One of the most common hotel loyalty program questions is, “What is the value of a point?”
Typically, I use the cost of points through the hotel program as the value of a point. This is an objective measure since buying points directly from the hotel program is one of the easiest ways to obtain hotel points. The purchase price of hotel points set by the hotel chain is an objective value for hotel points that can be applied across hotel programs.
Starwood hotel points purchased through SPG cost $35 per 1,000 points and there is an annual calendar year purchase limit of 20,000 points ($700). When I calculate the value of points earned from a loyalty promotion, I project the value of the points based on the purchase price from the hotel program.
Alternatively, I should be able to calculate the value of points I spend at the same ratio of $35 per 1,000 points. If I am getting the value from my points that SPG charges for points, then I consider those spent points as getting excellent value. When calculating the value of SPG bonus point promotions or the value of points earned through a Starwood SPG American Express card, I can estimate the value of my points earned at $35 per 1,000 points.
Unfortunately, the value of my points in the Starwood Preferred Guest (SPG) program may not bring a $35 per 1,000 points return on some free hotel night redemptions. The SPG Redemption table shows that the room rate for a SPG Category 3 to 7 hotel reward needs to be an extremely high priced hotel rate to actually get a $35 per 1,000 points redemption value from SPG points. The redemption rate at Category 1 and 2 hotels is much better aligned with actual hotel room rates.
In other words, I am pretty sure I can find a Category 2 hotel on a Friday night where my 3,000 points will save me more than $105 on the published room rate for the Starwood Hotel. Remember that the reward night covers room tax so basically any Category 2 hotel with a room rate over $95 will be $105 after tax and I am receiving excellent value from my points redemption.
Finding a Category 6 hotel charging over $700 per night is going to be a bit more difficult for most SPG members. While spending 20,000 points to avoid spending $500 for a night in a Starwood Category 6 hotel may be considered a favorable exchange by many SPG members, the redemption value of your points will be quite a bit less ($25 per 1,000) than you could probably find by spending points at low category hotels.
Sample room rates for Starwood Hotels in New York City
Wednesday, November 18, 2009:
W New York – Times Square (SPG Category 6) = $499 (Best Available Rate) $576.10 after tax
Redemption value: $576 ÷ 20,000 points = $28.80 per 1,000 points.
AAA rate = $474.05 ($547.47 after tax)
Redemption Value for AAA rate : $547.47 ÷ 20,000 points = $27.37 per 1,000 points (Good Redemption Value).
Westin New York at Times Square (SPG Category 5) = $407.55 (AAA rate) or $471.16 after tax.
Redemption Value: $471 ÷ 12,000 points = $39.25 per 1,000 points (Excellent Redemption Value).
Sheraton Manhattan at Times Square (SPG Category 5) = $360.05 (AAA rate) or $416.66 after tax.
Redemption Value: $417 ÷ 12,000 points = $34.75 per 1,000 points (Excellent Redemption Value).
New York City hotels appear to refute my argument that obtaining a redemption value near $35 per 1,000 points is unrealistic. My counterpoint is New York is the highest priced hotel market in the USA. Finding redemption values in the $35 range in other locations may prove more difficult.
Los Angeles, November 18, 2009
SLS Hotel at Beverly Hills (SPG Category 6) = $287.20 (AAA rate) or $327.61 after tax.
Redemption Value: $328 ÷ 20,000 points = $16.40 per 1,000 points.
W Los Angeles – Westwood (SPG Category 5) = $255.20 (AAA rate) or $291.13 after tax
Redemption Value: $291 ÷ 12,000 points = $24.25 per 1,000 points.
Westin Pasadena (SPG Category 4) = $159.20 or $183.19 after tax.
Redemption Value: $183 ÷ 10,000 points = $18.30 per 1,000 points.
Sheraton Gateway Los Angeles -LAX Airport (SPG Category 3) = $119.25 (AAA rate) or $136.03 after tax.
Redemption Value: $136 ÷ 7,000 points = $19.43 per 1,000 points.
I think Los Angeles is the more typical redemption value for US hotels using Starwood points. New York City, or major international destinations like London and Paris, or resorts like the Maldives and Bora Bora are going to have skyhigh hotel rates where there may be good redemption value in the range of $35 per 1,000 points at the upper SPG category hotels of 5, 6, and 7.
Most of us will likely find our choice is redeeming 10,000 points to save $200 which may be a desired exchange, but certainly not a high value exchange of SPG points for cash savings.
