Why would you book a stopover on a one-way trip?

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On Wednesday I saw this post by The Miles Professor explaining how to book stopovers on one-way Alaska Airlines award tickets.

The thing is, it's not immediately obvious why you would ever do this.

As The Miles Professor writes:

"One of my favorite ways to use stopovers is to schedule a stopover in my actual home city and use the stopover to connect two completely different trips."

Of course Alaska Airlines has a zone-based, not distance-based, award chart, so there's no reason you would need to book two round-trip tickets from your home city as two one-way trips with stopovers in your home city. For example, a Seattle resident could book the following two one-way tickets:

  • LAX-SEA (stopover)-BOS
  • BOS-SEA (stopover)-LAX

Each of those tickets would cost 12,500 Alaska Mileage Plan miles, assuming there's low-level award availability. But remember, our hypothetical passenger is a resident of Seattle, so they'd need to find some way to get to LAX in the first place, and some way back from LAX at the end! Each of those one-ways would also cost 12,500, bringing the total cost for 2 roundtrips to 50,000, just as it's supposed to be.

Now, at this point you've probably seen the sleight of hand I'm pulling; in fact our passenger knows better than to spend 12,500 valuable Alaska miles on a short West Coast hop, and instead transfers 7,500 Chase Ultimate Rewards, Starwood Preferred Guest, or American Express Membership Rewards points to British Airways Avios, and ends up with reservations that look like this:

  • SEA-LAX – 7,500 Avios
  • LAX-SEA (stopover)-BOS – 12,500 Mileage Plan
  • BOS-SEA (stopover)-LAX – 12,500 Mileage Plan

Here we've booked two-and-a-half round-trips for the price of one-and-a-half roundtrips. Not bad! Of course our passenger still has to find a way back from LAX if they decide to fly that leg, but even if they don't, they still end up a one-way flight ahead of the game, which isn't nothing.

If that's the obvious use for stopovers on one-way trips, I thought it'd be interesting to see which others I could come up with.

4 reasons to book stopovers on one-way award tickets

  1. See more cities. As you can see in the comments to The Miles Professor's post, you can also book stopovers on one-way Alaska Airlines partner awards, so if you're booking an award ticket on a partner airline like KLM, you can stop over for a few days and enjoy Amsterdam on your way.
  2. Cheap awards to Hawaii and Mexico. Since you can book award tickets from anywhere in the continental United States to Hawaii and Mexico for the same price, which is less than twice the cost of domestic awards, you can book future, onward travel to Hawaii for just 7,500 miles or Mexico for 5,000 miles, compared to the 20,000 and 17,500 Mileage Plan miles, respectively, you'd have to pay to book a separate itinerary.
  3. Position for future flights. I showed one example of this technique above, but you can also use it to position for flights on other carriers. For example, United operates an international hub out of San Francisco, but you might have difficulty finding low-level award space between Seattle and San Francisco on United-operated flights. Instead, you can use your free one-way flight to position to San Francisco on an Alaska Airlines-operated flight.
  4. Because you can. As long as you book your speculative onward connection at the end of your itinerary, you may as well tag an extra leg onto your reservation. Who knows, you might even end up using it! Just don't book a speculative connection at the beginning, since a missed first leg will typically cancel your entire itinerary.

Conclusion

Free one-ways are a fun and easy way to take advantage of airlines' generous award routing rules.

Which reasons to book a stopover on award tickets did I leave out?

Back-of-the-envelope assessment of the Diners Club Card Elite

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I saw today that Diners Club is now issuing consumer credit cards in the United States, and I mentioned on Twitter that the $300 annual fee might be worth paying if you value miles transferred from the program at more than 1.7 cents. That's an extortionate annual fee, and I won't be applying for the card myself, but in case you do value your airline miles that highly I want to show my work to explain how I arrived at that number.

The Diners Club Card Elite card gives 3 points per dollar spent at gas stations, grocery stores, and drug stores. The problem is that gas stations and grocery stores are already such heavily-bonused categories that neither, alone or together, could justify paying a $300 annual fee.

You can already earn 3 flexible Membership Rewards points per dollar spent at gas stations with the Amex Everyday Preferred card, and earn 2 US Bank Flexpoints per dollar spent at grocery stores (worth between 1.33 and 2 cents each when redeemed for airfare) while paying just under 50% the annual fee of the Diners Club Card Elite.

Drug stores, on the other hand, are not as frequently-bonused as they used to be, so the most relevant comparison is the "old" American Express Blue Cash card, which earns 5% cash back at drug stores after the first $6,500 in spend per membership year.

The Comparison

I consider the risk-minimal amount of spend at drug stores per month to be $13,000 for a single person, in most parts of the country (two PayPal accounts and a Serve account, if you have access to Family Dollar store locations). It's easy to spend more, but that provides a benchmark for monthly drug store spend.

