Points vs. Cash on our Hawaii Trip
Jan. 1st, 2022 04:20 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
canyonwalkerOn our trip to Hawaii last week we mixed using points and cash to pay for our expenses. We always try to use points for at least part of our expenses every trip though it doesn't always work out. This time it worked better than usual with us finding good points rates for the flight and hotel, leaving just the rental car as our big-ticket cash expense.
Why don't we just do an all-points trip? Isn't getting a completely free trip the point (ahem) of collecting points? Alas that's noob thinking. While points can be used almost any time nowadays it can be at very unfavorable rates. Why piss away your hard-earned points? It's so much better to get good value for them.
The trick to getting good value for your points is twofold. First, you have to know what the points are worth. Second, you have to find worthwhile redemption opportunities— and be willing to spend cash otherwise.
With other airlines and most hotels there's a broader range of points-vs-dollars ratios that can apply. There it takes more time and effort to figure out what the fair value is. With Marriott Hotels, for example, I consider the fair value to be $0.008 per point, or 0.8 cents per point (cpp), from years of experience. At least, that's what I strive to make my points worth when I spend them. Marriott offers me countless opportunities to get worse value.
The variability in what hotel and airline points can be worth is one of the things that has made credit cards' own point more popular the past few years. Chase, Citi, and Capital One all have their own points, and they all have more or less fixed redemption rates. Often there are 2-3 different rates per program, where favorable rates apply to certain categories. Hawk and I both collect Chase's Ultimate Rewards points. We aim to make them worth 1.5cpp as that's Chase's most favorable rate.
With Marriott properties the redemption costs were high, The cheapest hotel was 60,000 points per night— which I regard as worth $480, as mentioned above. And that rate only secured a room type called No View, for which the cash rate was $350. No thanks! Other Marriott properties offered nicer rooms but wanted upwards of 100,000 points per night. We weren't interested in spending $800 worth a points a night— not when there were decent alternatives available at lower prices!
We ended up staying at a Hyatt his trip. In the Hyatt program hotels generally have a fixed points price per property. For example, the Hyatt Regency Waikiki we stayed at is 20,000 points per night. That rate is the same whether the cash price happens to be $250, $350, or $450. So is it a good deal on points? That's where you have to know what your points are worth! We transferred points over from Chase, where they're worth 1.5cpp. So 20k points per night had a fair value of $300. But the room we bought was priced at just over $400, plus taxes and resort fees. All-in it would've been close to $500/night paying cash. So by buying it with $300/night worth of points we got strong value for our points.
The most common reason to want to spend cash and earn points would be because you need them for elite status. Remember, if you're spending points on a redemption you're not earning them! You can't have your cake and eat it, too.
It turned out I didn't need to earn more points on this trip— because I'd actually earned top tier status with Southwest 10 days earlier. I orchestrated that through making points-vs-cash decisions throughout the year. If I hadn't pulled it off earlier in the month I would've opted to pay cash for my Southwest ticket instead of points.
Why don't we just do an all-points trip? Isn't getting a completely free trip the point (ahem) of collecting points? Alas that's noob thinking. While points can be used almost any time nowadays it can be at very unfavorable rates. Why piss away your hard-earned points? It's so much better to get good value for them.
The trick to getting good value for your points is twofold. First, you have to know what the points are worth. Second, you have to find worthwhile redemption opportunities— and be willing to spend cash otherwise.
Knowing What Points Are Worth
The best way to figure out what points are worth is to observe what the cash prices for comparable flights or hotel rooms are. Some companies make this relatively easy by using a standard ratio themselves. For example, Southwest Airlines has pretty much a fixed ratio of about 80 points to the dollar. That means you never really have to look at a points price and ask, "Is this a good rate?" It's always the same rate. So our choice to use Southwest points instead of cash was easy (though see the Z-Factor below...).With other airlines and most hotels there's a broader range of points-vs-dollars ratios that can apply. There it takes more time and effort to figure out what the fair value is. With Marriott Hotels, for example, I consider the fair value to be $0.008 per point, or 0.8 cents per point (cpp), from years of experience. At least, that's what I strive to make my points worth when I spend them. Marriott offers me countless opportunities to get worse value.
The variability in what hotel and airline points can be worth is one of the things that has made credit cards' own point more popular the past few years. Chase, Citi, and Capital One all have their own points, and they all have more or less fixed redemption rates. Often there are 2-3 different rates per program, where favorable rates apply to certain categories. Hawk and I both collect Chase's Ultimate Rewards points. We aim to make them worth 1.5cpp as that's Chase's most favorable rate.
Finding Good Values— Or Paying Cash
In choosing where to stay in Hawaii we looked at several different hotel programs— and considered AirBnB, too. AirBnB got too frustrating with the first 3 properties we tried to click through all mysteriously becoming unavailable (that's a whole other issue) so we focused on hotels.With Marriott properties the redemption costs were high, The cheapest hotel was 60,000 points per night— which I regard as worth $480, as mentioned above. And that rate only secured a room type called No View, for which the cash rate was $350. No thanks! Other Marriott properties offered nicer rooms but wanted upwards of 100,000 points per night. We weren't interested in spending $800 worth a points a night— not when there were decent alternatives available at lower prices!
We ended up staying at a Hyatt his trip. In the Hyatt program hotels generally have a fixed points price per property. For example, the Hyatt Regency Waikiki we stayed at is 20,000 points per night. That rate is the same whether the cash price happens to be $250, $350, or $450. So is it a good deal on points? That's where you have to know what your points are worth! We transferred points over from Chase, where they're worth 1.5cpp. So 20k points per night had a fair value of $300. But the room we bought was priced at just over $400, plus taxes and resort fees. All-in it would've been close to $500/night paying cash. So by buying it with $300/night worth of points we got strong value for our points.
The Z-Axis: The Status Chase
At the top I said there were two factors to consider. There's a third factor, too; a Z axis, if you will. That's whether you need to accumulate points for some reason. This consideration can tip your decision toward paying cash even when the points rate is decent.The most common reason to want to spend cash and earn points would be because you need them for elite status. Remember, if you're spending points on a redemption you're not earning them! You can't have your cake and eat it, too.
It turned out I didn't need to earn more points on this trip— because I'd actually earned top tier status with Southwest 10 days earlier. I orchestrated that through making points-vs-cash decisions throughout the year. If I hadn't pulled it off earlier in the month I would've opted to pay cash for my Southwest ticket instead of points.
