You should always book one-way tickets, except when you shouldn't

Not just among travel hackers, but also in the civilian population, the conventional wisdom for a long time has been that it's usually better to make roundtrip airline reservations than book one-way tickets. There are a few reasons usually cited for this:

• In the case of a trip interruption or cancellation, you'll only pay change fees once on a roundtrip ticket booked on a single reservation, while you'd have to pay the corresponding fee in each direction if the tickets are booked separately.
• Since "only business travelers book one-way tickets," airlines take advantage of the opportunity for price discrimination to charge more for one-way tickets than roundtrip reservations. They may charge less for tickets with a Saturday night stay, a discount you can only secure if you book a roundtrip ticket.

I book virtually all of my airline reservations as one-way tickets these days, and thought it would be worth explaining why.

Some airlines compose all reservations from one-way segments

Alaska Airlines and Southwest Airlines treat all reservations as the combination of two or more one-way tickets. So you'll never save any money booking a roundtrip ticket on those airlines, rather than two one-ways.

In an extreme case, if you're tracking the price of your Southwest Airlines reservation in order to rebook at a lower fare, you might miss the opportunity if your outbound segment goes down in price and your return segment goes up in price by the same amount or more.

Keeping your reservations separate will make sure you capture any downward price difference in either direction.

Some airlines don't let you change your frequent flyer information after travel has commenced

If you want to credit one segment of a Delta-operated itinerary to SkyMiles and another to Alaska Mileage Plan, you're out of luck: once travel has commenced, you can't change the frequent flyer account linked to a Delta-operated reservation.

If you make two reservations instead, you can easily credit one of them to one airline's frequent flyer program and another to a second program.

Booking one-way tickets allows you to capture low-level redemptions, where available

Consider a $600 ticket, the individual components of which price at $350 each. While the roundtrip ticket is $100 cheaper than two paid tickets, if low-level award space is available on one segment, but not the other, you can buy one $350 paid ticket and redeem 12,500 miles, getting 2 cents per redeemed mile.

And of course, you can redeem 20,000 US Bank Flexpoints for the $350 ticket, which brings me to...

Price compression means more expensive tickets don't necessarily cost you any more

In the case above, the $600 roundtrip ticket (well, assuming it's actually $600.01) will cost 40,000 US Bank Flexpoints. But two $350 one-way tickets will also cost 40,000 Flexpoints! Furthermore, booking the tickets separately may reveal that a first class ticket in one or both directions costs only marginally more, allowing you to book yourself in greater comfort (and in a higher-earning fare class) without redeeming any additional miles or points. That's the phenomenon I refer to as "price compression."

When you should definitely consider booking roundtrip reservations

There are a few key exceptions to my rule of thumb that most trips should be booked as a series of one-way reservations:

• Complicated reservations. If you're booking multi-stop itineraries in one or both directions, you want to be accommodated if you miss a connection or a flight is cancelled. If your airline can't see your onward connections in their system, they probably won't accommodate you.
• If you're booking a revenue ticket in either direction of an international itinerary. With all of its marvelous pricing technology, the airline industry often charges less (sometimes much less!) for roundtrip tickets to and from Europe than for one-way reservations. So make sure you're actually saving money before booking one direction with cash and the other direction with miles and points.
• If you are buying travel insurance (and actually might use it). If you buy two one-way tickets, and your outbound trip suffers an event covered by your trip insurance, your return flight may not be covered. In any case, it means paying two trip insurance premiums for a single trip and a single covered event.

Conclusion

There are obviously a lot of moving pieces here, but the key take-away is to check the award and revenue pricing for all flight reservations as both one-ways and roundtrips. You may end up saving a lot of whichever currency you end up deciding to use.

Basis, hoarding, and devaluation

Last week a reader wrote in to suggest that I address the topic of saving up miles and points for emergencies, which gave me an excuse to think about two slightly different but related topics. The first is the question of points devaluation, either marginal like the upcoming American AAdvantage devaluation or radical like Southwest's move from fixed-value to revenue-based redemptions. The second is the question of loss of ability to manufacture large quantities of miles and points cheaply, which we had a laugh about on Twitter over the weekend.

Return on investment depends on both basis and sale price

Last month Matt at Saverocity gestured at taking the idea of "basis" from the field of finance and applying it to travel hacking.

If you buy a share of stock for $1, then however much or wildly its price swings your basis in the stock remains the same: the amount you paid for it. This matters because if you buy in at $1 and the price rises to $100, you've made a 9900% return on your original investment, while if you buy in at $50 then at the same sale price, $100, you've only made a 100% return on your investment.

Devaluations are gradual and predictable

For all the wailing and gnashing of teeth whenever an airline or hotel devalues its miles, that process is relatively gradual and relatively predictable.

After all these years, despite everything that's happened in the airline loyalty industry, the 25,000 domestic saver award ticket still exists.

It's absolutely correct to say that award redemptions for international premium cabins have gone up in price by 100% or more over the last decade, and that the airlines, particularly United and American, have imposed additional "stealth" devaluations by severely limiting saver award space, but that's a years-long process that we've become more or less accustomed to.

Increases in basis are sudden and unexpected

Let me tell you a story about basis.

