Starting from scratch: alternative banking products

This week I've been writing about some strategies, credit cards, and loyalty programs I would use differently if I were building a travel hacking practice from scratch. If I were ignoring my elite status and current stable of credit cards, I'd focus even more on fixed-value points for use in booking airline tickets, and I'd ignore hotel loyalty completely in order to maximize my cash discount booking hotel nights through online travel agencies.

Today's post is about the alternative banking products I've used, abused, and lost throughout the last five or six years.

High-interest prepaid savings accounts

Back when CVS allowed virtually-unlimited numbers of Vanilla Reload Network reload cards to be purchased with credit cards, the American Express "old" Blue Cash offered unlimited 5% cash back, and the Hilton HHonors Surpass American Express gave 6 HHonors points per dollar spent at drug stores, there was a constant search for new prepaid products that could be loaded and unloaded as quickly as possible through the Vanilla Reload Network. I burned through 3 MyVanilla accounts, 2 Netspend accounts, and a Momentum account all in order to liquidate as many Vanilla Reload Network cards as possible.

In hindsight, with Vanilla Reload Network cards today mostly unavailable to credit card users, that was a mistake: Netspend and Momentum offer savings accounts with higher FDIC-insured interest rates than those available anywhere else in the market today, and I'd prefer to still have working relationships with those companies.

American Express prepaid banking products

Like most aggressive users of American Express's Bluebird and Serve prepaid products, on January 8, 2016, my accounts were all closed. I had been using both accounts to liquidate PIN-enabled prepaid debit cards for free, and in the case of Serve, earn cash back by loading funds from my Fidelity Investment Rewards American Express card.

If I were starting over today, I wouldn't use American Express prepaid banking products to manufacture spend at all: I'd use them to manufacture transactions for high-interest savings, checking, and credit card accounts that require a certain number of transactions per month to unlock their highest reward levels.

Conclusion

I don't have any regrets about the path that my travel hacking practice has taken, even though I focus more on airline and hotel loyalty currencies than I would if I were starting from scratch today.

I probably slightly overpay for my checked bags by earning Delta Medallion elite status with a Delta Platinum American Express each year, and I earn only part of that value back with high-value SkyMiles redemptions.

Likewise, I tend to overpay for my hotel stays by earning Hilton HHonors points and Diamond elite status with my Hilton Surpass American Express, instead of booking through a cashback portal and online travel agency, and I've certainly overpaid by directing stays towards Hyatt during this year of my Diamond status match.

But building relationships with banks and merchants is a process that necessarily develops over time, and as things stand I'm more or less happy with the decisions I've made and the relationships I've built, even if I would have proceeded different in hindsight.

I'd sure kill for another shot at a Serve account, though.

Starting from scratch: hotel stays

In yesterday's post I talked about how to develop a strategy for booking airline tickets that works for you. As I said then, "the options you have available today are restricted by the decisions you made in the past." For example, your ability to get approved for new American Express credit cards depends on the number of American Express credit cards you currently have (in general folks are restricted to 4 total American Express credit cards each).

Hotels are cheap, if you ignore loyalty

Yesterday I explained that airfares are cheap, if booked using cheaply acquired fixed-value points. The opposite is true of hotels: while you can redeem fixed-value points for hotels, you'll be redeeming them against the full retail price of the hotel room, which means you're virtually certain to overpay.

For example, it's possible to use a cashback portal like TopCashBack to click through to Hotels.com and earn 9% cash back from TopCashBack, plus 10% back in the form of a Hotels.com award night when you book and stay 10 nights through Hotels.com.

There are additional benefits to booking through an online travel agency: you'll be able to pay with the credit card of your choice, meaning you'll earn that credit card's reward points as well, while redeeming US Bank Flexpoints, Citi ThankYou Points, or Chase Ultimate Rewards points through their booking tools necessarily keeps you from earning credit card rewards on your reservations.

But the most important benefit of booking through an online travel agency, rather than a hotel chain's own website, is that it frees you to book the cheapest hotel available (that meets your other requirements like location and amenities)!

To see how this works, let's take the example of a weekend stay in Portland, OR, from May 20-22, 2016. Once I've filtered by 3-star hotels in the downtown neighborhood, I find that the cheapest Hilton property is $189 per night, the cheapest Marriott property is $213 per night, and the cheapest Starwood property is $269 per night, before taxes.

Now, clicking through TopCashBack and booking through Hotels.com will save you 19% off whichever property you choose. But being agnostic as to the chain you're staying with saves you even more: an additional 11.27% compared to being loyal to Marriott and an additional 29.7% compared to Starwood loyalty.

Loyalty programs: cheap, but loyal

Hotel loyalty programs can also bring down the cost of your stays from retail, but only under certain conditions.

