My Personal Valuation of Qantas FF and Velocity Points

[Renato1]

Look at using airBnB instead of booking hotels can get fantastic places/deals Whole apartment in Amsterdam for 140 euros. Then have a kitchen to cook if you wish

I've just had a quick look at the AirBNB site. Looks interesting, though I'm not sure my wife would go for it.

We had a hotel room in Amsterdam that you couldn't swing a cat in - and I paid more than you did. They now want $400 a night for that same tiny room (good location though - between Dam Square and the Flower/dope market).
Cheers,
Renato

 

[Renato1]

But if you look at say $50 worth of petrol at a service station.
On an Amex card with surcharge of 2.25% = $51.25 for 100 points therefore each point cost you 51.25 cents
On a card that has no surcharge and 0.5 points/$ = $50 for 25 points therefore each point cost you $2
On a card that has no surcharge and 1 point/$ = $50 for 50 points therefore each point cost you $1

So we take that and look at redemption. lets say taxes are equal or close enough. I know its not, but you'd need to make a good spreadsheet to work it out!

Thanks, but let's use as an example a simple flight to Sydney from Melbourne, where it takes 8000 Qantas FF for an award flight for one to Sydney, plus $31 taxes and fees.

So, using the Amex card with 2.25% surcharge and earning two points, I'd have to buy 4000 litres of petrol at say $1.44 per litre (with my 4 cents a litre discount) and pay the 2.25% surcharge. Total cost of flight = $5889.6 +$31

Using a card with 1 point per dollar and no surcharge, requires 8000 litres. Total cost of flight =$11,520 + $31

Using a card with half a point a dollar an no surcharge, requires 16,000 litres. Total cost of flight = $23,040 +$31

But using no card, and not buying any petrol at all. Total cost of flight = $129 to $199

So, I can't really value the points in the manner that you do. Rather, the only way they can really be valued (assuming I am willing to pay for Qantas's service and safety record) is
($129-$31)X100/8000points = 1.225 cents per point
to
($199-$31)x100/8000points = 2.1 cents per point
Regards,
Renato

 

[burmans]

I've just had a quick look at the AirBNB site. Looks interesting, though I'm not sure my wife would go for it.

We had a hotel room in Amsterdam that you couldn't swing a cat in - and I paid more than you did. They now want $400 a night for that same tiny room (good location though - between Dam Square and the Flower/dope market).
Cheers,
Renato

All I can say is give it a go, my wife is a total convert on AirBnB, more room, more bang for buck, more luxury for the same price, in some cases MUCH more.

 

[lovetravellingoz]

All I can say is give it a go, my wife is a total convert on AirBnB, more room, more bang for buck, more luxury for the same price, in some cases MUCH more.

Ditto.

For Europe in particular AirBnB is my first port of call. Though I still check hotel sites for good deals.

What rules it out sometimes is where my arrival time is very late and this is where 24hr hotel check-in has its value.

 

[Renato1]

My benchmark is One World round world business class which I book progressively as legs open up . It costs me 300,000 points (by the time I do a few additions and changes as legs become available). Because of the difficulty and compromises in booking it compared to buying a cash ticket I value it at "only" $5000 (well say 6,000 less fees) so I value a point at about 1.67cents.

While I need to book this 11 month in advance it's not a disaster to have to cancel. 5000 points. An $83 option fee....

If I use points for anything else I weigh it against that benchmark. Recently I've use points for
Cathay business from HK to Europe or HK to US east coast (Chicago or NY). We fly Sydney-HK economy for cash. Daytime Cathay economy is OK in same timezone. stop over in HK which we like. Long haul Business in Cathay usually stacks up well against my benchmark and it's much easier to book.

Given that a return trip to London in economy is 128000 points, and 256,000points for business class, and that it's triple the economy cash ticket rate for business class - you seem to be getting great value for a round the world business class trip on both the point and the cash rate. I had thought that the round the world cash ticket rate was around $5000 just for economy.
Regards,
Renato

 

[ablecookie]

I've just had a quick look at the AirBNB site. Looks interesting, though I'm not sure my wife would go for it.

We had a hotel room in Amsterdam that you couldn't swing a cat in - and I paid more than you did. They now want $400 a night for that same tiny room (good location though - between Dam Square and the Flower/dope market).
Cheers,
Renato

Quite a effort to book Airbnb, simply so much to choose from. Basic to lux, had experienced it all.

