Blending earning and redemption rates

When an affiliate blogger is trying to sell you a credit card that allows you to redeem bank points against a travel purchase, they sometimes pull this fairly ingenious, if transparent, sleight of hand:

• When you earn airline miles for a purchase, then redeem those miles for travel, the value you get per dollar spent depends on the value you get per airline mile.
• When you earn bank points and redeem them against a paid flight purchase, you don't just get the value of your bank points, you also get the value of any airline miles earned for your paid flight.
• Therefore you should value a dollar spent with, for example, a BankAmericard Travel Rewards card not as the 1.5 cents in travel you get, but as 1.5 cents plus the airline miles those 1.5 cents in airfare will earn.

Did you catch the switch? All the work here is being done by the value of a dollar, a value which the blogger then assigns to whichever credit card has the highest signup bonus this week.

I thought of this yesterday because I'm in the process of booking a couple of spring and summer trips, and found myself in a somewhat related situation.

A Southwest Business Select fare buys a lot of Wanna Get Away fare

When I was booking my Southwest ticket to Montego Bay using US Bank Flexpoints, I booked a Business Select fare since Wanna Get Away fares weren't available and the difference in cost between Business Select and Anytime didn't move my fare into a higher Flexperks redemption band.

This creates the somewhat interesting situation wherein I redeemed 50,000 Flexpoints, worth $500 in cash, for a ticket worth $953.61, and earned 9,336 Rapid Rewards points, worth roughly $93 in Ultimate Rewards points I wouldn't have to transfer to Southwest in the future.

That future turned out to be yesterday, when I booked a ticket to Las Vegas for dates when Wanna Get Away fares are available. Since my ticket cost about 16,000 Rapid Rewards points, I only had to transfer 7,000 Ultimate Rewards points, worth $70, to Southwest to buy my ticket.

Now, it's worth saying that actual Southwest Airlines enthusiasts don't run into this situation: they book Wanna Get Away fares on every flight they're even remotely considering taking as soon as the schedule opens up, knowing they can cancel all their unwanted flights up to 10 minutes before departure.

But since I'm not a Southwest enthusiast, I was pleasantly surprised to see my best, cheapest choice for one flight earn over half the cost of my next flight on Southwest, which was also my best, cheapest option.

My first Delta Pay with Miles redemption

As long-time readers know, I earn 1.4 miles per dollar spent on my Platinum Delta SkyMiles American Express card by spending $50,000 each calendar year (or sometimes slightly more for technical reasons).

In order to break even against a 2.105% cash back credit card, my overall objective is to get about 1.5 cents per SkyMile on my award redemptions. If I can break even on my spend in that way, then I'll end up paying a $195 annual fee for 20,000 Medallion Qualification Miles and a domestic economy companion ticket.

Meanwhile, Delta-operated flights have a kind of "floor" on redemptions of 1 cent per SkyMile, since you can use Delta's Pay with Miles feature to reduce the price of revenue tickets by that amount: 10,000 SkyMiles reduces the cost of your ticket by $100, for example.

With all that said, today I made two Delta SkyMiles redemptions, both below my target threshold of 1.5 cents each!

I needed to book two one-way tickets, with a retail price of $362.80 and a SkyMiles award ticket price of 32,500 SkyMiles and $5.60 in fees. That produces a redemption rate of 1.1 cents per SkyMile for an award ticket, or just 1.54% cash back for purchases with my American Express card. Since I had the SkyMiles in my account, and I know my miles are worth nothing until they're redeemed, I booked my partner's ticket that way.

For my own ticket, I used the Pay with Miles option to redeem 35,000 SkyMiles against $350 of the fare, and pay $12.80 in cash for the remainder, getting exactly 1 cent per SkyMile in value. However, since Pay with Miles tickets now earn Medallion Qualification Miles, I'll also earn 2,663 Medallion Qualification Miles for the ticket. Compared to the award ticket redemption I booked for my partner, I'm paying 2,500 SkyMiles and $7.20 for 2,663 Medallion Qualification Miles.

From a pure imputed redemption value perspective, these two redemptions together leave me with a shortfall of $305.30, getting just $707.20 in cash value compared to the $1,012.50 I needed to break even on the prorated amount of spend (67,500 out of 70,000 SkyMiles).

What do these redemptions have in common?

I connected these redemptions in my mind because I happened to be making both of them on the same day. But they also both illustrate that, for me, there's no such thing as the perfect redemption: there's only the perfect redemption for the moment.

Instead of refusing to fly Southwest unless there were Wanna Get Away fares available, I redeemed fixed value points for the flights I actually wanted to take, and earned a boatload of Rapid Rewards points towards a future redemption. On the other hand, instead of redeeming SkyMiles at a low valuation, I redeemed them at an even lower valuation in order to accumulate a few thousand more Medallion Qualification Miles.

Finally, what all these redemptions have in common is that they let me pay as little as possible for the trips I want to take. And that, for me, is what travel hacking will always be about.

Conclusion

While the affiliate blogger version of this phenomenon is a barely-concealed attempt to sell credit cards, there's another element that rings perfectly true: earning a combination of fixed-value points, flexible points, and brand-specific currencies may give you the opportunity to leverage currencies against each other.

On the other hand, such a combination may cause you to orphan points in multiple programs without every getting sufficient value from any of them.

Money is fungible, but only if you funge it

Back in October, over at the Saverocity Observation Deck podcast Joe Cheung interviewed Noah from Money Metagame and they discussed a post Noah wrote last year asking the question, "Is Anyone Actually Saving Money By Travel Hacking?"