The biggest problem with hotel loyalty programs is that if you're not saving money on every single stay (compared to the online travel agency method described above), then you're faced with the unpleasant choice of deciding between overpaying for a hotel stay within the loyalty program or saving money but earning online travel agency rewards too slowly to notice your savings, or, God forbid, even wind up seeing a message like this:

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Having said that, there are 3 principle ways to use hotel loyalty programs to consistently bring down the price of your stays:

• Wyndham Rewards. The Barclaycard Wyndham Rewards credit card earns 2 Wyndham Rewards points everywhere, and Wyndham has a huge global footprint. Since all Wyndham Rewards properties cost 15,000 Wyndham Rewards properties per night, if your hotel stays typically cost more than about $150 per night (or about $180 before accounting for cash back portal and online travel agency rewards), you'll save money manufacturing spend on the Wyndham Rewards credit card compared to a 2% cash back card.
• Hyatt Gold Passport. If your travel takes you primarily to the kinds of mid-size European cities or larger American cities served by Hyatt, then you can often save money by transferring Chase Ultimate Rewards points to Hyatt Gold Passport from a Sapphire Preferred or Ink Plus credit card, earned with a Chase Freedom Unlimited card. Compared to paying with cash back earned on a 2% cash back card, you need to get a consistent value of at least 1.59 cents per Hyatt Gold Passport point to break even, since cash back is worth roughly 19% more than face value when spent on hotels at Hotels.com.
• Hilton HHonors. The good thing about Hilton's program is that, like Wyndham, Hilton has a huge global footprint, so it's not unreasonable to expect you'll be able to find Hilton properties to accommodate you almost anywhere you travel. Since the Hilton HHonors Surpass American Express earns 6 HHonors points per dollar at supermarkets and gas stations, you'll need to consistently get about 0.4 cents per HHonors point in order to come out ahead compared to a 2% cash back card, with the cash back spent at an online travel agency like Hotels.com. The $189 room we found in Portland above would cost about $186 after discounts and taxes, or 50,000 HHonors points, giving a value of 0.37 cents per HHonors point — in other words, you'd be better off earning cash back and using it to make a Hotels.com reservation at the same hotel, which happens to be the cheapest option for the weekend I searched.

It's not unreasonable to suggest that the Club Carlson Premier Rewards credit card, which earns 5 Gold Points per dollar spent everywhere, might be a competitive option for manufacturing unbonused spend. But due to the heavy discount afforded when using cash to book stays through online travel agencies, you'd need to consistently get 0.48 cents per Gold Point on all your Club Carlson award stays to break even compared to cash. Club Carlson is simply not a program that affords that kind of value anymore: Hotel Hustle's average value found for Club Carlson is 0.41 cents per point, with a median value of 0.379 cents per point.

Conclusion

As you can see, just as I showed yesterday, the best approach to booking hotel stays as cheaply as possible will depend on your situation: the fixed cost of hotel award nights can be an argument in their favor if you typically travel to expensive cities during peak travel times, or it can be an argument against them if you're a flexible leisure traveler who travels when hotels are cheap in dollar terms, and can be made even cheaper using online travel agency rewards.

Tomorrow I'll conclude this series with a look at the prepaid and alternative banking products I would use differently if I were starting out from scratch.

Starting from scratch: airline tickets

Travel hacking is an iterative game: the options you have available today are restricted by the decisions you made in the past. That's one reason I avoid giving advice whenever possible: your situation is different from mine, not just depending on the merchants you have available geographically, but also depending on which banks you have relationships with, which products you've already had or lost, and the amount of time you have available to dedicate to the game.

Having said that, I do sometimes think about how I would design a travel hacking strategy from scratch: with a blank slate, what approach would I take to the loyalty ecosystem to get the most value for my travel hacking dollar?

Today's post is about how I would approach booking airline tickets if I were starting from scratch. Tomorrow's will be about hotel stays.

Revenue versus award

Starting from scratch, there's a basic decision you have to make about how to pay for the flights you're responsible for securing each year: will you book revenue tickets or award tickets? Once you're deeply involved in the game you may have large balances across a range of programs you can deploy for their optimal uses. But when you're just getting started, it's much easier to focus on this stark choice.

When booking revenue tickets, you'll usually get a fixed return on your travel hacking dollar, or one that falls in a relatively narrow band: US Bank Flexpoints are worth 1.33 to 2 cents each, Chase Ultimate Rewards points in a premium (Ink Plus or Sapphire Preferred) account are worth a fixed 1.25 cents each, and Citi ThankYou points are worth between 1.25 cents and 1.6 cents depending on whether you have a Premier or Prestige card, and the airline marketing the flight.

When booking award tickets, there's no such band of values: points can range in value from a fraction of a penny up to 10 cents or so depending both on the cash price of the flight and the number of miles required to book it.

Note that neither of these options is any more or less "free" than the other. Since you should be manufacturing spend furiously, you're paying acquisition and liquidation fees for whichever currency you happen to choose. The only question is which strategy will bring the cost of your travel down the most.