Over the course of a year, that amount of spend would earn $7,540 with the "old" Blue Cash card (since the first $6,500 would earn just 1% cash back), or 468,000 transferrable Diners Club points (in which case you'd incur an annual fee of $300).

At that point it's easy to see that the surplus of $7,840 implies a value per transferred mile of 1.67 cents. If you value each one of your transferred miles at more than that, you might be better off with the Diners Club Card Elite.

Note the emphasis above: it's not worth earning the transferrable points if you occasionally redeem them for high-value awards – you need to value all the miles you earn, on average, at over 1.67 cents each.

While I used the "risk-minimal" amount of drug store spend in this comparison, in fact this is very close to the analytical limit: doubling annual drug store spend yields $15,340 in cash back and 936,000 transferrable points, or 1.63 cents per mile, because of the slowly diminishing importance of the $6,500 "penalty." In other words, having either or both cards doesn't affect the imputed mile valuation by much, regardless of your annual spend.

So, what are your miles worth?

From FlyerTalk, here are the transfer partners for the Diners Club rewards program (the catalog requires you to log in to view redemptions):

  • OneWorld: British Airways
  • SkyTeam: Delta Airlines, Korean Air.
  • Star Alliance: Air Canada, Eva Airways, SAS, South African Airways, Thai Airways.
  • Independent: Alaska Airlines, El Al Airlines, (1000:20), Frontier Airlines, Hawaiian Airlines, Iceland Air, Southwest Airlines (1500:1200), Virgin Atlantic.
  • Hotels: Best Western (1250:3300), Choice (1250:2400), Hilton (1250:2000), Hyatt (1250:750), Intercontinental Hotel Group (1250:1500), Marriott (1250:1500), Starwood (1250:750).
  • Rail: Amtrak.

What caught my eye here is the not-totally-unreasonable hotel transfer ratios, particularly the "mere" 40% penalty you incur transferring your points to Starwood Preferred Guest. At 0.6 Starpoints per Diners Club rewards point, you can earn 1.8 Starpoints per dollar spent at drug stores. While it doesn't convince me personally, there's certainly a lot of value that can be unlocked there — plus it's a good escape valve in case you decide to apply for the Diners Club card and end up unable to use the points for direct airline transfers.

Conclusion

In any case, that's how I glance at an earning ratio and decide what mile valuation is imputed – plus a quick review of the Diners Club Card Elite!

Comparing Alaska promotional redemptions to year-round Avios redemptions

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Introduction

Alaska Airlines has announced a promotion, whereby one-way economy awards between select city pairs on Alaska metal cost between 5,000 and 12,500 Mileage Plan miles, a 60% discount on some routes.

Of course, to qualify seats have to be available at the lowest level of award availability, and that means they're also bookable using British Airways' distance-based Avios award chart.

So I thought it would be fun to compare the standard cost in Avios and the promotional cost in Alaska Airlines Mileage Plan miles.

Why it matters

Alaska Airlines miles are very valuable when redeemed for partner awards (100,000 miles and trivial taxes and fees for Emirates A380 First Class to Asia, for example) and for last-seat availability, for example to Hawaii during the Christmas holiday season or when you just need to be somewhere and are miles-rich but cash-poor (I know the feeling!).

At the same time, they're relatively difficult to earn except through transfers from Starwood Preferred Guest, clicking through their online shopping portal, or crediting revenue flights on Delta, American, or Alaska to the Mileage Plan program.

That's why under most circumstances it would be preferable to redeem easily-acquired British Airways Avios for Alaska Airlines award flights, rather than Alaska's own, more valuable, Mileage Plan miles.

Sample analysis

Here are the city pairs between which Alaska Airlines is charging 5,000 Mileage Plan miles one-way from August 30 to October 31, 2014 (note that all these fares work both ways):

  • Boise-Las Vegas
  • Boise-Salt Lake City
  • Los Angeles-Salt Lake City
  • Oakland-Seattle
  • Oakland-Portland
  • Portland-San Jose
  • Portland-San Francisco
  • Salt Lake City-San Francisco
  • Salt Lake City-San Jose
  • Salt Lake City-San Diego
  • San Francisco-Portland
  • San Francisco-Seattle
  • San Jose-Portland
  • San Jose-Seattle

Of these city pairs, can you guess how many are more than 650 miles, the cutoff for British Airways 4,500 Avios one-way awards?

If you said 3, you'd be exactly right: the 3 Bay Area airports (SFO, OAK, and SJC) clock in at just under 700 miles to Seattle, putting those flights in the 7,500 Avios price band.

The next set of city pairs cost 7,500 Mileage Plan miles during the promotional period:

  • Bellingham-San Francisco
  • Bellingham-Oakland
  • Boise-San Jose
  • Boise-San Francisco
  • Boise-Oakland
  • Oakland-Vancouver
  • San Francisco-Spokane
  • San Francisco-Vancouver
  • San Jose-Vancouver

What do you think? How do these discounts compare to a 7,500 Avios redemption, available year-round?

