On thought leadership

As regular readers know, I'm a podcast fanatic. The only thing better than being able to conveniently manufacture spend is being able to listen to great audio content while you do.

One podcast I've given a few chances to, but haven't yet been blown away by, is the Ezra Klein Show. Klein is a great interviewer but has the absolute worst taste in guests to have on the show, which makes most of the interviews ultimately boring unless you're personally interested in the area the guest specializes in.

Back on April 19, 2016, Klein interviewed Ben Thompson on "how to make it in media in 2016." Well heck, I'm trying to make it in media in 2016! So I thought I'd give it a listen.

If you don't know who he is (I didn't), Ben Thompson is the motive force behind Stratechery.

Ben Thompson is a Thought Leader in Technology

About halfway through the Ezra Klein interview, Thompson begins talking about what makes people willing to make a site a "destination," and how to build an audience willing to sign up for subscriptions to get even more content (Thompson seems to have the same model I do, providing lots of free content as well as subscribers-only access to his inner-most musings).

Thompson's theory is that when you have a single, internally consistent vision of the topic you write about, it makes it easy to fit new information into your worldview, allowing you to generate "fresh" content based on the news without taking the time or effort to actually examine the facts on their own terms.

Listening to this interview, I immediately recognized the genre he was talking about, because travel hacking has its own Thought Leader, right in our very midst.

Gary Leff knows one big, stupid thing

When you visit View from the Wing, you are immediately informed that you're in the presence of a Thought Leader In Travel. And after listening to Ben Thompson cooly describe the anatomy of the Thought Leader, it's obvious what Gary Leff's single, internally consistent vision of the loyalty industry is: loyalty programs are the single greatest invention in the history of marketing, and travel companies tinker with them at their peril.

There are many reasons this is stupid, and I encourage you to come up with your own.

But the lowest common denominator explanation for why this is an incorrect world view to drive thousands of words per week is this: if loyalty programs can, through public signaling to one another, devalue more or less simultaneously, then all the programs can individually and jointly spend less on marketing expenses without ceding a marketing advantage to any other program.

And, amazingly, this is precisely the pattern we see in the real world, where the rest of us live.

I know a bunch of small, true things

Clearly, I'm not a Thought Leader in the terms Ben Thompson described. I don't have a single overarching philosophy, and I don't try to cram every new piece of information into my preconceptions. Instead, I know a handful of small, true things. For example:

What are Thought Leaders good for?

This post isn't meant to be an attack exclusively on Gary Leff (although, of course, also on him), but more generally to call into question the species of Thought Leader as a whole.

What is the point of using an overarching philosophy to interpret facts when you have the actual facts in front of you?

On the one hand, Gary Leff really is invited to attend, and even host(!), awards galas and loyalty conferences.

On the other hand, his insistence that the loyalty programs are sabotaging their own success through devaluations and a focus on revenue seems to fall on completely deaf ears, possibly because a graphomaniac internet enthusiast has no influence over the business practices of massive global enterprises.

Conclusion

Looking around today, it's clear that the future of the internet belongs to the Thought Leaders. Mr. Money Moustache is a Thought Leader in Financial Independence. Meb Faber is a Thought Leader in Value and Momentum Investing. Tyler Cowen is a Thought Leader in Condescension.

I imagine there are lots of reasons why people find these Thought Leaders comforting. They repeat the same nostrums over and over again, building a cushion of the familiar, the wise, the sensible. And who doesn't want to live in a familiar, wise, and sensible world?

But there is an alternative to Thought Leadership: taking the world on its own terms. Understanding that loyalty programs will continue to devalue, with or without notice. Understanding that passive, low-cost investing is the only method yet devised that will secure as much of the market's return as possible. Understanding that Tyler Cowen is a twit.

A big, false theory may be comforting, but a small, true fact is even better.

I wonder what's going on with all these Hyatt promotions

[9/29/16: edited to include base and bonus points earned on spend, hat tip to commenter VM.]

I just updated my Hotel Promotions page with yet another Hyatt promotion, meaning there are currently 4 concurrently running Hyatt promotions (although two are only available to co-branded credit cardholders).

The new Hyatt Regency promotion is pretty good

If you have a Chase Hyatt co-branded credit card and register by the registration deadline (turn off your adblocker if you don't see the credit card field) of October 31, 2016, and spend $500 in "net purchases" on the card at Hyatt Regency properties before December 31, 2016, you'll receive a $50 statement credit.