It used to be possible to buy $60,000 worth of PIN-enabled debit cards at a single CVS store location in a single day. You might use a 5% cash back card like the "old" Blue Cash. Or you might use a Hilton HHonors Surpass American Express and earn 6 HHonors points per dollar (drug stores used to be a bonused earning category, since replaced with restaurants).

Then CVS imposed a $5,000 daily limit on the purchase of prepaid cards. Suddenly, the same $60,000 in monthly spend took 12 trips to the drug store. Your basis, in the form of time spent traveling to the drug store, went up 1200% in the blink of an eye.

Today, CVS imposes a $2,000 daily limit, a further 2500% increase in your time basis to manufacture the same $60,000 per month in spend, which now takes 30 trips to the drug store.

Now, time is not the only basis you have in your miles and points. Your cash basis in the same $60,000 in spend hasn't changed, since CVS's activation fees haven't changed. But a 3000% increase in your time basis is a much more serious hit to your return on investment than a 50% devaluation of the value of the miles and points you earn.

When safe returns decrease, investors reach for yield

In some ways this is a good, natural, and clarifying process. When it becomes significantly more difficult to manufacture spend, people manufacture less spend, but better spend. It really may have made sense to manufacture spend with a 2% cash back card when all it took was an online order to the US Mint and a trip to the bank with a trunk full of dollar coins. If limited manufactured spend opportunities is what it takes for travel hackers to manufacture less spend on more lucrative cards, that's generally a good thing.

In other ways, of course, this increases the threat to the remaining methods of manufacturing and, especially, liquidating spend. If previously the diversity of techniques and opportunities kept any given opportunity safe, then fewer opportunities mean a higher concentration of people using any given tool. As those of us shut down by Bluebird and Serve know, increased concentration in a technique makes our corporate benefactors more likely to close down the opportunity and force us into even more expensive avenues.

Earn as many of the most valuable points you can, but don't hoard

All of this brings me back to my reader's question about hoarding miles and points for a rainy day, and my position on hoarding hasn't changed in the slightest since I wrote about it last October.

Hoarding can't and doesn't mean "earning more miles and points than you redeem." Everyone should be earning as many of the most valuable miles and points that they can, since we don't know when the next sudden increase in purchase price, our basis, will come along.

I earn cash back when cash back is the most valuable currency for me to earn, and I earn miles and points when they're the most valuable currency to earn. I basically don't factor future devaluations into my earning decisions, for all the reasons I explained above.

But if hoarding means anything, it must mean paying cash today, instead of points, in order to save your miles and points for a speculative, future higher value redemption. And I never hoard.

Like anyone, I'll maximize the value of my cash and points by booking expensive reservations with points and cheap ones with cash or, more usually, fixed-value rewards currencies. But given a choice between an average revenue rate and average points rate, I'll redeem the points every single time.

A belated 2015 end-of-year accounting

For the last two years, I've shared an accounting of my year in earning and burning miles and points (2013 and 2014). A reader recently reached out and asked whether I would do something similar for 2015.

The more volume I've pushed through my credit cards and loyalty accounts, the more difficult it's become to track the precise number of miles and points I earn each year. This isn't because of a lack of attention to detail; I actually maintain an unnecessarily-meticulous record of all the fees I incur while manufacturing spend.

The problem is simply that loyalty programs make it terribly obnoxious to track this kind of activity, so unless you track it throughout the year, you're left flailing at the end of the year to figure out the final score.

For example, if you have an American Airlines AAdvantage or IHG co-branded credit card, every time you redeem miles or points you get a 10% rebate. Barclaycard Arrival+ cardholders get a 5% rebate on all their redeemed miles. Should those points be reported as "earned," or deducted from "redeemed" miles?

Likewise, if I redeem Ultimate Rewards points by transferring them to United or Hyatt, and then redeem those United and Hyatt points for travel, where are the appropriate columns to debit and credit the transactions?

Nonetheless, as your humble servant, I did go through all the accounts I've previously reported on and calculated the total number of points I redeemed in 2015. So without further ado, here are my total redeemed mile and point totals for calendar year 2015:

View fullsize

As you can see, my total redeemed balances come to 1,678,000 miles and points. This is more or less meaningless for the reasons I explained above (Hyatt, United, and British Airways redemptions are counted twice, both above and below the central line), but hopefully it gives the curious an idea of the rewards currencies I choose to focus on.

Redeeming rump point balances

If having too many points in a single program is one kind of problem, both because of the increased exposure to devaluations and the fact that the least valuable point is the one that is never redeemed, then having just a few points in a program is a slightly different kind of problem.

The remaining points left in an account, whether "orphaned" there when you moved your earning activity to another program or the "rump" points left after a big redemption, can be difficult to redeem for anything: too few points for a big, valuable redemption and too many points to simply redeem for magazines.

Since I redeem my miles and points as aggressively as possible, I'm often faced with this problem of rump points. I thought it might be useful to go through my balances and see what I can get with my current account balances, without earning any additional points.

Club Carlson: 13,248 points

After my windfall back in January, I rebooked a couple of stays and ended up with a rump balance of just over 13,000 Gold Points. This is enough for a single night at a Category 1 property.