If you said they weren't any kind of discount at all, you'd only be 66% correct. That's because flights between Boise and the 3 Bay Area airports in fact cost just 4,500 Avios, clocking in at between 511 and 523 miles!

You get the picture.

Conclusion

I'll spare you the rest of the promotional city pairs (at the 10,000 and 12,500 Mileage Plan mile levels) and end with two thoughts.

First: there's nothing wrong with promotions like this. For folks who (rightly!) credit their revenue Delta and American Airlines tickets to Alaska's Mileage Plan, the ability to redeem those miles for short flights around the Western United States at a steep discount is a terrific opportunity, and I'm sure this promotion will be incredibly popular. The least valuable mile is the one you don't redeem, and if this promotion gets folks to redeem their miles for trips they want to take, it'll be an unqualified success.

Second: while this example involves small stakes – just a few thousand miles here or there – a rough background knowledge of airline partnerships like this will keep you from making shockingly expensive mistakes. The classic example is the couple who allegedly redeemed 2 million Starpoints for SPG Flights revenue First Class tickets to Australia on American Airlines — when they could have transferred just a few hundred thousand points to American and redeemed them for an AAnytime award!

Breaking: Iberia goes bizarre, British Airways award chart intact (for now)

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About 12 hours ago, at 10:23 am, I sent out what seemed like an innocuous tweet:

 

"Did Iberia go revenue-based while I wasn't watching? Short domestic flights are pricing out astronomically"

Here's what I was referring to. While planning an award trip using some of the 100,000 British Airways Avios I earned during that short-lived signup bonus back in January, I wondered whether I might see different availability or cheaper taxes and fees if I transferred my British Airways Avios (through Avios.com) to Iberia.

Here's the itinerary I was looking at, in British Airways' booking engine:

This is an example of an itinerary that, since British Airways prices segments out individually, is a pretty good deal despite their policy of charging three times the price of coach for US domestic first class. It's two 13,500 Avios legs paired with two 4,500 Avios legs, for a total cost of 36,000 Avios, while the same itinerary would cost 50,000 AAdvantage miles or 65,000 Alaska Airlines Mileage Plan miles.

Here's the same itinerary priced out with Iberia's award engine:

That's...weird. The same itinerary is pricing out cheaper using Iberia Avios than British Airways Avios (although the additional taxes and fees make British Airways the better deal overall).

But even weirder is that there's no reason, based on the award charts we all thought Iberia was using, for that odd number of Avios to be required at all.

Since Iberia only allows round-trip award reservations, I thought I'd see whether I got a similar result with a single-cabin reservation. Instead, it got weirder.

Here's a first class reservation between Madison and Chicago using British Airways Avios:

Just as we saw above, this roundtrip flight in first class prices out at 27,000 British Airways Avios.

Here's the same reservation priced out with Iberia Avios:

You read that right. The itinerary costs over twice as many miles using Iberia Avios (which, as a reminder, are freely transferrable to British Airways Avios).

For a final test, I thought I'd check the economy itinerary between Chicago and Lexington. Here's what British Airways shows me:

As you'd expect, the short round-trip itinerary prices out at 4,500 Avios each way.

Here's Iberia's pricing of the same award:

In this case, the economy itinerary costs almost three times as much using Iberia Avios!

The Explanation

As my Twitter follower @KennyBSAT was the first to point out, Iberia has quietly introduced what most bloggers this evening are calling a devaluation (see here, here, here, and here). They've already implemented a new award chart for partner award bookings, including American Airlines award bookings like the one I was booking today.

The new award chart will require close study, and as Gary points out, "long haul flying can be cheaper than using BA Avios."

The most interesting point my example above illustrates is that they appear to use a formula to weight mixed-cabin redemptions, such that adding short-haul economy legs radically reduces the total cost in Iberia Avios, sometimes below the cost in British Airways Avios. Since Iberia requires round-trip redemptions, it isn't obvious how to use this loophole to add a "third strike" to a reservation in order to drag down redemption costs. However, adding a short-haul economy flight to a long-haul business or first class flight may, as in my example, drastically reduce the number of Iberia Avios required for your award redemption.

Conclusion

Trust me: you'll be seeing a lot more analysis along these lines on all the most popular travel hacking blogs in the coming days and weeks. Potential arbitrage opportunities like these are the bread and butter of travel hackers, and I suspect a lot of discussions will be taking place on Twitter, as well as in the comments to this blog and others. Be sure to follow me @FreequentFlyr and check out my list of some of the best travel hacking feeds to make sure you're in the loop for this ongoing and guaranteed-to-be-lively discussion.

