Day: August 13, 2024

EDITOR’S NOTE: If you’re viewing this on a platform that doesn’t properly render the math formulas, pivot to the website for this article.

Introduction

When calculating the cash value of points redeemed for a free night at a hotel, a surprising number of blogs ignore the parking fees and resort fees charged by most programs. That disingenuously inflates the value of a hotel point, unless you’re able to talk your way out of a resort fee and you can get to the hotel without a vehicle.

Fees on Award Stays in Major Programs

Let’s interlude with a quick refresher on major programs’ rules about fees on award stays:

  • Hilton: no resort fees on points redemptions, but parking charged
  • Hyatt: no resort fees on points redemptions, parking may be charged depending on elite status
  • Marriott: resort fees and parking charged
  • Choice: resort fees and parking charged
  • Best Western: resort fees and parking charged
  • IHG: resort fees and parking charged

Calculating Cents per Point

Taken at face value, you’ve effectively got a cash co-payment on award redemptions in the form of fees with most major loyalty programs, which reduces the value of your points. The naive formula that you’ll typically see for cpp (cents-per-point) is:

cpp = \frac{rate*100}{points}

But, the total cash value of your stay is the nightly rate plus fees, not just the nightly rate. And as a result, we ought to include resort fees and parking in that valuation. Let’s introduce a MEAB reduced comparative value cv, which is a reduced overall cents per point that takes fees into account for redemptions:

cv_{meab} = \frac{(rate-fees)*100}{points}

Looking at the JW Marriott Austin for a concrete example: For a Saturday night, one-night stay in the cheapest room, the cash price next weekend is $235, plus a $25 destination fee, plus a $54 self-park fee. An award night for the same room on the same weekend is 43,000 Bonvoy points. That means we’re getting a reduced MEAB comparative value (cv) of:

cv_{meab} = \frac{(\$235-\$25-\$54)*100}{43,000} = 0.36

That works out to a whopping reduced comparative value of 0.36 cents per point, which is bad even by Marriott standards. Side note: If you instead booked this Marriott stay via the Chase Ultimate Rewards portal with a Sapphire Reserve, the $25 resort fee would be included in the cash rate and you’d end up paying 17,333 points and $54 for parking, instead of 40,000 Bonvoy points and $79 in fees. Remember this example when you’re looking the Ultimate Rewards 70% transfer bonus to Bonvoy.

So What?

Looking at reduced value comparative calculations lets you compare currencies across different programs in a more genuine and equitable way. The results aren’t always pretty, but they do make Hyatt and Hilton look better than other programs ceteris paribus.

Happy Tuesday friends!

Don’t worry friends, there’s always something more at MEAB.