Club Carlson's Category 1 offers very slim pickings. The Park Inn by Radisson Puerto Varas, in Chile, looks adorable, and there are a few properties in Eastern Europe that seem fine (although I'm not sure the Park Inn Danube, Bratislava, will still be Category 1 after they finish their renovations on September 1, 2016).

There are 3 Radisson Blu properties on the list, in Egypt, Turkey, and India.

But since none of those options work for me, I'll likely redeem my remaining Club Carlson points for airline miles. As you'd expect, the transfer ratio is terrible, with 2,000 Gold Points transferring to 200 airline miles with their partners. Still, it's clear that I'm much more likely to redeem 1,200 airline miles than 13,000 Gold Points.

IHG Rewards Club: 55,380 points

"FQF," I imagine you asking, "how can you call 55,000 points a rump balance? That sounds like a ton of points!"

Well, it's a rump balance because IHG is a terrible program. 55,000 points isn't enough for a single night at one of their top-tier properties. If I were skipping around the world living in PointBreaks properties it would be enough for 11 nights at one of those, but I already pay rent on a perfectly nice apartment, so I'm not keen on moving to Browning, MT, for 11 days.

Having said all that, IHG's huge footprint makes it easy to find properties to fill in the little gaps in an itinerary. I currently have a one-night stay booked at the Grand Hyatt New York for $202.27 (as part of my tentative plan to requalify for Hyatt Gold Passport Diamond status). Instead, I'll buy 5,000 IHG Rewards Club points for $40 and stay at the InterContinental New York Times Square, getting 0.3 cents per point, which is slightly below the Hotel Hustle median value for IHG Rewards Club points.

American Airlines AAdvantage: 13,917 miles

Despite having had a Citi / AAdvantage World Elite MasterCard for several years (since they keep waiving the annual fee), I only recently booked my first reduced mileage award.

This is how reduced mileage awards work: if you're redeeming miles for a one-way or roundtrip itinerary within the contiguous United States, and your origin or destination is on the list of eligible "destinations," you receive a 2,500- or 3,750-mile discount on the miles required in each direction. The discount is applied immediately over the phone, which is the only way to book these awards, and it can't be combined with the new short haul awards going into effect March 22, 2016, although American promises that "New reduced mileage award levels will be introduced for these shorter flights on April 1st."

All of this is just to say that when applying the 3,750-mile discount I'm eligible for, one-way awards to and from eligible cities cost just 8,750 miles. Moreover, since American's co-branded credit cards also offer a 10% mileage rebate on all redemptions (up to 10,000 rebated miles per year), that rebate immediately brings the total cost of such flights down to 7,875 in each direction in economy (19,125 in first class).

One interesting possibility with these awards is to use them for hidden city ticketing. Since every American Airlines itinerary from my home airport requires a connection in Charlotte, Chicago, or Dallas, I could theoretically use a reduced mileage award to fly there and simply exit the airport or continue on to a different destination on a different carrier.

In any case, I'll likely kill two birds with one stone and transfer 12,000 Club Carlson Gold Points to AAdvantage, leaving me just 633 AAdvantage miles short of a roundtrip reduced mileage award redemption (n.b. actually slightly more than that since the 10% discount is applied only after booking, so I'll actually need 1,508 AAdvantage miles to make the second one-way redemption. The proof of this is left as an exercise for the reader).

How much do you charge friends and family for travel?

Travel hacking is a specialized combination of knowledge, skills, and opportunities, plus of course making the time to take advantage of them. For those willing to invest in this world, the payoff is tremendous: the ability to pay for travel at a steep discount, whether you're buying luxury accommodations for the price of a Motel 6, or getting a Motel 6 for the price of a youth hostel.

Once you've invested the time and attention to learning those skills, it's natural to want to share the rewards with friends and family who, at least in my case, treat travel hacking as a curious combination of magic and fraud.

While I'm always eager to help out, being both a businessman and a poor person means I like to look for mutually beneficial arrangements when booking travel for my loved ones. In that spirit I think there are basically three models one can use when trying to help people save money on travel.

Offer a fixed discount off retail

This strategy makes the most sense for "arm's length" transactions. If you have more miles and points than you have near-term plans for, you can offer to book travel for friends and family at a fixed discount off the price they're already planning to pay.

If someone wants to book a $600 domestic flight, and you discover there's low-level award availability (or, better yet, discounted award availability like that offered to Citi AAdvantage credit cardholders), you can offer to book the flights for a mere $450. This is a classic win-win situation: the traveler gets a 75% discount off retail, and you get 1.8 cents or more per mile in cash — a pretty good redemption!

The drawback of this method is that there are situations where it simply doesn't apply: if a flight is cheap enough, or the mileage cost is high enough, there may simply not be a middle ground in which the booker and traveler can meet to mutual benefit.

Charge the opportunity cost of earning (or redeeming for cash) your points

This is the strategy I usually follow when offering to book travel for my close friends and family. If a hotel room costs 40,000 HHonors points, I'll offer to book it for $141, since that's the amount of cash back I could have earned manufacturing the same $6,667 on a 2.105% cash back card. In other words, I want to be "made whole," but I'm not interested in extracting any profit out of the transaction. If that's a discount off retail they'll usually be interested, and if not, there's no harm done.

