How do you want to think about budgeting for your hotel stays?

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I've written a series of posts about my preferred metric for evaluating hotel loyalty programs, which I call imputed redemption values. This is a straightforward metric that tells you if redeeming hotel rewards points gives you a better or worse deal than paying cash that you've manufactured on your most lucrative cashback-earning credit card.

For example, a 95,000-point Hilton Honors redemption would require $15,833 in bonused spend on a Surpass American Express card. If your most lucrative cashback card earns 2%, that gives you a breakeven point of $316 (since for prices above that, a points redemption will require less manufactured spend), if it's 2.105% cashback you have an imputed redemption value of $333, and if it's 2.625% your IRV is $415. 

This metric doesn't tell you what you should do with points you've already earned — I always prefer to redeem points before spending cash. But if your points redemptions come in consistently above your imputed redemption values (95,000 points for a $2,000 night), then you are well-advised to continue earning those points, while if you fall consistently short (95,000 points for a $95 night), you might consider moving away from those loyalty currencies and towards additional cashback, instead.

Yesterday Frequent Miler posted an interesting analysis of some data (with a followup here) from the Hilton Honors program showing, as I'd hypothesized last month, that the new program would see redemptions bunched more tightly around the 0.4 cent per point redemption level. He provides some important insight on different factors that might affect the ultimate value you receive; read the whole thing.

Such analyses are very useful, but it's also helpful to pull back occasionally and give some thought to more basic questions: what's the best way to save money on your hotel stays?

What programs allow you to earn the stays you want as cheaply as possible?

Bottom-tier stays

There are phenomenal values at the very bottom of several hotel loyalty charts:

  • If you have a US Bank Club Carlson credit card earning 5 points per dollar on all spend, you can earn a free night at any Category 1 property every time you spend $1,800. Even if your backup card earns 2.625% on unbonused spend, you're exceedingly unlikely to find a room for less than $47.25 per night — taxes alone are likely to be that much!
  • With an American Express Hilton Honors Surpass card you can earn 5,000 Honors points, which is, I believe, still technically the fewest points required for a Hilton award stay, after spending $833 at a bonused merchant. That's not a value that any other hotel loyalty program currently offers.

Mid-tier stays

If you're staying in a more expensive market, for example mid-sized or larger cities, there are a few options for getting reliably outsized value:

  • If you signed up for a Barclaycard Wyndham Rewards credit card back when the card still earned 2 Wyndham Rewards points for each dollar you spend, you can earn a free night at any of Wyndham's properties for every $7,500 you spend on the card — and Wyndham has a LOT of properties!
  • In my experience Hyatt offers consistently reasonable pricing for mid-tier stays. For example, while the Chase Marriott credit card's Category 1-5 annual award certificate has become worthless as desirable properties migrate up and out of Category 5, most of Hyatt's centrally located city properties still top out at Category 3 or 4, costing 12,000 to 15,000 points per night, and are eligible for the Chase Hyatt credit card's annual free night certificate. If you have a Chase Freedom Unlimited credit card earning 1.5 Ultimate Rewards point per dollar, and a premium Ultimate Rewards card that lets you transfer those points to World of Hyatt, these mid-tier properties have an imputed redemption value between $160 and $200, while nightly rates can be substantially higher.

Top-tier stays

At the most expensive properties, a travel hacker has a few options:

  • Hilton Honors currently tops out at 95,000 points per night (when standard room awards are available), allowing you to earn a free standard room award night for $15,833 in spend, or $12,667 on stays of exactly 5 nights, since the fifth night is still free on award stays;
  • World of Hyatt standard room redemptions top out at 30,000 points per night. If you choose to manufacture unbonused spend on a Chase Freedom Unlimited in order to transfer Ultimate Rewards points to World of Hyatt, such a top-tier redemption would require $20,000 in spend, with an imputed redemption value of between $400 and $525 per night, depending on your best cash back alternative.
  • Starwood Preferred Guest, and their new owner Marriott Rewards, seem like they should potentially offer some value, and indeed if you're committed to visiting one of their top-tier properties you should certainly redeem points instead of paying cash. If you're committed to visiting a top-tier, 45,000-point Marriott Rewards property, then manufacturing $15,000 in spend on a Starwood Preferred Guest American Express card and transferring the points to Marriott Rewards at a 1-to-3 ratio is clearly the cheapest way to pay for such a stay. However, for stay categories below top-tier Marriott Rewards stays I believe most travel hackers are likely to find more value elsewhere.

Conclusion

I have always thought it was a curious fact about travel that, when you do enough of it, transportation itself consumes a smaller and smaller portion of your travel budget. Of course you can make it more expensive by traveling in more expensive cabins, but the fact is a single night in a hotel can easily cost as much as a plane ticket!

I've never had any trouble finding miles, points, or cash to pay for flights; I spend much more time calibrating the points I earn for hotel stays than I do for my air travel.