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Sunday Reader Email Question: What Mile to Cent Ratio Is a Good Deal for Awards?

by on July 17, 2011 · 10 comments

in Sunday Reader Questions

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TPG reader Chris writes:
“My question: When booking an award ticket at what mile to cent ratio makes it a good deal? I recently booked a roundtrip domestic ticket on Delta using 25,000 points (their lowest tier) that would have cost me $420; therefore I got 1.68 cents per mile. Additionally, is it better to use points for upgrades rather than economy seats?”

The answer is: it depends on your situation. I know many people who are miles rich and cash poor and would prefer to use miles to book flights that will save them money. I have been in this situation before and (gasp) have even used miles for domestic coach flights when funds were tight.

What would I recommend as a general guideline? For most US airlines, I’d personally want at least 1.5 cents per mile to feel good about the redemption.

For me, I value airline elite status, so I pay for all of my domestic flights since I get upgraded on them. Nowadays on my awards, If I’m not getting 3 cents per mile in real value (not face value of the ticket), then I don’t redeem.

What do I mean by real value? It’s an internally calculated and completely unscientific number of what the award is valued to me. For example, my 120,000 Delta mile business class trip to Spain and Mauritius had a face value of over $9,000 if I bought it outright online. I never would have paid $9k, so I can’t claim that my 120k Skymiles had a value of 7.5 cents a piece. However, I conceivably would have paid $3,600 for this trip – maybe more, but probably not. It’s really not an exact science, but you get my drift. In the end, I had the miles and I wanted to go to Spain and Mauritius so I pulled the trigger. Simple as that. I probably wouldn’t have done 5 nights in Mauritius if I couldn’t fly business class (and since I won’t spend $9k for a ticket), my miles opened doors I never would have walked through. That makes me happy.

What I recommend is to go with your gut. If you feel good about an award, then book it! Miles are meant to be used. Generally they devalue over time, so if you find something that looks good to you and it’s going to save you money and you are happy, then book, book, book! Too many people are pack-rats with their miles and are holding off for unrealistic awards. Sometimes redeeming for a domestic ticket can make a lot of sense – don’t feel bad about it as long as it satisfies your needs.

As for upgrades, I generally do not find them to be worthwhile. There are so many co-pays and fare restrictions nowadays, it can be cheaper to buy a discounted business class ticket. Plus, if your flight is canceled or messed up in some way, you can be reaccommodated in coach and you only earn miles on the coach fare purchased. Spending a little more on business class or just using miles for business can make a whole lot more sense (of course this varies domestic vs. international), but I generally don’t recommend mileage upgrades (though Delta K fares to Hawaii plus 30k to upgrade roundtrip can make more sense than their crazy mileage amounts needed for awards).

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  • Jim

    Thanks for your information, it’s very helpful.

  • Dsom74

    My bottom line is always “if you feel good about an award, book it” so I like that you emphasized that. Each of our circumstances is different and often changes. My family has been miles rich and cash poor for awhile but one day (kids out of college, etc) we will (I hope) have more cash to spend. That will likely change the decision process for what makes best use of our miles. The wife and I will probably start using more miles for upgrades once it’s just the two of us, for example.

    I disagree though with the old argument about using the face value of a revenue ticket versus what one personally would’ve paid, in valuing a mile. In my view there are two values for your miles, it’s not an “either/or”. The “market value” of your Mauritius ticket was in fact $9,000 as that is what it would’ve cost to purchase said ticket at that time in the marketplace. So using $9K as the market value for your CPM is accurate in that sense. And your personal cash price you “would have paid” is your personal value of the ticket. Using that value for your CPM is also accurate, just in a different sense. It’s no different than any other commodity. Would I pay several hundred grand for a Lambourghini? Heck no. But that’s still the asking price and, after some haggling at the dealer, what some people do pay.

    And for us, we use miles exclusively for really cool trips that may end up being once in a lifetime. The real value in those goes far beyond anything monetary.

  • Adam K

    Brian I completely agree with your “real value? It’s an internally calculated and completely unscientific number”

    Because valuing that business class ticket at $9,000 is unrealistic. Would you really get out your Amex card right now and purchase that ticket for 9 grand. No way. Had you purchased it in Economy, it would probably cost $1-2k. That you would spend out of pocket. So assigning some slightly higher value to the business ticket makes sense.

