True Point Value: an example of misleading cents per point value

I’m not a fan of using cents per point (CPP) to measure the amount saved using points, particularly since point programs are designed to alter our purchasing and travel behavior. CPP is often misleading because

  1. You would never have paid the sticker price for what you purchase with points. The actual value of the item to you (the amount you would have paid) is almost always less than sticker price.
  2. CPP doesn’t consider all the ancillary bookings like positioning hotels and positioning flights necessary to take advantage of a redemption.
  3. CPP doesn’t consider viable alternatives if you were to book with cash.
  4. As a corollary to (3), CPP doesn’t consider the cost of flexibility. If you’re willing to make your travel plans around a unicorn business class flight, the viable alternatives should be equally as flexible.
  5. To make points bookings, you need bank of depreciating points. Even the most ardent sticklers of the “earn and burn” strategy most likely has million+ points banked at any given time. With a 5% depreciation rate, you lose 50k points per year for every million points banked.

Park Hyatt Paris-Vendome is usually around $1497/night for a random set of nights.
Park Hyatt Paris-Vendome is usually around $1497/night for a random set of nights.

There are several highly rated, 5* hotels in the area. They are about a third the price of the Park Hyatt.
There are several highly rated, 5* hotels in the area. They are about a third the price of the Park Hyatt.

An example of (3) is the Hyatt Paris Vendome. During these nights, they are 35k points per night while the sticker price was $1500/night. On paper, that’s 4.29 cents per point. Very few of us would have paid the sticker price. One of the reasons is because there are a half dozen 5-star, exceptional (9.3+/10 on Expedia) hotels within 3 blocks of this hotel and they are going for 1/3 to 1/2 the price! Even if you wanted a luxury stay in Paris, most of us wouldn’t have paid $1000/night to stay at this particular hotel.

If you’re willing to pay $700/night for a luxury hotel at the Paris City Center, the true CPP for this Hyatt booking is closer to 2 cents per point rather than 4.29.

The best way to get the actual value of the points is to look holistically at all reasonable alternatives while planning a trip. Compare your entire trip with points versus what you would have booked with cash. This includes being just as flexible with dollars as you are with points, and valuing trips by the actual cash amount you would pay for it, not some inflated sticker price.

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