This promotion belongs to a category of promotion I typically blow off. For example, American Express periodically has Offers For You promotions for discounts off certain purchases at Hilton brand properties.

I'm normally not interested in these promotions because my goal is to pay as little cash as possible for my travel, which means redeeming miles and points I've already purchased at a steep discount to their ultimate value. Paying for travel with a credit card, which I have to pay off with cash, is an admission of failure to a travel hacker.

There are two big differences with this promotion:

  • The $500 purchase requirement doesn't need to be a single transaction. That means the cash co-pays for Hyatt Regency Points + Cash stays will count towards the $500 threshold.
  • 3 Hyatt Gold Passport points per dollar spent at Hyatt properties with the Chase Hyatt credit card is competitive with any other rewards-earning credit card.

That doesn't mean I'm going to "chase" this promotion, but it does mean I'm not writing it off as completely irrelevant. I'll take a look at my existing and possible Hyatt Regency reservations, and if the cash components add up to $500, I'll pay for them with my Chase Hyatt credit card. If they don't, I'll pay with a discounted Hyatt gift card instead.

This is yet another stackable Hyatt promotion

With the addition of this Hyatt Regency promotion, it's now theoretically possible to stack all the current Hyatt promotions by booking, before October 31, 2016, 10 non-consecutive Category 2 Points + Cash stays at Hyatt Regency properties through the Hyatt mobile app.

You would pay 40,000 Hyatt Gold Passport points and $550 in co-pays, plus tax, which I'll hand-wavingly assume comes to 10%, for a total of $605. I'll also assume you select the 1,000 Hyatt Gold Passport-point Diamond amenity during each stay. You would earn:

  • a $50 statement credit to your Chase Hyatt credit card account;
  • a 4,000-point rebate to your Hyatt Gold Passport account;
  • 10,000 Hyatt Gold Passport points in Diamond amenities;
  • 15,000 Hyatt Gold Passport points in "More Points. More Play." promotion points;
  • 1,815 Hyatt Gold Passport points for your credit card spend;
  • 5,000 Hyatt Gold Passport points for booking 10 stays through the mobile app (see Michael's comment on receiving the promotion multiple times);
  • [edit: plus 3,575 Hyatt Gold Passport points earned on the $550 in cash co-pays.]

Your total out of pocket expense for 10 elite-qualifying stay credits would therefore be 4,185 [edit: 610] Hyatt Gold Passport points and $555.

Now, that's not a great argument for mattress running, and it's not intended to be. But I do think it's a pretty good argument for staying at a Hyatt Regency, or booking a Points + Cash stay instead of a points-only stay, if you're able to hit the relevant promotion thresholds (10 eligible nights and $500 in spend) at Hyatt Regency properties, and thereby re-qualify for Diamond status.

So what's going on with all these promotions?

To state the obvious, it is not usual for a loyalty program to be running 4 stackable promotions simultaneously. So what's going on?

I figure there are two obvious explanations. First, Hyatt might be trying to get their membership numbers and revenue up in the fourth quarter either to ward off a takeover offer after Starwood's acquisition by Marriott, or to fetch as high a price as possible in the inevitable merger.

Second, Hyatt might be trying to retain all the new Diamond members they acquired poaching from Starwood at the end of last year and beginning of this year. I'm someone who never would have considered staying at Hyatt properties as a non-elite member, but as a Diamond I started booking towards Hyatt whenever possible. And not just that, I also book Points + Cash stays, which I would never do at a chain with less valuable points, like Hilton, which I'm eager to burn.

So it may be that this aggressive push for paid and Points + Cash stays in the end of the year is an effort by Hyatt to retain their new Diamond members, who have turned out to be more lucrative than they expected when they began matching Diamond status back in November and December of 2015.

Transfer large blocks of Starpoints using Marriott Flight and Hotel Packages

Today Marriott closed its purchase of Starwood Hotels & Resorts and introduced point convertibility between the Marriott Rewards and Starwood Preferred Guest programs. After linking your accounts, points are now transferrable between the two programs in either direction at a ratio of 3 Marriott Rewards points to 1 Starpoint.

Upon seeing this news, my first reaction was, "doesn't this make Marriott Flight and Hotel Packages astonishingly cheap?"

Well yes, yes it does.

