Some people collect hotel points without having a very good idea of what they are worth. This sometimes leads to a dilemma. For an upcoming hotel stay… should I pay cash or redeem my points?
It’s not always easy to decide, but it might help to explain how I approach the decision. My approach is the same for every hotel chain – with some minor differences – so I’ll look at each major hotel chain separately. Today I’ll look at Hilton Honors…
Step One is Always Math (Sorry!)
Hilton Honors will let you book any room using points, although the best value comes from standard rooms booked in five-night blocks. It doesn’t matter whether you book using points or whether you pay cash – you will get the same room. And if you enjoy elite status, you will have the same chances of receiving an upgrade. So you really are just comparing two different payment methods.
Here’s an example (the Hampton Inn in Mexico City’s Historical Center)…
It is VERY IMPORTANT to include all taxes, service charges and resort fees, because you will NOT have to pay these on a full award stay with Hilton Honors.
In this example, I could pay 70,000 points in total, or $377.23 in total.
You simply divide one by the other in order to calculate a “cents per point” – $377.23 / 70,000 = 0.54 cents per point.
Is That Good or Bad?
It depends on your own perspective…
But I like to compare this to the cost of BUYING points from Hilton Honors. At very regular intervals, you can buy Hilton points for 0.5 cents each. So this provides a valuable reference point.
Since you could buy Hilton points for 0.5 cents and redeem them for 0.54 cents in my example above, you are potentially on the right track…
But You Earn More Points When Paying Cash for Your Room
… yes you do. Especially when there are interesting promotions happening, such as the current double/triple point promotion.
If you pay cash for my Mexican example, your rate would be $317 pre-tax. You would therefore earn:
- 10 base points per $ – 3,170 points
- 20 promo points per $ – 6,340 points
- elite status tier bonus (another 10 points per $ for Diamonds) – 3,170 points
- 14 Aspire credit card points per $ – 4,438 points
- For a potential total of 54 points per $ – 17,118 points
So Your “Opportunity Cost” is Higher
By redeeming points instead of paying cash, you could be forgoeing the chance to earn 17,118 points. So, your “opportunity cost” when redeeming points is actually 87,118 points (70k + 17,118). Compare that to the $377.23 cash cost and you’d be getting 0.43 cents.
I hope that it’s not getting too complicated, but it does demonstrate that you definitely wouldn’t want to buy 70,000 points for this redemption opportunity.
But I Might Never Get Around to Spending my Hilton Points!
This is the crux of the matter. If you are fully committed to Hilton Honors – with the Aspire credit card in your wallet (and the associated Diamond status) – you will struggle to find good opportunities to REDEEM points, simply because it will be so tempting to pay a cash rate and earn tens of thousands of points more.
So, you must draw the line somewhere… But you might have more than one. Here are mine…
- 0.6 cents of value or higher –> ALWAYS use points (I can buy more later if needed)
- 0.5-0.6 cents of value –> PROBABLY use points (depending on my balance and promotion details)
- 0.4-0.5 cents of value –> MIGHT use points if my balance is growing too large
- less than 0.4 cents of value –> NEVER use points…
The Bottom Line
Some people have inflated expectations of the value of a Hilton point – perhaps driven by blogs trying to sell you credit cards – and will hang on to their Hilton points until the right opportunity comes along.
Other people are more conscious of “earning and burning” points to avoid potential devaluations. But that doesn’t mean that you should just waste points on low value redemption options.
So pick a number that works for you and enjoy those free stays without worry…
Thanks for the logical explanation!