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Points and miles have changed my life for the better in countless ways. Not only have I taken more trips without having to worry about the cost, but I’ve been able to travel in an unbelievable amount of luxury, flying first or business class more often than not. This is because I focus heavily on redeeming my points for the maximum value possible.
Valuations can be an incredibly useful tool for beginners and pros alike to analyze deals. But we all have to admit that they stop being relevant in certain extreme cases. I’m talking specifically about those insanely expensive international first class redemptions, the brag-worthy ones that make all your friends want to start collecting points as well. So when should you rely on the value of your points, and when does it no longer matter? Let’s take a look.
Valuations Work Well… Up to a Point (pun intended)
Every month The Points Guy publishes a list of valuations for all the major airline, hotel and transferable points currencies. This guide can be incredibly useful for a couple of reasons. First off, it helps you decide when to use points and when it might make more sense to pay with cash. You can use this formula as a quick shortcut:
(Cash Price of Ticket – Award Taxes, Fees and Surcharges) /
Number of Points or Miles = Value per Point/Mile
If your answer is higher than the published valuations, you’re probably getting a good deal.
The valuations can also help you compare between programs, as no two types of points are created equal. For example, American Express Membership Rewards points are worth a lot more than Hilton Honors points, even though credit cards in both programs are currently offering similar 100,000 point sign-up bonuses right now. In fact, based on TPG’s valuations, one Membership Rewards point is worth more than three times as much as a Hilton Honors point, so the bonus on one of those two 100,000 point cards is worth a lot more than the other.
Of course, you sometimes have to adjust these numbers to suit your own needs. For instance, while Delta SkyMiles are valued the lowest of the three legacy US airlines, SkyMiles might be worth more to your personally if you live in one of Delta’s hubs, such as Atlanta (ATL) or Detroit (DTW), and need to fly the airline regularly.
My $16,234 Flight Home
While I’m currently spending the year living in Shanghai, I’m of course going back to the US to celebrate Thanksgiving with my family. For my return flight back to Shanghai (aka “home”), I’m booked in ANA’s incredible 777-300ER first class.
I booked this ticket with 105,000 Membership Rewards points — which TPG values at $1,995 — and about ~$150 in taxes. I could’ve also booked the same ticket for 120,000 United MileagePlus miles and a similar amount of taxes. Not the cheapest award ever, but I was looking to spend my Amex points and I was happy with the deal I got.
I was especially happy to get this flight for nearly free, since the cash cost would have been a whopping $16,234. I’ve had the opportunity to fly luxurious long-haul first class flights before, but this is by far the most expensive cash value of any of my redemptions (even more than Emirates, Lufthansa and Cathay Pacific first class).
After subtracting the ~$150 in taxes I paid, the cash value I got for my points was $16,084. This means if we use the equation from earlier…
($16,234 – $150) / 105,000 = 0.153
It would seem I redeemed my Amex points at a rate of 15.3 cents each, over 8x higher than TPG’s valuation of them at 1.9 cents each. Yes, I’m absolutely thrilled with the deal I got and very excited for this flight… but very little of that has to do with the cents per point valuation I earned or the cash value of the ticket.
Why You Shouldn’t Care About the Numbers
At the same time that I’m taking off from Washington, DC (IAD) to fly back to Shanghai (PVG), an ANA flight will be taking off from Shanghai to complete the journey back to DC, with a stop in Tokyo (NRT). The cost of a first class ticket on that journey? An absolute steal at only $7,284. Note this ticket is identical to my east-to-west itinerary, with the minor caveat that the inter-Asia flight between Tokyo and Shanghai is operated by a 787 instead of a 767.
If I’d redeemed my Membership Rewards points for this flight, I would have only gotten 6.8 cents per point. This is still 3.5x above TPG’s valuations of Membership Rewards, but on paper at least, it’s over 50% worse than my redemption. But the person flying on this itinerary will enjoy the same priority boarding, in-flight experience, food, drink and seat that I will. So am I really getting more than twice as much value for my points just because I need to fly from Shanghai to Washington DC that day instead of the other way around?
Supply and Demand Create Pricing Variations
Unfortunately in the airline industry, there’s often very little correlation between price and the quality of the flight experience. Of the 38 one-stop first class flight options Google Flights found on the date I’m traveling, ANA features 5 of the 10 most expensive choices, bested only by Emirates, Lufthansa and, believe it or not, Air China. While Emirates is in a league of its own, the difference in first class quality between many of these other airlines is subjective at best.
Korean Air is one of the cheapest options at only $6,450, but excellent food and service — and suites with closing doors on some of their 777s — mean that it really gives ANA a run for its money.
You could book this flight by transferring 80,000 Ultimate Rewards points to Korean Air, giving you a value of ~8 cents per point. Is my ANA redemption twice as good? Absolutely not. You could even argue it’s worse, as I spent $1,995 worth of points instead of ~$1,680, which is what TPG values 80,000 Ultimate Rewards points at.
You can repeat this calculation with any of the other flight options: British Airways’ mediocre first class at $12,000, Etihad first class at $16,000, the list goes on and on. While personal preference and the type of points you have available might push you to one redemption over the other, it’s hard to argue from a purely numerical perspective which one would be the best “value.”
Yes, there’s certainly a lot of variation in the quality of first class products being offered by airlines today. But often this variation is minimal, especially when you’re comparing two options on the same type of plane, such as a 777 or A380. Rarely, though, is that variation actually reflected in the cash price of a ticket. Supply and demand are the driving forces here, and you might find little changes — like flying east versus west, or changing your departure by a day — can change the cash price of your ticket by two-fold.
So don’t get too hung up on these values. I’ve gotten over 10 cents per point from five different redemptions over the last few years, going as high as 17.2 cpp on a Cathay Pacific first class redemption. But at the bottom of the list is by far the best flight I’ve ever taken: a 22-hour Emirates first class extravaganza that netted me only 10.5 cpp. Valuations can be a useful system for analyzing and record keeping, but when cash prices get so exorbitantly out of hand, they stop making sense for anything other than bragging rights. So the next time you’re booking a first class mileage ticket, focus on spending as few miles as possible and use flight reviews to pick the best experience, not the most expensive ticket.
Featured image of ANA’s first class on the 777-300ER by Zach Honig / The Points Guy.
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