Starwood's new 33%-46% transfer bonus

The math behind Marriott Rewards Flight and Hotel Packages normally works like this: if you book 7 Marriott Rewards nights at full price, you can transfer 50,000, 70,000, 100,000, or 120,000 points at a 1:1 ratio to a domestic airline (the ratio is different for many foreign carriers). If you choose United as your transfer airline, you receive a 10% bonus.

For example, 7 nights at a 25,000 Category 5 Marriott Rewards property would cost 150,000 points (since the 5th night is free). With a Flight and Hotel Package, you can instead spend 200,000, 220,000, 250,000, or 270,000 Marriott Rewards points and receive the difference in airline miles with Alaska, American, Delta, Air Canada, or British Airways, along with a few others.

Since Starpoints now transfer to Marriott Rewards at a 1:3 ratio, 270,000 Marriott Rewards points cost 90,000 Starpoints. 90,000 Starpoints, transferred directly to an airline partner, would yield 110,000 miles. Transferred first to Marriott Rewards, it yields 120,000 miles (132,000 United MileagePlus miles).

This is worth doing even if you don't plan to stay a single night with Marriott, as long as you have a use for the miles. If you are planning a 7-night stay somewhere anyway, then the value becomes virtually unbeatable.

This makes the Starwood Preferred Guest American Express card great for unbonused spend

As long as this option persists, manufacturing unbonused spend with the Starwood Preferred Guest American Express card will earn 1.33 to 1.46 miles per dollar spent with all the major US carriers, when Starpoints are transferred to Marriott Rewards in batches of 90,000.

While the Chase Freedom Unlimited earns a slightly higher 1.5 United MileagePlus mile or British Airways Avios, earning Starpoints instead gives you access to those currencies as well as Delta SkyMiles and American AAdvantage and Alaska Mileage Plan miles.

Obviously, the more of the 7 included Marriott hotel nights you use, the more value you'll get from this technique, but as shown above it's worth doing even if you don't use a single one of your included nights.

Note that you don't have to decide on a property and dates for your stay at the time of redemption — the award is deposited into your account, and can even be upgraded later if you decide to stay at a property in a category higher than the one you paid for.

Quick hit: my content around the web

Although my posts this week have had a little bit of a focus on the personal finance side of travel hacking, I primarily use this website to write about the travel side of travel hacking. But if you're interested in hearing my take on topics both near and far from travel hacking, there are a few other places where you can find me thinking out loud and otherwise.

Saverocity Observation Deck

I (famously) listen to podcasts while I run my travel hacking errands, and it's especially fun to listen to podcasts about travel hacking while I do so. The Saverocity Observation Deck podcast has been hospitable enough to invite me on to contribute to episodes 11, 15, 26, and 38. Listen to those, and other episodes, and you'll be able to decide for yourself if you like it.

Saverocity Forum

While I personally feel that travel hacking and personal finance hacking are closely related, I know not all of my readers do, so my tendency is to post my reflections on personal finance hacking over at the Saverocity Forum. You have to create an account first, but then you should be able to use this link to find all the threads I've created there.

Twitter

Twitter is the greatest invention since flying cars, and I'm always on Twitter. I find it pretty difficult to find Twitter users worth following, but the good news is that the more worthwhile Twitter users you follow, the more likely you are to find additional worthwhile Twitter users.

My Twitter handle is @Freequentflyr. Incidentally, that's arguably an even better way to get in touch with me than e-mail, as long as you're not asking or disclosing anything you'd like to keep private.

The many flavors of negative-interest-rate loans

A negative-interest-rate loan is one which, over the course of the loan, requires the borrower to repay less than they originally borrowed. Such loans have received a lot of attention in the business press lately since countries like Germany and Switzerland began issuing bonds with negative yields.

But negative-interest-rate loans aren't just for industrial and financial superpowers anymore! Here are three flavors of negative-interest-rate loans available to the enterprising travel hacker (and one bonus flavor), sorted by the duration of the loan, and suggestions for how to maximize their value.

25-55 days: manufactured spend

Most people think of the profit from manufactured spending as coming from the rewards earned on their spend, and that's true if you liquidate your spend directly back into the cards used to manufacture it.

But when you manufacture spend on a rewards-earning credit card, you're also borrowing money that can be used for other purposes. If you manufacture and liquidate spend on the day your credit card statement closes, you may be able to use the funds for up to 55 days, depending on how long your statement cycle is and how many days your bank gives you to pay.