Revenue tickets are cheap

On the revenue side, there are lots of good options depending on your situation:

• Citi ThankYou Premier. A fixed 3.75 cents in airfare per dollar spent at gas stations. At $5.75 in "all-in" cost for $505 in spend, a 69.6% discount off retail.
• US Bank Flexperks Travel Rewards. Up to 4 cents in airfare per dollar spent at grocery stores or gas stations (wherever you spend more each month). At $6.30 in "all-in" cost for $506 in spend, an "up to" 68.9% discount off retail.
• BankAmericard Travel Rewards. For those with $100,000 on deposit with Bank of America, Merrill Lynch, and MerrillEdge, a fixed 2.625 cents in airfare per dollar spent everywhere. At $4.30 in "all-in" cost for $504 in spend, a 67.5% discount off retail.
• Chase Ink Plus. For small business owners, a fixed 6.25 cents in airfare per dollar spent at office supply stores (and 2.5 cents per dollar spent at gas stations). At $9.18 in "all-in" cost for $309 in office supply spend, a 52.5% discount off retail.

When I say "depending on your situation," I mean to draw attention to the fact that you when starting from scratch, you shouldn't pursue all four options! If you don't have access to gas station manufactured spend, the Citi ThankYou Premier won't work for you. If you don't have access to grocery store manufactured spend, the Flexperks Travel Rewards card isn't for you. If you don't have access to $100,000, the BankAmericard Travel Rewards card won't give you the same value it will someone who does. And if you don't own a small business, Chase probably won't give you an Ink Plus.

Award tickets are cheap and (can be) hedged

On the award side, the picture looks radically different. Three of the four major domestic airlines offer some form of "last-seat" availability on their own flights: Delta, American, and Alaska will sell almost any seat on almost any date for some number of miles, while United reserves last-seat "standard" availability to their co-branded Chase credit cardholders. Thus there are three pots airline rewards currencies fall into:

• Delta. When starting from scratch, there are two main ways into the Delta ecosystem: their own co-branded credit cards, and American Express Membership Rewards co-branded credit cards. Unfortunately, neither of them is cheap. The American Express Delta Platinum and Reserve credit cards offer 1.4 (Platinum) and 1.5 (Reserve) SkyMiles per dollar spent everywhere when you spend exactly $25,000 (Platinum) and $30,000 (Reserve) and $50,000 (Platinum) and $60,000 (Reserve) each calendar year. But the Delta Platinum card costs $195 per year and the Reserve $450 per year! Meanwhile, the American Express Premier Rewards Gold costs $175 per year and earns 2 Membership Rewards points per dollar spent at gas stations and supermarkets. Those points can then be transferred to Delta on a 1-to-1 basis. Moreover, Membership Rewards points let you hedge your downside risk: if a particular Delta award redemption gives you less than 1 cent per Membership Rewards point, you can book it as a revenue ticket. If it gives you more than 1 cent per point, you can book it as an award ticket.
• Alaska and American. Advanced travel hackers muck about with applying for Alaska and American co-branded credit cards over and over again at various intervals. But when starting from scratch, there's a simple way into both ecosystems at the same time: with the Starwood Preferred Guest American Express. When transferred to either Alaska or American, the card earns 1.25 miles per dollar spent everywhere, which is higher than the amount you can earn directly with either airline's co-branded credit card. Like Membership Rewards points, Starwood Preferred Guest also offers a hedged downside risk, since you can redeem their points for between 1 and 1.43 cents per point for revenue tickets using "SPG Flights."
• United. If you're able to make United your main airline, then you'll never do better than with a Chase Ink Plus small business credit card, because of its bonused earning rate at office supply stores and 1-to-1 transfer ratio to United MileagePlus. But if you can't get a small business credit card, then you have some hard decisions to make. You could get a Chase Freedom Unlimited, which earns 1.5 Ultimate Rewards points everywhere, and a Chase Sapphire Preferred, which enables the transfer of Ultimate Rewards points to United, but that combination comes with a $95 annual fee. Alternatively, a Chase United MileagePlus Club card earns 1.5 United miles on all purchases but has a $450 annual fee. That's the kind of up-front expense that's not precisely crazy, but needs to be well-justified before taking it on.

Your situation should drive your decision between revenue and award tickets

As I mentioned, I try not to give advice.

Your situation is different from mine: your award availability, typical revenue flight prices, and airline service have nothing to do with mine.

But in my experience, for many people, much of the time, a focus on revenue tickets will generate bigger savings than a focus on award tickets, and if I were starting from scratch, that's where I'd start.

Fortunately, you don't need to take my word for it: all the numbers are above. Look at your own travel needs and it should quickly become obvious whether revenue flights or award flights will generate more value for your travel hacking dollar.

Tomorrow, I'll take the same approach to hotels: starting from scratch, are award nights really cheaper than just paying for your hotel stays?