But there are two pitfalls here. The first is figuring out what your actual opportunity cost is. In the case of hotel points or airline miles earned with a credit card (at the expense of cash back), the calculation is simple, as shown above. But if you're redeeming Ultimate Rewards points for a friend's Hyatt stay, the relevant cost isn't how much cash you could have earned instead of earning Ultimate Rewards points, it's how much the Ultimate Rewards points are worth if redeemed for cash. The same is true of any rewards currency that can be directly redeemed for cash, like US Bank Flexpoints.

The second wrinkle is valuing instruments that are, due to price compression, worth manifestly less than their face value to the travel hacker. For example, a $400 American Airlines voluntary denied boarding voucher is worth much less than $400 to me, since I can redeem 20,000 US Bank Flexpoints, worth $200 if redeemed for cash, for the same flight (in reality it's not quite that bad since the voucher has the added flexibility of being combinable with cash for flights at the bottom of a Flexperks redemption band).

When deciding the opportunity cost of something like that, you could either think about the actual delay that earned you the voucher in the first place (how much is 5 hours in a Chicago airport worth? Did you have to buy lunch?), or simply assign it the value of the points you would use to book a flight of the same value. In the above example, that could be the $200 cash value of 20,000 Flexpoints.

Travel is free (for other people)

The third option, of course, is to just give travel away! What are you, some kind of cheapskate?

For children, grandchildren, nieces, nephews, parents, grandparents, and anyone you're about to propose to, the best option is not to charge them anything for their travel. Your miles and points didn't cost you much, you have too many of them, and it'll mean the world to them to get to see the world.

This is the strategy I use when booking vacations for my partner and I, and it's fun. I heartily recommend occasionally splurging on your loved ones, the operative word being "occasionally."

I don't mean to get all philosophical this close to the end of the post, but people basically don't value stuff they get for free. Or, to put a slightly finer point on it, people quickly get used to getting stuff for free and quickly come to accept it as the natural order of things, rather than a gift or treat for a special occasion.

That's why I think for kids or siblings it's probably better in the long run to offer a big discount off retail rather than spread free trips around like gelt at Hanukkah.

Conclusion

So, what did I miss? Do you charge your loved ones for "free" travel, and if so, how much?

What revealed preferences have taught me about valuing miles and points

One fascination of the miles and points community is "valuing" their loyalty currencies. This should be, in principle, one of the most important aspects of an earning strategy: earn more valuable points before less valuable points is a mantra as obvious as it is useless.

But determining the value of points is vigorously disputed terrain.

Hotel Hustle can tell you the value other people are getting for their hotel points

I love Hotel Hustle, and write about it relatively often. It has two relevant features here: you can plug in your own points valuation and search by "Hustle Hotness:" what percentage of your assigned value you're getting at each property in your search destination.

But additionally, Hotel Hustle will show you the range of values other people using Hotel Hustle have found on their own, real-world searches.

For these purposes I've always like the median value, which has 50% of search results giving more value, and 50% of searches giving less value. So across all the tabulated Hotel Hustle search results, you can see that Hilton HHonors points are worth a median of 0.44 cents each.

That doesn't mean you'll get 0.44 cents per point, but it's a benchmark you can use to evaluate your earning and burning decisions, and it's based on real-world award search results.

Affiliate bloggers make up values depending on which way the wind is blowing

Bankrate.com employee Brian Kelly will tell you each month what cards have the biggest affiliate payouts.

Likewise Thought Leader from Behind Gary Leff will periodically post his updated points valuations.

And of course Rich Weirdo Ben Schlappig has a whole page devoted to valuing miles and points.

Here are the values revealed preferences show for the miles and points I earn

The concept of "revealed preferences" is a powerful one in behavioral economics. Rather than attempting to establish the value of goods in the abstract, or by measuring quanta of pleasure, revealed preferences allow you to determine a good's value to the consumer by the price they're actually willing to pay for it. Revolutionary, right?

So here are the values I actually put on my miles and points, determined strictly by what I do, in fact, pay for them each month:

• 1.4 SkyMiles are worth about 2 cents. When buying cheap, PIN-enabled prepaid debit cards at unbonused merchants, I split my purchases between my American Express Delta SkyMiles Platinum Business card and my 2% and 2.105% cash back cards. My indifference between earning 1.4 SkyMiles and 2% cash back means I value SkyMiles at about 1.43 cents each.
• 6 Hilton HHonors points are worth up to 4 cents in airfare. I only have a single local grocery store that sells PIN-enabled prepaid debit cards, and I can choose between using my American Express Hilton HHonors Surpass card or my US Bank Flexperks Travel Rewards card. I use my Surpass card, valuing each HHonors point at up to 0.67 cents in paid airfare.
• 2 Ultimate Rewards points are worth slightly less than up to 4 cents in airfare. As above, I have a single local merchant that codes as a gas station and sells PIN-enabled prepaid debit cards. I could use either my Chase Ink Plus or my US Bank Flexperks Travel Rewards card for purchases there, but lean towards the Flexperks card, valuing an Ultimate Rewards point at slightly less than up to 2 cents in paid airfare.

