My Personal Valuation of Qantas FF and Velocity Points

[dajop]

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)

I actually agree with your valuation (approximately- I value them at ~ $0.004-$0.0045 USD per point), and actually Renato1's comment is consistent - The key being where the points are coming from .... if they are coming from Amex spend, where 1000 MR points = 1000 HH points or 1000 QF points, it's clearly 1:1 between HH & QF, and Renato1's analysis makes total sense. If they are coming from earning in hotels ..... 1000 HH points can be transferred to 150 QF points, so in the example give, the 30000 pts are only worth 4500 QF pts (or $45 @1c per point)

 

[Renato1]

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?

No, Melkin's valuation technique related primarily to a round the world flight in Business using One World, whereas in contrast my valuation technique related to travel around Australia in economy. Neither of us valued the points at zero - they can't be, so long as Qantas doesn't charge zero for flights.
Cheers,
Renato

 

[MEL_Traveller]

No, Melkin's valuation technique related primarily to a round the world flight in Business using One World, whereas in contrast my valuation technique related to travel around Australia in economy. Neither of us valued the points at zero - they can't be, so long as Qantas doesn't charge zero for flights.
Cheers,
Renato

Can't the points, in theory, have a negative value? Using points can tie you in to expensive flights which you could buy elsewhere for less. Not for premium travel, but almost certainly for international economy travel.

 

[Renato1]

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.




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

I don't agree with paying the taxes and fees with points, as that is really poor value in every case I've examined (mainly at the Virgin site where they show the taxes and charges more easily, and where those taxes and charges are generally lower than at Qantas).

But you raise a really, really good point about having to take account of the points one would earn if buying the ticket outright. I think I forgot about this, because the last time I actually paid for a Qantas ticket was in 1980 when I bought a return student ticket to Perth.

Then for the $129 flight, assuming one does get the 800points on purchasing the ticket
($129-$31)X100 + 800 points = 8000point
And so (129-31)x100/ (8000-800)= 1.36 cents per point.....which is an 11% improvement on my original valuation

Now I have to go back and revisit all my original calculations.
Regards,
Renato

 

[Renato1]

Can't the points, in theory, have a negative value? Using points can tie you in to expensive flights which you could buy elsewhere for less. Not for premium travel, but almost certainly for international economy travel.

While, as you've pointed out elsewhere, one can spend points very poorly relative to buying a ticket going at a heavily discounted price, I can't see how those points could be negative unless the taxes, fees and carrier charges associated with the spending of those points is greater than the cost of the discount ticket - which I'd have thought to be highly unlikely.

This is comparing like and like, although arguably if comparing to say a ticket from a very low cost carrier one could find that the cost of the taxes, fees and carrier charges are greater than the low cost carrier's discounted tickets, and so using points is negative. But that's not comparing like and like. For example, I might find that I don't fit in the low cost carrier's seat, or the low cost carrier may cancel his flight for lack of customers - something that one wouldn't expect from the better carriers whose points I'm using.
Regards,
Renato

 

[MEL_Traveller]

While, as you've pointed out elsewhere, one can spend points very poorly relative to buying a ticket going at a heavily discounted price, I can't see how those points could be negative unless the taxes, fees and carrier charges associated with the spending of those points is greater than the cost of the discount ticket - which I'd have thought to be highly unlikely.

This is comparing like and like, although arguably if comparing to say a ticket from a very low cost carrier one could find that the cost of the taxes, fees and carrier charges are greater than the low cost carrier's discounted tickets, and so using points is negative. But that's not comparing like and like. For example, I might find that I don't fit in the low cost carrier's seat, or the low cost carrier may cancel his flight for lack of customers - something that one wouldn't expect from the better carriers whose points I'm using.
Regards,
Renato

That was in fact my point with a sample round-the-world ticket. For economy at at least, using QF frequent flyer points could actually be a negative. As per the link I posted, you could do a RTW sub $1500, including several flights on full service carriers. This could be approaching the taxes fees and charges on a points redemption depending on the mix of carriers.

Major low cost carriers don't simply cancel flights... in the example RTW one of the carriers was Norwegian Airlines. They're an EU carrier, so any cancellation on or close to the day of departure would give you nearly $900 cash back (Aussie dollars) in your pocket.

Looking at flights to Honolulu or Japan... using QF award points might save you just $20 off sale fares... and you've possibly paid more in credit card surcharges to earn those points. Plus, of course, any fees and charges associated with your credit card to be part of an awards program. Some charge $50-$60 or more just to 'earn'. So again a potential negative points value.