The Hilton smartphone app's best (new?) feature

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I don't have a very high opinion of hotel smartphone apps. Frankly, I find them pretty annoying; they constantly require me to sign in with login credentials I can never remember, and all but the simplest room searches are typically impossible. I principally use them to check whether points have posted from my co-branded credit cards and revenue stays.

One bright spot is the Club Carlson app, which allows you to easily search for both award availability and "Points + Cash" availability. That's something that's easy to do each morning while I wait for hotels to open up rooms for award redemptions.

The best Hilton HHonors app innovation

I just noticed this change today and thought I'd pass it along, although it may have been implemented a few versions ago. Hilton has a lot of brands in their hotel portfolio, and each one has different benefits included in standard room rates or provided to HHonors elite members.

As confusing as those differences are, even worse is that the HHonors account management page is notoriously unreliable, so even if you understand the choices you need to make, you're still bound to run into problems trying to adjust all the relevant account settings.

Do you know the difference between a Hampton Inn & Suites and a Hilton Garden Inn?

Neither did I, until I opened the HHonors app and navigated to "My Account" and "Hotel Benefits." There, each brand is listed and you're able to easily select which of each brand's benefits you'd like on your next stay.

That's where I found out that breakfast is included at Hampton Inn & Suites, so as a Gold member I can choose between 250 HHonors points or a bottle of water and a snack with each stay, while at Hilton Garden Inn I have to choose between free daily hot breakfast or 750 HHonors points per stay.

When it matters

Travel hackers typically relish complicated loyalty rules: the more complications there are, the more loopholes are bound to pop up. But Hilton's hellish website and byzantine brand differences just never made it fun to learn the ins-and-outs of the program.

The app's simple interface now lets you easily make split-second decisions like: on a one-night stay at a Hilton Hotels & Resorts property, would I rather get breakfast in town or pocket 1,000 HHonors points? If, like me, you typically sleep through breakfast anyway when on vacation, the 1,000 HHonors points start to look tempting – and choosing them is now just a matter of tapping an in-app sliding button 24 hours before you check in.

MS for hotels: taking Matt at his word

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Background

This week I saw a lot of reactions to Drew at Travel is Free's post on manufacturing spend for hotel stays. Unfortunately, by looking only at the dollar cost of manufacturing spend, and not the opportunity cost, Drew left out the key fact that if you're not getting 2 or 2.2 cents per point when manufacturing spend on your co-branded credit cards, you'd be better off earning cash back and paying with cash for your stays.

Matt at Saverocity took advantage of that oversight to poke fun at Drew:

"Let me ask you a question… if I gave you $10,000 (plus fees) of my float and said. Come back with as many SPG points as you could, what would you do?

  • buy 285,715 points with the 10K?

  • buy 20x $500 cards with your SPG Amex and earn 10,000 points?

  • buy 20 x $500 cards with your 5x, earning $500 cash and use that to buy at 3.5cents each?[...

...]Option 2 (use the SPG) vs Option 3 (use a 5% and buy points) is the difference between earning 10,000 (SPG card) and 14,785 (14,285, plus the act of buying the would earn 500 more)."

Now, my readers know that this wasn't strictly speaking fair of Matt. Of course you should be putting as much spend as you can on your 5% cash back cards – until that spend is throttled.

But Matt's quip still got me thinking: are there co-branded credit cards that generate points that can't be bought more cheaply with a 5% cash back card?

Love for sale: buying hotel loyalty points

Here's the cost of buying hotel loyalty points from each program I follow (without any bonuses on purchased points):

  • Starwood Preferred Guest (up to 20,000 Starpoints per calendar year): 3.5 cents per Starpoint;
  • Hilton HHonors (up to 40,000 HHonors points annually): 1 cent per HHonors point;
  • Marriott Rewards (up to 50,000 Marriott Rewards points annually): 1.25 cents per Marriott rewards point;
  • Hyatt Gold Passport (up to 40,000 Gold Passport points annually): 2.4 cents per Hyatt Gold Passport point;
  • IHG Rewards Club (up to 40,000 IHG Rewards points annually): 1.15 cents per IHG Rewards point;
  • Club Carlson (up to 40,000 Gold Points annually): 0.7 cents per Gold Point.

Analysis: cash back versus co-branded credit cards

Remember, the question is: are there points that are cheaper to earn through manufacturing spend on a co-branded credit card than buying them with cash back earned with a 5% cash back credit card (within annual purchase limits)?

We can immediately rule out the Starwood Preferred Guest American Express and Chase Marriott Rewards, Hyatt Gold Passport, and IHG Rewards Club credit cards, all of which earn just 1 point per dollar spent. Earning 5% cash back, on the other hand, allows you to purchase:

  • 1.43 Starpoint (43% bonus);
  • 4 Marriott Rewards points (300% bonus);
  • 2.08 Hyatt Gold Passport points (108% bonus);
  • or 4.35 IHG points (335% bonus).

