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How much is a mile really worth? It’s one of the fundamental questions of the points and miles hobby, and there is no shortage of blogs out there that will tell you what they think.
We’ve always been skeptical about the conventional wisdom on point values. Where are these guys getting their numbers? Is there anything more than a subjective gut feeling backing them up? So we decided to take a look at real trips booked with points by AwardWallet members.
Our goal was to come up with an objective, data-based valuation. How much do AwardWallet members actually save when they redeem each type of points? We still have a long way to go to get this right. But now that we’ve got a basic framework, it’s time to share some results.
In this post, I'll take you behind the scenes to share our current methodology and what we have planned for the future.
- How to Calculate Point Values
- Using Real Bookings for Mile Value Calculations
- How Do We Find the Cost of a ‘Similar' Paid Itinerary?
- Mile Values for 11 Airline Programs, Using Real Bookings
- What the Mile Value Averages Mean
- A Few Areas for Improvement
- Final Thoughts
How to Calculate Point Values
When we talk about mile values, we’re really asking ourselves: “how much did I save by using points instead of money?”
First, you need to find out how much it would have cost to buy (with money) the same travel you’re considering booking with points. With paid travel, this price includes all taxes and other fees.
However, with award travel, there is often a cash component to your booking. Points or miles typically cover the base airfare but not taxes and carrier-imposed surcharges. For example, let's say you need to decide between paying $783.50 for an economy flight from the U.S. to Europe or booking an award for 30,000 miles and $65 in taxes and fees.
To determine how much you saved by using points, you need to account for the out-of-pocket cost.
- $783.50 = Cash Price
- 30,000 miles + $65 = Award Price
If you pay cash, your total cost is $783.50—which includes all the taxes and fees. But if you book with miles, you’ll still have to pay $65. So, to calculate your savings, you need to subtract $65 from the cash price.
- $783.50 – $65.00 = $718.50 (Savings)
In this example, you saved $718.50 by using 30,000 miles to book your trip. When we put mile values in a “cents-per-point” format, we’re really just breaking down the question above into “how much did I save with each point I spent?”
Take your savings from the previous step and divide by the number of points you spent.
- $718.50 / 30,000 = $0.02395
This equation gives you dollars per point. Since the savings per point is generally quite small, it’s usually easier to multiply by 100 (or move the decimal two digits to the right) to get cents per point.
- $0.02395 x 100 = 2.395 cents per point
This basic formula makes it possible to compare the value of points across loyalty programs—and make better choices when you redeem.
Using Real Bookings for Mile Value Calculations
As you probably know, AwardWallet helps you keep all of your travel reservations organized in one place. You can view your upcoming (and past) reservations any time you like on your personal travel timeline. This feature works by monitoring for new reservations in all the loyalty accounts you track in your account list. You can also give AwardWallet permission to scan one or more email accounts where you receive booking confirmations.
To calculate mile values, AwardWallet looks at all the travel reservations that are booked with points or miles. We check how many miles were redeemed, how much was paid out of pocket, and what it would have cost to buy a “similar” itinerary for the same travel dates. Then, we find the average value per point using the formula described above.
How Do We Find the Cost of a ‘Similar' Paid Itinerary?
The trickiest (and most subjective) part of calculating mile values is finding the right paid flight to plug into the “cash price” part of the equation. The rest of the equation is just math.
Ideally, we'd ask each traveler to pick the flight that they would have booked if they had to pay cash. But there isn't a one-size-fits-all solution because every trip is different.
For the short term, we decided on a basic set of rules to pick a paid-ticket price:
- the paid flight is in the same class of service
- the paid flight departs on the same calendar day
- total travel time that is no more than 20% greater than the award flight.
When an award ticket is added to your travel plans, we use pricing data from Skyscanner and Kiwi to find the cheapest ticket that meets the three criteria above. Overall, I think our results hold up pretty well when you average lots of trips together. Some prices for individual trips may be a little high or low, but those errors should cancel out as our data set grows.
Of course, our current method is far from perfect. We wanted something we could build and share quickly—and this round only took nine months! I'll address some of the key issues at the end of this post. But first, let's take a look at the initial results.
Mile Values for 11 Airline Programs, Using Real Bookings
For each loyalty program, we've calculated an average value using the formula above. For the initial launch, we decided to calculate mile values for 11 airline frequent flyer programs. I've added a recent screenshot for reference, but you can also check our live mile-value results for the most current data.