Domestic Australian travel I agree has a different range of values.

 

[greenfish]

One question to ask yourself with the comparision between J redemptions and the cash fare cost is - "would I ever pay the cash fare?". If the answer is no, then there's no point valuing the points based on the cash fare.

I flew F to LHR last Saturday using QF points on Emirates. The cash fare was about $10K. I didn't achieve 5c per point though, as I would never have paid cash for this fare; instead I'd have flown Y.

So on a purely cash basis, my points were worth around 1c (192,000 points vs $2K one way last minute Y fare - and that's ignoring the taxes). On the other hand, the points were also priceless, as they allowed me to have an experience that I'd simply never pay for otherwise. And I now know I really really like F on Emirates

 

[burmans]

One question to ask yourself with the comparision between J redemptions and the cash fare cost is - "would I ever pay the cash fare?". If the answer is no, then there's no point valuing the points based on the cash fare.

I agree and yet some insist on doing this. You can lead a horse to water etc..

 

[Renato1]

That was in fact my point with a sample round-the-world ticket. For economy at at least, using QF frequent flyer points could actually be a negative. As per the link I posted, you could do a RTW sub $1500, including several flights on full service carriers. This could be approaching the taxes fees and charges on a points redemption depending on the mix of carriers.

Major low cost carriers don't simply cancel flights... in the example RTW one of the carriers was Norwegian Airlines. They're an EU carrier, so any cancellation on or close to the day of departure would give you nearly $900 cash back (Aussie dollars) in your pocket.

Looking at flights to Honolulu or Japan... using QF award points might save you just $20 off sale fares... and you've possibly paid more in credit card surcharges to earn those points. Plus, of course, any fees and charges associated with your credit card to be part of an awards program. Some charge $50-$60 or more just to 'earn'. So again a potential negative points value.

Domestic Australian travel I agree has a different range of values.

Glad to hear that cancellations aren't as frequent as I feared - though even with $900 in my pocket, there is still the issue of overnight stays and getting some booking for the rest of the trip. I note that with carriers like RyanAir, if flights are cancelled due to an industrial dispute or bad weather - you are pretty much on your own. Contrast this to British Airways during the BA strike 10 years ago - they happily paid for my 4 nights accommodation at the 5 star Raddison Edwardian at Heathrow, where we were staying, which I claimed when I got back home.

Though my main concern still relates to comparing apples with apples. I would hate to have to endure some low cost flights like the Iberia trip I've mentioned before, where 2 hours seemed like 8 hours, because my legs were jammed into the seat in front of me and I couldn't move them - without playing footsie or kneesies with the two guys either side of me (they'd put my wife in the row in front of me).

Certainly, paying thousands of award points for a saving of $20 is poor practice. The membership reward fee on my ANZ Amex FF card is $55 a year, so that if I just earned a point per dollar on that card and half a point on the associated Visa card, and paid surcharges on the Amex card and blew all the points on a $20 saving - it would be a loss. It might happen with the less savvy.

Though it also should be put into context - every day thousands of people choose to fly at peak time, where the economy fare can be twice the price of off-peak times on the same day, and more than twice the price of sale tickets at off-peak times on the same day. Thus if they expended points at peak time, they would have gotten good value on a points per cent basis, as opposed to the ones who spent points instead of buying the sale ticket. But they both bought exactly the same service taking them from point A to point B, and go that service. In that context, comparing the less savvy traveller using points unwisely, relative to the peak traveller, he or she may still be ahead.
Cheers,
Renato

 

[MEL_Traveller]

Though it also should be put into context - every day thousands of people choose to fly at peak time, where the economy fare can be twice the price of off-peak times on the same day, and more than twice the price of sale tickets at off-peak times on the same day. Thus if they expended points at peak time, they would have gotten good value on a points per cent basis, as opposed to the ones who spent points instead of buying the sale ticket. But they both bought exactly the same service taking them from point A to point B, and go that service. In that context, comparing the less savvy traveller using points unwisely, relative to the peak traveller, he or she may still be ahead.
Cheers,
Renato

Indeed - but - award seats are capacity controlled. The chances of being able to secure award seats on ultra peak flights may be slim or none. Award seats are generally only seats an airline feels it's not going to be able to sell.