The US Bank Club Carlson Premier and Business cards, which earn 5 Gold Points per dollar spent everywhere, come closer to par, since you can buy just 7.14 Gold Points with a 5% cash back credit card – a 43% bonus, the same as purchased Starpoints.

Hilton HHonors for the (dubious) win

The only hotel program whose co-branded credit cards stand toe-to-toe with 5% cash back in this comparison is Hilton HHonors. The Hilton HHonors Surpass American Express earns 6 HHonors points per dollar spent at gas stations and grocery stores, while a 5% cash back card in the same categories would only allow you to purchase 5 HHonors points at 1 cent each.

Conclusion

As Matt correctly points out, this analysis is absurd: you'll virtually always be better off spending your 5% cash back on revenue rooms, rather than buying hotel points to redeem for the same or similar hotels. However, it is worth keeping in mind if you happen to be close to a hotel redemption (perhaps an expensive Starwood Nights & Flights or Marriott Hotel + Air vacation package) and are considering shifting some of your manufactured spend from your 5% cash back card to a co-branded hotel card in order to earn the remaining points. Except in the case of Hilton, that's a trap – keep earning 5% cash back and just buy the remaining points you need (or transfer them from a flexible points currency like Ultimate Rewards).

Hilton's odd premium award night pricing

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It's no secret: I'm a big fan of Hilton, and it's one of the first chains I check for convenient downtown locations, free breakfast with HHonors Gold elite status, and affordable redemptions (well, as long as you're earning 6 HHonors points per dollar spent in the ubiquitous gas station and grocery store bonus categories).

In the last month or so, while planning my winter jaunt to Italy, I've been noticing some odd premium award night pricing, and today finally decided to get to the bottom of it.

What's an "odd" premium award night price?

To give you a taste of what I'm talking about, here's a standard award night redemption at the Hilton Molino Stucky Venice in early January:

Fair enough: it's a Category 8 property, which should price between 40,000 and 70,000 HHonors points, depending on the season (for some reason Venice doesn't appear in the HHonors Points Search Tool so I don't know precisely when seasonal pricing is in effect).

Here's the oddity I'm talking about:

A premium room award (in this case a "King Hilton Deluxe Room") costs fewer HHonors points than a standard award. That's what I'm calling an "odd" price for premium award nights.

While I'm happy to book the discounted rate, I've been digging around trying to find some explanation (was there a European premium room award promotion I missed?). Here's what I found.

Premium room awards are revenue-based

When the Hilton booking engine determines the number of HHonors points required to book a premium room award night, it applies a mechanical calculation, multiplying the revenue cost of the room by a constant HHonors point valuation to arrive at a total cost in HHonors points. For example, here are two premium room awards at the Hilton Portland & Executive Tower:

As you can see, the HHonors point valuation for both rooms is identical to many decimal places, at 0.278 cents each. This may be slightly misleading since I believe they're internally using the total price including taxes, bringing the internal valuation to 0.318 cents each. Since manufacturing spend on an American Express Hilton HHonors Surpass card is only worth it if we plan on redeeming points for more than 0.37 cents each, that's not typically going to be an ideal forward-looking redemption (but may be worth it if you've already banked plenty of HHonors points).

The internal valuation varies by property

The tricky thing here is that the valuation used by Hilton to calculate the number of points required for premium room awards isn't constant across properties. Here's a valuation of 0.36 cents each (0.41 cents after taxes) per night at the Hilton Austin:

Odd premium award night pricing is a natural consequence

Fortunately for us, Hilton doesn't bother checking that the premium room award price is in fact higher than a "standard" award redemption. In all fairness, it usually will be: premium rooms are usually at least a little more expensive than standard rooms, and HHonors points are typically only worth 0.3 to 0.5 cents each for standard redemptions anyway.

Odd premium award pricing results from low premium room rates and high internal valuations. To open up a pricing opportunity, premium room rates have to be fairly close to standard room rates and the internal valuation has to be fairly high.

It's still unclear to me which currency internal valuations are denominated in and how often they're adjusted; sudden currency fluctuations may open up more opportunities for odd premium award nights, but I haven't been able to test that yet.

Conclusion

This post serves more to sate my curiosity than as a call to action, since it's hard to predict when a premium room award is going to end up pricing out cheaper than a standard room. For further reading, here's an example of Loyalty Lobby finding an odd premium award night price in Shanghai back in 2012, and here's a somewhat dated Points Guy mention of the same phenomenon.

Point density versus imputed redemption values

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There are two related, but distinct, concepts that bear thinking about when contemplating hotel loyalty currencies. The same concepts are involved in airline mile redemptions, but in a much more nebulous way since airline award availability is much more closely tied to fares than in the hotel world, where (in some cases and under some circumstances) you are able to redeem your points for hotel rooms year-round.