Understanding Hotel Hustle award alerts

I've written quite a few times about Seth Miller the Wandering Aramean and Hotel Hustle, his tool for searching for award space across hotel chains.

Like most (all?) his online tools, it's undocumented, which means it requires quite a few rounds of trial and error before you get the hang of its, shall we say, nuances.

Just yesterday I discovered another one of those nuances that I thought readers might appreciate.

A Hyatt property can have any of three flags — or none of them

As a newly-minted Hyatt Diamond, I've been doing a lot of searching for Points + Cash rates to fill out my travel schedule for the year, and to do so, I've spent a lot of time using Hotel Hustle.

To understand how Hotel Hustle views the universe, you have to treat every Hyatt property as having 3 possible "flags" in a true or false position:

• Flag #1 asks, "is there a cash rate available?"
• Flag #2 asks, "are there rooms available for all-points redemptions?"
• Flag #3 asks, "are there rooms available for Points + Cash redemptions?"

If there are rooms available for all-points redemptions there should be cash rates available, but the same is not true for Flags #3 and #2; in the course of researching this post I discovered a property with Points + Cash availability but with no points-only redemptions available.

(As an aside, I'm sure I could call Hyatt and have them book me into an all-points redemption, but Hotel Hustle operates based on what's available on the website — no bargaining allowed.)

Hotel Hustle treats each combination of flags differently

Say I'm interested in visiting Philadelphia on July 25, 2016, which happens to be the first day of the Democratic National Convention. Here's what Hotel Hustle shows me when I narrow my search to Hyatt:

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It looks like Hyatt doesn't have any properties in Philadelphia, so I'm out of luck.

But a bit earlier in the year, say, this Saturday, my results look different:

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It turns out Hyatt has all sorts of properties in Philadelphia! That Hyatt Place in Mt. Laurel looks promising, but unfortunately it doesn't have any points-only or Points + Cash award availability.

Of course, if I arrive a few days earlier, I might be interested in spending some time up in Plymouth Meeting:

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I'm in luck! Points + Cash rates are available, securing me a precious stay credit towards requalification.

Making sense of Hotel Hustle flags

Each of the above pictures illustrates a particular combination of flags, each of which you need to understand to get all the information you need from Hotel Hustle.

The first picture illustrates the situation when none of the flags are "true:" Hotel Hustle will not help you. You cannot configure any kind of alert for a property that does not have any rooms available for cash.

The second picture illustrates a situation where only Flag #1 is "true:" Hotel Hustle will allow you to set an alert for points-only award availability in the righthand sidebar or, if you can locate the property on the map and click on it, set an alert for Points + Cash award availability.

The third picture illustrates the (unusual) situation where Flag #1 and Flag #3 are "true," but Flag #2 is "false." Hotel Hustle does allow you to set a points-only alert in the righthand sidebar, but it only allows you to view Points + Cash availability by locating the property on the map and clicking on its icon.

Points-only and Points + Cash are different alert types

What if you're not interested in qualifying or requalifying for Diamond status with Hyatt and just want to save some money on your next Hyatt stay?

In the second picture above, you can see that you can create both points-only and Points + Cash award alerts through Hotel Hustle. But if you are indifferent between the two, you need to create both types of award alert.

If you select "Manage Alerts" you can see which kind of award alert you've created. If you want to be alerted when either a points-only or Points + Cash awards become available, your "Manage Alerts" page should look like this:

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The "C&P Alert?" column designates whether the alert is for Points + Cash or a points-only award availability.

Conclusion

I poke fun at Seth for not documenting his web apps, but in all fairness, even if he did I wouldn't read the documentation.

At the same time, since I just figured out how this worked I suspect there's a chance it will be of value to some of my readers!

Mattress running for Hyatt stays and bonus points

Pure mattress running for hotel elite status rarely makes sense: you only receive status benefits for nights you stay, so the further away from elite status you are, the less worthwhile a potential mattress run towards status will be.

At the same time, mattress running for bonus points during promotions rarely makes sense because travel hacking makes hotel stays so cheap that any bonus points earned are unlikely to buy you much hotel than you can purchase any day of the week by simply manufacturing spend.

As a new Hyatt Diamond, I decided to see whether the current Stay More Play More promotion may make mattress running make sense for the combination of elite-qualifying stays towards renewing my status, and the bonus points earned.

How much does a mattress run cost?

To calculate the cost of a mattress run, I take the cost of a paid stay and, in the case of a Points + Cash stay, the cost of any points redeemed, then subtract the value of any points earned on the stay. Here are some sample calculations I scratched out last week, based on nightly rates at my local Hyatt property.

