Note: This post was updated on 8/13/11 to improve the methodology.
Today, I will show you how I assign values to hotel points, which can get a little tricky. I use the same basic approach to value hotel points that I used to value airline miles: determine the ratio of dollars to points for a hotel stay. The table below shows 4 different hotel category redemption levels for Starwood, Hilton, Marriott, and Priority Club.
Today, I will show you how I assign values to hotel points, which can get a little tricky. I use the same basic approach to value hotel points that I used to value airline miles: determine the ratio of dollars to points for a hotel stay. The table below shows 4 different hotel category redemption levels for Starwood, Hilton, Marriott, and Priority Club.
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A
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B
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C
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D
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E
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F
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G
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Hotel Points Valuation Tool
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Hotel
|
Rewards
Category |
Points Required
|
Estimated Cost
|
Value of
Points |
Sign-up Promotion
|
Promotion
Value |
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Starwood
|
7
|
35,000
|
$1,055
|
$0.0301
|
30,000
|
$904
|
||
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Starwood
|
5
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16,000
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$318
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$0.0198
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30,000
|
$595
|
||
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Starwood
|
3
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7,000
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$179
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$0.0256
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30,000
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$767
|
||
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Starwood
|
1
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3,000
|
$91
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$0.0303
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30,000
|
–
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Average:
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$0.0265
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$756
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Hilton
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7
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50,000
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$378
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$0.0076
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50,000
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$378
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Hilton
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5
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35,000
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$231
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$0.0066
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50,000
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$330
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Hilton
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3
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25,000
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$157
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$0.0063
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50,000
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$315
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Hilton
|
1
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7,500
|
–
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–
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50,000
|
–
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Average:
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$0.0068
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$341
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Marriott
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7
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35,000
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$426
|
$0.0122
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50,000
|
$608
|
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Marriott
|
5
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25,000
|
$264
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$0.0106
|
50,000
|
$528
|
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Marriott
|
3
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15,000
|
$175
|
$0.0117
|
50,000
|
$584
|
||
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Marriott
|
1
|
7,500
|
$99
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$0.0132
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50,000
|
$660
|
||
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Average:
|
$0.0119
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$595
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||||||
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Priority Club
|
Intercontinental
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40,000
|
$371
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$0.0093
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60,000
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$556
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Priority Club
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Crowne Plaza
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25,000
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$264
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$0.0106
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60,000
|
$634
|
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Priority Club
|
Holiday Inn.
|
15,000
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$215
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$0.0143
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60,000
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$860
|
||
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Priority Club
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Candlewood
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15,000
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$113
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$0.0075
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60,000
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$453
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||
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Average:
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$0.0104
|
$626
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Methodology
In order to arrive at the Estimate Cost of Room, in column D, I collected rate info from the respective websites of the hotels listed in the table. I pulled rates for the following cities: Los Angeles, Chicago, New York, Miami, Sydney, Hong Kong, Beijing, Tokyo, London, Paris, Rome, and Moscow. Data points were not available in every city, or in every category. However, each data point is weighted equally in the calculations.
Conclusion
According to my analysis, Starwood points are the most valuable, at approximately 2.7 cents per point. After that is Marriott at 1.2 cents per point, followed closely by Priority Club at 1.0 cents per point. Trailing the pack is Hilton at 0.7 cents per point. Before going any further, it is important to point out that there is a tremendous amount of inconsistency in the pricing of hotels relative to their assigned category. For example, a Starwood Category 5 hotel might cost $400 in New York, but only $200 in Chicago. Each will cost you 16,000 points, but one is clearly the better value. Perhaps more importantly, international hotels tend to offer better deals than do domestic hotels. I initially ran this analysis using only domestic hotels. When international hotels were added, the value of the points went up for every program. The key takeaway here is that hotel points can have significantly different values depending on how they are used. It is important to be aware of these differences in order to make the most of the points you have earned. This chart should provide you with a starting point to determine the difference between a good and a bad deal.
Interestingly, at Marriott properties, there is consistency in the price/points ratios across hotel Categories. The implied value of points across all categories falls within a narrow range (1.1 to 1.3 cents per point). Starwood points appear to be more valuable when redeemed at the very low end or the very high end of the Category spectrum, while Hilton points appear to be more valuable when used at the high end of the spectrum.
Columns F & G are intended to estimate the value of the current credit card promotions that are available. (I have not included Hyatt in this list because the price/points ratio is quite difficult to extract from their website. In addition, the promotion on the Hyatt credit card offers 2 free nights at up to Category 4 rooms, not a specified amount of points.) Links to the current promotions are found below:
Priority Club (Chase)
As always, if you don’t understand or if something looks funny, leave a comment or send me an email.
As always, if you don’t understand or if something looks funny, leave a comment or send me an email.
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Very interesting and well written! Thank you. One question: I have a Hilton Rewards credit card that gives me 3 points for each dollar spent. Is it fair to assume that the real value of Hilton may be equivalent to 3 times the $0.0068 value in real terms?
The value of the points is determined by what you get when you redeem them. You’re thinking of the cost of the points. I like to put this in terms of opportunity cost. If you didn’t use your Hilton Card, you may opt for a card that pays 1% cash back. In this case, 1 cent = 3 miles. That makes the cost of a mile 0.33 cents. Of course, there are cash back cards that pay higher bonuses in different categories, which increases your opportunity cost.
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I work in the loyalty industry and while your analysis is accurate in determing what the value of a point is on redemption, its completely irrelevant.
There are two relevant metrics, one of which is the cost to the hotel brand of the point on redemption. A metric called cost per point or CPP. In the hospitality industry, this may have nothing to do with the amount charged for the room, but may be calculated as low as what the cost is for a maid to service the room or as high as the nightly room rate if the chain has to pay the full price of the room to a franchisee.
The other is the value of a point to the consumer and is what I think you’re trying to capture. This is based on a combination of the earning rate and the redemption rate. To ascertain this, take the numbers you’ve shown above and factor in how much you have to spend to get the number of points required to rent the room. For example, when you look at the calculations above, it looks like Starwood is the best choice. But it’s actually the worst, because Starwood only gives you 2 points for every dollar you spend while the other chains you show all give you 10. So the same amount of spend at a Marriott gives you 5 times the points. Divide the value you show above by 5 for Starwood and you’ll see my point.
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