Read the whole piece, as they say, but rather than respond directly to him, I am going to be more proactive and explain how how you really can save money using the tools of travel hacking.

Money doesn't funge itself

Perhaps after opportunity cost, the fungibility of money is one of the most popular concepts from economics applied to travel hacking. If money is fungible, then it doesn't matter how you earn income: whether from employment, reselling, manufactured spending, or high-stakes poker, every dollar you earn goes into the same pot, out of which you make decisions about consumption and savings.

This is true as a description of money, but need not be true about your own behavior towards money.

Ringfence your profits

One way to turn your travel hacking into asset-building is to identify and isolate your profits from travel hacking and direct them exclusively towards long-term asset accumulation. For example, if you have a Fidelity Visa Signature card earning 2% cash back, you're already depositing your cash back each month into a Fidelity account. Instead of withdrawing it into your regular checking account, where it will funge with all your other money, put it into a separate account (I personally use a Consumers Credit Union Free Rewards Checking account that pays 3.09%+ APY).

The key point is that it has to be additive. If you already have an IRA housed with Fidelity that you would max out each year anyway, you aren't increasing your savings by depositing cash back rewards into it, you're just changing the funding stream. Instead, you could open a brokerage account and use your cash back rewards to fund investments in that account.

Buy travel from yourself (with a friends and family discount)

When I'm booking travel for other people, I normally charge them either the cash value of the points I redeem or the fairest price I can think of, for example one cent per mile for airline miles and half a cent for Hilton Honors points. Since in virtually all cases I would rather have money than miles and points, this is usually a way to get my friends and family big discounts and turn my stagnant balances into cash — a win-win.

I don't pay myself for travel I redeem on my own behalf, but you could! After all, if you treat a 25,000-point Hyatt redemption as "free," instead of costing as it does $250 in transferred Ultimate Rewards points, you might travel more than you really, objectively speaking, can afford to. If you instead sold travel to yourself (with the same friends and family discount you'd give anyone else) and moved money permanently into an investment account or other place you were sure you wouldn't spend it, you might develop a more tangible sense of the costs of your "free" travel.

A related issue arises when you redeem bank points like those earned with the BankAmericard Travel Rewards card, Capital One Venture, or Barclaycard Arrival+ against travel purchases: the redemption really does reduce your outstanding credit card balance, and so is clearly some form of "income," but you never actually see a deposit into a bank account. Instead, you simply don't pay off part of the credit card balance you incurred booking your travel. "Buying" travel from yourself is a way of dealing with this curious situation and converting hypothetical profits into long-term assets.

Liquidate into your net worth, not your bank account

I've written before about using Plastiq to liquidate tiny-denomination prepaid debit cards, like the balances left over on 5% Back Visa Simon Giftcards (you can find my personal referral link on my Support the Site! page). Plastiq has a lot of billers in its database, so you might be tempted to use it to pay monthly recurring bills, like your rent or utilities. But making those types of payments won't help you accumulate assets, they just leave extra cash in your already-funged checking account.

Instead, you could deliberately target those payments towards long-term debt reduction, like making additional payments towards your mortgage, auto loans, or student debt. That way, instead of replacing payments you are already making anyway, you're using travel hacking to pay down those debts more aggressively and both increase your net worth and reduce the interest you'll pay over the life of the loans.

Conclusion

The economics professors in my audience are welcome to tut-tut me for suggesting such degrading psychological tricks, but it seems crystal clear to me that if you don't use one of these or some other method of isolating and investing your profits from travel hacking, then it's exceedingly unlikely to actually improve your overall financial position. On the flip side, a few additional thousands of dollars invested in sensible low-cost index funds have the potential to turn your short-term travel hacking profits into long-term financial success.

Quick hits: hijinks booking Mileage Plan awards on Virgin America

In the last few months I've written a couple posts about booking award travel on Virgin America, with Alaska Airlines Mileage Plan miles and with HawaiianMiles, mentioning a few things I had come across doing everyday research.

Lo and behold, I actually just had occasion to book a Virgin America ticket with Mileage Plan, and found a quirk that might cost you thousands of Mileage Plan miles if you aren't paying attention.

Virgin America sometimes only makes one First Class award seat available to Mileage Plan at a time

I was searching for two tickets between the East Coast and San Francisco for June, and saw two First Class seats available for 60,000 Mileage Plan miles on Virgin America's nonstop flight:

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After running the dates by my partner, I decided to just book one ticket for myself and book hers later. After running a search for one passenger, I found a First Class ticket available for just 25,000 miles:

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While selecting my seat, I noticed that the First Class cabin was completely empty. After booking my ticket, I decided that booking a refundable 60,000-mile ticket for my partner made sense to make sure we were on the same flight. But when I searched again, another First Class ticket had become available at the 25,000-mile level!

Then I remembered that all Alaska Airlines tickets are refundable greater than 60 days before departure, so I went ahead and booked her a low-level ticket as well.

Out of curiosity, I searched again and yet another 25,000-mile ticket had become available. In other words, Alaska Airlines was only showing one low-level First Class award seat at time, but immediately made an additional seat available each time one was booked.

This doesn't seem to be a universal phenomenon, since I was able to find 7 First Class seats simultaneously on the same route on January 18, 2018, but it does seem fairly common for dates in June, when I'm planning my trip.

Since Alaska award tickets are refundable within 24 hours of booking, and outside of 60 days, there's no risk booking low-level award tickets one at a time to see if additional seats become available. If they don't, and you'd like to make different plans, you can quickly cancel all the reservations you were able to make.