Possible uses: Besides short-term liquidity, you can get even more value from these short-term negative-interest-rate loans by funding bank accounts that require large deposits in order to trigger signup bonuses. For example, Citi is currently offering a $400 signup bonus for opening a checking account with $15,000 in new money, which has to be kept with Citi for 30 days. $15,000 manufactured on a 2% cash back card and 1% "all-in" cost will net $150 in credit card rewards and $400 from Citi. Since the money was borrowed, that's the equivalent of a negative 44% APR loan.

6-12 months: interest rate arbitrage

If you're anything like me, you're constantly getting balance transfer and cash advance checks in the mail from your credit card companies. For the last year it felt like I was getting two or three offers from Discover every week! The offers can take many forms, but usually include a promotional interest rate on the amount you write the check for, while charging a balance transfer or cash advance fee in the range of 2-5%.

These offers are very bad for short-term liquidity because those fees act as an up-front interest charge which can't be avoided by paying off the balance early, as is the case with manufactured spend.

Possible uses: for medium-term needs, these offers can give you the opportunity to swap out higher-interest-rate debt for lower-rate debt, while generating valuable liquidity. For example, if you have 12 months remaining on a car loan at 5% APR, and are sent a 12-month 0% APR cash advance offer with a 3% cash advance fee, you will not just save money on the total interest you'll pay, but also have the option to swap equal-installment car loan payments for 11 minimum credit card payments and a "balloon" credit card balance pay-off in the 12th month. That added liquidity can be plowed back into manufactured spend, reselling, or any other high-value investment you have available.

12-21 months: savings and investment

There are a range of cards available that offer 0% APR on purchases and/or balance transfers. When those cards are also rewards-earning credit cards, these act as longer-term negative-interest-rate loans. For example, a new application for a Chase Freedom Unlimited will earn 1.5 Ultimate Rewards points per dollar spent and charge no interest on purchases for 15 months. $10,000 manufactured with that card will earn 15,000 Ultimate Rewards points. If you redeem 10,000 points to cover your manufactured spend costs, the 5,000 remaining points are the negative interest on your 15-month loan.

Possible uses: Depositing the same $10,000 in a 4.59% APY checking account will produce another $459 or so per year, driving the APR on your borrowed funds even further below 0%.

This technique may also be useful if you don't have the funds to maximize your annual contribution to an IRA or other tax-advantaged savings vehicle: using negative interest rate loans to cover your expenses while deducting retirement contributions from earned income can generate valuable savings on federal and state income taxes.

Up to 20 years: federal student loans

Whether or not you think college students should have to borrow to pay for higher education, for many students there is in fact a stark choice between borrowing or not attending college at all. The good news is that as long as long as students borrow exclusively from the federal government's Direct Loan program, they're eligible for the income-based repayment plan, or IBR. Under an IBR plan, any principal and interest balances that aren't repaid after 20 years are forgiven.

This too meets our definition of a negative-interest-rate loan: for borrowers whose repayments after 20 years don't add up to the amount they borrowed, the difference between the amount repaid and amount borrowed will constitute the negative interest they earned during the repayment period.

Possible uses: I don't know if there are actually any ways to leverage these negative-interest-rate loans, so just consider this an advertisement for the income-based repayment program and Federal Direct Loans.

On the other hand, no one should ever take out private student loans, which can be almost impossible to discharge in bankruptcy and offer few or none of the alternative repayment options the federal government makes available.

Conclusion

For now, we live in a low-interest-rate, low-yield world. Juicing your investment returns and reducing your interest payments with negative-interest-rate loans is one way to squeeze higher yield from a market that has run out of low-hanging fruit.

What's the return on a diversified portfolio of hip alternative investments?

There's a healthy overlap between people with an outside-the-box attitude towards funding travel and those interested in alternative approaches to savings and investment:

  • Kiva has long been a (controversial) tool used by travel hackers and outside-the-box thinkers to earn miles, points, and cash back by making short-term loans funded with rewards-earning credit cards.
  • More recently, Greg the Frequent Miler has been doing yeoman's work (followup here) reporting out the similar, albeit much riskier, possibility of funding Kickfurther (my personal referral link) "Consignment Opportunities" with credit cards to earn both credit card rewards and investment returns.
  • At some point I must have signed up for a Fundrise account, and they've been badgering me to invest in their "Income" and "Growth" eREIT's for weeks now.
  • Finally, if you listen to any popular ad-supported podcasts you've likely heard about Wunder Capital and their solar power investment funds.

