How much are points worth? Here's an easy way to assign a value to loyalty program points
The basis of the reward travel game is knowing how to use the accumulated points and miles, as well as not getting lost [...]
The basis of the reward travel game is knowing how to use the accumulated points and miles, as well as not getting lost along the way even A benefit that can be turned into an advantage thus making our journey better. It doesn't matter whether we are talking about traveling in business class or economy, whether we are talking about sleeping in a 5-star hotel or ten days in a low-cost facility.
Introduction
In this article:
As we all know, the world of loyalty programs is mainly composed of two phases: one in which points are accumulated and one in which the accumulated points are spent in exchange for benefits, trips, prizes, etc....
As for the accumulation phase few doubts are: in addition to offers and possible bonuses, lately many companies and companies are modifying their programs so that the accumulation of points is directly proportional to the expenditure made, and not to the service used, as was previously the case (as, for example, did the "defunct" Alitalia).
Instead several doubts may arise when someone decides how to spend it, because now almost all of these companies have many partners and allow points to be used in a whole host of different areas: such as getting an airline ticket, booking a hotel stay, renting a car, buying a new phone, etc...
It therefore arises naturally to ask where it is most appropriate to spend one's points, to give them maximum value.
Formula
In this article I would like to present a pretty simple mathematical formula that you can use as a universal tool to figure out what is the most effective way to spend the points you have accumulated. This formula is in no way tied to any rewards program; it is good for all types of points or miles. We will focus specifically on American Express points, as they offer almost endless different ways to use them.
Using this formula is extremely simple and consists of taking the market price (in euros) Of the service (airfare, hotel stay, or other) or product (even voucher) we want to purchase and divide it by the price in miles. Doing so will give us the value (in euros) of what a single mile or point spent is worth.
It is a very simple division, the only thing you have to pay attention to is the order of how the division is done: the price in euros must be divided by the price in miles, not vice versa!
Examples
Let's take an example with the old Alitalia program, because at the moment there is still no accumulation/expenditure table of the Ita Airways' Flying program
An example to better understand: one round-trip ticket from Milan to Cagliari With the now defunct Alitalia had a fixed price of about €135 (AZ had territorial continuity to and from Sardinia). With the Millemiglia program, a round-trip ticket to Italy had a cost of 20k miles. So to know how much a single mile would be worth in case we spent them on this ticket we would have to divide 135€ by 20k and get 0.00675, so each mile would be worth 0.675 cents.
However, to know whether 0.675 cents for a mile is a good deal or not, we have to compare it to another expense. Let us then assume an A/R ticket from Milan to New York in business class, again with AZ. The price of such a ticket is around 1800 (which can go up exponentially if there are few seats available) or 80k miles. Dividing 1800 by 80k we get a value of 0.0225, or 2.25 cents per mile.
So spending the miles in the second case is certainly more advantageous than in the first case since they are worth almost 3.5 times more (or those for Cagliari are only worth 30% compared to those for New York)!
Staying with Alitalia Loyalty, let's perform the calculation on the value of individual miles to understand the convenience of the new Lastminute vouchers.
Let us perform this calculation on both the voucher from the larger denomination and the one from the smaller denomination. The voucher from the larger denomination is worth €500 and costs 172k miles, while the one from the smaller denomination is worth €25 and costs 8,500 miles.
After two quick calculations it becomes clear that the value of miles in the case of this investment is very low and it is just absurd that as the value of the voucher increases, not only is there no mileage gain, but there is even a loss: to have a total value of 500€, it is cheaper to buy 20 vouchers of 25€ (170k miles in total) rather than a single one of 500€ (which costs 2k miles more).
Comparing the value of individual miles invested in this way versus the good old A/R business class ticket to New York, it is evident that the miles spent in these vouchers are worth about 12% of those spent in airfare, translated: their value has literally been decimated!
Minimum value
This is precisely why we must be careful to always set ourselves a minimum threshold value of the miles or points below which we should avoid investing. Of course, this minimum value does not have a fixed value, since each point or mile in loyalty programs has a different value and each person has different needs and desires about how to spend their points.
American Express Membership Rewards points.
For those who are American Express cardholder certainly knows about the Membership Rewards program to which almost all Amex cards are enrolled and where you get 1 MR point for every euro spent. After accumulating them, these points can be spent in multiple ways such as reducing the card's account balance, reducing its annual fee, buying products or applying for vouchers to spend on travel on the Amex website. However we decide to spend it, it says on the website, the exchange rate is 1000MR=4€. Therefore, to get something worth 100€ will take 25k MR, it follows that the face value of each individual MR point is equivalent to 0.004€ (0.4 cents).
At this point it may seem unnecessary to perform the simple calculations that are given above, since the value set is that and will never change. But this is not always the case, as the minimum value of points will never fall below 0.4 cents, however, in some cases it can be much higher. For example, Amex has a partnership with Italo (so much so that there is an Italo Card from American Express).
In the program's rewards catalog, you can purchase Italo vouchers with MR points, where 30€ is the minimum denomination and 130€ is the maximum. Performing the usual calculation we get that by spending the points in this way we make them worth between 10% and 20% more than the canonical nominal value of only 0.4 cents per point.
But MR points reach their maximum potential when they are converted into points from other loyalty programs, such as airlines or hotel chains. When making this conversion, the ratio is not always 1:1: it was 1MR:1MM with Alitalia, it is 5MR:4SM with Emirates, it is 3MR:2FBM with the FlyingBlue program, etc.
Spending MR points in this way will give maximum value to each individual MR point. By converting 112 500 MR points we will get 90k SM with which we could take a round trip in business class from Milan to New York (worth over 2,000€) going for almost 2 cents each MR point, or almost 5 times the canonical value.
Buying points
This reasoning is very important in understanding when it is convenient, or not, the practice of purchasing points from a loyalty program. Understanding minimum value and potential value will help us understand when it is smart to buy the points they send us for one of our goals and when it is better to wait for better promotions to buy instead.
How to make more points and miles count
As noted in the examples above, our points or miles are worth more the higher the commercial value of the service we want to get: thus it makes more sense to spend the points on long-haul flights rather than short flights, and it makes more sense to buy tickets in higher travel classes rather than economy.
In fact usually a business ticket from Milan to New York costs about four times that of economy; using miles however Emirates, KLM and Air France charge precisely twice as much, Lufthansa just under twice as much (the 85% more), Alitalia just over one and a half times as much (the 60% more).
In conclusion
With this article, we have tried to explain in the simplest way possible how to assign a value to one's points and how to set a point of nonconvenience that can prompt us to pay for a ticket or hotel room cash Instead of using dots.