The Mileage Plan search engine shows incorrect fees on Virgin America

For some reason the Mileage Plan search engine shows fees and charges of $19, but once you select a flight and continue the correct fees and charges, in this case $5.60, are shown.

My only theory is that the engine might be adding half the $25 partner booking fee, $12.50, to the security fee of $5.60, and rounding up to $19.

In any case, when you proceed to checkout you'll see the correct, lower fee before paying.

My Jamaica all-inclusive wasn't annoying for any of the reasons I expected

I got back from Jamaica on Monday night, and had an absolutely marvelous time. On Friday I wrote about some questions I had about the experience, since I've never visited an all-inclusive resort (or Jamaica) before.

Now I have the answers to those questions and more! This is a pretty detailed [i.e. boring — ed.] post so go ahead and skip it unless you're curious.

Getting to the resort is totally seamless

All the Zilara website says is "After passing through customs, simply visit the Hyatt Lounge, where airport agents will arrange travel to our hotel."

I had no idea what this meant, but it turns out be to uncannily accurate. Immediately after customs in Montego Bay, you enter a large arrival hall with "lounges" for most or all of the resorts on the island. There, I confirmed the credit card I had on file, filled out some paperwork, and after 5 or 10 minutes a driver arrived to take us to the resort.

I'm not entirely clear on the economics of these airport vans, since none of the vans I saw had any kind of resort branding, so I assume they're private contractors who take turns driving guests to and from all the resorts as they arrive and leave.

Everything about the physical property is terrific

Reader Ben commented on Friday's post that the Hyatt all-inclusive properties are relatively new, and as far as I can tell the Hyatt Zilara Rose Hall opened in late 2014. If anything, I'd say the property felt even newer than that. The little things that are usually the first to go worked flawlessly: the sinks, showers, light switches, air conditioning, phones, etc. never gave us any trouble at all, which is something at a property where people are constantly tracking around sand and seawater!

My Diamond status maybe got me an upgrade or two

When we checked in at the airport I saw that our room type was "Jr. Suite King," which is at least an upgrade from the room I'd reserved, and which I assume was based on my Diamond status (it certainly wasn't based on the rate I paid). We arrived at the property around noon, and were told that we wouldn't be able to check in until 3 pm, the guaranteed check-in time.

When 3 pm came and went, our room still wasn't available, so we parked in the lobby to wait. After half an hour more, the front desk clerk came over, apologized even more, and upgraded us again to an "Ocean View Jr. Suite King."

It was great! Here's the view from our balcony, in case you missed it on Twitter:

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We ate several meals out on the balcony, as well as resting and reading out there.

The employees are incredibly friendly

I always have a lot of followup questions when I'm in a new and unfamiliar environment, and all the employees were friendly and accommodating.

One interesting thing I observed and finally asked someone about is that the hierarchy of employees felt very "flat." There were always a lot of staff around but I never observed anyone "managing" anyone else, giving instructions or criticism. It turns out the only way to identify the supervisors is that their shirts, which are otherwise identical, have a slight slit at the bottom that I never would have noticed if I hadn't asked. After that it was funny to keep an eye out for who was in charge at each restaurant, bar, and activity.

I discovered two and a half rules governing guests

As the curious sort, one of my biggest questions was just how many rules we'd accidentally bump against. I figured as a bumbling American people would always be telling me to do this and not do that.

But over the course of our 3-night stay I only ever observed 2 (and a half) rules being enforced.

First, children are absolutely forbidden on the adults-only Zilara side of the resort. This was somewhat funny because the Zilara side, especially at the beach, literally runs into the family-friendly Ziva side; it has to since the two properties share the same water sports booth. But if any kids stepped over onto the Zilara side security suddenly materialized and ushered them quickly away. The parents did not, usually, find this as funny as I did.

Second, you had to wear a shirt in the food service areas, which is not an unreasonable rule and one I only discovered because I tried to grab a sandwich from one of the to-go areas on my way back to my room.

The half-rule I also discovered is that the bars don't serve beer before 10 am. I don't have a good sense of why this rule exists, since the minibars in each room are restocked with beer every day.

You may ask, what rules did I expect to encounter? Lots! For example, the swimming pool is right next to the beach, and there's a long list of rules, including the obvious "guests must shower before using the pool." I am the only person I observed, in 3 days, showering before using the pool. So, the pool had some sand in it, but no one seemed to mind, including the employees.

I didn't observe anyone trying to sunbathe in the nude so I don't know whether they'd allow that or not. It seems like an obvious benefit of an adults-only resort, but perhaps they get too many American tourists for anyone to be interested. I didn't see any rules posted against it, though.

Order room service all the time

If I go back to this property I'll order room service for breakfast every day (I recommend the Yardie omelette, side of toast, side of bacon), and then just grab a sandwich, burger, or pizza for lunch. I tried a couple of the restaurants that open for breakfast and lunch every day and they made no impression whatsoever. One served a "barbecue chicken" that didn't taste like anything even after I doused it in hot sauce, and I got some eggs and toast at the other which tasted about the same. Just a waste of time waiting to be seated, waiting for a waiter, and waiting for your food.

Plan around dinner

I knew this going in, but didn't put enough emphasis on it while actually planning our days. The dinner restaurants open at 6 pm each day, and if you don't get there at 6 pm, you're going to have trouble eating there. Our first night we managed to be seated immediately at the French restaurant, our second night we gave up and ate at the buffet (big mistake), and our third night we couldn't get seated at the Italian restaurant but ended up having an amazing meal at the Caribbean restaurant.

