The goal of travel hacking is to 1) earn the most amount of points and miles for your purchases and sign up bonuses and 2) to get the most amount of value out of those points or miles when you redeem them. This second part seems to be the most difficult aspect for people to handle most likely because the average person hates math. If you overlook this aspect of travel hacking, you’re really doing yourself a huge disservice. Earning all the points in the world doesn’t matter if you don’t get good value out of your points.
Determining good value requires you to first understand the value of points. See this article for our value of all airline miles, hotel points and credit card points. Good value will be equal to the value of points and miles listed in that article. Anything below that number is bad value. Anything higher than that is good to amazing value. Value is expressed in cents per point which is abbreviated as cpp. Even though airline points are usually called miles, you can still use cents per point. So for example, someone might tell you that they got 3cpp for a hotel redemption. In other words, they are saying that they got three cents per point.
So now that you know the importance of redemption value, we have to figure out how to calculate it.
The math
There are various points calculators out there that you can use but I’m not a fan of using them because the math really isn’t that hard. Doing the actual math allows you to gain more skills. If you do it enough, you may be able to do it in your head so you don’t have to rely on a points calculator. Instead of relying on some website to tell you if something is a good deal, you’ll learn for yourself what’s a good deal and what isn’t.
Let’s use a few examples. Let’s assume you want to stay at the Hyatt Regency St. Louis in November. Search by city and then you’ll see your options. Click on “view rates” for the hotel you want which for this example is the Hyatt Regency. What’s really nice about Hyatt is that you can easily toggle between cash and points. Make sure “use points” is on so you can first see if there’s award availability for your dates. There’s nothing to calculate if they don’t have availability. When I ran this search, a standard room with 2 double beds came up for 8,000 points. Since we are staying for 4 nights, 8,000 x 4 = 32,000 points.
Now we need to go back and toggle off use points. You’ll see a bunch of other rooms come up but since we want to do an apples-to-apples comparison, let’s select the same room we were just looking at. Note that some hotels will show you several rooms when looking at award space so just make sure you are always comparing the same rooms. Assuming you’re signed in, and you should be, you’ll see a member rate and a standard rate”. We want the member rate. Click “select and book”. You’ll once again see both of these rates so click on “book” under the member rate. This brings you to the payment page. For this example, the total cost including taxes was $846.97. Make sure you always get the total price including taxes.
Let’s review where we are at. We have 3 pieces of data. Ultimate Rewards (or WoH points) are valued at 2cpp. The points needed for 4 nights is 32,000. The cash price is $846.97.
Open up the calculator app on your phone. Type in the cash price first which 846.97. Then click the division sign (÷). Now type in the total points required for the stay which in this case is 32,000. You probably don’t even have to hit equal but if you don’t see the result, click the equal sign. You should see this result: 0.0264678125. That’s a long number so let’s just express that as 0.026 as you only need three deciminal places. At this point, you could just leave that as is or if it is easier for you to handle, you can multiply by 100. If you multiply by 100, the result becomes 2.6.
No matter how you look at it, the result is 2.6cpp. I personally don’t have to take that last step of multiplying since it makes sense to me to express two cents as 0.02. Of course, we don’t say .02cpp so this could confuse some people. If it is easier for you to multiply by 100, then go for it. We all process information differently. Either way, it’s important to use three decimal places since 2.1 cpp is very different than 2.9 cpp. 2.1cpp is a standard redemption whereas 2.9 cpp is a nice one.
So now let’s finish this up. You’ve determined that the redemption rate is 2.6 cpp and you value Ultimate Rewards (or WoH) points at 2 cpp so this is clearly a good redemption. I would definitely book it.
Let’s look at a few more examples.
Example 1 – points plus cash
Sometimes you have the option of using points plus cash to book a hotel. How do we do the math here?
This is the exact same hotel from the previous example. The math is pretty much the same but now there is an extra step. The redemption value will be based upon the money you are not paying. Recall that the total price is $846.97. Take that number and subtract by the new cash price which is 445.76. So 846.97 – 445.76 = 401.21. Notice that the total miles required is now just 16,000. So let’s do the same math before just with these new numbers. $401.21 divided by 16,000 = 0.025 or 2.5 cpp. Still a pretty good redemption rate but not as good as the 2.6 cpp you were getting before. I’d still go for it if you wanted to conserve your points and save some money at the same time.