Table of Qualitative Value for Starwood Preferred Guest Free Night Redemption
My basic question as Loyalty Traveler has been, “What is the value of a SPG point?”
In an article earlier this month, “Hotel Points Exchange Rate Theory”, I argue that hotel points only have potential value until they are actually redeemed for something of tangible value. A hotel room has tangible value and the value has a set dollar amount for the night you buy with your points.
Obviously a person who redeems 12,000 points for the Westin New York Times Square at a redemption rate of $39.25 per 1,000 points gets a better quantitative value than the person who redeems 10,000 points for the Westin Pasadena on the same night for a redemption value of $18.30 per 1,000 points.
In reality you need a hotel where and when you need a hotel and your redemption value will vary. So now my question is how do I compare the qualitative difference between the free night redemption at Westin Times Square, New York and Westin Pasadena?
I have set up a qualitative scale based on quantitative values. My standard of excellence is based on getting an “Excellent” redemption value when a SPG member can realize $35 per 1,000 points spent on a free night. SPG sells points at the rate of $35 per 1,000 points, so any redemption that saves money at a higher rate than $35 per 1,000 points is “excellent” in my opinion. You can simply buy points from SPG and get the room for less money than the room rate being charged (up to your annual 20,000 points purchase limit of course).
The scale drops in incremental levels of ½ a penny per point. In other words, $35 per 1,000 points is an excellent redemption value. When you realize $30 per 1,000 points you have made a “Good” redemption value. $25 per 1,000 points is an “Average” redemption value. $20 per 1,000 points is a “Fair” redemption value. $20 per 1,000 points is a “Poor” redemption value. Less than $20 per 1,000 points is a “Bad” redemption value.
The SPG table looks like this based on a standard where redeeming points for free hotel rooms at a rate greater than $35 per 1,000 points is considered an “excellent” value:
Working from this standard table of qualitative value I can now create tables for any SPG category hotel to show the qualitative value of a hotel free night based on the room rate being charged for the night at that particular hotel.
SPG Redemption Value for Free Nights Using Points
What I see in these tables is the use of points at a Category 7 hotel is less likely to provide excellent value (Is the room rate > $1,050 per night at the Category 7 hotel?) than a Friday or Saturday night at a Starwood Category 2 hotel where any rate over $105 (after taxes) is going to be an “excellent” redemption value based on the same quantitative-qualitative scale.
I have also ignored peak season rates which were suspended for 2009at the upper end SPG Category 5 to 7 hotels. If reinstated in 2010 there will need to be additional tables to account for Category 5 hotels at 16,000 points, Category 6 at 25,000 points, and Category 7 at 35,000 points. These peak season tables will be less favorable for finding excellent value redemptions.
Conclusion: You will likely pay more points for an equivalent cash savings when redeeming points for a high category hotel with Starwood compared to a low category hotel.
[correction 11:00am Sun, Oct 25 - original post used 70,000 as nightly Category 7 rate for Bora Bora all-suites properties which is incorrect for these uber-category 7 hotels. These Category 7 hotels are available for points on these dates, however, Le Meridien is actually 75,000 points per night or 300,000 points for 5 nights for the lowest category room SPG customer service could find. A different category room in overwater suite is 120,000 points per night or 480,000 points for 5 nights.
The St. Regis Bora Bora is available at 480,000 points for a 5-night stay.
Le Meridien Bora Bora (SPG Category 7 all suites hotel @75,000 points per night) November 16-21, 2009
All rooms are suites and are double points. 75,000 points per night with 5th night free = 300,000 points for a 5-night stay.
Published rate = 51,000XPF (after tax per night) = about $3,200 for 5 nights.
$3,200 ÷ 300,000 points = $10.67per 1,000 points redemption value. (Bad value on my qualitative scale)
St. Regis Bora Bora (SPG Category 7 all-suites hotel @ 120,000 points per night) November 16-21, 2009
Published rate = 70,000XPF = about $4,850 for 5 nights
$4,850 ÷ 480,000 points = $10.10 per 1,000 points redemption value. (Bad value on my qualitative scale)
On one hand you can just pay the cash for Bora Bora and save your points for higher value redemptions at other Starwood Hotels. On the other hand, blowing 300,000 to 480,000 points for an incredible 5 night hotel stay leaves you with $3,000 to $5,000 to invest in paid Starwood Hotel stays that can earn many of these points back while also earning high elite status.
Figuring the best value for your points is ultimately a personal decision.