It seemed like the consensus was that the Italian restaurant was the best on the property, so it's a bit disappointing we didn't get to eat there, although we could have done a lot worse. I'd recommend picking a restaurant in advance every day and simply planning to be there at 5:55 pm, since I don't know of another way to be sure you get your first choice.

People were tipping a lot

I don't know what the point of going to an all-inclusive is if you're going to walk around with a wallet, but people were tipping everywhere. People sitting, in swim trunks, at the swim-up bar would pull soggy dollar bills out of their underwater pockets to hand to the bartenders! I'm glad the US dollar is so durable, and I'm sure the staff were appreciative, but it seemed like overkill to me.

The entertainment surprised and delighted

In the evenings there were a lot of very strange events going on. One night on our way back to the room we accidentally stumbled upon a fashion show, firebreathing performance, and synchronized swimming show (in that order, not all at once). There was nothing about any of them in the daily program so it felt oddly serendipitous, although I'm sure I could have asked someone what the evening entertainment was in advance, if I'd known there would be evening entertainment.

Likewise someone told me Saturday morning that they'd just been going for a walk on the beach the night before and discovered the resort had set up a rum bar and dance party.

Basically, save some energy for the evening and walk around after dinner and you'll likely run into something totally unexpected.

Conclusion

Overall, I'd say my expectations were exceeded in almost every way: the resort was great, the beach was great, the pool was great, and the staff were terrific.

The only area where I'd say my expectations were met, but not exceeded, was at the themed restaurants, which it turned out work just like the cruise ship dining experience I feared: either plan ahead or plan to wait if you want to eat at the in-demand restaurants.

I'm going to Jamaica and I couldn't be more excited

This weekend I'm heading to the Hyatt Zilara Rose Hall for my first international trip of 2017 (and first since being approved for Global Entry). I'm not bringing my computer so there shouldn't be any activity here on the blog until next week, although if you find yourself in FQF-withdrawal you can check out my new personal finance blog on the Saverocity network. I hope you like it.

This is my first time visiting Jamaica and my first stay at an all-inclusive resort (although a couple Spanish girls did let me use their wristband at an all-inclusive in Cuba once), and I am both excited and extremely curious.

What will the facilities be like?

This is obviously an issue visiting any hotel for the first time, but it seems like a slightly bigger deal this time, since I don't plan on going anywhere else all weekend. If the swimming pools are cold, the rooms are dated, and the showers don't work it's not like I can go walk around Paris to distract myself.

What will the beach/ocean be like?

The quality of the sand and water, and the temperature of the ocean, can vary incredibly from beach to beach and from season to season. I've dived in crystal clear warm water off the coast of Cuba and trudged around in murky silt in Atlantic City. If the beaches are great and the ocean's clean, even if not warm, then I don't expect I'll have much to complain about.

What will the food be like?

I tried to reach out to the Hyatt but never got a response, so my current expectation is that none of the restaurants on the Zilara and connected Ziva properties require reservations, and I plan to try as many of them as possible (we'll only be there 3 nights). I'm not a food blogger or a very good photographer but I'll try to get some pictures to share when I get back.

Will my status get me anything?

As a newly-requalified Hyatt Diamond and soon-to-be Globalist I'm curious whether I'll get any kind of special treatment, like an upgraded room or slippers or something. I don't think of Hyatt Gold Passport as offering "soft" benefits, versus concrete benefits like confirmed suite upgrades and breakfast, but maybe they'll surprise me.

How annoyed will I be?

I like to say that the worst possible price for anything is "free," the proof of which is the line around the block every time Ben & Jerry's offers a free small ice cream cone. People waiting for hours to save $1.09 is both a moral and economic catastrophe.

Price is the greatest rationing mechanism mankind has devised so far, which means an all-inclusive resort is guaranteed to use some other mechanism. Will the restaurants have inconvenient hours? Limited capacity? How much time will I spend waiting in line versus drinking rum out of a coconut on the beach?

Conclusion

I don't want to come across as pessimistic; like I say, I'm absolutely thrilled about the trip and can't wait to get there. But I truly have no idea what to expect, which means the trip has the potential to give me a huge pleasant surprise or end in, well, disappointment.

I expect I'll have internet access at least some of the time I'm there so be sure to follow me on Twitter if you want to find out all the details in more-or-less real time, although God willing I won't be spending much time on my phone while I'm there!

Interesting Starwood and Marriott stacking opportunities

I was chatting yesterday with someone who has had a lot of success with Marriott recently, taking advantage of a number of opportunities that currently intersect due to the merger of the Marriott and Starwood hotel chains. While I don't generally think of Marriott Rewards as being a program that offers travel hackers much value, that may be less true today than it has been even in the recent past.

Here are a few ways you might be able to get above-average value from Marriott Rewards.

Transfer Starpoints to Marriott Rewards

While I mentioned this back in September in the context of Marriott Flight and Hotel packages, it's also true that you can simply transfer Starpoints to Marriott in order to book award stays.

Marriott award stays top out at 45,000 Marriott Rewards points (15,000 Starpoints) and Ritz-Carlton stays cost up to 70,000 Marriott Rewards points (23,333 Starpoints). The 5th award night is free for reservations with both Marriott Rewards and Ritz-Carlton.

That means the most expensive Ritz-Carlton property in the world requires just $23,333 in unbonused spend on the Starwood Preferred Guest American Express, or $18,667 in spend for stays of exactly 5 nights.