Now, the last thing you want to do is put all your speculative eggs in one basket, so I got to wondering, what kind of return might you get from an equally weighted portfolio of all these investments?

Annualizing "target" returns

The first thing to take into account is that the investment horizon for each of these vehicles is different, so we need to adjust the various returns appropriately. I'll use $1,000 investments in each example for ease of comparison.

  • Kiva loans funded with a 5% cash back credit card might earn more or less than 5% because of the varying term of Kiva loans. A recent search for short-term, high-quality Kiva loans returned 15 loans, all of which had a duration of 8 months. Assuming you wait to reinvest your Kiva repayments until all your loans have been repaid, and you suffer no defaults or delinquencies, you could invest $1,000 1.5 times per year, for a total annualized return of 7.5%.
  • Kickfurther consignment opportunities funded with a 2% cash back credit card will yield 2% cash back, plus your total Kickfurther principal and interest payments, minus 1.5% of your Kickfurther principal and interest payments. In other words, a 12-month consignment opportunity offering a 16% return on a $1,000 investment will pay $20 in cash back plus 98.5% of $1,160 ($1,142.60), for a total annual return of 16.26%. Assuming the four currently available consignment opportunities are typical in both length and rate of return, we can mechanically compute an average annualized return of 14.65%.
  • Fundrise works a little bit differently since you're investing in eREIT's which are designed to be held for the long term and which pay out throughout the life of the investment and then return remaining (potentially appreciated) principal at the end. Under the "accountability" tab for each eREIT, you can see the returns Fundrise seeks from each investment fund. For the Income eREIT they will charge no management fee if the annualized return is less than 15%, and for the Growth eREIT they'll pay a penalty if the annual return is below 20%, so we can use those as the "target" returns for each fund.
  • Finally, Wunder Capital is currently offering a "Term Fund" with a target return of 8.5% and an "Income Fund" with a target return of 6%.

Building a diversified hip alternative investment portfolio

If I were interested in building a portfolio of these alternatives, my model would be diversifying across the four platforms somewhat like this: by putting $1,000 in as many suitable Kiva loans as possible, $1,000 across as many Kickfurther consignment opportunities as possible, $1,000 in each of the two Fundrise eREIT's, and $1,000 in each of the Wunder Capital funds.

That would produce a $6,000 investment with a target annualized return of 11.94%.

This would be a very stupid thing to do

There are at least two questions worth asking about such a diversified portfolio of hip alternatives:

  • How likely am I to make more money with this portfolio than I would with conventional investments?
  • How likely am I to make any money at all, versus losing some or all of my principal?

The first question speaks to the question of whether the higher target return you're seeking will adequately compensate you for the added risk you're taking with these bizarre, untested investment vehicles. After all, Vanguard will sell you a low-cost mutual fund invested in corporate junk bonds any day of the week. Why buy untradable junk from strangers when Jack Bogle will sell you relatively liquid junk?

The second question is whether you'll be compensated at all, or whether an economic downturn, poor management, and/or fraud will wipe out your investment completely with little or no warning.

But, gambling is fun

There's a painful irony to the fact that these alternative investment vehicles have been legalized and are being aggressively promoted at a time of low interest rates and pessimism about future returns in the stock market, because those conditions have retail investors desperately fishing around for investment opportunities with a higher return than their passively managed index funds. Frantically taking bigger and bigger risks makes the problem of low returns worse for all the investors who pick the wrong alternatives to invest in (and there are a lot of wrong alternatives).

On the other hand, for the dwindling number of investors with a secure path to retirement and enough money left over to gamble with, these alternatives seem like they'd be fund to play with. And who knows? You might even make some money.

How to think about the "single best" rewards currency

Last week I joined Joe Cheung for a recording of the Saverocity Observation Deck [edit: now available for listening!] and among the many subjects we touched on was the idea of the "most valuable" loyalty currency. I pointed out that affiliate bloggers are forced by their business model to argue that Starwood Preferred Guest Starpoints are worth at least 2 cents each because Starpoints can only be earned in any volume through the Starwood Preferred Guest American Express cards, which earn 1 Starpoint per dollar spent.