Conclusion: my values aren't yours

My situation is unique, as is yours. I travel all the time, and am dedicated to keeping my rewards balances as low as possible, meaning I'm not stockpiling millions of any one currency. Instead, I'm redeeming miles and points roughly as quickly as I redeem them, giving me lots of "gut-check" opportunities to see whether I'm getting enough value from my rewards currencies to justify earning more of them.

For example, in January I had decided to cancel my American Express Delta SkyMiles Business Platinum card, when a health emergency in the family caused me to redeem most of my SkyMiles balance at a value of over 5 cents per SkyMile. With an empty SkyMiles account, and the possibility of future urgent travel, I decided it made more sense to keep the card and pay 1.43 cents per SkyMile again this year.

Likewise, just this week I redeemed 20,000 US Bank Flexpoints for a first class flight that otherwise would have cost $343. Alternatively, I could have redeemed 27,440 Ultimate Rewards points (at 1.25 cents each), making me feel fantastic about earning 2 Flexpoints per dollar instead of 2 Ultimate Rewards points per dollar at my local gas station.

Exceptions, exemptions, and exclusions from hotel rewards and benefits

After 4 years involved in travel hacking, I still find myself learning something new almost every week. For example, since until this year I'd never had Hyatt Gold Passport Diamond elite status before, it had never occurred to me to dive into the gritty details of Suite Upgrade Awards.

There are in fact quite a few popular benefits of hotel loyalty programs that have cavernous exceptions you may not know about. Here are four.

Hilton HHonors elite 5th night free exceptions

Elites in the Hilton HHonors loyalty program get their 5th night free on all-points award stays (not on "points and money" awards).

But the Hilton HHonors terms and conditions conceal a landmine: the 5th-night-free benefit "[d]oes not apply when stay is booked as part of a Reward Stay offer, package, or promotion offered by Hilton or any of its partners, or at All-Inclusive properties or Distinctive properties."

"All-inclusive properties" is simple enough, although I consider it a bit cheap since there are non-all-inclusive properties that cost more points per night than Hilton's all-inclusives while still managing to honor the 5th-night-free benefit.

That leaves the question: what are "Distinctive" properties? Amazingly, the Hilton HHonors terms and conditions don't say. For that, we'll need to turn to Citibank.

Citi Hilton HHonors Reserve weekend night exemptions

You may have heard of the Citi Hilton HHonors Reserve weekend night certificates offered as a signup bonus after spending $2,500 on the card within 4 months and on each account anniversary if you spend $10,000 during the membership year.

What you may not have heard about are the properties that are exempted from having to honor those free night certificates! Citi excludes all-inclusive properties and distinctive properties, and handily provides us with an actual list of the excluded properties. Besides the all-inclusive properties, they also list all the "Distinctive" properties that are excluded. Most of these are simply timeshare properties operated as Hilton Grand Vacations properties, but the last one, the Qasr Al Sharq, appears to me to just be a very luxurious hotel that managed to carve itself out an exemption.

Hilton HHonors breakfast and upgrade policy exclusions

If you're used to receiving a complimentary continental breakfast when staying at Hilton and Conrad properties, you might be surprised to discover that Waldorf Astoria Hotels and Resorts are excluded from that benefit. Your "My Way" benefit choices are limited to upgrades to preferred rooms and your choice of 1,000 HHonors points, a free in-room movie, or a spa, golf, or restaurant discount.

Speaking of those upgrades to preferred rooms: the Napua Tower at the Grand Wailea and the Imperial Floor at Rome Cavalieri are excluded by name from the preferred room upgrade benefit.

Properties excluded from Hyatt Suite Upgrade Awards

Everyone knows that "Suite upgrade awards are only valid for standard suites, defined as each participating property’s introductory suite category," which can be a real pain when you're trying to figure out which available suites are and aren't eligible for upgrades.

But there are also properties and brands that are completely excluded from suite upgrades!

First of all, "Suite upgrade may not be booked at Hyatt hotels or resorts before they have opened."

And second, "Suite upgrade awards are not available" at:

• Park Hyatt Beaver Creek Resort and Spa
• Park Hyatt Maldives Hadahaa
• Park Hyatt Sydney
• Andaz Tokyo
• Hyatt Regency Kyoto
• Hyatt Regency Phuket Resort
• Hyatt Regency Tulsa
• Hyatt Regency Wichita
• Hyatt Paris Madeleine
• Hyatt Herald Square
• Hyatt Key West Resort and Spa
• Hyatt Manila City of Dreams
• Hyatt Santa Barbara
• Hyatt Residence Club resorts
• Hyatt Place and Hyatt House hotels
• and M life resorts.

Some of these properties, like the Hyatt Place and Hyatt House brands, simply don't offer suites. M Life resorts are only bookable as part of a joint marketing effort, so you can imagine some kind of logic behind them not offering free suite upgrades to Hyatt elites.

But the Park Hyatt Beaver Creek and Andaz Tokyo do have suites, and the Park Hyatt Maldives and Park Hyatt Sydney at least have upgraded rooms. They're just extremely expensive and the properties aren't inclined to guarantee them to Diamond elite members in advance, for free.

Conclusion

Travel hacking is the knowledge that the house doesn't always win; it can be beat. But it can only be beat when you know what you're entitled to, and what the loyalty programs and properties can give you at their own discretion.