At the Tier 5 Ritz-Carlton, St. Thomas, you'd pay 280,000 Marriott Rewards points for a stay that would otherwise cost $2,729 in cash (dates June 30 to July 5, 2017). At roughly 1 cent per point, that would give you a roughly 3% return on your unbonused Starwood Preferred Guest American Express purchases.

Note that Marriott is terrible about making award rates available, so this isn't as low-hanging a fruit as you might otherwise hope.

Match Starwood Preferred Guest Gold to Marriott Rewards Gold

Since the merger you've been able to link your Starwood Preferred Guest and Marriott Rewards accounts and take advantage of your highest status in either program. You can find the details here, but the most important takeaway is that Starwood Preferred Guest Gold status matches to Marriott Rewards Gold status.

You can get Starwood Preferred Guest Gold status by spending $30,000 on a Starwood Preferred Guest American Express, or simply by holding an American Express Platinum or Platinum Business card, both of which offer complimentary Starwood Preferred Guest Gold status.

Marriott Rewards Gold status, on the other hand, is somewhat harder to earn and somewhat more valuable, coming as it does with free continental breakfast at Marriott properties.

Maximize the Chase Ritz-Carlton Visa

I don't carry the Chase Ritz-Carlton Visa since I don't pay $450 annual fees, but it has a number of features that may offer genuine value: a $100 hotel credit every time you book a paid Ritz-Carlton stay of 2 or more nights and three lounge upgrades on paid stays annually.

Those can be combined, and if you're aggressive about maximizing both benefits then three paid 2-night stays, each with a $100 hotel credit and lounge upgrade, during lower-cost or off-peak periods could handily offset a big part of that $450 annual fee, especially if you're traveling with a large family.

Conclusion

It really does seem like, for now, the merger of Marriott and Starwood has given those with Starwood Preferred Guest American Express cards access to similar values as they're used to at Starwood properties in Marriott's much larger portfolio of hotels.

Personally, my Hilton Honors Diamond status and cheap and plentiful access to Hilton Honors points, as well as Hyatt Gold Passport Diamond status and cheap and plentiful access to Hyatt points through Ultimate Rewards, together mean that I have no interest in spinning up another hotel loyalty relationship. But if you're still deciding on an approach to hotel stays, it seems you could do worse than looking into the Marriott/Starwood relationship.

How I think about the Hilton Honors reforms

People are talking about Hilton's recent announcement that they'll be eliminating the concept of hotel award categories and charging whatever they think is fair for a free night at their properties. They're also rebranding their loyalty program to "Hilton Honors," although I assume I'll keep spelling it "HHonors" for at least 8-12 months.

Hilton HHonors then

While some bloggers made a big deal about Hilton HHonors variable pricing, there was nothing mysterious about it. Every property had a fixed price for standard room awards, and that price varied by calendar month. You could find each property's standard room award rate, by month, by going to the Hilton HHonors Standard Room Rewards Pricing Points Search Tool.

That URL now redirects to the Hilton homepage.

Hilton Honors now

Now, properties will still have standard award rates, those award rates will vary by day, month, or season, and there will be no way of knowing how much a room costs until you check the award availability for the specific dates you're interested in.

That's bad if you are in the business of slowly saving up Hilton Honors points for specific stays at specific properties on specific dates, since by the time you save up enough points, the number required might slip away from you.

Obviously no travel hacker does anything like that.

What it means for a travel hacker

The starting point for a travel hacker looking at this situation is the Wandering Aramean Hotel Hustle "Visualize" page, where you learn that across thousands of Hotel Hustle searches, the average value of a Hilton Honors point is 0.450 cents and the median value is 0.425 cents.

Like Doctor of Credit, I'm under no illusion that this change is being implemented to help Hilton Honors members get more value from their points.

But there are three ways the changes to Hilton Honors could be implemented, all of which would be in the spirit of "saving Hilton money," but that would have very different implications for travel hackers.

• The average value of a Hilton Honors point could go down. Since grocery store manufactured spend on an American Express Hilton HHonors Surpass requires that you get 0.35 cents per Honors point to break even compared to a 2.105% cash back card, reducing the average value of a Honors point below that level would reduce the value of manufacturing Hilton Honors points compared to cash back.
• The standard deviation could go down. Currently, even with Hilton Honors points worth 0.45 cents on average, it's not difficult to find more valuable redemptions that get you up closer to the 1 cent-per-point range. A more aggressive pricing scheme might tighten the band around 0.45 cents so that it's still worthwhile to manufacture Hilton Honors points, but the potential upside of saving up Honors points is much lower than what a travel hacker might expect today.
• The upside value might be capped. This is the real risk to travel hackers, and to the Hilton Honors program itself: if the program keeps low-value redemptions, and keeps the average redemption value at 0.45 cents per point, but at high-end properties, or during peak seasons, instead of simply charging more points switches to a revenue-based system anchored at 0.4 or 0.5 cents per point, then the "upside risk" of accumulating Hilton Honors points will be eliminated. Currently, you can accumulate Hilton Honors points with relatively little downside risk and the potential for significant upside if you stay at a particularly expensive property during particularly expensive dates. Putting a firm cap on that upside would mean there was little point in wasting credit card spend on any of their Citi or American Express co-branded credit cards.

Conclusion

I think it's an interesting question, although not one to spend too much time thinking about, whether Hilton HHonors points were worth too much in the past.

While it was and for now continues to be trivial to earn hundreds of thousands of points while redeeming them for outsized value at Hilton's prestige properties, that could only have ever represented a tiny percentage of overall Hilton redemptions, most of which were done safely in their comfort zone of 0.4 cents or below.