 

[Moopere]

I don't agree with paying the taxes and fees with points, as that is really poor value in every case I've examined (mainly at the Virgin site where they show the taxes and charges more easily, and where those taxes and charges are generally lower than at Qantas).

I agree, though its interesting to get a glimpse of what the programs themselves value their points at. If they are going to pay your taxes on your behalf, they certainly don't want to be out of pocket doing so - and though the translation almost certainly isn't 1:1, I bet its pretty close, and close enough for our estimation purposes.

Random date chosen, VFF economy reward booking:

PER-MEL

23,000 points, or,
16,900 + $39.21

The difference in points being: 6,100 meaning that VFF presents a value proposition of AUD$0.006427/point. I've seen this move about a tiny bit but it usually ends up at 0.6 or 0.7c/point

This is also, plus or minus a tiny bit, the valuation I get when putting in a fair number of domestic Y rewards to my spreadsheet - so to me, its the same. Pay tax with money, pay with points.

Interestingly the price of what used to be called the 'anytime reward' which is really just a full economy (saver) fare ticket paid with points is $433.87 in folding cash or 66,800 points ($0.00649/p) or 55,200 + $75.10 (which to me looks like 55,200x0.00649 + 75.10 = $433.35).

My rule of thumb method, for quick calcs is 0.7c/p so if I took a glance at this flight I'd use the all inclusive points price of 66,800 x 0.007 = $467.60

Plus and minus all the little stuff (which is still important) which as credit card earn if using money and points returned for the actual flight if applicable.

I'm not saying that I consider if wrong to exclude the tax, but if you're doing a lot of comparisons then if the error margin is relatively small its a lot quicker to just convert everything you see in front of you to money and choose from there.

 

[Moopere]

I've mentioned a few times that I generally value my points at a minimum 1c/p. Its a bit sloppy but is easy to remember and use when I'm doing a lot at once. This would seem to fly in the face of my perception of Y redemptions at 0.7c/p and it probably is, but I generally won't redeem for Y flights unless something really special is going on with the fare price and/or the points required - and heres why.... for me, points are hard to get, credit card churn earns me a fair number, flying and CC spend a reasonable return, but for mine, they remain hard to earn and all to easy to burn

If faced with essentially an even proposition I'll almost always use money and preserve the points. So, though I value my points at 1c/p and will spend up to 1c/p to gain them, I'm pretty stingy about spending them at that rate in actual fact. The view being that they are worth a _minimum_ of 1c/p to me to sell, but I'm really hoping for a significantly better return.

As I've mentioned previously, my own preference is spending points on J upgrades, or international redemptions of various types depending on airline. However, if this wasn't interesting, as I understand it isn't for many, I'd be a _lot_ more strict with the amount I'd be prepared to pay for points accrual and would probably end up aligning with the airlines themselves ... redeeming where possible at around 0.5, 0.6c or 0.7c/p but spending less than this to gain which essentially rules out _ever_ paying a CC surcharge. Sign on bonus points could, with care, conceivably cover the card start-up cost and you'd churn yearly.

 

[Renato1]

I agree, though its interesting to get a glimpse of what the programs themselves value their points at. If they are going to pay your taxes on your behalf, they certainly don't want to be out of pocket doing so - and though the translation almost certainly isn't 1:1, I bet its pretty close, and close enough for our estimation purposes.

Random date chosen, VFF economy reward booking:

PER-MEL

23,000 points, or,
16,900 + $39.21

The difference in points being: 6,100 meaning that VFF presents a value proposition of AUD$0.006427/point. I've seen this move about a tiny bit but it usually ends up at 0.6 or 0.7c/point

This is also, plus or minus a tiny bit, the valuation I get when putting in a fair number of domestic Y rewards to my spreadsheet - so to me, its the same. Pay tax with money, pay with points.

Interestingly the price of what used to be called the 'anytime reward' which is really just a full economy (saver) fare ticket paid with points is $433.87 in folding cash or 66,800 points ($0.00649/p) or 55,200 + $75.10 (which to me looks like 55,200x0.00649 + 75.10 = $433.35).

My rule of thumb method, for quick calcs is 0.7c/p so if I took a glance at this flight I'd use the all inclusive points price of 66,800 x 0.007 = $467.60

Plus and minus all the little stuff (which is still important) which as credit card earn if using money and points returned for the actual flight if applicable.

I'm not saying that I consider if wrong to exclude the tax, but if you're doing a lot of comparisons then if the error margin is relatively small its a lot quicker to just convert everything you see in front of you to money and choose from there.