A room in HK that literally can't swing a cat!, supposed to be all inclusive from bathroom to kitchen, but on arrival, there's no even a single chair, simply there's no room for it.

On the other hand scored a room in luxury apartment in a 26th fl high rise in SIN together with access to pool, sauna, gym, view, etc. Owner only came home late at nite and bed till late, so we ended up with the apartment to ourselves.

Moral is need to compare, read all the reviews, check the location, terms of the stay, communicate with owner, etc. Allow an hour or two of effort.

 

[MEL_Traveller]

I had thought that the round the world cash ticket rate was around $5000 just for economy.
Regards,
Renato

You can buy a mixed class round the world cash ticket for around $5000 - this includes economy class for the legs into and out of Australia, and Swiss business class for all other sectors, and allows a stop in Asia, Europe and the USA. The fare is readily available, all on the one ticket through travel agencies (no need to cobble together individual flights).

As for straight out economy class... putting together your own itinerary round the world using a mix of low cost and full service carriers is possible in the $1500 range including all taxes - simply add an Australia to Asia return and follow this itinerary from mrbobish: http://www.australianfrequentflyer....airfares/cheapest-ever-rtw-you-can-69020.html

 

[Alanslegal]

Given that a return trip to London in economy is 128000 points, and 256,000points for business class, and that it's triple the economy cash ticket rate for business class - you seem to be getting great value for a round the world business class trip on both the point and the cash rate. I had thought that the round the world cash ticket rate was around $5000 just for economy.
Regards,
Renato

If you wanted to go RTW very cheaply, you could probably be able to do it for less than $2,000 all up - just need to be creative and willing to fly LCCs. There was a challenge here once upon a time to go RTW for less than $1,500 RTW and it was do-able then.

 

[MEL_Traveller]

If you wanted to go RTW very cheaply, you could probably be able to do it for less than $2,000 all up - just need to be creative and willing to fly LCCs. There was a challenge here once upon a time to go RTW for less than $1,500 RTW and it was do-able then.

As per the post immediately above yours... RTW possible for $1500 including add-on flights from Australia. That includes some sectors on full service carriers!

 

[dajop]

TSo, using the Amex card with 2.25% surcharge and earning two points, I'd have to buy 4000 litres of petrol at say $1.44 per litre (with my 4 cents a litre discount) and pay the 2.25% surcharge. Total cost of flight = $5889.6 +$31

Using a card with 1 point per dollar and no surcharge, requires 8000 litres. Total cost of flight =$11,520 + $31

Using a card with half a point a dollar an no surcharge, requires 16,000 litres. Total cost of flight = $23,040 +$31

But using no card, and not buying any petrol at all. Total cost of flight = $129 to $199

So, I can't really value the points in the manner that you do. Rather, the only way they can really be valued (assuming I am willing to pay for Qantas's service and safety record) is
($129-$31)X100/8000points = 1.225 cents per point
to
($199-$31)x100/8000points = 2.1 cents per point
Regards,
Renato

I'm trying to work out your logic here. Presumably you need to buy petrol to get around in your car (ie you're not buying petrol just to accrue points .... and driving around the ring road a few times to burn the petrol so you can buy some more to accrue some more points ....), so a free flight does not cost $11,520 + $31. The petrol costs $11,520, the flight $31!

Using Amex with 2,25% surcharge, and earning 2 points per dollar, to get 8000 points you need to spend $4000. So thats's $3912 (~2717 litres) of petrol + $88 surcharge. Given you need to buy petrol, your flight costs you $88+$31. You are paying ($88x100/8000) = 1.1c per point.

However that is comparing it to paying with cash and earning no points. If you have a card that earns 1 point per dollar, and there is no surcharge you'll be getting 3912 points anyway from 2717 litres of petrol. So you are really paying $88 for 4088 points.... or 2.15 c per point. So unless that 8000 pt flight is worth more than $203 then it's not worthwhile to pay with Amex, if you have a 1 pt/$ visa in your wallet!

 

[Moopere]

Its impossible to really get a community wide consensus on this subject because the real and perceived value of points is going to be different for everyone - mainly because the earn and burn opportunities and requirements are almost infinitely variable.