In words, I can pay $50.38 (after buying a gift card at an 18% discount) and 2,642 Hyatt Gold Passport points (4,000 minus the 1358 points earned on the cash portion of the stay), or I can pay $122.84 and earn a total of 1,872 points. A valuation of 1.61 cents per Hyatt Gold Passport point makes the two options a wash. If I value Hyatt Gold Passport points more highly than that, I should book an all-cash stay, and at a lower valuation, I should book a Points + Cash stay for my mattress run.

The question is, it possible for the Stay More Play More promotion to make mattress running cheap, or even free? The answer, it turns out, is yes — for a certain definition of free.

Stay More Play More makes mattress runs cheaper the more nights you stay

Stay More Play More is really 5 distinct promotions, and it's essential to grasp that to make any sense of this calculation:

• one promotion offering 5,000 points on your 5th eligible night;
• one offering 10,000 points on your 10th night;
• one offering 15,000 points on your 15th night;
• one offering 20,000 points on your 20th night;
• one offering 25,000 points on your 25th night.

Keep in mind that no other nights are bonused in any way under this promotion: only these multiple-of-five eligible nights between April 1 and June 30, 2016, earn any bonus points at all.

The first promotion may be marginally worth a mattress run if you have access to a Category 1 Hyatt property. You'll earn 5,000 bonus points plus, as a Diamond, 6.5 points per dollar on the cash portion of your stay, plus 500 bonus points (at Hyatt Place and Hyatt House properties) or 1,000 bonus points (at other Hyatt properties).

A Points + Cash stay at a Category 1 property will thus cost $50 plus tax and earn a net of 3,325 Hyatt Gold Passport points, or 1.5 cents per Hyatt Gold Passport point at Hyatt Place and Hyatt House properties or 3,825 points (1.31 cents per point) at other Hyatt properties.

If you value Hyatt Gold Passport points at 1 cent each (when transferred from Ultimate Rewards), that's like paying $11.75 or $16.75 for a stay credit, which may be worth doing if needed to secure Diamond elite status the following year.

The promotion for later nights shifts the balance even more in your favor. Booking your 10th night on a Points + Cash stay in Category 1 gives a net cost of 0.6 cents per point and at Category 2 a net cost of 0.8 cents per point.

The deeper you get into the promotion, the more lucrative it becomes. If your 25th night happens to be at a Category 7 Park Hyatt on a Points + Cash stay, you'll pay 15,000 and $300 for the night — then get 27,950 points back, leaving you out of pocket just $170.50 for your Category 7 night.

Think twice before mattress running unbonused nights

The flip side of the structure of this promotion is that unbonused nights (all but the 5 bonused nights) make little sense for mattress running. Even at the very top of the promotion earning 5,000 bonus points per night leaves you paying 1.5 cents per point at Category 1 properties, which is 50% more than you would pay simply transferring in Ultimate Rewards points.

But even more importantly, if you are staying that many nights in a single 3-month period you're unlikely to need the elite-qualifying stays at all — you'll probably requalify for Diamond status on the stays you'll naturally book during the calendar year.

When the Fun Stops

If you've ever visited Las Vegas, you've no doubt seen the constant parade of advertisements run by the Nevada Council on Problem Gambling, with the campaign slogan "When the Fun Stops."

I've persisted, in the face of pressure from Rolling Stone, in calling travel hacking "the game," which makes us players, and which usefully raises the specter of problem gaming. In general, I think there are three ways a healthy attitude towards travel hacking can become problematic.

Getting stuck on the status treadmill

One of the great intellectual triumphs of the loyalty industry was making it difficult — but just easy enough — to qualify for elite status. Hotel loyalty programs offer three good examples:

• The Hilton HHonors Surpass American Express and Citi Hilton HHonors Reserve give top-tier Diamond elite status after spending $40,000 on either card;
• The Starwood Preferred Guest American Express gives 5 nights and 2 stays towards SPG elite status just for being a cardmember;
• The Chase Hyatt Gold Passport credit card gives 2 stays and 5 nights towards elite status after spending $20,000 with the card, and 3 stays and 5 nights towards elite status after spending a total of $40,000 with the card each calendar year.

Likewise the Delta Platinum and Reserve business and personal American Express cards each offer Medallion Qualification Miles towards elite status at certain spend thresholds, the Citi / AAdvantage Executive World Elite MasterCard offers 10,000 Elite Qualifying Miles after $40,000 in calendar year spend, and the Barclaycard AAdvantage Aviator Silver World Elite MasterCard gives 5,000 Elite Qualifying Miles after spending each of $20,000 and $40,000 on the card per calendar year.

For an experienced travel hacker those thresholds are easy to meet, which is easy to confuse with being worth meeting.

But if you'll enjoy few or any of the benefits of elite status, you shouldn't be going out of your way to earn — or even think about earning — elite status in programs you don't actually take advantage of!

Losing track of point values

The Chase Marriott Rewards credit card has earned 1 Marriott Rewards points per dollar spent everywhere, well, forever.

But the Marriott Rewards program has undergone a series of horrific devaluations since the credit card was introduced!

