The Personal Value of Points
Working out the ‘value’ you’re getting for points isn’t always that straightforward. In particular it’s very easy to oversimplify things by just dividing the cash value for the redemption, by the number of points you’re redeeming. Whilst this will give you a good guide for the return you’re getting, there’s a pretty big question you shouldn’t forget to ask: ‘If you weren’t using points, then what would you be spending instead and/or willing to spend?’ Which also leads to other considerations, such as whether you’re getting any extra perks on a points option and whether this is a saving on something you’d be doing anyway, or a luxury you can only justify because of points.
Recently I very nearly slipped into the trap of oversimplifying my points ‘value’ based purely on cash value. In my example, I thought I was about to get 1.5p per Avios (a decent return), and eventually realised that my personal valuation should have been more like 0.27p per point. Here’s why:
I was looking at options for a summer break during the school holidays for my family: 6 people – myself, my wife and four children. As this is a peak period, I assumed converting some of my Amex points to Avios and identifying available reward flight options for a list of destinations we’re interested in would be our best option. So I used BA Redemption Finder, found a couple of decent options and eventually decided that August economy flights from London Heathrow to Palma Majorca at a total of 90,000 Avios (15,000 return per person), plus £200 taxes was a decent deal. For comparison the cash price for 6 seats was about £1,600, so my 90,000 Avios would have been getting me £1,400 of flights. This must be the best deal I could get, right?
Wrong! Luckily, before I booked I had the sense to reflect – what would I have booked if I didn’t have the Avios? Well, for a start, being based in Bristol, 100 miles from London, I wouldn’t have paid £1,600 to drive that far to fly. The only reason I’d started with London, was that British Airways don’t fly from Bristol and I was assuming Avios would be my best option. If I was paying for flights I would always fly from my local airport, where possible. So I checked flights from Bristol to Majorca, assuming they’d also be £1,200+ in school holidays and was surprised to find EasyJet flights during that peak period starting at just £443 for the whole family. These were only available on very select dates (otherwise the price generally was £1,000+ for 6 people), but as my only requirement was flights 7-10 days apart during the school holiday period, this wasn’t an issue. Suddenly, to me personally the 90,000 Avios would now not only represent just a £243 saving, they’d also come with the unnecessary inconvenience of having to drive to London, and pay for airport parking.
On the flip side, you could argue that there is extra value in a British Airways flight, and the cheaper EasyJet flights are night flights, which wouldn’t be my first choice. However, it comes back to the very personal question of the importance of any specific differences. To us, as a family, on balance flying from our local airport is more important than flight departure time, flexibility on dates or the difference between EasyJet and BA, and so the £443 flights fit our requirements better than the £1,600 flights – therefore even redeeming the 90,000 points as a statement credit, and treating this as a £405 discount against the flight costs, would be a better value option. For someone living in London, someone who needs very specific dates, etc. the calculation would be completely different and the Avios option would likely represent better value.
The value of every points redemption relies on your own set of variables – your requirements, preferences, etc. Which is why it’s important not just to treat the cash value as the key factor, but to also think carefully about alternative options and your own valuation.
So, now I have good value flights, departing from my local airport, and I’m still sitting on an extra 90,000 points. Not only that, but booking the flights on my Amex Platinum, got me double Amex points and helped me hit a ‘Save to Card’ bonus points offer for 500 extra points – so I also earned 1,400 extra points on the booking itself.
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