If Starpoints were worth any less than 2 cents each, it would be impossible to promote the card to unsuspecting customers, since there are no-annual-fee cards that offer 2% cash back on all purchases.

A few illustrative examples of this Starpoint value game:

If you're curious, Hotel Hustle pegs the median value of Starpoints redeemed for hotel stays at 1.849 cents each.

The fact is, the impulse to identify a "single best" or "most valuable" rewards currency is fundamentally misguided: the most valuable rewards currency may not be the single best rewards currency — and vice versa!

Three "single best" rewards currencies

Knowing everything you know about loyalty programs and travel hacking, what credit card would you sign up for if it you had to pick just one? I think these are three reasonable choices (feel free to suggest others in the comments):

  • If you have access to unlimited grocery store or gas station manufactured spend, the US Bank Flexperks Travel Rewards Visa earns "up to" 4% on airfare and up to 3% on hotel stays, and charitable spend earns "up to" 6% and 4.5%.
  • If you have access to unlimited unbonused manufactured spend, the Amex EveryDay Preferred offers 1.5 flexible Membership Rewards points per dollar spent everywhere.
  • And if you have access to unlimited unbonused manufactured spend, the Starwood Preferred Guest American Express cards earn 1 Starpoint per dollar spent everywhere.

The Flexperks Travel Rewards card has obvious advantages: a high earning rate and the ability to redeem your points on any flight and at any hotel means you're unlikely to experience orphaned points or be unexpectedly forced to pay cash for travel.

The Amex EveryDay Preferred isn't of much use when redeeming for paid flights or hotels, since Membership Rewards points can be redeemed for just one cent each towards those reservations. On the other hand, British Airways Avios transfers (1000 Membership Rewards point for 800 Avios, for an earning rate of 1.2 Avios per dollar spend everywhere) give access to high-value American Airlines and oneworld reservations, and both Delta SkyMiles (Skyteam) and Air Canada Aeroplan (Star Alliance) are Membership Rewards transfer partners at a 1000:1000 transfer ratio. Even transfers to Hilton HHonors would be worthwhile at redemption values above 0.44 cents, after taxes, thanks to the 1000:1500 transfer ratio, since at that rate you'll be better off booking with transferred Hilton points than directly with Membership Rewards points.

The Starwood Preferred Guest American Express cards allow you to earn Starpoints, which can be valuable for hotel stays if you frequently stay in cities with Starwood Preferred Guest properties. They also give you access to American Airlines AAdvantage miles, Air Canada Aeroplan miles, and Delta SkyMiles at a 1:1.25 transfer ratio when you transfer Starpoints in multiples of 20,000. Finally, the SPG Flights award allows you to book paid flights at valuations of between 1 and 1.4 cents per Starpoint.

"Single" is doing all the work in this analysis

At this point the game I'm playing should be clear: no travel hacker should have just one of the three cards described above, because having just one credit card makes travel hacking nearly impossible!

  • A Starwood Preferred Guest credit card is great for Starwood stays, but it's a lousy way to pay for flights, leaving you to pay cash for all of your non-award flights and all of your non-Starwood hotel stays.
  • An Amex EveryDay Preferred card is great for earning 27,000 Membership Rewards points per calendar year at grocery stores, but it's a lousy way to build up the balances you need to book a whole year's worth of travel with unbonused spend.
  • A Flexperks Travel Rewards card is great for booking paid domestic flights, but lousy for booking premium-cabin international flights or expensive hotel stays.

Earn the "best" currency for the job

In the above analysis I completely excluded my favorite travel hacking tool, the Chase Ink Plus. Why? Because it's almost useless without access to other, complementary tools. It's true that it helps you purchase Ultimate Rewards points at 0.59 cents each, and allows you to redeem them for 1.25 cents each, or a 52.4% discount off retail.

But a 2% cash back card, used to manufacture unbonused spend, generates virtually the same discount off retail, and gives you the flexibility to spend your rebate on things besides travel, as well.

Meanwhile, the vaunted transferability of Ultimate Rewards points means you can book Hyatt stays with ease, but under virtually no circumstances are Marriott Rewards or IHG Rewards points worth 1.25 cents each, leaving you to book full-price stays without even earning rewards or triggering hotel promotions. Long-haul premium-cabin United awards may cost less with Ultimate Rewards transfers, but you'll give it all back booking full-price domestic economy awards.

