Should the collapsing £ make me re-assess my points valuations?

On Wednesday I ran this article discussing what value I got from my miles and points in 2016.

One thing I didn’t consider was the substantial fall in the value of the £ over the last few months.  The $ is now 25% below what I considered the ‘norm’ of $1.60 over the last few years.  The Euro is off by 17% if you assume a recent ‘norm’ of €1.35.

Having just paid £8.92 for a cappuccino here in Dubai (the Dirham is pegged to the US$), I thought it was worth having a look at this topic in more detail.

How may the currency collapse have impacted your points collecting?

It is easier to look at hotel points rather than airline miles because the dynamics are more straightforward.

A few things can be stated as fact:

Hotels priced in $, Euro or indeed any other overseas currency (the Pound has overtaken the Argentinian Peso to be the worst performing global currency this year) are now more expensive to a £ earner than they were

Because the major hotel companies operate in $ or € (Accor), there is no pressure to revalue reward pricing

Because the UK is a small part of the global travel market, fewer UK tourist trips are unlikely to cause any fall in overseas hotel pricing

Your hotel points are therefore more valuable than they were as long as you redeem outside the UK because you are getting a more expensive room for the same number of points

pound

These leads to other observations:

Hotel credit cards are now more attractive than they were compared to cashback credit cards since the value of the points has probably increased by 20%-25% (unless you only redeem hotel points in the UK)

But:

If you earn the bulk of your hotel points via UK hotel stays, you won’t notice any benefit when travelling.  This is because the points you earn are based on the $ equivalent of your room bill.  Points may be worth more but you are receiving fewer of them with each stay.

If you earn the bulk of your hotel points via UK hotel stays, you are now worse off if you only redeem them for UK hotel stays.  This is because you are earning fewer points per £ spent but the cost of UK hotel redemptions is unchanged.

What about airline miles?

The impact on frequent flyer miles is less clear cut.  The number of Avios or other miles you earn is NOT based directly on what you paid for the ticket.

You won’t be earning fewer Avios for your flights, even though you will be earning fewer hotel points for your stays.

If the price of cash airline tickets from the UK continues to fall due to weakening travel demand (although incoming tourism may pick up the slack) then your points are worth less in comparison to the cash cost.  Airline economics are far more complicated than hotel economics though – you have the impact of fuel ($ priced but cheaper than historical averages at present) and the cost of the loans or leases on the aircraft (usually $ based but interest rates are also at historical lows).

The easiest conclusion to draw is that the fall in Sterling has increased the value of your hotel points.  It may make you want to reconsider whether you should prioritise them over your airline miles, which have not changed in value and will be worth less if cash ticket prices from the UK fall.

(Want to earn more hotel points?  Click here to see our complete list of promotions from the major hotel chains or use the ‘Hotel Promos’ link in the menu bar at the top of the page.)

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Comments

  1. I’ll be interested to see how the travel industry reacts to Brexit short and long term, everyone i know has at least mentioned the £’s falling rate, and quite a few of those people are cancelling holiday plans as a result.

    If airlines saw a drop in bookings they might need to pull a sale or two out of the bag.

  2. Roger Wilco says:

    “some are quietly rubbing their hands at the prospect of increases in demand of UK exports.”

    … which will be much helped by the customs wall that will be raised between the EU and its largest (by far) export market after a hard brexit.

    Hint: pleased compare the value of UK exports to China (much touted by the brexiters to replace the EU exports) and that to tiny Ireland. Or India (also much touted) vs Belgium

    But in the short term, I thank the brexiters for making my kids’ tuition fees that much cheaper this year!

    • BlackBerryAddict says:

      And I strongly dislike the Brexiters for (among many other reasons) making my kids’ tuition fees and living costs in Europe that much more expensive

    • so will there be large import duties on German cars in this country (good).?

      • Import tariffs work both ways! So all those nice teas and jams we want to sell the EU can also be subject to import duty.

        • Precisely! So if the tariffs are 8-12% and the currency has devalued by approx 20% then those teas and jams (? ) generate a higher net gain, as explained by the-real-A above.