Why I insist on pedantically comparing award redemptions to cash

In the comments to last Wednesday's post, reader Paul Wellington made a great comment, which read in part:

"this sort of redemption nerd logic makes me chuckle and misses the forest for the trees. You have zero interest in paying for it. So who cares what promotion they're running that nominally reduces the value of your redemption? Absolutely irrelevant. Your focus should be on 1) free 2) quality of amenity/experience. What do you care if the cash payers are getting a small break if you're still getting the same package of goods with points? Obviously, this is an elastic concept - at a certain price point, you'll happily pay cash instead of give up valuable points, but it's nowhere near that sweet spot."

I responded to Paul there, but I think he makes a couple very interesting points I want to address in slightly more depth.

There are (at least) three "costs" that matter when evaluating a redemption

There are two different ways to judge a redemption — and they may produce conflicting results:

• How much did the points cost to acquire? If you manufacture spend, you can add up all the fees you paid to earn the earn the required number of points, and end up will a total out-of-pocket cost. For example, if you buy $300 Visa gift cards from Staples, you may pay 0.59 cents per Ultimate Rewards point, so a 30,000-point Hyatt Gold Passport stay will cost $177 in out-of-pocket fees (although the correct point of comparison is the $300 in cash you could redeem the same 30,000 Ultimate Rewards points for).
• How much could you have earned manufacturing the same spend on a cashback-earning credit card? This value is what I call the "imputed redemption value" or opportunity cost of a redemption. If you buy PIN-enabled Visa gift cards at an unbonused merchant with a Marriott Rewards co-branded credit card, a 50,000-point redemption will cost you the $1,000 you could have earned manufacturing the same spend on a 2% cash back credit card.

Once you know those two costs, you can compare them to the retail cost of the award redemption or (my preferred metric) the cost of the hotel you'd stay in or ticket you'd buy if you didn't have access to loyalty currencies.

There are logically three places that price may fall:

• The hotel may be cheaper than the price you paid for the required points. A 50,000-point Marriott room night might be selling for $250. If you transferred in 50,000 Ultimate Rewards points, you're paying $250 more than you would if you just redeemed your Ultimate Rewards points for cash and booked a paid stay!
• The hotel may be more expensive than the price you pay for the required points, but cheaper than the imputed redemption value. Since I buy my HHonors points for about 0.22 cents each, but they have an imputed redemption value of 0.35 cents each, hotel redemptions falling in that range save me money compared to paying cash, but cost me money compared to manufacturing spend on a cashback-earning credit card instead of on my American Express Hilton HHonors Surpass card.
• The hotel may be more expensive than the imputed redemption value. This is what you should generally think of as a "good" redemption: you're earning more value manufacturing spend on your co-branded credit card than you would have putting the same spend on a cashback-earning credit card.

Direct your spend to the cards that generate the most consistent value

Now, Paul is exactly correct that I have zero interest in paying cash for my stays. Since the least valuable point is always the one you don't redeem, I'll happily, eagerly, ecstatically redeem points at a mediocre or bad value rather than pay cash.

But if, over time, one loyalty currency affords me less and less value compared to earning cash instead, I'll shift my earning away from that currency towards cash or another, more consistently-valuable one.

But it's only possible to make those longterm strategic calculations if you also make sure to conscientiously track the value you get when redeeming your miles and points! That can seem pedantic, but only because the conventional wisdom about the value of manufacturing spend on hotel co-branded credit cards is roughly correct (Starwood, Hilton, and Wyndham are pretty good, the others are very bad).

If hotel occupancy rates stay high, and programs continue to devalue, their currencies will edge closer and closer to the breakeven point, and even programs like Hyatt Gold Passport will stop generating consistently outsized value. If you don't know how to calculate the value you're getting from your points, you're at risk of being left behind as those shifts take place.

Western Hemisphere all-inclusive resorts

I wrote a few weeks ago that I've been craving a beach vacation, and I decided to take a look at so-called "all-inclusive" resorts, mainly out of curiosity: I've never stayed at one of these resorts (although I did crash one in Cuba's Veradero beach community) and I have a hard time conceptualizing exactly how they work. With the points currencies I have easy access to, there are 4 obvious options in the Americas:

• Hyatt Zilara Cancun
• Hyatt Zilara Rose Hall
• Hilton Rose Hall Resort & Spa
• Hilton Puerto Vallarta Resort

The Zilara properties are Hyatt's brand of adults-only all-inclusive properties, while the Hilton properties are all-ages (a slight disadvantage in my book as a childless person, no offense meant to childful people) but available using Hilton HHonors points, an account where I've found myself with an uncomfortably large balance.

Methodology

In deciding between the four properties, I want to be as rational as possible. In my view there are two main considerations:

• Nightly room rates. What's the imputed redemption value of a points stay, and what are some typical nightly rates: are points redemptions a good deal?;
• Flight options. Paying for your stay is only the part of a trip's total cost — you've also got to get there. Especially if you're booking for two or more people, a small difference in flight costs can swamp any difference in room rates.

Hyatt Zilara Cancun

The Hyatt Zilara Cancun costs 25,000 Gold Passport points per night for single or double occupancy rooms (40,000 for single or double occupancy suite nights), and 12,500 points per additional person after the first two.