Putting together a travel hacking strategy should be as holistic a process as possible, and trying to decide in advance which rewards currencies is "most valuable" is likely to sabotage that process. Over the course of a year you may need to take into account all sorts of conditions:

  • if you're trying to qualify or requalify for Hyatt Diamond status, you might want to book Points + Cash awards, which may require a flexible Ultimate Rewards-earning credit card for the points portion, plus a co-payment with cash or a Hyatt gift card;
  • if you have access to grocery store manufactured spend, you may be able to pay for your hotel stays more cheaply with a Hilton HHonors Surpass American Express card than with a Flexperks Travel Rewards card (the Hotel Hustle median value of HHonors points is 0.448 cents each);
  • if you book deeply-discounted or weekend leisure travel, you may not be able to qualify for airline elite status without triggering an elite-qualifying dollar waiver using a co-branded credit card.

Conclusion

Never lose sight of the ultimate purpose of travel hacking: to pay as little as possible for the trips you want to take. The "most valuable" currency you earn isn't the "best" currency unless it helps you pay for those trips more cheaply than you could otherwise.

A real travel hacking strategy can be mostly indifferent to the supposedly objective "value" of any given currency. Ultimate Rewards points are "worth" 1.25 cents each when redeemed for paid flights with an Ink Plus or Sapphire Preferred, and 1.5 cents each with a Sapphire Reserve, but can be worth two or three times that when redeemed for Hyatt stays, Southwest flights with a companion pass, or United or Flying Blue award tickets. Delta SkyMiles are "worth" 1 cent each when redeemed for "Pay with Miles" tickets, but far more when deployed strategically for high-value redemptions.

When you are just getting started in the game, it really does make sense to pick one card to focus on — a 2% cash back card! That's not because 2% cash back is the most you can hope to earn in this game, but because until you thoroughly understand the parameters of the game, any "single best" credit card is virtually guaranteed to leave you worse off than that 2% cash back card will.

Pro tip: booking premium cabins with US Bank Flexpoints

As fans of US Bank Flexperks Travel Rewards know, and people who recently applied for a personal or business card during the recent Summer Olympics promotion will soon find out, the third-party travel provider US Bank uses no longer allows multi-city itineraries to be booked online through their travel portal, although such tickets can still be booked over the phone at no additional charge.

Booking premium-cabin tickets is possible to do online, although you need to be extremely careful while doing so, and under most circumstances I think you'll be better off booking such tickets over the phone as well.

Here's how I found that out while making a first class reservation over the weekend.

US Bank allows you to search for "business class" flights

When conducting a search for flights through US Bank's travel provider, you can no longer search for multi-city itineraries, but if you select "Advanced Search" you can search for "Business Class:"

Check your search results carefully for class of service

Here's the first search result for a "Business Class" flight between Washington and Lexington, KY:

There's something that should be immediately suspicious about this search result, but which I missed the first time: there are 9 seats available. What Delta Connection flight has a First Class cabin with 9 or more seats?

The answer is revealed when you expand the flight details:

This flight books into the "W" Comfort+ fare class, not into the correct "P" First Class fare bucket.

The key takeaway here is that this is your one and only chance to see what cabin you're booking into: on none of the subsequent checkout screens is the class of service listed.

"Business Class" search results are all over the place

At first I thought this was a Delta-specific situation, in which you can book Comfort+ but not First Class seats online.

But no! Here's a flight correctly pricing out in Business class between JFK and LAX:

Basically it seems like a combination of sloppy programming on the part of the travel agency and the exploding number of fare classes and cabin configurations by the airlines. On 3-cabin aircraft you can book into the Business cabin, and on 2-cabin aircraft you might be booked into First class or Comfort+ depending on what fare classes are available and on how the online search engine is feeling that day.

You can change flights within 24 hours for $30 (or free)

After realizing I had mistakenly booked a flight in Comfort+, instead of First Class, I called US Bank's travel agency, QualityRewardTravel, at 1-866-814-1293. After waiting on hold for 5 or 10 minutes, I explained the situation and gave my Agency Record Locator to the phone agent. She told me that within 24 hours of booking, flights could be changed or cancelled for a fee of $30.

I told her I was calling because their website had made a mistake, and that I wasn't going to pay to fix it.