I did exactly this exercise when I first joined the AFF forum and because at that time I was a complete newbie with relation to everything flight/points related it was a steep and frustrating learning curve.

After faffing around for quite a while I realised that no matter the infinite nature of the variabilities here, I had to find a way to get a peg in the sand or else I'd never know what I was doing. The only way I could get close to doing this was to make a few broad judgement calls and choose my frequent domestic ports, a few likely dates during the year when the chances were reasonable that I'd be travelling and get the BFOD dollar value of those flights. At this stage I didn't even know which FFP I'd be most interested in, so I did the numbers for both Velocity and QFF.

After spending literally days with Excel and travel web sites I started to see some numbers coming out of the maze - despite sales and weird routings and other outliers, economy with both airlines was looking like a conversion of about 0.7c/p, business class presented a_lot_ more variability, however, even here, numbers around 2c/p were starting to look more and more common, though with care it became obvious that 2-5c for business was very likely.

Somewhat similar to population statistics studies, these are broad strokes and one can easily pull out individual numbers which further prove or disprove the theory - however, importantly for me, if gave me a base to work off. I revisit my big spreadsheet about once a year, but the numbers haven't really changed a lot as time has passed.

This exercise led me to the following personal conclusion: I don't ever pay more than 1c/p. No matter what else is going on, I can't lose at 1c/p. Obviously, before a flight is booked a comparison is made between outright dollar spend and points spend, as very often, particularly with economy seats, it can be 'cheaper' to simply spend money and leave ones points for better opportunities.

These days, with some experience behind me, I don't swap points for economy fares, the greatest gain is always business class. My tendency has been to buy, with money, the cheapest ticket that still allows a J upgrade and I use points for the upgrade. By and large, domestically at least, this reaps about 2-3c/p of value.

Despite a fair amount of international travel most of my flying is domestic, and my perception of value is therefore strongly swayed by this fact - also, most of my points earn is via credit cards, so I have inherent limitations that others won't have - I need to accrue points easily (via CC) inside Australia. Wherever possible I also have to try and convert 'foreign' FFP's into one of my main pools - those being Velocity, QFF or Amex.

I treat points now like money, so, if a flight costs AU$500 but I'll recover 500 points as a result of the spend + flying then my giant spreadsheet presents this to me as a 'real' cost of $500-(500x0.01)=$495, modifiers are added for lounge access or other amenity that I'd purchase if not provided 'free' as part of a bundle (J class ticket or status). Amenity that I wouldn't spend money on I discard in the calculation.

This process then very quickly allows me to compare BFOD, perhaps with a carrier I don't normally use, with points reward seats that might carry inherent amenity (like lounge access via status), etc, etc, etc. The same applies for hotel stays. Am I better off paying 200$ a night for a room or $100+30,000 points (Hilton in 90% of my cases). Hilton points are valued by me at 0.005c/p so, 100+(30,000*0.005)=250$ ... better spending cash at $200

 

[Renato1]

I'm trying to work out your logic here. Presumably you need to buy petrol to get around in your car (ie you're not buying petrol just to accrue points .... and driving around the ring road a few times to burn the petrol so you can buy some more to accrue some more points ....), so a free flight does not cost $11,520 + $31. The petrol costs $11,520, the flight $31!

Using Amex with 2,25% surcharge, and earning 2 points per dollar, to get 8000 points you need to spend $4000. So thats's $3912 (~2717 litres) of petrol + $88 surcharge. Given you need to buy petrol, your flight costs you $88+$31. You are paying ($88x100/8000) = 1.1c per point.

However that is comparing it to paying with cash and earning no points. If you have a card that earns 1 point per dollar, and there is no surcharge you'll be getting 3912 points anyway from 2717 litres of petrol. So you are really paying $88 for 4088 points.... or 2.15 c per point. So unless that 8000 pt flight is worth more than $203 then it's not worthwhile to pay with Amex, if you have a 1 pt/$ visa in your wallet!

