PointsValues Methodology for Valuing Points and Miles
We look at a variety of sources and trends to run models on how points and miles costs compare to the published cash rate. We then distill this information to answer two key questions: 1) what good, average and poor redemption rates can one expect to receive, and 2) what are some factors that affect the likelihood of getting a good redemption?
Our methodology relies on a probabilistic approach to valuing miles and points. We believe this is an apt method because there is always uncertainty in your future travel needs, and uncertainty on the loyalty program side such as published cash rates, category changes and devaluations. We believe, therefore, that fundamentally judging the value of a loyalty program currency involves asking what the cash value would be if the points / miles are spent on a set of randomly selected hotels, flights and dates.
We then analyze factors that determine the likelihood of one getting a better redemption. Oftentimes, these factors include things like airline selection or hotel categories.
A good redemption rate is what you aspire to achieve when maximizing the value of your points or miles, and helping you to accomplish this is the goal of our website. If you are getting a redemption value close to this rate, you can consider it to be a good redemption by virtue of the fact that it is less common and considered to be towards the upper end of all possible redemption rates.
Mathematically, our good redemption rate represents approximately the 75th percentile of all possible redemptions.
An average redemption is what you would expect to achieve, over the long run, if you did not try at all to maximize the value of your points or miles. In other words, if you blindly chose to pay in points or miles at random, you would expect to receive this redemption rate. Of course, in the short run, your results would likely differ, but the average redemption rate represents a likely cash value if you were to put in no effort into maximizing the value of your points and miles.
Of course, our goal is to be better than average, but this is a good reference point in knowing what the lower end of what one can expect to receive in redemption value.
Mathematically, our average redemption rate represents approximately the 50th percentile of all possible redemptions.
A poor redemption is what you would achieve if you consistently redeem your points or miles for hotel stays or flights that offer lower than typical redemption rates.
There may be various reasons beyond your control for why you would receive a poor redemption rate, such as geographical circumstances or personal preference. This is a good reference point in knowing what the (nearly) worst-case scenario of what one can expect to receive in redemption value.
Mathematically, our poor redemption rate represents approximately the 25th percentile of all possible redemptions.