Example 2 – Focusing on the best redemption possible
Let’s assume you have 215,000 Chase Ultimate Rewards points. You want to use all of them for the best hotel stay possible. You want to get at least 2.5 cpp. You could either search for a bunch of hotels and do the math each time or you can do this backwards so that you only need to do the math once. Don’t worry, this is pretty easy. The goal is to get a base price so that you know that you want to find a hotel with a total price at or above this base price. Anything lower and it’s not going to work.
Take your points, 215,000 and multiply by the desired redemption rate, 2.5 cpp. The result will be 5,375. We can confirm this math be dividing 5375 by 215,000 which will get you 0.025. So we know the math here checks out. Getting back to that result of 5,375, we’ll express that as $5,375 since that’s our baseline cash price. Assume we search 3 hotels that all have availability at 215,000 points. The cash rates for these hotels are $5,120, $5,245 and $5,687. Well without doing any other math, we know that two of them do not meet our criteria as they are less than $5,375 but one is above that number so that’s a good redemption. We could do the math on that to get the exact cpp but there’s really no point.
So when is this going to come up? One scenario would be when you are looking to book a specific category hotel and you don’t really care where it is. Let’s say you want to stay a category 8 Hyatt hotel in Hawaii. You don’t even care what island. There’s 5 of them at the moment and you want to get the best value. Although they always won’t all be the same value, assume for this example that 3 of them are. You can use this method to select the best redemption possible if that’s what your goal is.
Although hotels were used in this example, the same math works for flights. Let’s assume you find several flights and they are all 40,000 miles. You want to get 2 cpp (you can still say cents per point even though we’re using miles). Just multiply 40,000 by 0.02 and you’ll get 800. So you want to then check the cash prices for these flights. If they are less than $800, you’re better off booking with cash. At or above 800, you’re better off with points (miles).
Example 3 – buying points and miles
This is a topic that really confuses a lot of people. Unfortunately, travel companies can use terms like “sale” and “bonus” to trick you into thinking that you’re getting some type of deal. As we’ve discussed in this article, the math usually doesn’t check out. These offers to buy miles come in any number of variations but it really doesn’t matter what it looks like. The math is the same.
Here’s an example of something you’ll see with United. It’s call Award Accelerator.
I’m not picking on United, I just had this handy. Again, don’t be thrown off by how these offers are presented. The math is exactly the same. We first need to consult our chart to see how much United points are worth. We check and see that they are worth 1.5 cpp. Now let’s do the math. Take the price, $181 and divide by the amount of miles, 8,000. The result is 2.2 cpp. In this case, we don’t want this number to by high because you are paying this price. Look at it this way, you are paying $2.20 and getting $1.50 in return. That’s pretty stupid huh? Of course it is but if you don’t do the math, you don’t know how stupid this is.
Another thing that trips people up is when they are offered bonus points. Marriott will run sales for Bonvoy points and I’ve seen people explain how great of a deal this is. They are 100% convinced that they are making a smart move. Consider this example, “get a 40% bonus when you buy 100,000 Bonvoy points for just $1,250”. This is just another way of selling you 140,000 points for $1,250. Don’t get thrown off by the term bonus or sale. Do the math. 1250 divided by 140,000 points is .0089 (I use an extra decimal place for these points). Let’s go back and check our chart. You’ll see that Bonvoy points are worth 0.8 cpp. That’s not a typo. These points are worth less than one cent. So you are buying points valued at 0.8 cpp for 0.089 cpp. Another way to look at this is that you are giving someone 89 cents and getting back 80 cents. Again, not a smart move.
Of course, there may be a few times when buying points makes sense but those are rare. We discussed them in this article.
Conclusion
I could keep going with examples here. It doesn’t matter what it is. Trying to compare the SUBs for two different cards? Booking hotels or airfare? Buying points? Whatever you’re doing, if it has to do with value of points, you have to do the math. I see so many people asking questions that would be easily answered by just doing the math. I never mind answering questions in our group but I also want to see people doing the math because it will make them a much better travel hacker.
I really need you to understand that all points have a baseline value and that they all vary. You need to understand this baseline in order to compare it against the redemption rate you are finding. This is the only way you’ll know if this is a good deal. I realize math is intimidating to some people but take it slow. Practice. Ask questions. Once you get the hang of it, you shouldn’t have a problem. More importantly, you’ll be a much better travel hacker once you grasp and follow this concept.
Still need help?
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