This is pretty weird. A few weeks ago I checked award flights for Melbourne to Perth on the Virgin site and got
Mid week mid July Purchased ticket $249 or 17,100 points inclusive of taxes or 14,300points + $18.15 taxes

(249-18.15)x100/14300= 1.61cents per point

Seeing your figure of $39 for taxes, I went back tonight to see of I'd written something down incorrectly but found all of them sold out till mid October (how come Perth got so popular?)
Anyhow for Thursday 15th Oct, the ticket price was now $259, the points required were higher, but the difference for with and without taxes was still 2800 points and the taxes and fees were still $18.15.

So 1815cents divided 2800 points = 0.644 cents/point
which is the same as the figure you got!

So, I still can't see why you'd spend points at 0.64cents per point, when you value them at 1cent per point, and in the example above - just spending them on the flight component, they come to 1.61cents per point. To my mind, one is throwing away nearly a cent a point when the points are used to pay taxes and charges.

I know you think the effect is small, but looked at another way, instead of using 2800 points to pay for the $18.15, one should really be using only 1134 points if paying at the same rate as for the flight.

So, 2800 points - 1134 points = 1666 points which takes me about a week to earn on my grocery shopping using my Amex Platinum Edge card.

If one then pays the taxes for a return trip for two with points - that's four weeks of point earnings on groceries down the drain. So, I don't think the point usage on taxes and charges to be insignificant.
Cheers,
Renato

 

[knasty]

Renato the. 64c/mile is a buy rate, not a sell rate. You're paying cash to pay fewer miles ie. Effectively a Buy. So if you're normally willing to pay 1 or 1.5c and you can buy at ~.7 it can be quite compelling. I normally pay the maximum cash up to $50 worth, after which you have to pay a credit card fee which is outrageous. But I'm about to get the 110,000 bonus Amex card so my short term value of Vff has dropped due to the flood of supply.

 

[Renato1]

Renato the. 64c/mile is a buy rate, not a sell rate. You're paying cash to pay fewer miles ie. Effectively a Buy. So if you're normally willing to pay 1 or 1.5c and you can buy at ~.7 it can be quite compelling. I normally pay the maximum cash up to $50 worth, after which you have to pay a credit card fee which is outrageous. But I'm about to get the 110,000 bonus Amex card so my short term value of Vff has dropped due to the flood of supply.

Thanks for your input - but I really can't see the distinction.
If I am willing to expend points at 1.6cent/point to pay for a $249 ticket, why would I be either willing to, or find it compelling to expend points at 0.64cents/point to pay for $18.15 in taxes and fees? I think I am better off saving the points which I am getting less value for and putting them towards a future higher value spend on air-tickets.

Congratulations on the 110,000 bonus points. I'm a bit annoyed that I have a Platinum Edge card so can't get the points on your card - especially the two lounge passes, since we only plan to travel domestically twice a year maximum.
Cheers,
Renato

 

[Moopere]

Thanks for your input - but I really can't see the distinction.
If I am willing to expend points at 1.6cent/point to pay for a $249 ticket, why would I be either willing to, or find it compelling to expend points at 0.64cents/point to pay for $18.15 in taxes and fees? I think I am better off saving the points which I am getting less value for and putting them towards a future higher value spend on air-tickets.

True, which is why I made this comment

This is why I tend not to exchange points for Y flights - because J upgrades/redemptions can usually reap 2-3c a point or even more if you put in a fair bit of research effort.

I recommend real caution here - you could conceivably separate out any number of different perceived or real values (whats lounge access worth for example?) and start to seriously skew the final figure of your points value. Theres no right or wrong as we're dealing with a closed system, theres no actual point me comparing points value to you for example, but it opens the opportunity for error to creep in the more complex the systems used to derive value become. For example, its often the case the QF Y international reward flights have extremely large tax/fee components attached, so large in fact that very often its only several hundred dollars off the straight cash payment price - we don't know what the airlines are up to in such cases, they could conceivably be selling the ticket component at below cost whilst ultimately gaining revenue because of a ludicrously high fee/tax component - all I know for sure is that I need a certain amount of money to buy the ticket in its entirety - the taxes and fees are not negotiable.