So, will Hilton reduce the average value of their points by causing mid-tier properties to cost slightly more points, or will they make top-tier properties cost vastly more points? We shall see.

Maybe just show up to a Global Entry interview without an appointment

I've never had a card that offered Global Entry or Precheck fee reimbursement because I don't pay $450 annual fees, but a generous reader with many, many more such credits than he could ever use insisted I use one to pay my Global Entry registration fee (thanks, SD!).

This being the federal government, all the Global Online Enrollment System, or GOES, requires is the credit card number and verification code of the credit card used to pay the enrollment fee; they don't verify the billing address or zip code of the credit card.

I have three regional Global Entry interview locations relatively close to me, but since I wasn't in any rush I didn't shop around and simply selected the first interview time available in downtown DC. It was months in the future, and I completely forgot about it.

After I rescheduled the appointment to yesterday, I diligently set up calendar reminders on my phone so I'd be sure to make it. I had a 2:45 pm appointment, and gave myself plenty of time to get there, arriving at 2:19 pm. By 2:39 pm, I had completed my interview and was walking out the door.

Maybe just show up?

As far as I can tell, the Global Entry interview appointment system allows one interview to be scheduled every 15 minutes at a given location. But at an actual Global Entry interview location, there are multiple agents working and interviews take much less than 15 minutes.

I don't know if there's an official protocol, and frankly I don't know if the agents know if there's an official protocol either: when I showed up at my interview location there was just a ratty paper book where you wrote down your name and the time you arrived. There's also a line for "notes," where people at my location wrote down their scheduled interview time or "walk-in," but that appeared to have been made up completely by the people being interviewed; there were no instructions to that effect.

This is an extremely common phenomenon, where the objects of bureaucratic indifference organize their experience so it makes more sense than it, objectively speaking, does.

Agents have access to an eclectic range of data

The first question my agent asked me was "what was the purpose of your trip to Turkey?" My totally truthful response was, "I was connecting on a flight to Budapest."

Then he asked me about my business, and I told him about this blog, so he asked me, "so is your travel for business?" My totally truthful response was, "I try to be scrupulously honest about only deducting legitimate business trips."

Only as I was walking home did I realize all he was asking me was, "business or pleasure?"

So don't overthink the agent's questions. Just say "business" or "pleasure."

The agent also asked me if I'd ever been arrested "regardless of the outcome of the case." I told him I had and he asked me if it was for a DUI (drunk driving). It wasn't (I don't drive drunk), and I told him so, and he told me that his system was showing him "some notes." It didn't keep me from being approved so I have no idea what his "notes" were showing him, but the point is, their system has more-or-less real-time access to criminal databases, so don't lie if you've ever been arrested for anything!

What are HawaiianMiles worth?

Hawaiian Airlines is a traditional US carrier that flies between the Hawaiian islands and between Hawaii and the Western United States as well as New York's JFK airport, and from Hawaii to Australia, New Zealand, American Samoa, Tahiti, Japan, Korea and China.

They have a co-branded credit card with an $89 annual fee and 35,000-mile signup bonus. The card doesn't have much value unless you fly a lot on Hawaiian metal, but if that's the case you get access to discounted flight awards and no blackout dates for award tickets. The card also gives 5,000 bonus miles each anniversary if you spend $10,000 on the card, but the card doesn't earn bonus points in any interesting categories of spend so that's unlikely to be the best place to direct your unbonused spend.

All of this raises the obvious question, "why are we talking about HawaiianMiles?" Good question! The reason we're talking about HawaiianMiles is, first, that they are historically very easy to earn. Long after Amazon.com, for example, was removed from airline and hotel shopping portals it remained on the HawaiianMiles marketplace, allowing you to earn HawaiianMiles for all your Amazon.com purchases. For heavy users of Amazon.com, that might mean tens of thousands of HawaiianMiles per year.

The second reason to look at HawaiianMiles is their travel partners. While you might not be interested in flying on Hawaiian metal between North America and Hawaii or the Pacific rim, you might be more interested in flying on their partner airlines. Since they have a fairly eclectic mix of revenue-based, distance-based, and zone-based travel partners, I had the idea of comparing HawaiianMiles redemptions on each partner with redemptions of that partner's own rewards currency.

Let's take a look!

All Nippon Airways

ANA is a transfer partner of American Express Membership Rewards, so their points are relatively easy to earn for folks with American Express cards that earn flexible Membership Rewards points.

Unfortunately, HawaiianMiles can't be redeemed for ANA flights between North America and Japan. Instead, there are two kinds of awards you can book: roundtrips between Hawaii and Haneda, in economy or business class; and roundtrips between Haneda and domestic Japanese destinations, in economy only.

There's no other way to say it: ANA's award chart for flights on their own metal is nuts. Here's Scott Mackenzie doing his best to explain it. However, we're just focused on the conversion rate between HawaiianMiles and ANA Mileage Club miles, which isn't too hard.

• Roundtrip domestic ANA flights up to 600 miles cost between 10,000 and 15,000 ANA miles depending on season, and 18,000 HawaiianMiles year-round, for a conversion rate of between 1.2 and 1.8 HawaiianMiles per ANA Mileage Club mile;
• Roundtrip domestic ANA flights over 600 miles cost between 12,000 and 23,000 ANA miles depending on distance and season. However, there are no eligible cities farther than 2,000 miles from Haneda airport so the equivalent ANA chart actually tops out at 21,000 ANA miles during high season. These flights cost 22,500 HawaiianMiles year-round, for a conversion rate of between 1.07 and 1.88 HawaiianMiles per ANA Mileage Club mile.
• Roundtrip ANA flights between Haneda and Hawaii cost between 35,000 and 43,000 ANA miles in economy, depending on season, and 90,000 HawaiianMiles, for a conversion rate between 2.09 and 2.57 HawaiianMiles per ANA Mileage Club mile.
• Roundtrip ANA flights between Haneda and Hawaii cost between 60,000 and 68,000 ANA miles in business, depending on season, and 155,000 HawaiianMiles, for a conversion rate between 2.28 and 2.58 HawaiianMiles per ANA Mileage Club mile.

