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By far, the most common question I’m asked about loyalty points is ‘How much are they worth?’ — followed by ‘How should I use them?’. Points and miles are a form of currency, so they have value. However, unlike a traditional currency where you can use a £1 coin to pay for something worth £1, the points and miles value can vary hugely depending on how you choose to use them.
TPG UK publishes a monthly valuation of popular mileage currencies. There are dozens of decisions and considerations that go into determining each amount. In the simplest terms, they are the value you can realistically get when redeeming them. Of course we’d love for everyone to get the maximum value by redeeming for long-haul premium flights, however, we recognise both the practicality and difficulty of using them this way.
So, we balance that value with a value for say, using Avios for Reward Flight Savers. You may disagree with our valuations, and that’s fine — we welcome additional opinions, as these help shape each valuation.
But if you have a a balance of any mileage currency (including those not listed in our monthly list), how can you determine their value?
If you can’t use your points, then they are essentially worthless. If you are only interested in using your points for first class flights to Sydney booked six weeks in advance, then you will likely be unable to use your points.
We strive to teach you as many uses for your points as possible. If you consider your points worthless because you can’t use them, but can discover new ways to actually use them, then they suddenly have a value. Conversely, if you find your points easy to use it may increase your value of them.
There are various ways to redeem points for a fixed value, such as a gift card. This is generally a poor value use (well below our monthly valuations), but if you are essentially exchanging them for cash for something like a Tesco voucher, then there is fixed value for each point.
Here’s where it gets a bit complicated. You will generally get the most value from your airline points at least when redeeming for premium flights — whether that is for a straight out redemption or an upgrade. You’ll often get far more value than our monthly valuation. So you may redeem, say 100,000 points, for a premium seat or upgrade that has a retail price of £5,000.
The challenge with assigning a value this way is that there is likely to be two different amounts — one is the sky-high retail price of the seat you have scored with your points, and the other is the price that you would have realistically paid for that same seat in cash.
Premium cabin flights can be really expensive to purchase in cash — some first class fares can be £10,000+. I love a first class flight as much as the next person, but I would never, ever pay that much for it. So for me to say, ‘I obtained XX per point value because my flight cost £10,000’ to me feels untrue because I would never have paid the asking price for a cash seat.
If I would have been willing to pay, say £3,000, for that seat in cash (noting the airline would likely never sell the seat that cheap), then I think it’s a much more reasonable and accurate valuation to say ‘I obtained XX per point because I used points for a flight for which I would have otherwise been willing to pay £3,000’.
This topic has created some spirited discussion in the TPG UK office. General Manager Christian Kramer agrees that he has a maximum value he would be willing to pay for a cash ticket on a particular route, so he would measure the points used against that maximum value.
Director of Content Nicky Kelvin says it can be difficult to even determine a maximum threshold value for which he would pay cash, because using points has allowed him to have experiences that are difficult to value because they are so unique and treasured. It’s certainly difficult to put a monetary value on having a shower on an aircraft. He also notes that redeeming points for last-minute flights can be a great value because the cash price of some last-minute flights — even in economy — can be very high. But, he would not necessarily be willing to pay more in cash for a last-minute ticket (especially in economy) than a ticket booked in advance.
Assuming you can use your points, it’s smart to come up with your own valuation of each point that you are comfortable with, using some of the metrics above. This will make it easier to decide when and how to use the points and ensure you’re happy with how you use each and every one.
Featured image by JT Genter / The Points Guy
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