    People have told me in the past “I only redeem in business or first because I can get 8 cents per mile!” It always seemed disingenuous because they’d never pay that amount for the ticket so I thought their redemption claims weren’t valid. Net net I enjoyed your explanation.

  • Anonymous

    How you determine “value” is key. Using miles/points can enhance your travel experience but that doesn’t always translate into dollars saved. I like to use the 1.5 – 2cent/mile rule but I also consider things like maintaining status, travel schedules, flight times, current bonuses, and flight durations. Using miles may enable me to fly on preferred airline at preferred time, but I may be able to fly a low-cost carrier to nearby city in less time for much less. If miles get me an $800 ticket on airline A when I can get a $400 ticket on Airline B, I value the miles closer to $400.

  • Jeff

    Thanks for the information. Great post. Been wondering about this.

    I like the encouragement to use the miles.

    I’m currently in San Diego and brought my girlfriend out here RT on miles. 32,500 miles. Coach ticket from when I wanted to book woulda been about 550.00+ so it’s bout 1.6 cents per mile. the 32K was the exact amount of “bonus” miles I got with my Amex Delta 50% transfer so it really feels ‘free’ and is a great birthday gift tacked onto a business trip (which I’m getting personal miles for). I’m one of those cash poor guys at the moment so lovely weekend made possible by reading this blog.

  • Pulley

    I agree with Dsom74. I wouldn’t pay $9,000 for the ticket and I would travel to Mauritius with being in business class. So for me it is a $ 9,000 redemption value.

  • Pulley

    Sorry for my typing skills. I “wouldn’t” travel to Mauritius “without” being in business class. The most I’ve paid for C tickets is $5,000 SAV-ICN-BKK so I could use that value as well.

  • Dan

    Honestly, for airline miles, I stay away from valuation calculations. I won’t use miles for domestic travel; my wife and I hardly fly domestic, and with capacity controls, it’s usually just easier to pay for the ticket and get an itinerary that we want. Domestic coach is generally cheap enough on an absolute basis that paying cash won’t hurt too much.

    Now, we do like to travel overseas. Yes, the holy grail for an overseas trip is that coveted J/F seat. But valuation levels aside, it does take a lot of miles to get two J seats. My wife and I are looking at going to Europe during the fall of next year (thanks for the Spain advice you emailed me, Brian!) One consideration with airline miles is that you have to use them in large chunks. We’ve got enough miles for two coach tickets (120k) but not J (210k). Since we are not regular United fliers, and we got all of our miles through credit card bonuses, I just don’t see us getting anywhere near 210k miles anytime soon. So the choice is to pay either $2k-$3k for two coach tickets, or 120k miles. $2k is a lot of money to me, and I’d rather burn the miles before they get devalued again. So, we might be getting a crappy valuation, but we may not have decided to go if we actually had to pay for the tickets.

  • Anonymous

    Same Dan as above, but I broke my comment into two parts.

    Hotel points are a different story. I’m a big SPG person, and SPG allows you to redeem as little as 1200 points as part of an award. This gives me a lot of flexibility in choosing how I redeem awards. In addition, I’m generally a lot less fussy about hotels than I am with flights. Once I’ve found the “ideal” flight, anything else is probably a lot less so. This is especially true if the ideal flight is a non-stop at a reasonable price. Any alternative is likely to involve a connection. Sure, it might be cheaper, but what if it involves a 4-hour layover?

    With hotels, it’s generally easy to find an affordable local one if I can’t get a good valuation on my points. If the local one is of the same quality as the SPG property, sometimes I’ll use that price as the basis for my valuation. One thing that is different with hotel points is that most programs don’t have separate tiers for “saver” or “flex” awards. Whereas the airlines will charge you double the points to get any available seat if the “saver” awards a full, many hotels promise that if a standard room is available for sale, it’s available for award redemption. This comes in handy for redeeming during ultra-peak periods where they will jack up the cash rates. Thai beach resorts during Xmas and New Years come to mind, as well as Oktboberfest in Munich.

    So, with hotels, the bottom line to me is that I have many more options to redeem my points, and because of that, I have to be a lot more picky in how I do that. Interestingly enough, SPG sells their points at 3.5 cents/point. I consider a redemption “good” if I can get 4 c/p or better in valuation.

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