HawaiianMiles are worth between 0.39 and 0.94 ANA miles.

JetBlue

JetBlue's TrueBlue loyalty program is revenue based, although the dollar value you get per TrueBlue point varies depending on, well, it varies. On a random search I found 6 different conversion rates, between 0.91 cents per TrueBlue point and 1.39 cents per TrueBlue point, with an average of 1.11 cents per TrueBlue point.

HawaiianMile redemptions on JetBlue are also revenue based, although the conversion rate comes with the stern warning: "Miles required for redemption will vary based on ticket value. Chart above shows ESTIMATED mileage redemption amounts."

Nonetheless, it's possible to calculate the minimum and maximum dollar value per HawaiianMile, and arrive at an average redemption value of 0.81 cents per HawaiianMile. Compared to the average of 1.11 cents per TrueBlue point, one HawaiianMiles is worth about 0.73 TrueBlue points. 

Korean Air

Korean Air SKYPASS miles are easy to earn through transfers from Chase Ultimate Rewards, but of course Ultimate Rewards points are valuable for all sorts of redemptions, so you might prefer to redeem a less flexible and less valuable rewards currency like HawaiianMiles instead.

There are three kinds of HawaiianMiles redemptions on Korean Air: roundtrips within South Korea, roundtrips within "Asia," and roundtrips between Korea and the United States. Flights can be booked in coach and business class. To the best of my knowledge Korean Air does not make partner awards available during their "peak" travel season, so HawaiianMiles can only be used for Korean Air redemptions during SKYPASS's "off" season (if you know otherwise let me know and I'll update this post).

• Coach roundtrips within Korea cost 10,000 SKYPASS miles or 15,000 HawaiianMiles, for a conversion rate of 1.5 HawaiianMiles per SKYPASS mile;
• Business roundtrips within Korea cost 12,000 SKYPASS miles or 30,000 HawaiianMiles, for a conversion rate of 2.5 HawaiianMiles per SKYPASS mile;
• Korean Air has three different zones in Asia, while HawaiianMiles has only a single zone. SKYPASS charges between 30,000 and 50,000 miles for coach tickets depending on zone, while Hawaiian charges 30,000 HawaiianMiles, for a conversion rate of between 0.6 and 1 HawaiianMiles per SKYPASS mile. In other words, HawaiianMiles are 40% more valuable than SKYPASS miles when redeemed for Korean Air flights to Southwest Asia;
• In business class between Korea and Asian destinations, SKYPASS charges between 45,000 and 90,000 miles while HawaiianMiles charges 60,000 miles, for a conversion rate between 0.67 and 1.33 HawaiianMiles per SKYPASS miles;
• Finally, between Korea and the United States SKYPASS charges 70,000 miles in coach and 125,000 miles in business, while HawaiianMiles charges 100,000 miles in coach and 200,000 miles in business, for a conversion rate of 1.43 HawaiianMiles per SKYPASS mile in coach and 1.6 HawaiianMiles per SKYPASS mile in business.

In sum, one HawaiianMile is worth between 0.4 SKYPASS miles (on domestic business class flights) and 1.66 SKYPASS miles (on coach flights to Southwest Asia).

Virgin America

Like JetBlue, Virgin America's Elevate program is revenue based. Unlike JetBlue, however, HawaiianMiles redemptions on Virgin America are distance-based, with three distance bands: under 750 miles, between 750 and 2,000 miles, and more than 2,000 miles. Virgin America Elevate doesn't black out award space to their own members (since the program is revenue based), but they do limit award availability made available to partners.

Until recently, there was no good way of checking Virgin America partner award availability, but since Alaska acquired Virgin America, it's now possible to search for partner award seats using the Alaska search engine. Look for dates where the lowest level award seats are available.

I can't think of any useful metric to convert a distance-based award chart into a revenue-based program. Elevate miles are worth "about" 2.2 cents each, so that's as good a benchmark as any when deciding whether to redeem HawaiianMiles on Virgin America flights.

Virgin Atlantic

Virgin Atlantic's Flying Club breaks out award prices for each of their destinations individually, while HawaiianMiles consolidates them into geographic areas. That means HawaiianMiles charges the same price for destinations that Virgin Atlantic charges different amounts for. Here's the HawaiianMile award chart for redemptions on Virgin Atlantic, helpfully annotated with the amount charged by Virgin Atlantic Flying Club:

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The key takeaway is that while redemptions always require more HawaiianMiles than Flying Club miles, the difference narrows on Upper Class redemptions since HawaiianMiles awards don't accelerate in price the way Flying Club awards do. So while HawaiianMiles are worth between 0.25 and 0.42 Flying Club miles for economy redemptions, they're worth up to 0.92 Flying Club miles on Upper Class redemptions between, for example, the UK and Johannesburg.

Note that all redemptions on Virgin Atlantic will have carrier surcharges, which you can get a sense of on the Flying Club website.