After asking her supervisor, she made a "one-time" exception and changed the flight into First Class for free, noting that the flight cost the same number of points as my original reservation.

Make multi-city and premium-cabin reservations over the phone

Multi-city Flexperks reservations already have to be made over the phone, but I would suggest that any premium cabin flight involving a connection should also be booked over the phone, since the flight search results do not show the class of service available on each leg. It seems likely that they show itineraries where business or first class seats are available on only some of the flights. Alaska Airlines is notorious for doing this in their search results, although they at least alert you when you select a mixed-cabin itinerary.

Of course, when the cabin you want simply doesn't appear in the online search results, you'll also need to call to book.

Conclusion

One of the great things about US Bank Flexpoints is that they allow you to take advantage of price compression, when nonstop, more convenient, or premium cabin itineraries cost the same number of Flexpoints as inconvenient or economy class flights. However, US Bank's travel agency doesn't make it as easy as it should be to take advantage of that key feature of the program.

Trip delays and trip delay insurance

If you follow me on Twitter you may have noticed that I had a bumpy couple days coming back from my family's camping trip back in my ancestral homeland. As always, a disastrous itinerary for me means a blog post for you!

What is a trip delay?

When you buy an airline ticket, you receive a promise that you'll be delivered from your origin to your final destination — and not much more. If you're involuntarily denied boarding or you're delayed on the tarmac for over 3 or 4 hours you may be entitled to some cash compensation (depending on the size of the aircraft and other factors).

Of course airlines do, under some circumstances, some of the time, do more to accommodate passengers: if a flight is delayed or cancelled, they may be willing to reroute passengers on other airlines or to different airports. If a delay or cancellation requires an overnight stay, they may be willing to pay for overnight hotel accommodations and meals.

Note that "may" is the operative word here.

What does a trip delay cost?

Before I get to trip delay insurance, I want to be clear about our terms. A trip delay has a lot of costs, only some of which can or should be formalized into dollar terms.

During a long delay, you may have to pay for:

  • meals;
  • hotel stays;
  • clothes;
  • toiletries;
  • transportation.

These are your "out-of-pocket" costs during a trip delay.

But it's essential to understand that those costs do not come close to encompassing the costs of a trip delay.

If you miss a job interview because of a trip delay, you're out of a job. If you don't make it to Thanksgiving, Christmas, Pesach, or Eid-al-Fitr because of a trip delay, you lose out on precious time with your family (not to mention the food). If you arrive late to a deathbed because of a trip delay, you may not make it there at all.

These are the real costs of a trip delay, even they don't cost you a penny out of pocket.

Trip delay insurance doesn't promise to make it right

It's possible to imagine a product that immediately goes to work for you in case of a trip delay to ensure that your trip is minimally impacted. As soon as a delay is announced, such a trip insurer (or ensurer) would swing into action, proactively booking you tickets on substitute flights — no matter the cost — that get you to your destination as close as possible to your original arrival time.

That product doesn't exist. You can't buy it alongside your airline ticket when making a reservation, you can't buy it from Berkshire Hathaway Trip Protection, and you don't get it when booking a reservation with your Chase Sapphire Preferred card.

Trip delay insurance just promises to pay for your out-of-pocket expenses

That doesn't make trip delay insurance worthless. Since there are out-of-pocket expenses incurred when a trip is unexpectedly delayed, trip delay insurance is a way to recover those costs so that trip delays don't add expensive insult to inconvenient injury.

Being able to pick your hotel of choice during an overnight delay, and be reimbursed later, has real value (especially to a travel hacker). Being able to eat at your restaurant of choice, rather than wherever agrees to take your airline's funny money, has real value. Being able to buy a real toothbrush and your preferred toothpaste instead of the garbage airlines hand out to delayed passengers has real value. Hell, you can even get a couple free pairs of socks out of it if you play your cards right.

But trip delay insurance won't get you to your job interview on time and it won't get you any more time with your family. It covers your out-of-pocket expenses, but there's no trip delay insurance product out there that even tries to make you whole.

Conclusion

As I mentioned on Twitter, my delayed trip was paid for with a Chase Sapphire Preferred card, and I've already submitted my trip delay insurance claim.

In 5-60 days (it's insurance, after all), I'll have a post dedicated to that process.

In the meantime, just remember: your trip delay insurance covers the costs, not the consequences, of your delayed flights.