Meanwhile, due to a current 50% discount promotion, a 5-night stay in mid-July costs $2,400, giving an upfront value of just 1.92 cents per Hyatt Gold Passport point. Since paying for that stay would also earn a Diamond elite member 15,600 points, the net value per point is just 1.71 cents each. That's a perfectly good redemption if you're transferring in Ultimate Rewards points worth a penny each, but it is on the low end of possible Hyatt redemptions. 

I have quite a few flight options to Cancun for the same July dates. Southwest flies from relatively-nearby Chicago nonstop in each direction for 30,014 Rapid Rewards points and $73.69 in taxes and fees ($373.83 in cash value if the Rapid Rewards points are transferred from Ultimate Rewards). A business class itinerary operated by American would cost me 60,000 Alaska Airlines Mileage Plan miles and $105. And an economy US Bank Flexperks redemption from my home airport would cost just 40,000 Flexpoints (redeemable for $400 in cash). Given those options, I'll pay the extra $25 to redeem Flexpoints and fly from my home airport.

Total cost for 5-night trip: $1,250 in Ultimate Rewards points, $400 in Flexpoints per person, $2,050 for two people.

Hyatt Zilara Rose Hall

Like the Hyatt Zilara Cancun, the Hyatt Zilara Rose Hall costs 25,000 Hyatt Gold Passport points per night for single or double occupancy reservations.

With the same ongoing 50% discount promotion, five nights at the Hyatt Zilara Rose Hall cost $2,215, or 1.77 cents per Gold Passport point. After accounting for points earned on paid stays (14,397), a Diamond elite would get a total of 1.59 cents per Gold Passport point redeemed.

While the two Zilara properties cost the same number of Gold Passport points, flights to Montego Bay are much more expensive than to Cancun: I can redeem 60,000 Alaska Airlines Mileage Plan miles plus $145.31 in fees per passenger, or 60,000 Delta SkyMiles plus $120.31 per passenger. The corresponding flights are just a hair over $1,000, so they'd cost 60,000 US Bank Flexpoints per passenger. Here Southwest comes to the rescue, with $586.79 roundtrip flights from Chicago Midway. That would cost me 30,000 Flexpoints per ticket ($300 cash value) or 32,832 Rapid Rewards points plus $114.69 per passenger ($443.01 cash value).

Total cost for 5-night trip: $1,250 in Ultimate Rewards points, $300 in Flexpoints per person, $1,850 for two people.

Hilton Rose Hall Resort & Spa

Remember, my motivation for booking this beach vacation was at least in part to use up some orphaned Hilton HHonors points after I started directing as many reservations as possible to Hyatt in order to take advantage of my matched Diamond status.

It turns out, however, that Hilton doesn't honor the 5th-night-free on award reservations at their all-inclusive resorts! That means a 5-night stay at the Hilton Rose Hall Resort & Spa costs 350,000 HHonors points, which if earned at 2.105% in opportunity cost comes to $245.58 per night — within striking distance of the $250 per night in cash value of Ultimate Rewards points redeemed at the Hyatt Zilara properties above.

By way of reference, the same 5-night stay would cost $1,745, or 0.5 cents per HHonors point.

Total cost for 5-night trip: 350,000 HHonors points ($1,228 in opportunity cost), $300 in Flexpoints per person, $1,827 for two people.

Hilton Puerto Vallarta Resort

The final entry here is Hilton's Puerto Vallarta Resort, which is just 50,000 HHonors points per night in July. Without the benefit of a 5th night free, you'll pay 250,000 HHonors points for a five night stay that otherwise retails for roughly $1,107, or 0.44 cents per HHonors point. Given a 2.105% cash back opportunity cost on manufactured spend, that comes to about $175 per night at this resort, the cheapest we've see so far.

Given that lower cost, it would be dynamite if I could get there on the cheap. Southwest isn't an option because of their punishingly early flights from the only two nearby airports they serve (there's a 5:30 AM now?). But I can pay 60,000 Alaska Airlines Mileage Plan miles and $133 per passenger for business class tickets, which is better than paying the 70,000 US Bank Flexpoints it would take to pay for the oddly expensive revenue economy tickets.

Total cost for 5-night trip: 250,000 HHonors points ($877 imputed redemption value), 60,000 Mileage Plan miles and $133 per passenger, 120,000 Mileage Plan miles and $1,143 for two people.

Conclusion

Presumably these calculations won't be useful to anybody else unless they want to visit an all-inclusive resort in mid-July! But this is the kind of calculation I run when I'm thinking about visiting a new property: how much will it cost to stay there, how much will it cost to get there, and what will I get for my money?

Personal finance digression: Robinhood is a pretty good app

Every once in a while I take a break from blogging about travel hacking and write about whatever personal finance topics are on my mind. For the past few weeks I've been playing around with an app called Robinhood, and thought I'd share my impressions.

Robinhood is a mobile-only trading platform

I don't exactly understand why mobile-only applications are so popular at the moment, but Robinhood is a good example of one. As far as I can tell, there is no way to log into your Robinhood account on their website to view past trades, deposits, withdrawals, dividends, etc.

Fortunately, the app is pretty good! The main page of the app shows the current value of your account, including cash and the market value of all the shares you currently own. Below that, there's a newsfeed that shows headlines based on general market events and news specific to the shares you're tracking. Finally, the main page shows your current share positions and any ticker symbols you've saved for the app to track.