You need to read my post in the context of Justin's valuation method.
Both you and I are getting roughly the same answer because we are treating points as a bonus, and the surcharge as a cost to getting that bonus.
Regards,
Renato

 

[mark4217]

This thread is out of control hahaha maybe we all start afresh

 

[Renato1]

You can buy a mixed class round the world cash ticket for around $5000 - this includes economy class for the legs into and out of Australia, and Swiss business class for all other sectors, and allows a stop in Asia, Europe and the USA. The fare is readily available, all on the one ticket through travel agencies (no need to cobble together individual flights).

As for straight out economy class... putting together your own itinerary round the world using a mix of low cost and full service carriers is possible in the $1500 range including all taxes - simply add an Australia to Asia return and follow this itinerary from mrbobish: http://www.australianfrequentflyer....airfares/cheapest-ever-rtw-you-can-69020.html

Thanks - you've given me more ideas (as per usual).
But Melkin was talking about an RTW One World trip for his valuation purposes. I know One World have some low cost carriers (like Iberia) but I'd have thought the One World Business fares were dearer than the lowest cost ones.
Regards,
Renato

 

[Renato1]

Its impossible to really get a community wide consensus on this subject because the real and perceived value of points is going to be different for everyone - mainly because the earn and burn opportunities and requirements are almost infinitely variable.

I did exactly this exercise when I first joined the AFF forum and because at that time I was a complete newbie with relation to everything flight/points related it was a steep and frustrating learning curve.

After faffing around for quite a while I realised that no matter the infinite nature of the variabilities here, I had to find a way to get a peg in the sand or else I'd never know what I was doing. The only way I could get close to doing this was to make a few broad judgement calls and choose my frequent domestic ports, a few likely dates during the year when the chances were reasonable that I'd be travelling and get the BFOD dollar value of those flights. At this stage I didn't even know which FFP I'd be most interested in, so I did the numbers for both Velocity and QFF.

After spending literally days with Excel and travel web sites I started to see some numbers coming out of the maze - despite sales and weird routings and other outliers, economy with both airlines was looking like a conversion of about 0.7c/p, business class presented a_lot_ more variability, however, even here, numbers around 2c/p were starting to look more and more common, though with care it became obvious that 2-5c for business was very likely.

Somewhat similar to population statistics studies, these are broad strokes and one can easily pull out individual numbers which further prove or disprove the theory - however, importantly for me, if gave me a base to work off. I revisit my big spreadsheet about once a year, but the numbers haven't really changed a lot as time has passed.

This exercise led me to the following personal conclusion: I don't ever pay more than 1c/p. No matter what else is going on, I can't lose at 1c/p. Obviously, before a flight is booked a comparison is made between outright dollar spend and points spend, as very often, particularly with economy seats, it can be 'cheaper' to simply spend money and leave ones points for better opportunities.

These days, with some experience behind me, I don't swap points for economy fares, the greatest gain is always business class. My tendency has been to buy, with money, the cheapest ticket that still allows a J upgrade and I use points for the upgrade. By and large, domestically at least, this reaps about 2-3c/p of value.

Despite a fair amount of international travel most of my flying is domestic, and my perception of value is therefore strongly swayed by this fact - also, most of my points earn is via credit cards, so I have inherent limitations that others won't have - I need to accrue points easily (via CC) inside Australia. Wherever possible I also have to try and convert 'foreign' FFP's into one of my main pools - those being Velocity, QFF or Amex.

I treat points now like money, so, if a flight costs AU$500 but I'll recover 500 points as a result of the spend + flying then my giant spreadsheet presents this to me as a 'real' cost of $500-(500x0.01)=$495, modifiers are added for lounge access or other amenity that I'd purchase if not provided 'free' as part of a bundle (J class ticket or status). Amenity that I wouldn't spend money on I discard in the calculation.

This process then very quickly allows me to compare BFOD, perhaps with a carrier I don't normally use, with points reward seats that might carry inherent amenity (like lounge access via status), etc, etc, etc. The same applies for hotel stays. Am I better off paying 200$ a night for a room or $100+30,000 points (Hilton in 90% of my cases). Hilton points are valued by me at 0.005c/p so, 100+(30,000*0.005)=250$ ... better spending cash at $200

Thanks for that detailed account. I think we are using very similar valuation techniques, the only difference between me and you is that I am valuing distance as opposed to comfort (business class), even though the comfort criterion provides better value per point.