Those concepts are "point density" and what I've called in the past (Club Carlson, Hilton) the "value per night required" to justify manufacturing spend on a co-branded credit card rather than a 2.22% cash back credit card like the Barclaycard Arrival+ MasterCard.

What's the difference?

Point Density

Point density, in the sense I use it, is a specific measure of the rebate value of a dollar spent with a hotel chain when the earned points are used for award stays with that chain.

On this page, I've calculated the point densities for 6 hotel loyalty program under a variety of conditions. Point density takes into account 2 variables: your elite status with the chain in question (and use of a co-branded credit card, if applicable) and the desired hotel category you aim to redeem your points in, and generates a single number: the number of dollars you need to spend to generate that award night redemption.

Some of this information was assembled by Travel is Free in this sprawling infographic (now slightly dated). You'll want to examine my complete point density charts if you want to make an educated decision about your own loyalty.

To give the most trivial example of point density, here's the amount of money that has to be spent with each hotel loyalty for a non-elite member using a third-party credit card to earn an award night at a top-tier property in that program, notwithstanding any promotions:

  • Starwood Preferred Guest (excluding "suite-only" properties): $17,500
  • Hilton HHonors: $9,500
  • Hyatt Gold Passport: $6,000
  • IHG Rewards: $5,000
  • Marriott Rewards (excluding Ritz Carlton properties): $4,500
  • Club Carlson: $3,500

Point density is the concept you want to focus on when you're paying out of your own pocket for your travel or have a choice where your employer puts you up. By examining the various point density charts, you can decide where the rebate value of your hotel spend will be highest: which chain will reward you with free nights at the properties you want to stay the most quickly?

Imputed Redemption Values

What I've previously called the "value per night required," but which is better called "imputed redemption value," measures something different: the value you need to get from redemptions of your manufactured spend to justify putting it on a hotel's co-branded credit card rather than a 2.22% cash back card like the Barclaycard Arrival+ World MasterCard.

My updated calculation of these imputed redemption values for Club Carlson are illustrative:

Reading this chart is simple: if you're redeeming 70,000 Gold Points for one night at a Category 7 Club Carlson property, your imputed redemption value is $308, since that's the value of the Barclaycard Arrival miles you could have earned with the same $14,000 in manufactured spend. If a revenue room at the same property is less than $308, you would have been better off manufacturing that spend on a 2.22% cash back card — or staying at a cheaper property!

However, as I've stressed before (here and here), that doesn't mean you shouldn't redeem your Gold Points for that night. On the other hand, if you find yourself consistently redeeming your points for below their imputed redemption value, you should take the time to reconsider your overall miles and points strategy.

Here's the chart I assembled for the Hilton HHonors program, assuming your spend is manufactured with the HHonors Surpass card at 6 HHonors points per dollar spent:

Here's a real-life example of decision making using this chart: I'm planning a 2-night stay at the Hilton Molino Stucky Venice this January, when the cheapest standard room award is 50,000 HHonors points. When I pull up room rates at the property, I find that rooms on my travel dates are costing $193. Since that's $8 above the imputed redemption value of $185 for 2-night, 50,000 point stays, I know that I'm not going to be leaving money on the table booking with HHonors points rather than my Arrival+ card.

This analysis doesn't take into account the points and elite night and stay credit earned on paid stays. In this case, by booking with HHonors points I'm foregoing about 3,700 HHonors points (as a Gold elite), or more depending on any promotions running in January.

That's a trivial enough sum that I'm comfortable disregarding it, but if you're gunning for high-level elite status with a chain that rewards loyalty better than Hilton does, like Starwood or Hyatt, foregoing your elite stay and night credits might require a larger redemption surplus.

Remaining Imputed Redemption Values

The remaining co-branded credit cards don't feature high earning on everyday spend like Club Carlson or lucrative bonus categories like the HHonors Surpass, so their imputed redemption values are easy to calculate:

Starwood Preferred Guest

Marriott Rewards

Hyatt Gold Passport

IHG Rewards

Remember: lower imputed redemption values are better

When deciding whether to redeem a fixed-value points currency or a hotel's own loyalty currency, you'll ideally maximize the difference between the value of your stay and your imputed redemption value. That's the money you "save" by manufacturing spend on a co-branded credit card instead of a 2.22% cash back credit card.

In this light, some of the higher imputed redemption values in the charts above are so high it's hard to imagine their relevance. In reality, if you look closely at the properties involved you might find the values are not completely unrealistic.

True, in a few minutes of surfing I wasn't able to find a single IHG property that retailed for over $1,100 per night. But Park Hyatts like Milan ($662 for the first date I checked), Paris Vendome ($730), and Sydney ($939) can easily exceed the $660 imputed redemption value for Category 7 properties. That's worth keeping in mind if you have your heart set on a specific property in an exotic locale (so-called "aspirational" award trips).

