I’m working to come up with qualitative ranges in value because it would be really cool to just look at a chart and make a quick decision of which hotel provides a good or excellent redemption value for my hotel points when faced with a choice of hotels at various price levels and different redemption categories requiring different amounts of points.

Translating Quantitative Points Value into Qualitative Value

Example using a Hilton Hotel in Paris, France.

A single night at the HHonors Category 6 Hilton Arc de Triomphe for dates I checked came to $495 per night. The choice is $495 or 40,000 points. The quantitative redemption value works out to be $495 ÷ 40,000 points x 1,000 (or simply $495/40) = $12.38 per 1,000 HHonors points redemption value.

This is an “excellent” redemption value in my opinion.

So here is the basis for creating a qualitative judgment based on quantitative values. I think most of us will agree that getting $12 per 1,000 HHonors points is an “excellent” value.

As value drops below $12 per 1,000 points spent we must reach a point where the value is no longer “excellent”, and simply a “good” value.

At an even lower quantitative redemption value, say $5 per 1,000 points the qualitative value at some point drops to another lower level of just an “average” value for hotel points spent.

And at some point the money saved by spending points must become a “poor” value, i.e. the cash saved is not worth the cost in points for a free night, and the choice to spend cash rather than points becomes the better value for most hotel loyalty program members.

I’m working to come up with these qualitative ranges in value because it would be really cool to just look at a chart and make a quick decision of which hotel provides a good or excellent redemption value for my hotel points when faced with a choice of hotels at various price levels and different redemption categories requiring different amounts of points.

In yesterday’s Hilton HHonors post I set $7.00 saved per 1,000 points spent as my marker for when the redemption value using points is “excellent”. I set less than $3.00 per 1,000 points as a “poor” redemption value. This is a work in progress that I am trying to refine.

The Value of HHonors Points Exchanged for a Free Room Night

(based on a set-point of trying to get $7 in cash savings for every 1,000 HHonors points spent on free night rewards.)

 

 

 

Now I know there are category 6 hotels that will cost over $280 per night (Hilton Arc de Triomphe) and these hotels provide an excellent value for HHonors points based on this scale of $7 per 1,000 points being rated “excellent” redemption value. Even if the Hilton Arc de Triomphe goes to category 7 in 2010, the redemption value will still be “excellent” when spending 50,000 points to save $495, the room rate for the July 2010 dates I checked. $495 ÷ 50,000 points = $9.90 per 1,000 points.

This table advises me that I am getting excellent value for my HHonors points if I spend 25,000 points and get a Category 3 hotel room that would have cost over $175 per night. Are there Category 3 hotels that cost over $175 per night more than just a few days per year? I have not looked into that.

Certainly there should be Category 1 hotels in 2010 where the nightly rate will be over $52.50 and using points will provide an “excellent” redemption value.

 

Here are some real examples of redemption value using San Francisco hotels for Tuesday October 27, 2009.

Hilton San Francisco Union Square (HHonors Category 6 = 40,000 points)

Pay $160.65 ($185.68 after tax) or spend 40,000 points for King Bed Deluxe Room

$186 ÷ 40,000 points (x 1000) = $4.65 per 1,000 points (“average” value)

 

The factor that complicates the calculation is determining the points a member does not earn when using points for a free reward stay. Here is an example:

 

Hilton San Francisco Fisherman’s Wharf (HHonors Category 6 = 40,000 points)

 

Pay $179 ($206.75 after tax) for a King Bed Deluxe on a special rate offering 2,500 bonus points.

A HHonors basic member can earn 15 points per $1 when choosing Points & Points earning preference.

 

This means the HHonors member is not earning 2,685 HHonors points when redeeming points for a free night rather than paying for the hotel stay. ($179x 15 points/$1 = 2,685.)

 

This particular Hilton property also has a rate offer for 2,500 bonus points per stay. The bonus points rate is no additional cost compared to the lowest best available rate for the hotel at $179.

 

By using points for a free night reward the HHonors member actually is not trading 40,000 points for $207 in savings since the member would earn 5,185 points by paying for this hotel night. If the HHonors member earning Points & Points spends $207 rather than 40,000 points, then the member’s account balance will be 45,185 points higher after the stay. (I’m ignoring elite bonuses and other promotional bonuses which will drive the redemption value even lower.)

 

The simple calculation is 40,000 points saves $207. Redemption value = $5.18 per 1,000 points. This is a “good” redemption value.

 

But, the real calculation should be $207 ÷ 45,185 points = $4.58 per 1,000 points. The redemption value is now below $5/1,000 points and I rate this as just “average” value.

 

And depending on what bonus points promotions you are eligible for and what elite or HHonors credit card spending bonuses you may be entitled to the redemption value for HHonors points drops even more.

 

Hampton Inn San Francisco/Daly City (HHonors Category 3 = 25,000 points)  Oct 27, 2009

Pay $139 King Bed ($152.90 after tax) or 25,000 points?

$153 ÷ 25,000 points = $6.12 per 1,000 points. This is a “good” redemption value.

 

A more precise calculation will count the points I do not earn when using a reward stay.

$139 x 15 points per $1 = 2,085 points

My new calculation is $153 ÷ 27,085 points = $5.65 saved per 1,000 points and this still ranks as a “good” redemption value.