With respect to the Hilton Hotel at $100 plus 30,000 points vs $200 cash, for me the calculation would have been simpler - given that you and I value Qantas points at a one cent per point, I'd have looked at it as ($100 + $300) vs $200, and rejected the point spending.
Cheers,
Renato

 

[MEL_Traveller]

Thanks - you've given me more ideas (as per usual).
But Melkin was talking about an RTW One World trip for his valuation purposes. I know One World have some low cost carriers (like Iberia) but I'd have thought the One World Business fares were dearer than the lowest cost ones.
Regards,
Renato

I appreciate that - but isn't the point that the Qantas points have zero value if you can get the same or similar product for less by paying cash?

 

[Moopere]

Thanks, but let's use as an example a simple flight to Sydney from Melbourne, where it takes 8000 Qantas FF for an award flight for one to Sydney, plus $31 taxes and fees.

So, using the Amex card with 2.25% surcharge and earning two points, I'd have to buy 4000 litres of petrol at say $1.44 per litre (with my 4 cents a litre discount) and pay the 2.25% surcharge. Total cost of flight = $5889.6 +$31

Using a card with 1 point per dollar and no surcharge, requires 8000 litres. Total cost of flight =$11,520 + $31

Using a card with half a point a dollar an no surcharge, requires 16,000 litres. Total cost of flight = $23,040 +$31

But using no card, and not buying any petrol at all. Total cost of flight = $129 to $199

Firstly, I never compare actual cash value to CC spend - its a convenience thing - so regardless if I could save a further 1% by using folding money I know I won't ever go to the trouble, therefore I add the cost of using a card to my calculations (and its never more than 1% as I won't pay more then that ... will walk away if required).

Additionally, I assume that whatever I'm buying is something that I need or want to buy, the money for petrol, in the example above, will be spent on petrol regardless of other factors. In the above example the Amex is out as it costs 1.125c/point. The other two have no surcharge so they are 'in'. Like a lot of FF chasers I have a lot of credit cards, pretty quickly I came to realise that I couldn't easily, at the point of sale, remember which cards had what bonuses and so-on, thus my reliance on my self instituted maximum cost of no more than 1c/p. I assume that each point gained costs me 1c. If its free, well, great, more win for me.

So, I can't really value the points in the manner that you do. Rather, the only way they can really be valued (assuming I am willing to pay for Qantas's service and safety record) is
($129-$31)X100/8000points = 1.225 cents per point
to
($199-$31)x100/8000points = 2.1 cents per point

Usually there is an option with rewards flights to pay the total amount, including fees and taxes with points, I declutter my calculations by assuming points are money and money is needed as a total to gain a ticket. A big part of the reason for this is that different airlines charge wildly different fees (fuel surcharges and whatnot). So, in my calcs, this particular ticket is going to cost me $129 in folding money, how many points is that?

$129 = 8000 points + some more points for the tax component (I'd have to check, but prolly around 6000 ... is that about right?) = $129/14,000 = 0.009 or 0.9c/point - in my world, I wouldn't do it, as I'm always assuming my points cost 1c/p and are worth more (or at least I need to convert them for more to make this a decent business proposition)

$199 = 8000 points + 6000 points (tax) = 199/14,000 = 1.4c/p

Simplistically speaking.

However, it doesn't stop there:

The purchase of the flight outright with money (cc) will gain me 129 points if the earn is 1:1 and the flight itself will gain me some points too, 490 with VFF and I think 800 (minimum points guarantee??) with QFF. Going with the QFF example, 129+800=929 points earned if paying card. Value of those points at minimum is $9.29 (I won't convert for less than 1c/p as previously mentioned).

So, modified cash price becomes $119.71 (inc tax) (status credits also have value, so you might modify further, but thats another conversation)
Points cost = 14,000 all inc, and at 1c/p = $140 ... and for a lot of airlines there is no FF point earn on straight rewards seats.

Obviously I am using my own valuation of points in the example above. You can back convert to arrive at a figure which suits you - but be strict with yourself. If your own valuation comes out at 2c/p then never pay more than that as its a losing proposition. Likewise, if you back convert a few example rewards seats/cash costs and can't stretch to more than 0.5c/p then never pay more.

Whilst the single example you have given shows are marked difference in potential points value (1.225c/p versus 2.1c/p) you will almost certainly find that this difference diminishes to almost nothing once you add a few more data points to the stats - do the same calculation for the same route (if this is one you travel frequently) over say 6 months if its relevant to your flying habits.

