I’ve mentioned that recently I made a very non-sexy IHG redemption, getting only 0.51 CPP. Why was it non-sexy? Well, according to my post, I speculatively value IHG point at 0.5 cents. What I mean by that is I would be willing to pay this much to acquire it. Or would I?
The more I thought about it, the more I realized that if someone offered me IHG currency at that price right now, I would pass. There are a few reasons why. Even though I burned 75,000 IHG points, I still have a decent supply of this currency left. Also, I have been acquiring points and hotel certificates (via sign-up bonuses) in various hotel programs such as Wyndham, Hyatt and Club Carlson.
All those co-branded cards come with renewal perks, and should give me a decent supply of points each year. We don’t take that many vacations (compared to most hobbyists), so that amount should be sufficient for several long weekends. Plus, I can always sign up for hotel cards if needed.
Another reason I would not buy IHG points speculatively at 0.5 cents each is because I know I can usually obtain them via Daily Getaways promotion that comes each year, or regular IHG sale where you can get 100% bonus on your purchased points. In each case, the price works out to be around 0.58 cents per point.
Hotel points can be likened to an individual stock. Sure, they can be redeemed for gift cards etc., but the rate is usually abysmal. So, if you want to get any kind of decent value, you are stuck with their properties. I don’t speculatively buy individual stocks, but if I did, they would have to come with a significant discount. And by significant, I mean “huge.” Since I know I can buy IHG points for 0.58 on a regular basis, paying 0.50 cents is “weak sauce.”
Which brings me to another point. The stash I used for this redemption was obtained via past IHG promos where I paid around 0.30 cents per point. I don’t know the exact figure because some of the stays we would have made anyway. But needless to say, it was a very attractive cost/benefit ratio.
Imagine you had a stock which appreciated 70% over the last two years, and you currently find yourself in need of cash. Also, you have a chance to sell this stock and pay no tax on it. Would you do it? This is essentially the situation I found myself in. So, I “sold” the stock.
Of course, it’s a totally different story when you have an immediate redemption in mind. The best example is PointBreaks program where all properties cost only 5,000 IHG points per night. This is a tremendous bargain, and could easily justify buying IHG points for 0.58 cents each. In this case, you are basically “flipping stocks.”
You enter a position near the close of one trading session (capitalizing on discounted price of IHG points) and exit at the open of the next session for a nice quick profit (redeeming those points at a decent property that otherwise would cost more). Of course, there is always a risk that your dates won’t be available, but such is the nature of trading stocks (hotel points).
This is a classic example of buying low and selling high. And that’s what this hobby is all about. Forget some arbitrary number that a famous blogger puts on miles and points. It’s about acquiring currencies cheap (or close to free), and redeeming them for outsized values.
Obviously, you have to take several factors into account. If you have a trip coming up and are reasonably sure that you’ll get better value then rather than burning your points now, it could make sense to hang on to them. In this particular case, you have “insider info” that makes you confident that your stock will appreciate further. In my case, I was quite happy getting a 70% return on my investment. Did I forgo a spectacular redemption in the future, aka missed out on a bull market? Maybe, but I won’t be losing sleep over it.
So, how much would I speculatively pay for IHG points? I’m not really sure. But at this time, it’s much closer to 0.3 cents than 0.5 cents. Once again, it has to do with the amount of points I currently have, our travel style and other factors.
To a lesser extent, I apply the same logic to miles. How so? Well, I need miles to go to Europe, but I don’t need hotel points. So, I am a bit more picky when it comes to miles redemptions. Still, I’ve used them on numerous occasions where I only got 1.3 CPM on award seats. And I probably will do it again. Once again, miles can be likened to a volatile stock, though not quite as volatile as hotel points.
Plus, most of my miles were obtained via sign-up bonuses where my investment was minimal. Basically, I just had to spend a certain amount in order to collect the prize. I did buy AA mies for 1.1 cents each because at the time, it seemed like a good idea. Would I do it again? Probably not. Although, I’m reasonably sure that I will get my money back when I “sell” them.
Much of this hobby is a guessing game, but the principle is quite simple: Buy low, sell high. Simple.
Leana is the founder of Miles For Family. She enjoys beach vacations and visiting her family in Europe. Originally from Belarus, Leana resides in central Florida with her husband and two children.