So, whilst having gone to some effort in the above rant, I understand what you are saying and I tend to do the same which is to preserve points wherever I can. However, the value judgements are made using as much as is possible an even playing field for comparison (convert everything to AUD$ value..even points) then the comparisons are made for best fight option to take - the payment bit can be done in a different way, so I might, at payment, pay the tax component with money and the ticket component with points, to me it doesn't matter because points and money have the same value for this bit of the calculation - therefore why not save points.

The difference in the flight component bit, as you've noticed above, personally speaking I think this is the difference between the asking price and the minimum price Virgin is actually willing to accept. In other words, an inflated price will translate into a perception of higher return on your points and of course this value bounces around all over the place as the yield management of the airline kicks into play.

Congratulations on the 110,000 bonus points. I'm a bit annoyed that I have a Platinum Edge card so can't get the points on your card - especially the two lounge passes, since we only plan to travel domestically twice a year maximum.

Despite how it appears to be worded on face value I believe you will be okay with a Plat Edge. I have one too and intend to go for the 110K offer later this week. I'm sure I stumbled over a tight definition of 'existing cardholder' somewhere in the T&C on the velocity or Amex site and it looked to me to include all other Velocity type Amex cards, but not directly issued cards - I'll try to drag up the reference and post it up.

 

[cove]

I circulated the 110,000 plus 20,000 referral to some of our staff. It is a good deal but only if the applicant does not already hold an Amex directly branded card.

 

[Renato1]

True, which is why I made this comment

This is why I tend not to exchange points for Y flights - because J upgrades/redemptions can usually reap 2-3c a point or even more if you put in a fair bit of research effort.

I recommend real caution here - you could conceivably separate out any number of different perceived or real values (whats lounge access worth for example?) and start to seriously skew the final figure of your points value. Theres no right or wrong as we're dealing with a closed system, theres no actual point me comparing points value to you for example, but it opens the opportunity for error to creep in the more complex the systems used to derive value become. For example, its often the case the QF Y international reward flights have extremely large tax/fee components attached, so large in fact that very often its only several hundred dollars off the straight cash payment price - we don't know what the airlines are up to in such cases, they could conceivably be selling the ticket component at below cost whilst ultimately gaining revenue because of a ludicrously high fee/tax component - all I know for sure is that I need a certain amount of money to buy the ticket in its entirety - the taxes and fees are not negotiable.

So, whilst having gone to some effort in the above rant, I understand what you are saying and I tend to do the same which is to preserve points wherever I can. However, the value judgements are made using as much as is possible an even playing field for comparison (convert everything to AUD$ value..even points) then the comparisons are made for best fight option to take - the payment bit can be done in a different way, so I might, at payment, pay the tax component with money and the ticket component with points, to me it doesn't matter because points and money have the same value for this bit of the calculation - therefore why not save points.

The difference in the flight component bit, as you've noticed above, personally speaking I think this is the difference between the asking price and the minimum price Virgin is actually willing to accept. In other words, an inflated price will translate into a perception of higher return on your points and of course this value bounces around all over the place as the yield management of the airline kicks into play.

.

Thanks. I think we are now in complete agreement.

I may have to explore this upgrade business - if most everyone here thinks it is great, I might be missing out on something.
Cheers,
Renato

 

[Moopere]

I may have to explore this upgrade business - if most everyone here thinks it is great, I might be missing out on something.

You are

But be forewarned, once you start swapping points for J upgrades/rewards, its terribly terribly difficult to later go back to book and endure a Y seat at the back of the bus.

 

[Moopere]

I circulated the 110,000 plus 20,000 referral to some of our staff. It is a good deal but only if the applicant does not already hold an Amex directly branded card.

mmm, yes, its always the question this - most here probably have some type of Amex card I'd imagine and as per usual there seems to be anecdotal evidence from some that holding certain types of Amex doesn't preclude them from gaining the bonus. I notice at least one person seeming to report gaining the bonus against this offer (on the main thread for this offer). I guess as usual, buyer beware.

I've had an Amex of one type or another for years ... 2-3 years ago I got this Velocity Amex and gained the bonus at the time, can't remember now if it was 40K or 80K ... it was reasonable anyway. Cancelled it 1-2 years later as part of the normal CC churn we all have to endure.

I've just applied online now and have apparently been accepted, not that I doubt this, but I suspect pretty much all these applications get accepted by the web interface unless you tick/enter a red-flag item. I'm sure they get reviewed later on. In any event, I'll report back here if the points arrive .. or if they don't :O

If they don't then I'll cancel immediately for a refund (hopefully) - no harm no foul