Conclusion

Imputed redemption values give you a simple method to decide how to achieve your travel goals as effectively as possible.

On that note, consider that cash and points awards, such as those offered by Hilton, Hyatt, and Starwood, sometimes provide the best of both worlds: the ability to redeem your Arrival miles against the cash portion of the award, while cashing in your hotel points at a value that exceeds the "remaining" imputed redemption value for your stay.

US Bank's quietly great credit card

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I got into a discussion on Twitter back in May about the most "under-covered" credit cards in the travel hacking blogosphere, and decided to lay out my argument here for why the US Bank Flexperks Travel Rewards credit card might be the second-best credit card for the working travel hacker.

The "old" Blue Cash card still gives 5% cash back in all the best bonus categories

The best card currently available is the American Express Blue Cash card, which gives unlimited 5% cash back at gas stations (for purchases up to $400, then 1%), drug stores, and grocery stores after spending $6,500 on the card each year of card membership.

That's so lucrative I've argued that even if you prefer airline miles for high-value "aspirational" redemptions, in many cases you'd be better off simply buying those miles with your 5% cash back rather than earning them with the airline's co-branded credit card.

But for any number of reasons your spend on a Blue Cash card is – at some point – going to be throttled.

Most of us book revenue tickets from time to time

Over at Milenomics, one of my favorite travel hacking blogs, the author strives for EQM-Zero, on the grounds that it's so easy to earn rewards currencies that spending actual money is a mug's game. The ideal year of travel for Milenomics is the year he earns no elite qualifying miles – the year he doesn't pay a penny to the airlines directly.

I agree with everything about that — except that some rewards currencies book into paid fare classes.

For example, if you earned Barclaycard Arrival miles through the RewardsBoost portal when American Express gift cards were still available there, you might have been earning up to 6.6% cash back — if and only if you were redeeming your Arrival miles for paid hotel rooms or airline reservations. If your total costs after liquidation were 1%, that would make for an 80% or higher discount on your travel, which is competitive with virtually any loyalty currency out there.

The other typical case of booking into a paid fare class is when award redemptions simply aren't competitive with revenue fares. Delta's stingy low-level award availability means there are times you might be faced with a sub-$300 ticket that would cost 40,000 Skymiles.

Note that I haven't said anything about earning elite status here: in the current climate of airline devaluations I think most travelers are better off ignoring the elite status treadmill and, as Milenomics puts it, Being Your Own Elite.

The Flexperks Travel Rewards card is cheap

The annual fee for the Flexperks Travel Rewards card is $49. They have a gimmick, however, whereby after you spend $24,000 on the card each cardmember year, you earn 3,500 bonus Flexpoints. And then they let you redeem those 3,500 Flexpoints against your $49 annual fee (getting 1.4 cents each in value).

Flexperks Travel Rewards are (not that) convoluted

Many credit card rewards programs give you options to redeem your miles for revenue tickets and other cash equivalents:

  • Citi ThankYou points can be redeemed for mortgage and student loan rebate checks, or revenue tickets booked using their portal;
  • Chase Ultimate Rewards points can be redeemed for cash back at 1 cent each or for revenue tickets at 1.25 cents each through their booking portal;
  • Barclaycard Arrival miles can be redeemed for half a cent each in cash back or 1 cent each against travel purchases over $25 made with the card;
  • American Express Membership Rewards points can be redeemed for 1 cent each for revenue tickets using their booking portal.

US Bank's program, by contrast, is more complicated: Flexpoints can be redeemed in bands, starting at 20,000 Flexpoints for revenue tickets costing up to $400. Up and down the chart, Flexpoints are worth as much as 2 cents (a $399 flight will cost 20,000 Flexpoints) and as little as 1.33 cents (a $401 flight will run you 30,000 Flexpoints).

Unlimited 4% in gas or grocery is terrific

If unlimited 5% cash back in both gas station and grocery store bonus categories is the gold standard, unlimited 4% earning at one or the other must be a close second.

Besides its annoying redemption bands, the Flexperks Travel Rewards card has one more twist: you earn 2 Flexpoints per dollar spent at either gas stations or grocery stores (or airline tickets) each statement cycle; you receive the bonus Flexpoints in the category you spent the most in.

Of course, to receive 4% back in value you'd need to hit the absolute top of a redemption tier with each and every redemption. Without a doubt, that's a tall order.

But now watch this.

Unlimited 2.66% in gas or grocery is also very good

It's true that the Amex Everyday Preferred, with its $95 annual fee, offers 3 Membership Rewards points per dollar spent at gas stations (with 30 monthly transactions), which can be redeemed at 1 cent each for paid travel or transferred to their travel partners.