Virgin Australia

Virgin Australia's Velocity program is only open to residents of Australia and a few other countries in the Pacific, so you're unlikely to ever actually redeem Velocity miles for a Virgin Australia flights.

HawaiianMiles and Virgin Australia Velocity both use distance-based award charts, although they use different distance bands (Velocity has more, smaller bands). Here's the HawaiianMiles award chart, with the corresponding cost in Virgin Australia Velocity miles:

View fullsize

Note that Australia is very far from the other continents so unless you're flying around the South Pacific all international redemptions will fall in the "Over 4,000 Miles" distance band, where HawaiianMiles are worth between 0.28 and 0.6 Velocity miles each in economy and between 0.3 and 0.64 Velocity miles in business.

Conclusion

Now that we've reached the end of the exercise, what kinds of conclusions can we draw? First, it's worth reiterating that HawaiianMiles are not very valuable, so you certainly shouldn't be going out of your way to earn them.

However, if you have access to cheap and plentiful HawaiianMiles, it's possible to redeem them for real value:

• If you live in a city served by JetBlue, HawaiianMiles are worth an average of 0.81 cents towards those flights. It would take a lot of HawaiianMiles before you could redeem for a cross-country flight in their Mint business class product, but if that's the flight I wanted to take I'd much rather redeem HawaiianMiles than pay cash!
• If you can find partner award space on Virgin America, short roundtrip flights cost as little as 20,000 in economy, and the longest flights in first class top out at just 90,000 HawaiianMiles roundtrip.
• If you can find Korean Air partner award space, HawaiianMiles can be redeemed for first class travel between the United States and Korea, or within Asia, at relatively reasonable rates.

If you don't have the patience or inclination to book travel on Hawaiian's partner airlines, HawaiianMiles can be transferred to Hilton HHonors points at a rate of 1.5 HHonors points per HawaiianMile. HHonors points are also not very valuable, but they're much easier to redeem than HawaiianMiles.

Finally, HawaiianMiles can be redeemed for about half a cent each in rental car gift certificates, or even gift certificates to Foodland, a Hawaiian supermarket chain.

Sustainability: value, cost, and risk

When a good deal comes along, especially if it doesn't have a designated expiration date, folks often talk about whether the deal is "sustainable" or not. The general idea is that if a deal is "too good to last," then it won't.

Of course, there are lots of ways a deal can end. If it's ended retroactively, those who jumped on it quickly will find they've wasted their time, or worse. If it's ended going forward, the prospective benefits of a credit card application may be cut short, or someone can be left with a garage full of merchandise they have to return or resell at a loss.

I think there are three slightly different issues related to sustainability that guide how I think about how long a deal is likely to last: value, cost, and risk.

High-value deals aren't particularly vulnerable

For $75 per year, anyone can carry a Hilton HHonors Surpass American Express and earn 6 HHonors points per dollar spent at grocery stores. Applied to certain high-value redemptions, like a 5-night stay at a premier property like the Conrad Maldives Rangali Island, that might work out to a roughly 14% return on your grocery store spend (for a sample reservation from December 31, 2017, to January 5, 2018).

That's a great value. And since it costs American Express just a fraction of the value the cardholder receives, it's not particularly vulnerable. After all, American Express doesn't care where you redeem your Hilton points, they care what they pay for them, and they pay much less for 6 HHonors points than they earn on your grocery store swipe fees.

Likewise, the US Bank Flexperks Travel Rewards card offers "up to" 4 cents per dollar spent at grocery stores, but it's not like you get a check every month. Instead, you have to save up enough points to redeem for a flight you're planning to book. Then you have to hope the fare is close to the top of a redemption band. It could take the average customer years to save up enough points to redeem for a single flight, during which time they've paid multiple annual fees and they haven't cost US Bank a dime — in fact, they've been a profit center. That's a high-value deal to the travel hacker that has nonetheless proven extremely resilient over time.

High-cost deals are vulnerable in the medium-term

Compare that to the original "old" Blue Cash card from American Express, which offered 5% cash back at grocery stores and drug stores. Admittedly, cash back accrued with a 2-month lag time, but you could earn unlimited cash back far in excess of any swipe fees on a card, and with no annual fee. The "old" Blue Cash card was a loss center, and American Express noticed. They shut down some heavy hitters and transitioned the remaining cardholders to the product they continue to offer, which limits bonused earning to $50,000 of spend per calendar year.

Banks and other merchants have proven willing, but not particularly skillful, at shutting down opportunities like this. When you find an opportunity that moves cash directly to you from a bank or merchant, it's a good bet the opportunity will be closed within 6-18 months.

High-risk deals are extremely vulnerable

In my experience, banks don't seem to mind customers who grind away at them day in and day out. The reason isn't any secret: acquiring a single customer who runs up credit card balances they're unable to pay off covers the costs of many people happily earning 1-2% per month. A fisherman doesn't get at angry at all the fish he doesn't catch; he knows the more fish there are, the more likely he is to land a big one.

But unprofitable behavior is different from risky behavior. Spending a multiple of your credit limit each month isn't likely to get you shut down because it's unprofitable — lots of things we do are unprofitable in the short term. Spending multiple times your credit limit each month is likely to get you shut down because it's risky — if you look like you're struggling to juggle your credit limits across multiple cards, it creates the (not unreasonable!) fear that a particular bank might be the one left holding the bag.

That's not to say risky deals aren't worth pursuing. They're often very worth pursuing! But the riskier your behavior looks to the other participants in a deal, the more rapidly it's likely to be shut down — even if it's no more or less profitable than a high-value deal that's been available for years.