What the Mile Value Averages Mean
Here are a few notes to help you understand the numbers we’ve published so far. Instead of sharing only a single average for each program, we decided to break our award flight data into four additional groups based on the class of service and whether the flight is short- or long-haul.
Class of Service
When we first started looking at the data, we realized that some of the best programs for premium-cabin awards weren’t all that great for economy tickets. If you only look at the total average in the leftmost column, it can be easy to draw the wrong conclusions about which programs will be the most valuable.
We decided to aggregate the data for awards in basic economy, economy, and premium economy into one group and all business- or first-class awards into another.
Regional (short-haul) vs. Global (long-haul) Flights
We also noticed some big differences in value when comparing short- and long-haul award tickets. On a short, regional flight, first class usually means a slightly bigger recliner seat with some extra legroom. On a long-haul flight, a business or first-class seat will normally convert into a lie-flat bed. It didn’t seem like a great idea to put those vastly different products into the same average.
We didn't expect a big difference in the mile values for economy awards when we made the short- vs. long-haul distinction. The seat and cabin experience are pretty similar, regardless of the length of the flight. So, we were surprised to see some significant differences.
With Alaska Mileage Plan and Air France/KLM Flying Blue, long-haul flights seem to be a much better value. On the other hand, regional economy awards booked through Air Canada's Aeroplan program look like a better deal than global economy awards so far.
What About Transferrable Points?
To estimate the value of transferrable points, we've combined the value of each flexible bank program's airline partners into a single, weighted average. This calculation only includes data from the airline programs that are also shown in our “Airline Mile Value” averages. Other transfer partners are not yet included, so the transferrable points averages aren't reflective of your full set of options.
We wanted to share initial results as soon as possible. So, we picked a few basic criteria that wouldn’t require a huge number of data points to be meaningful. Long term, we’d like to create a tool that lets you check our mile value averages (and see the underlying award prices and taxes) for specific trips.
You'll notice that it's possible to save your own mile value by overwriting the left column on the mile values page. This gives you additional control over how mile values are displayed as we start to use them in more places. You'll see mile values showing up in our Credit Card Spend Analysis tool and in the summary popup for programs you track in your account list.
A Few Areas for Improvement
As noted above, getting a more accurate mile valuation for an individual trip requires additional input from the traveler.
Getting the Right Itinerary
In some cases, the best option is to check the price of the exact same itinerary you booked with miles. If your award ticket is exactly what you wanted, the price to buy it gives you the most accurate mile valuation.
More often than not, the award tickets you end up booking are simply the best itineraries that were available to book with miles. If you could have happily booked any of several itineraries, using the price of your exact trip may cause us to overvalue your redemption.
On the other hand, if you need to arrive at your destination for a meeting at noon, we could be seriously undervaluing your redemption by picking a cheaper red-eye flight that departs at 10 pm. That's not going to work for your meeting, but our current formula treats that as a similar itinerary for valuation purposes—at least for now.
Related: Which Flights Can I Book with Miles?
It's Only Savings If You'd Actually Buy It
There are also situations where it doesn't make sense to use the full price of a paid ticket to calculate mile value. For example, it's not uncommon for a first-class ticket from the U.S. to Asia to cost $10,000 or more—especially on some of the nicest carriers like Cathay Pacific, Japan Airlines, or ANA. But did you really “save” $10,000 if you used miles for a flight you would never buy?
It's hard to put a value on aspirational award redemptions. Is a $10,000 first-class ticket worth $1,500? $2,500? It really comes down to the individual traveler. So we're working on an update that will give AwardWallet members more control over the price we use to calculate the valuation for each award trip.
Overvaluing One-Way Awards
One-way award tickets are another significant weak spot in our initial release. We haven't yet adjusted our calculations to account for round-trip itineraries booked as separate one-way award tickets.
Most loyalty programs will let you book a one-way trip at half the mileage requirement of a round trip. On the other hand, most airlines charge a premium for one-way travel.
If you book two one-way awards around the same time, a better mile valuation would recognize those as two parts of a ticket that could be booked for less as a round-trip cash ticket. This turned out to be a little trickier than we first thought, but it's on our radar for a future update.
Right now, our mile valuations are interesting, but not especially helpful for planning your personal points strategy. If you want to make more informed decisions about earning and spending miles, you’ll need to account for personal factors like where you plan to travel and how to value your savings each time you redeem.
Our team is hard at work to fix existing issues and build some of the new features I’ve mentioned in this post. We're hoping to launch some initial results for hotel valuations in the near future. In the meantime, your feedback and ideas will be especially helpful at this early stage of the project.
Please let me know what you think in the comments!
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