It's also true that the Chase Ink Plus and Bold (also with $95 annual fees) earn 2 Ultimate Rewards points per dollar on up to $50,000 spent at gas stations. Those points could be redeemed for 2.5 cents towards paid travel or transferred to their partners, where it would be easy to get more value from them, for example on short-haul Avios redemptions.

But I know of no other card that offers unlimited 2.66% in cash value per dollar spent at either gas stations or grocery stores. And remember, that's the absolute minimum value you'll receive – the higher your fares are within each redemption band, the more valuable your Flexpoints become.

It actually gets better

I know this is getting a bit long already, and you might already be convinced. But there are two more things I'd be crazy to leave out:

  • The Flexperks Travel Rewards card earns 3 Flexpoints per dollar spent on Kiva loans. Even if you redeemed your Flexpoints for cash (at 1 cent each), you can use this card to earn 3% interest on as much money as Kiva will let you lend out. If you focus on short, 6-month loans, you can earn low-risk, 6% interest on your savings using this card;
  • With each Flexperks flight redemption, you also receive up to $25 in credit against purchases made with the operating carrier during your trip. If you are already redeeming Flexpoints at the top of a band, that can push you over 2 cents each. And if all else fails, you can buy a $25 gift card from your flight's operating carrier on the day of travel. Note that you do have to call into US Bank after your travel is completed to request the credit. 

Applying for US Bank cards sucks

You knew there had to be a catch, and here it is: many people with multiple recent credit card applications have trouble getting approved for US Bank credit cards.

The single most important thing you can do to increase your chances at approval is to freeze your IDA and ARS credit reports. I get e-mail from readers at least once a week lamenting the fact that they applied for a US Bank card without freezing those reports and ended up being denied, despite their perfect credit profiles.

It doesn't cost more than the price of a couple certified letters, and it can help you get in on one (or two) of the most lucrative credit cards available today.

So my suggestion is to do it, and do it today.

The question that matters about the US Airways credit card

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Signup bonuses play a vanishingly small role in my miles and points strategy. They consume, on the other hand, approximately 95% of the the attention of most miles and points bloggers, one reason I scarcely read any other bloggers these days. It's trivially easy to manufacture 100,000 American AAdvantage miles should you foresee a need for them, while most bloggers will tell you only a madman would forego the chance to "opportunistically" acquire them at a cost of just $250. Then, as if to emphasize the absurdity, they spill even more ink over a 5,000 Starpoint increase in the signup bonus for the American Express Starwood Preferred Guest card!

Ongoing benefits (like companion tickets) and lucrative bonus categories are miles ahead of signup bonuses in my decision making.

So in all the supposed "assessments" of changes to the Barclaycard US Airways MasterCard after the merger with American Airlines is completed (for example see here, here, here) I always look for one piece of information that's invariably missing: what's going to happen to the 10,000 miles anniversary bonus offered by the US Airways MasterCard once it becomes an AAdvantage card?

Barclaycard hasn't made a decision yet

It's clear that if Barclaycard had made a decision about what's going to happen to the "anniversary mile" version of the card, they would have shared it. In fact, they've already mailed out an update on what changes will be made to the card's ongoing benefits (eliminating the card's companion ticket and 5,000 mile discount on award bookings, most notably).

But they haven't shared what's going to happen to the anniversary miles.

Barclaycard wrote oddly specific terms and conditions

Let me preface this by saying the terms and conditions of the US Airways MasterCard include the same language found on all such documents:

"The APRs, fees, and other account terms, as well as the benefits and features associated with the account are subject to change to the extent permitted by law."

That being said, the language related to the anniversary miles is extremely specific:

"Anniversary Bonus Miles: Beginning with the first anniversary of Account opening and every anniversary thereafter, Cardmembers will be awarded 10,000 Anniversary Miles."

Barclaycard has a very expensive team of lawyers

If Barclaycard believed that they could eliminate the anniversary bonus miles without legal risk, they would do so. The fact that they claim not to have made a decision yet is strongly dispositive to me that they believe they do not have the ability to eliminate the anniversary bonus miles for cardholders who signed up for the card under that offer.

Credit card contracts are different than loyalty program terms and conditions

Loyalty program terms and conditions as written today have a plethora of conditions that protect the provider from any legal liability for future enhancements (devaluations) to the program.

Credit card terms and conditions, on the other hand, are real contracts entered into between customers and banks for mutual benefit, and there are substantially more restrictions on the kinds of changes that can be made to them, with or without notice.

Further, Barclaycard is bound by state consumer protection laws and would be vulnerable to claims in every state they have cardholders if they were to make a change they didn't believe was airtight from their lawyer's point of view.

Conclusion

I don't know anything more than anyone else pontificating about the coming changes to the US Airways credit card. But whenever you see an article purporting to explain those changes, now you know what to look for: does the author have any additional information about the anniversary miles, or are they just reciting their Barclaycard-approved talking points?