Article: The Worst Ways to Use Frequent Flyer Points

[andye]

I always laugh at these so called "valuations" because they are so subjective, and most of the higher values (those that the airlines would like to promote, and sites like points hacks that look to attract interest) do not apply to most people.

The value of a point to any individual can be looked at as the sum of the actual dollar savings (money not spent), and the intangible things (e.g. "comfort") that you may not actually be willing to pay cash for, but are still nice to have. It is valuing that factor that is so subjective. Even the actual dollar savings are very subjective.

Take an example of a return J trip SYD-SIN. This will cost 136,800 points (plus taxes and charges of around $500). A Sale business class on Qantas can be had for a total of around $4,200 including real taxes and charges which are about $230. This gives an apparent "value" of the points of around 2.7c per point. If you dig a bit further, the two bookings are not equivalent - the revenue fare earns points and SC. SC will have varying value depending on status, lifetime status, SC earned for membership year etc, but the points will vary depending on status from 15,600 to 26,000. The value of these points should be factored in (but there is no precise way to do so). For comparison purposes, I will simply add a midpoint of about 20,000 points to the "cost" of the redemption. This lowers the value to around 2.36c per point,

Bow that value is only achieved if you were will to pay the sale business price in cash. For some people, that is true, but for the vast majority of aspirational members, this is not the case Their true willingness to pay is more in the economy fare bracket. This will cost 50,400 points and around $300 in taxes. A revenue sale economy fare will cost around $906 including the same real taxes of around $230. With and earn of between 5,200 and 10,400 the value is now only 1.09c per point. That Qantas sale fare is pretty well priced, but if you were only willing to pay the bare minimum, then Scoot can be had return for around $700. You are not losing any earn there, so the "value" of the points is around 0.79c per point.

What about international upgrade options - often seen as the "best" value. This gets really subjective, as almost be definition (excepting edge cases like corporate travel policies), if you are willing to take the gamble on a QF international upgrade to a premium cabin, then you were NOT willing to pay the full premium price in the first place. So lets look at that same SYD-SIN in J, and lest assume you are really lucky and snag an upgrade each way. That will cost you a total of 109,000 points for the upgrades. You will still earn for your base economy fare (something between 7-15k points). So the net points upgrade cost is likely to be somewhere around 97,000 points. However, in order to be eligible to upgrade via the lottery, you can't buy that cheap sale fare - you now need a saver fare at least. That costs around $1,150 - so you have now paid $250 more for the chance to upgrade. On the full business price, the points value would be around 3.14c per point - so looking better. But it has already been established that this person wasn't willing to pay that amount up front - but they are willing to pay a premium (they pay for the saver fare). If they were willing to pay more than that - say $3,000 for the business fare, then the points value would be around 1.9c per point. These values should really be discounted, as not only does it come with the gamble, but the actual amount these aspirational travellers would pay is not likely to be close to the premium cabin fare.

For some people, and some scenarios there are very real savings and high value - but they are very niche. For the most part they crop up when the traveller needs to travel, and it is a route that doesn't offer cheap fares - either at the time of booking, or just generally. Most of these opportunities seem to crop up on some regional domestic routes. Take the classic SYD-LDH - if you can get the reward flight, it will cost 16,000 points plus $196. Actually paying for a Red e-Deal fare on dates when those awards are available would cost $1,102. Earn would be 1,600 points for the revenue fare. Value of the points 5.15c per point.

The actual base value for anybody who wants to redeem points and is willing to pay to fly Qantas would be the approx 0.7c per point that points plus pay gives. That simple saves dollars off real fares. You can do better in economy, but unless it is a niche route domestically, lots of times when reward seats are available, the revenue fares are cheap (hence why they can show "classic plus" rewards sometimes being cheaper than classic). For those using for premium cabins - be it directly or upgrade, most of the "valuations" make people feel good by looking at the full sticker prices they would not be willing to pay\, and don't consider the actual amount that they would be willing to spend, or the things they do not get. Even the headline example in the article that claims 3.8c per point value has ignored the 15,600 - 20,000 points that would have been earned on the revenue fare, which if factored in make the actual value from 3.32 down to 3.07c per point. Of course, points club would change this as well, as there may be points to be earned on the award flight.

Of course, the airlines love it when people are happy to think they are getting great value.

I agree with most of the above. I am similar in that I wouldn't pay for long-haul J with my own money. Though, I'm very pleased to go J for a price not much more than Y using points

Website valuations omit important factors when valuing. Basic sum should be:
(Best cash price on similar airline-redemption taxes-incidental redemption expenses such as additional accommodation/transfers) ÷ (Points required+Points forgone)
This doesn't account for personal value of status credits and convenience if indirect routing.

Furthermore if you wouldnt pay for revenue J, the cash value of a J redemption point is related to the number of $ the airline would have to offer you to move back to Y for each leg

 

[PERLHR]

I've booked a few "negative value" BA rewards over the years, they've been LHR to EU flights and it would have worked out $20-40 cheaper via via BA but instead I booked with Qantas points as it provides the ability to cancel with a refund (minus the 6000 points).

If you are with BAEC and buy flight with AVIOS through BA, then subsequently cancel you get all.your AVIOS back with a flat fee of 30 pounds (I think it is).

 

[Dr Ralph]

Surely the worst way to use points is NOT to use them at all before they expire.

 

[Pushka]

Surely the worst way to use points is NOT to use them at all before they expire.

As explained in the article, there is a negative spend which is worse than never using them at all, and which is covered there anyway.

 

[wombatpatties]

My husband is not a traveller internationally or anywhere in fact! I have finally convinced him to take up an offer with points. We are off to Tasmania on Thursday, Qantas had a deal going, costing us only skybus return and dinner at night. Not bad for a couple of pensioners.

UPDATE: It was superb, the hotel that is. Had 2 attendants on the flight. One had hardly any makeup, hair tied back, spots on her face and was the nicest Qantas human ever. The other was plastered in awful pancake mixture, a constant frown on her face, lipstick that could warn off anything insect like, and never spoke a word at anytime to anyone. Thankyou Qantas you got half of the staff right. But all in all, hubby loved the RACV hotel and Cascades lounge area. Will there be another deal going???