        • Although of course to export to Europe we’ll have to meet all their standards, except will no longer have any say in the formation of said standards (and if we join the EEA will in addition have to pay for access). So we’ve taken back control, except if we actually want to trade with them in which case we’ve lost control. Oh goody.

      • the real harry says:

        there will be no such thing – cars will escape all tariffs

        think BMW, Audi etc – think Nissan etc

        there’s clearly going to be a quid pro quo where cars are involved

        not for nothing are Germany & the Ruhr the paymasters of Europe

        we’re the German cars’ biggest export market

        guess why Nissan announced Qashqai + 1 other Nissan model will be made in UK at the weekend? (assurances on tariff)

        • I’m not so sure I agree, Brits who must have a merc or a beemer will pay the price regardless, but Europeans who want a qashqai or xtrail will likely just switch to something else if price becomes too high. I think nissans decision is much simpler than all the speculation suggests. I’ll eat my hat if we leave the EU in 2019, we are still part of it and the pound has crashed so in the short term there is no reason at all for them to leave but I’m in no doubt they will do so as soon as it suits their purpose. The whole idea of what Britain wants and what they will negotiate seems like a pipe dream to me. In reality I suspect they will be offered terms and told to take them or leave them. Only negotiations I forsee is related to the necessay window dressing to ensure all parties can best present the outcone to their own audience.

  3. Roger Wilco says:

    Correction: “…between the UK and its largest (by far) export market”

    • TGLoyalty says:

      Lots also fail to consider that raw materials and supplies come in from across the globe for even our large exporters, most are adding value through assembly or parts etc, so depending on your currency exposure its not as clear cut as exporters are winners.

  4. I missed the Daily Mail article does anyone have a link please?

    • its in this Wednesday’s paper…

      • Or not! Was meant to be 2 weeks ago, then last week …..

        It must be a month now since the photographer came round. I’ve gone even greyer since then ….

    • I thought you were referring to a Daily Mail editorial piece on the issue dominating the comments page? Silly me.

  5. Wonder if Rob will do a follow up article on Nov 9th. (Assuming there’s no demand for a recount)

    The result across the pond is likely to shift GBPUSD one way or the other…

    And to those caught up in the whole Leave/Remain arguments, and the future impacts, I’d encourage you to take a step back breath and look at the bigger picture, go Google…

    1) Fiat currency creation by central banks
    2) Continued reduction in net energy. (EROEI)

    These have a far greater impact on your future prosperity than Brexit ever will.

    Anyway back on topic…

    Rather than buying HH pts with poor USD rate, one sweet spot is still the old
    TescoCC–>Virgin–>Hilton points shift.. I may take advantage whilst it still exists.

    • the real harry says:

      Sometimes you need to resolve to take action – and then take action!

      Twice in my life I’ve seen GBP1 = USD2 – each time I have resolved to stick a few K in USD deposits, each time I have failed to take action, each time I have cursed my failure to take action

      At the mo we have 2 situations I need to take action on

      1 we have some land that needs selling in EU, we could use the money here, we should sell the land – value has gone up some 20% in a year

      2 my wife’s pension fund (that I manage) is badly balanced and mostly in USD SE Asia and China Opps funds (but spread around 10% x10 so not quite that badly balanced) – the good news is, that means it went up 25% in the last year. I need to crystallise the gains – I must take action

      3 I want to watch http://www.bbc.co.uk/iplayer/episode/b081v8yc/nigel-farage-gets-his-life-back – I must take action 🙂

      • 1 & 2 – agreed, wish I had more in USD, but at least I’ve got a bit of a stash in AUD and EUR! Re 3 – started watching it but got bored halfway through. Now onto Black Mirror on Netflix instead 🙂

        • the real harry says:

          Nice one – I think my father has Netflix so might cadge a borrow.

          We lucked out on NZD when we moved there (NZ), currency changed in our favour over 2 years plus the housing market went mad.

          Worked out OK plus we ended up selling our place to nice neighbours who had a father to care for with senile dementia (ie moved into our old place).

          Got a bit screwed by the auction house on our furniture but hey

        • Latest series of Black Mirror is excellent, great ideas and great plot twists.

        • Totally agree, have also been catching up on some season 2 episodes I missed, interspersed with some Deutchsland 83, which is also excellent!