Category 7 hotel using cash, its nightly rate would range from $150 to $900+. All else being equal, I would definitely choose to use my points at a $900 hotel to get the most value out of my points.

Airline Award Programs: Each airline award program uses one of three types of redemption structures: 1) revenue-based, 2) distance-based, and 3) region/level-based.

1) Revenue-based programs (Southwest Rapid Rewards) place a fixed monetary value on each point. If there’s a seat for sale, there’s an award seat available, and the more expensive the seat is, the more points it will cost.

2) Distance-based programs (British Airways Avios, LANPass, Iberia) categorize and price flights according to their distance flown. Each individual flight segment of an itinerary is priced out according to its distance, and then all segments are added up to get the total award point price. This system opens the door to some incredible values on short-distance flights that have very high cash price tags. For example, it costs 4,500 miles to fly from Tokyo to Osaka on Japan Airlines using British Airways’ Avios distance-based points. That same flight costs over $250 in cash. Same situation if you use British Airways points for Lima to Cuzco on LAN, New York to Toronto on American Airlines, and many other partner routes. You could fly 11 of these flights—hypothetically worth $2,750—with 49,500 points. Well guess what: the sign-up bonus for the Chase British Airways credit card is 50,000 points. Read more in my British Airways Avios program guide, and/or here and here.

3) Region/level-based programs (United Mileage Plus, American AAdvantage, US Airways Dividend Miles, Delta SkyMiles) categorize and price flights based first on the region(s) of their departure and destination. Then, they only allot a certain number of award seats that are available on each flight. These limited award seats are further divided into two price levels: the low-level “saver” option and the high-level “standard” option (generally 2x as many miles). There are painfully few seats available on each flight in the low-level “saver” category, and when they are unavailable, only high-level “standard” awards are left. A resourceful and responsible frequent flyer will go to enormous lengths to avoid booking a high-level “standard” award because it is surely an egregious misuse of miles. I did it once, and I cried for days on end. That being said, if you are broke and out of options, sometimes you just gotta do what you gotta do, and you will forgive yourself someday. Someday…

Despite the occasional frustration of (not) finding award availability on the region/level-based award programs, there are plenty of values to be had. For example, American Airlines and US Airways both have amazing values with their off-peak awards to Europe, South America and the Caribbean. And United partner awards to almost anywhere in the world—both one-way and round-trip—are widely available and easily searchable online. Even better, these programs’ flexible routing rules allow open jaws and/or stopovers on international trips, which, when used cleverly, can create additional free one-way flights and side-trips before or after your primary trip (the expert on this little-known, high-value technique is the blog MileValue).

For example, my parents did a round-trip from San Francisco to Berlin on Air Berlin using AAdvantage miles, but by gaming the award chart and stopover system, they got free one-way tickets to Kona, Hawaii on the tail end of their trip. Here’s how to do this trick on American (via MileValue) and it can be done on United, Delta, and US Airways too!

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