The same card that would have earned you three free nights at the JW Marriott in Washington DC for $50,000 in spend will now barely earn you one night for the same spend (the property now costs 40,000 Marriott Rewards points per night).

If you got on board early, you could have powered your way through a series of devaluations and suddenly find yourself earning far fewer stays for the same amount of spend.

Losing track of costs

This is a story I've told before, but I think it's still illustrative. I was introducing a friend to travel hacking right about the time when Vanilla Reload Network cards stopped being sold to credit card users at national pharmacy outlets.

I broke the news to my friend and explained that only cash was now accepted for the reload cards. And my friend, who was eager to earn as many United MileagePlus miles as possible for an upcoming trip, asked me, "well, what if I take out a cash advance from my card and use the cash to buy a Vanilla Reload card?"

It's a funny story, but it illustrates an actual problem I see all too often: once folks are stuck in a groove, they'll do anything to stay in that groove, even when the costs slowly (or rapidly!) start to outweigh the rewards they were initially earning.

Conclusion

At the end of the day, I'm a travel hacking enthusiast. I think this game, in the huge variety of forms it takes, will be around for a long, long time to come.

But that general relaxation about the bigger picture shouldn't be treated as an invitation to take your eye off the particular credit cards, programs, and techniques you use!

A relentless focus is the only way to make sure you're getting the most value out of every second you spend playing this game.

And if you don't have that focus? Well, there's always tennis.

The concept of loyalty and the Wyndham Rewards revaluation

I had an interesting exchange on Twitter the other day with Seth, the Wandering Aramean, who was arguing in response to Trevor at Tagging Miles that loyalty currencies are on a perpetual downward valuation spiral. While they devalue at different rates and different times, Seth claimed, they never increase in value.

My response was, "What about Wyndham?" After all, the May 11, 2015, revaluation of the Wyndham Rewards program made the 4 cheapest award categories (5,500 to 14,000 Wyndham Rewards points) more expensive, while the 5 most expensive award categories (16,000 to 50,000 Wyndham Rewards points) became less expensive when all properties were realigned at 15,000 Wyndham Rewards points per night.

Meanwhile, the Barclaycard Wyndham Rewards credit cards continue to offer 2 Wyndham Rewards points per dollar spent everywhere.

Reconciling these two positions is easy, as long as you can tell the difference between loyalty programs and loyalty.

If you were a loyal Wyndham guest, you probably got screwed

I admit that I've been travel hacking so long that it's a bit tough to remember what "loyalty" is supposed to signify.

But if "loyalty" means anything, it's surely the willingness to pay more to direct your stays or flights to a particular travel provider, not for any short-term interest but because over multiple nights, flights, stays, and years, your business will be rewarded in a way it wouldn't if you stayed at the cheapest possible hotel and booked the cheapest possible flight each time you traveled.

Since most travelers, most of the time, are traveling domestically, and only rarely staying in the most expensive categories of property, the change of cost of Wyndham Rewards nights to a flat 15,000 points was, as Seth asserted, a radical devaluation for "loyal" travelers, which is to say for travelers who directed their paid stays to Wyndham in order to secure cheap future award nights.

If you're a travel hacker, the Wyndham Rewards revaluation was a godsend

Compared to putting the same spend on a 2% or 2.105% cash back credit card, the Barclaycard Wyndham Rewards credit cards allow you to purchase a night at any Wyndham Rewards property in the world for between $150 and $158. As it is for a "loyal" Wyndham Rewards customer, at many properties that's an increase over the cost prior to the May 11, 2015, revaluation.

But the key takeaway for the travel hacker is that other, cheaper options remain for the nights you'd otherwise have redeemed Wyndham Rewards points for. There's a difficulty in analyzing the situation precisely, but fortunately Wyndham still makes available the list of properties which went up and went down in category in 2013, which at least gives a sense of what properties were in which categories prior to the 2015 revaluation.

With all that in mind, here are some United States properties which, as of 2013, cost less than 15,000 Wyndham Rewards points per night. These are properties that became more expensive after the 2015 revaluation. Next to each property I also suggest the cheapest nearby competing property and its imputed redemption value.

I don't claim this is exhaustive research — anybody can do the same research and find more extreme examples at their leisure using the links provided above.