 

Caveat: Although the Hampton Inn Daly City is quantitatively a “good” value, the added benefit of being in downtown San Francisco at the Hilton Union Square or Hilton Fisherman’s Wharf is value that one must consider when making a hotel points redemption. You may get better value quantitatively with the Hampton Inn Daly City, but the quality of a hotel stay in downtown San Francisco is a factor one must consider when choosing where to spend points.

 

 

 

Here is the link to the Qualitative tables by HHonors Hotel Category from yesterday’s Part 1 post.

Here is the link to Part 2 with rationale for why I created these qualitative tables.

 

I plan to develop qualitative tables for Starwood Preferred Guest next. And the SPG post will not include the detailed explanation of why and how I am creating these tables.

What is a good value when spending hotel points?

This is the basic question I am asking. This is a qualitative and subjective question. Yesterday, I just threw out some charts of qualitative value without much discussion of why I created the tables.

I’m working to come up with qualitative ranges in value because it would be really cool to just look at a chart and make a quick decision of which hotel provides a good or excellent redemption value for my hotel points when faced with a choice of hotels at various price levels and different redemption categories requiring different amounts of points.

Say I spend 40,000 hotel points instead of the $200 room rate (after tax) being asked by the hotel.  

Did I get “good” value for my points?

Quantitatively I can say I received $5.00 per 1,000 points I spent.

$200 ÷ 40,000 points x 1,000 = $5.00 per 1,000 points.

 

This is a simple quantitative value I can calculate based on the money I saved by using points. But my main question is qualitative.

Is spending 1,000 HHonors points to save $5 a “good” value for a Hilton HHonors member?  

When I spend 30,000 points rather than spending $100 for a hotel room I can calculate the quantitative value of my points spending as $100 ÷ 30,000 points x 1,000 = $3.33 per 1,000 points.

Is spending 1,000 hotel points to save $3.33 a “good” value? I know I can get much higher value when spending my points if I am selective about when and where I spend points.

In real travel I am often faced with choices. When I search Miami and see 12 hotel choices how do I determine which hotel is a good deal for my points?

I can stay at one Hilton hotel, rated HHonors Category 6, that will cost $300 per night or I can spend 40,000 points and leave the hotel with no credit card charge for the room night. (Tax is usually included in a hotel room night reward using points although some hotels have additional resort fees or city tax not covered in the hotel points reward.)

Another Miami area Hilton brand hotel is only a Category 3 hotel at 25,000 points or a room rate of $140.  Which hotel – the category 6 at 40,000 points saving $300 or the Category 3 at 25,000 points saving $140 is the better redemption value? Quantitatively it is easy to see that the Category 6 hotel provides better value on a simple numerical basis (Redemption value = $7.50 per 1,000 points), but how much worse is the value for the Category 3 hotel (Redemption value = $5.60 per 1,000 points).

Saving $7.50 per 1,000 HHonors points I spend is a better value, but is getting only $5.60 per 1,000 points a much lower value for my points? Should I be concerned if I only save $5.60 per 1,000 HHonors points? Am I wasting the value of my points?

I am only considering the numbers here and not specific hotel attributes like location on the beach, hotel facilities, and TripAdvisor reviews which may all be important factors in your final decision on where and when to spend points.

The primary qualitative question most of us want answered when trying to get hotel value out of our points spending still remains after determining the quantitative redemption value for hotel points.

Is redeeming 1,000 HHonors points for a $5 hotel cash savings a “good” value?, an “average” value?, or a “poor” value?

Loyalty Traveler Guide to HHonors Hotel Value

My Loyalty Traveler question is whether I can create a guide for hotel loyalty program members to reference and quickly decide what is a good value for any hotel program?

Yesterday, I started on this path of qualitative analysis with HHonors.

I have redeemed around two million HHonors points for free room nights over the past 10 years. Intuitively when I started to create tables I thought getting $10 per 1,000 HHonors points would be the benchmark for getting “excellent” value from points spending for free hotel nights. This means if I spend 25,000 HHonors points I want to realize a $250 cash savings with my hotel points redemption reward.

Once I placed these values into tables I had to reconsider my initial qualitative analysis. When looking for $10 per 1,000 points redemption value as the standard for determining an “excellent” use of points instead of cash, I am saying that I don’t rate a hotel redemption as “excellent” in a Category 6 property unless I am saving $400 by using 40,000 points for a free night.

Finding a Category 3 hotel requiring 25,000 points for a free night or charging $250 per night may be tough in the real world. I doubt Hilton has many hotels in the Category 3 level charging $250 for a free night.

In my economic reality I will be happy if I can save $300 by spending 40,000 points. Sure there may be better redemption values possible, but when faced with the choice of spending $300 or 40,000 points I almost certainly would go with spending points.

Higher category hotels can have outrageously high-priced room rates. Finding a Category 6 hotel requiring 40,000 points for a free night or charging $400 per night might be much easier to find than a $250 Category 3 hotel to realize  “excellent” value for my points.

Finding  a $200 per night Category 2 hotel costing 20,000 points per night is probably not that common a redemption value. I adjusted my initial tables based on seeking $10 redemption value per every 1,000 HHonors points to a lower $7.00 per 1,000 points to better match the real world rates of most Hilton Hotels across the 7 hotel redemption categories and Waldorf-Astoria Collection.