Worst case, and using only one data point, you can simply go with 1.225c/p ... don't pay more and you can't lose, likewise, don't exchange points for less than 1.225c/p

 

[burmans]

Quite a effort to book Airbnb, simply so much to choose from. Basic to lux, had experienced it all.

A room in HK that literally can't swing a cat!, supposed to be all inclusive from bathroom to kitchen, but on arrival, there's no even a single chair, simply there's no room for it.

On the other hand scored a room in luxury apartment in a 26th fl high rise in SIN together with access to pool, sauna, gym, view, etc. Owner only came home late at nite and bed till late, so we ended up with the apartment to ourselves.

Moral is need to compare, read all the reviews, check the location, terms of the stay, communicate with owner, etc. Allow an hour or two of effort.

Thats what reviews and picyures are for! Plenty of hotel rooms like this too in HK, suggest you actually read the reviews and look at the pictures. In fact reviews are a filter for me, if they dont have a number and are rated highly dont look in big cities.

 

[Moopere]

Thanks for that detailed account. I think we are using very similar valuation techniques, the only difference between me and you is that I am valuing distance as opposed to comfort (business class), even though the comfort criterion provides better value per point.

Its a really important consideration. We all make 'value' judgements, which is why these waters are so murky. If the prices were the same we'd all travel business class all the time. The reality is that this isn't the case, so what are we, as individuals willing to pay for J?

Myself, I won't pay the $2000 or whatever it costs today to travel full cash fare in J PER-MEL, thats my value judgement .. different for everyone. However, if the checkin person asked me would I pay 500$ or $1000 would I accept? Quite probably. If by using AUD$ + points I can secure a J ticket PER-MEL for equivalent value of <$1000 then I'll usually go for it. There is a point for all of us where we'd say yes, but just one dollar more and we'd decline.

If one is absolutely happy to always fly Y and J simply doesn't hold any personal benefit then thats a perfectly fine judgement call and I have friends who do this - but you need then to be extremely strict with your points accrual cost - most of the FF schemes are built around this expectation or the buying of 'toasters' and whatnot via their FF store. So long as you get your 0.7c or 1c/p then these calls are fine, so long as you never _ever_ spend more than 0.7c or 1c/p to accrue the points in the first place.

With respect to the Hilton Hotel at $100 plus 30,000 points vs $200 cash, for me the calculation would have been simpler - given that you and I value Qantas points at a one cent per point, I'd have looked at it as ($100 + $300) vs $200, and rejected the point spending.

Sorry, I slipped in, without warning, my own judgement on the value of Hilton points there - the 30,000 I was referring to were 30,000 hilton honors points - I value these differently to QFF or VFF points (though the spreadsheet used to derive the value judgement is much the same).


The important thing for me is to think of and value points as if they were a foreign currency. Once I got into that mindset things became clear. What is the cost of money in the currency I am dealing with? Baht might cost me 1$=28 baht, 1 euro might cost me $1.30, 1 QFF point is $0.01. The other important thing for me when doing these calculations is to only include items that I'd _actually_ buy. Theres a subtlety in there. I will and have bought Y and J tickets for cash and am willing to do so again in the future when the price is right - so I include those in valuing my points. Will I ever pay 20,000$ for an F ticket to LA? No, I won't, however, once having valued my points against Y or J would I use that currency to buy an F ticket if the conversion cost represented good value? Absolutely yes.

 

[Moopere]

I appreciate that - but isn't the point that the Qantas points have zero value if you can get the same or similar product for less by paying cash?

I agree with this. I'd answer 'yes'.

Which is why we in this game need to be constantly vigilant. With programs changing their T&C all the time and the individuals value of points always changing too, we need to be on the lookout for situations where it becomes predominantly the case that cash price is less than our perception of points value.

Of course if we constantly review the cash price of routes and adjust the 'value' of our points hoarding accordingly then we'd never get surprised, but for those of us who keep large points balances a change in the market value of a programs points can easily translate into a serious haircut. In a way, if we're "buying points" via whatever means instead of gaining them absolutely free (including all the nuances involved) then what we're really doing is a form of currency speculation.