• Baymont Inn and Suites Florence/Muscle Shoals. Was 14,000 Wyndham Rewards points ($147 IRV). Nearby: Hampton Inn Florence-Midtown. 20,000 Hilton HHonors points ($70 IRV).
• Days Inn Tempe ASU. Was 10,000 Wyndham Rewards points ($105 IRV). Nearby: Embassy Suites Phoenix - Tempe. 30,000 - 40,000 HHonors points ($106 - $141 IRV).
• Days Hotel Oakland Airport-Coliseum. Was 14,000 Wyndham Rewards points ($147 IRV). Nearby: Hilton Oakland Airport. 30,000 HHonors points ($106 IRV).
• Ramada Denver Midtown. Was 10,000 Wyndham Rewards points ($105 IRV). Nearby: Hampton Inn & Suites Denver-Speer Boulevard. 30,000 - 40,000 HHonors points ($106-$141 IRV).
• Knights Inn Lafayette Midwest. Was 5,500 Wyndham Rewards points ($58 IRV). Nearby: 
  Homewood Suites by Hilton Lafayette. 30,000 - 40,000 HHonors points ($106-$141 IRV).
• Travelodge - Columbus. Was 5,500 Wyndham Rewards points ($58 IRV). Nearby: 
  Hyatt Place Columbus/OSU. 8,000 Hyatt Gold Passport points ($80 IRV). Also
  DoubleTree Suites by Hilton Hotel Columbus Downtown. 20,000 - 30,000 Hilton HHonors points ($70 - $106 IRV)

Conclusion

The point of this post is not that the Wyndham Rewards revaluation was "a good thing." Whether or not a particular individual benefited or suffered from it depends on that person's past and future pattern of paid and award stays.

My point is that for a travel hacker the increases in prices at Tier 1-4 Wyndham Rewards properties are easily offset by balances in competing programs with more reasonably priced properties in the same markets.

Meanwhile, the decrease in prices for properties in Wyndham Rewards tiers 5 to 9 (16,000 to 50,000 Wyndham Rewards points) make their top-tier properties radically more affordable in the same markets as their competitors continue to charge high prices, whether you choose to pay in cash or in points.

Am I mainly a domestic traveler? Does it matter?

The idea for this post came to me last weekend when a reader I met in DC suggested that I'm "mainly a domestic traveler," in contrast to his own travel style as an international business class traveler.

This exchange happened to resonate with me since I remembered a post Matt at Saverocity wrote last year which claimed I tend "to fly on these domestic tickets a lot, leveraging super sweet spots with the Flexperks and other programs," while he "see[s] little of [me] flying internationally."

I was a bit surprised by both claims, since I think of myself as doing a lot of international travel.

So, am I mainly a domestic traveler? What does or would that mean?

My 2015 travel was mainly domestic

In 2015, I spent a total of 81 days wholly or partially traveling, only 11 days of which were spent traveling internationally, on my Italian caper.

That produces a fairly low 14% of travel days spent on international travel, which suggests I may, indeed, be primarily a domestic traveler.

My 2016 travel (so far) is mostly international

The travel I've booked so far in 2016 is much more evenly split: of the 35 days I've either traveled or have booked for 2016, 18 of them are international, on my upcoming summer vacation in Europe, while 17 are domestic, including my January trip to New York and March trip to San Francisco and my upcoming trip to Lexington, Kentucky.

That being said, I'm sure my travel in the second half of 2016 will bring the ratio of domestic versus international travel days up substantially.

Folks should do whichever kind of travel interests them most

I have a buddy in the venture capital space who once explained to me that when a venture capitalist invests, he or she doesn't buy a portion of the existing company, they buy a portion of the company as it will exist post-investment.

In other words, the investor isn't buying a share of the scrappy garage-based company, they're buying a share of the company once it moves into its swanky new headquarters in Brooklyn.

People sometimes seem to apply a similar principle to their own travel once they begin travel hacking. They gradually (or suddenly) become less interested in taking the trips they used to take at a fraction of the cost, and become increasingly excited about booking travel that never would have occurred to them before they learned just how cheap travel could become.

Know and remember who you are

There is a vast travel hacking blogosphere intent on selling you on the most comfortable new airline equipment, the longest new routes, and the best new inflight champagne.

If you were jealous and anxious about the airline equipment and inflight service you were missing out on before you started travel hacking, then by all means, use travel hacking as a tool for satisfying your envy, if you think it will help.

But if you were fine traveling in economy before you discovered travel hacking, it's worth thinking long and hard about whether you'd rather take the same trips and pay a fraction of the price, while saving the difference, or pay the same amount and fly in a cabin of service that meant nothing to you before bloggers and forums starting explaining how you haven't lived until you've spent 10 hours in a slightly more comfortable box.

Conclusion

I'm well aware that my readers are an eclectic bunch and I'm not in the position to tell anybody what cabin anybody should be booking their domestic or international travel in, or which currency they should be booking it with.

What I'm interested in is keeping my readers grounded in the real world they actually inhabit, in the face of a blogosphere intent on pumping awards balances as high as possible with credit card applications that don't make a lick of sense in the context of the trips they're actually interested in taking.

Earn cash first, spend cash last

Last week I wrote about the option of redeeming Wells Fargo's Go Far reward points for 1.22 cents each when using them to purchase Hyatt gift cards (an offer that's still ongoing).