That latter functionality works even if you don't have any shares deposited with Robinhood. In other words, you can use the app to simply track the price of any stocks and ETF's you're interested in.

I've always been curious why most brokerages report share prices with a 20-minute delay, which doesn't seem particularly consumer-friendly. In any case, it's cool that Robinhood reports share prices in real-time.

Buried slightly deeper in the app's menus are the options to view past transactions, make deposits to and withdrawals from your Robinhood account, cancel pending orders, and all the other things you might want to do with a brokerage account. They even show you all your scheduled dividend payouts on a single screen, which I've never seen in a brokerage account before (although my experience with them is limited).

Robinhood executes commission-free trades of US stocks and ETF's

Now we come to the real point of the app: Robinhood doesn't charge any commission to buy or sell US stocks and exchange-traded funds.

Most brokerage firms will charge you $7 or more to execute simple trades. If you want to buy or sell a single share, that commission can easily dwarf any paper profits you made on the underlying security.

There's not much else to say: Robinhood doesn't charge those commissions. They do list a number of fees for trading listed foreign securities, "Euroclear," and "Canadian." Those situations haven't come up for me yet.

Robinhood makes deposits from a bank account immediately available

This is a neat gimmick: in order to get you trading as soon as possible, Robinhood makes funds available immediately when you initiate a deposit from your linked bank account.

When I initiated a purchase in my Vanguard brokerage account the other day, it took 3 or 4 days for the funds to become available and the price had already moved away from me, so I do appreciate this feature of Robinhood.

Two minor problems and one philosophical grievance

There are two things that will become immediately obvious as soon as you start using Robinhood:

• Robinhood does not service tax-advantaged accounts. You can't set up Robinhood as a traditional IRA, Roth IRA, Health Savings Account, 529 College Savings account, or any other kind of account besides a taxable brokerage account. If you're in a tax bracket where short term and long term capital gains are taxed at different rates from ordinary income, you have to be aware of what kinds of capital gains and losses you create through the app. For my sins I've already earned $15 in short term capital gains which I'm not looking forward to reporting next year.
• Robinhood's newsfeed function is not hosted natively in the app. I think the newsfeed is a sort of silly gimmick, but if a headline does catch your attention you have to wait for your mobile browser to load the website, which more often than not has a paywall keeping you from reading the article that interested you! Note to all app developers: If you're going to have a newsfeed, host the articles on your app!

Still, those are both quibbles. The real problem with Robinhood is that it makes day-trading incredibly easy, and more or less encourages its users to day-trade. It does this in two ways.

First, by not charging fees for each trade, Robinhood removes any disincentive from quickly moving in and out of stocks. Don't get me wrong: I don't think it's good that brokerages charge fees for trades. That's money customers would rather keep. But that basically bad practice does at least discourage people from buying and selling stocks based on minor price changes. It acts as a subtle encouragement to hold securities for the long term.

Second, the newsfeed is, more or less, a stream of constant headlines telling you to buy, sell, or short whatever stocks you happen to have loaded into Robinhood. Their algorithm simply shows all headlines related to your shares from a range of financial websites, blogs, and actual news sources. For ConocoPhilips, my current newsfeed shows:

• ConocoPhilips: Shorts Closing In On The Bottom
• How To Play The Growth In US Oil Exports With Fat Dividends (Part 1)
• Oil Patch: The 'Circle The Drain' Phase Begins
• Short Conoco Philips Now

You can, and should, ignore the newsfeed, but as far as I can tell you can't hide or mute it, and it creates this sensation of light dread whenever I open the app.

Conclusion: Gambling is fun

Robinhood should not be your main brokerage account. That should be some place like Vanguard, where you can buy low-cost mutual funds without paying a commission, and set up tax-advantaged accounts like IRA's.

But if you have some money set aside for fun, Robinhood really does allow you to buy and sell US listed shares and ETF's without paying a commission, leaving you all the upside — and downside — risk from your stock market hunches.

Besides that, Robinhood allows you to buy and sell Vanguard ETF's like VTI (Total Stock Market ETF) and VXUS (Total International Stock ETF). As I like to say, although the personal finance and financial planning industries are obsessed with tax-advantaged accounts, there's no law against holding securities in a normal, taxable brokerage account. So if you'd like to save more money than you're able to in your IRA's and 401(k) accounts, you can buy and hold low-cost Vanguard ETF's in Robinhood without paying any commissions for the trades.

P.S. My top-secret gambling strategy

It seems crazy to write this much about a trading platform without revealing my proprietary gambling strategy. I have a simple rule: always bet the hard ways.

Wait, that's craps.

My proprietary gambling-on-the-stock-market strategy is to buy consistent dividend-paying stocks when they near their 52-week low. If the stock price recovers, I sell it. If it doesn't, I collect the dividend until it does. So I bought Royal Dutch Shell at an average of $38.73 and sold it at $44.86 (for my sins it's now at $45.27). Currently I'm holding BP, International Paper (IP), ConocoPhilips (COP), and the aforementioned VXUS.

I don't recommend this strategy to anybody, since it's based on nothing. But gambling, famously, is pretty fun.