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.