Commenter Rob S made an observation in the comments to that post that I think is worth exploring in some more depth. He wrote:

"but those WF reward points can be used for flights at 1.5 cpp. Some people can redeem at 1.75 cpp. so i don't think I will be doing this"

Rob is referring to is what's called, for reasons lost to history, "uplift," the ability to redeem Wells Fargo rewards points for more than 1 cent each towards paid airfare after spending a certain amount on certain Wells Fargo rewards-earning credit cards.

Uplift isn't something I've written about before and I can't find any good blog posts to link to about it, but Rob is exactly correct: some people can redeem Wells Fargo rewards points for 1.5 or 1.75 cents each for paid airfare after meeting certain spending thresholds with their Wells Fargo credit cards.

The question I want to explore is, under what circumstances does uplift change the value proposition of redeeming Wells Fargo rewards for cash?

Earn cash first

I have a simple approach to my manufactured spend practice: I earn cash first. That's because cash is basically the opposite of miles and points: it's worth face value when redeemed for goods and services, and if you choose to invest rather than spend it, it increases, rather than decreases, in value over time.

Miles and points, on the other hand, are worth varying amounts depending on current cash prices and award availability. Therefore, given the option between cash and points, I'll always earn cash first.

Spend cash last

The flip side of the above principle is that once I have miles and points in my rewards accounts, I'll redeem them whenever possible rather than spending cash. Again, that's because cash is flexible and can be deployed wherever necessary, while miles and points can only be redeemed for dates and flights the loyalty programs choose to make available.

When I find that availability, you better believe I'll redeem miles and points for it.

How uplifting are Wells Fargo rewards?

Suppose a Wells Fargo cardholder has earned the maximum uplift of 1.75 cents per "Go Far" rewards point redeemed for paid travel. Keeping in mind that those rewards points can each be redeemed for 1 cent in cash, the uplift provides a discount of 43% off paid airfare (a $175 flight would cost $100 in foregone cash back redemptions).

That's a pretty good discount, for a civilian.

But a 43% discount off paid airfare is not exactly inspiring for a travel hacker. If you earn US Bank Flexpoints, then at the top of each redemption band you'll get a 50% discount off paid airfare (plus a $25 credit towards in-flight purchases). If you earn Chase Ultimate Rewards points (transferred to United or British Airways) or American Express Membership Rewards points (transferred to Delta) you might be accustomed to getting much larger discounts, depending on your local airfare market.

Hyatt gift cards are cheaper than cash

The reason I wrote favorably about redeeming Wells Fargo rewards points for Hyatt gift cards is not because they give a discount off Hyatt stays, but because they give a discount off the cash portion of Points + Cash stays (or, in the cash of pure mattress runs, the cash cost of the stay). That's the portion you've already committed to paying in dollars, which is the component you should be seeking to minimize the cost of.

Paying $41 instead of $50, or $246 instead of $300, is a savings in cash for the portion of a stay you were going to pay in cash anyway. There is literally no other currency but US dollars you can use to pay the cash portion of a Points + Cash stay.

How to meet your favorite blogger (as long as it's me)

I love meeting readers, for a lot of reasons. It lets me get a sense of what kind of people are attracted to this site, and what they like about it. It gives me an unparalleled chance to learn since, as I'm fond of saying, every travel hacker knows something you don't know. And of course it's nice to be reassured that there are really human beings out there reading my blog and not just bots pulling my e-mail address for spam directories.

I've now met quite a few readers all around the country, both during my own vacations and while attending (slightly) more organized gatherings like the Saverocity DO's and TravelCon II last year. With that experience under my belt, here are some tips for what you can do if you'd like to meet me in person.

Follow me on Twitter

I live on Twitter, as my Twitter followers will warn you, and I usually tweet about my upcoming travel destinations and while traveling, depending on my access to the internet. That's the best way to find out where I am and where I'm going.

If we'll be in the same place, contact me

You can direct message me on Twitter, or send me an e-mail, and I'll usually get back to you in pretty short order, again depending on my internet access and how busy I am.

Suggest one or two concrete times and places

This is typically the key hangup. I don't know your city, I don't know your geography, I don't know what you call downtown versus what I call downtown, and if we have to do a bunch of laps back and forth while I'm on vacation, I'm gonna lose interest real quick.

But as long as you're specific about some times and places you'll be available, I'll usually try to join you for at least a beer or two.

Blog subscribers are also invited to subscribers-only meetups

At the suggestion of a long-time subscriber, about a year ago I started holding subscribers-only meetups, which are chances to hang out not just with me but with fellow travel hackers who have decided to support this site through a monthly blog subscription. So far I've held subscribers-only meetups in Chicago and New York City, and the feedback has been terrific. After all, my readers have a lot more to teach each other than I have to teach anybody!

And of course don't be offended if I can't make it

I take my vacations seriously, which means a lot of sleeping in, a lot of site-seeing, and a lot of late nights. So I might not be able to find the time to meet with readers on any given vacation. It's me, not you, so don't take it personally!