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Maths logic was never my strong point, so I’m looking for some expert confirmation that my assumptions are correct here.
Take an example cash rate for an IHG room as £240.
The 100% reward points option is 35,000, which I make almost 0.7p per point achieved.
However, there are various points & cash options. For example, at both extremes:
Option 1:
30,000 pts + £27
So here, I’m redeeming 30000 points for £213 of room value = 0.7p per point.Option 2:
10,000 pts + £134
Here, I’m redeeming 10,000 points for £106 of room value = 1.0p per point.So my question is what factor does the cash element of these points/cash options play in the equation to maximise the value of each point I own? Presumably maxing out points value with option 2 at 1.0p per point, even if redeeming with additional cash is the way to go, right?
The fact that in the second cash/points example, my £134 cash payment is effectively “buying” 25,000 points which at 0.5p a point, and this is cheaper than the 0.7p per point of the full 100% point option means that overall the booking is better value per point redeemed. Right?
I’m pretty sure now I’ve typed that out, I’ve answered my own question, but please correct me if I’m missing something!
Thanks.
Might depend how many points you’ve got in your IHG account and how you earnt them.
Me personally, I value IHG points at 0.004ppp (same as many other people).
So for me, a points price of 35k points is ‘costing me’ £140 worth of points. Given the cash price is £240, you are getting 0.0068ppp value which IMO is very good.
There is no way I would do option 2 where £134 of real money is needed in lieu of points.
I can use that £134 for other stuff, whereas my reasonable stash of IHG points isn’t really much use outside of IHG redemptions.Your circumstances may differ.
@NunoBettencourtsPinky what you’ve done is correct but incomplete. You should also look at the difference between Option 2 and the 100% rewards option. You spend 25000 extra points to save £134, which is 0.54p per point. That’s OK vale and above the usual target of 0.4p. So I would go with a 100% redemption unless you have an immediate better use for the points.
You’re missing one vital point which most people (inc Rob) never take into the calculation.
There’s the cash rate and then there’s the cash rate.
Are you basing your numbers on the cash rate with no membership, the one with membership, fully refundable, semi refundable etc.
If you’re comparing like for like then it’s the membership rate, fully refundable, but if you’re close to the date of travel you might be comparing against non-ref rate. You also need to factor in whether taxes are included, and the horrid hidden amenity fees which are often waived for status members.
Your maths is also incorrect. Option 2 comes out at 1.34p/point. If you can find a redemption at 1.34, bite their hand off. Best I’ve seen the last year was 0.9p against a best flex rate.
I’m hitting 0.65 at the moment on a redemption I’m just about to make. Bit gutted because it was 0.9 a couple of weeks ago but I couldn’t pull the trigger as I hadnt finalised flights. I’ll be checking it every few days to see if it changes so I can cancel and rebook.
@NunoBettencourtsPinky what you’ve done is correct but incomplete. You should also look at the difference between Option 2 and the 100% rewards option. You spend 25000 extra points to save £134, which is 0.54p per point. That’s OK vale and above the usual target of 0.4p. So I would go with a 100% redemption unless you have an immediate better use for the points.
I sort of agree, but if I can squeeze 1.0p per point out of my points balance (even by paying cash for part of the room night), doesn’t it make more sense to hang onto my existing points as long as possible (by using option 2) to aim for that sort of value wherever I can?
Taking it to the theoretical extreme, and referring to my original post, lets say my total points balance is 105,000 and I need to book 10 nights at that hotel:
Would it make more sense to buy 10 “option 2” nights, redeeming 10,000 points a night achieving 1.0p per point and pay the cash balance for each night, or:
Book three nights at 35,000 points each (achieving 0.7p per point), then seven nights at the £240 per night cash rate?
Your maths is also incorrect. Option 2 comes out at 1.34p/point. If you can find a redemption at 1.34, bite their hand off
Option 2 is 10,000 points plus £134 cash. So I’m redeeming 10,000 points for the balance which is £106 (assuming the cash rate is £240).
£106 divided by 10,000 is 1.06p per point, no?
For the lurkers, I should point out that I’m not really this anal about redeeming value out of points, but just trying to work through the extremes of the theory of the game. 🙂
OK there are two things here.
Firstly, I’m going to sound like a bore but just because the hotel wants £240 for the room does not make the room worth £240.
If points were not available what would you book instead? If you would not choose the IHG hotel but another one which is just as good for £200 then your points are worth £200. But if you would still genuinely pay £300 for the IHG hotel, then your points are arguably worth £300, or you are getting to pay £240 for something worth £300 to you.
So if the cash rate is generally acceptable to me I would tend to see 0.4p to 0.5p per point as the break even. If the cash rate is unacceptable but the points price is acceptable, then I just ignore the cash rate.
Secondly, IHG points & cash is actually just an indirect method of buying points.
Generally IHG redemptions are fully refundable up to the day before (but always check carefully when booking as, especially at times of high demand, they can be non-refundable), however with points&cash you do not get the money back under any circumstances.
What you are actually doing is buying 5000 points for £27, or buying 25000 points for £134, then immediately redeeming them.
Furthermore, for some reason the points&cash rates are different at different hotels. It never goes below USD 30 for 5000 points (about £25, or 0.5p per point) so there is actually no need to pay £27 (which would be charged in USD anyway). Find a hotel where it’s USD 30, buy the points you need (make sure redemptions are refundable first!), then cancel and book the hotel you want.
Obviously, don’t do this too often or IHG might get upset – I only do it once or twice a year if I am short of points. This should also be employed with managing your points totals, because every so often you get the opportunity to buy points directly at around 0.45p to 0.5p anyway.
To conclude. If the hotel is really worth £240 to you, then it absolutely makes sense to buy points at 0.5p and immediately redeem them at 0.7p – but you must remember that is what you are doing.
Cash rate may also be eligible for cashback at some sites, and WILL also generate points, and so you need to figure that into the decision making too.
Cash rate may also be eligible for cashback at some sites, and WILL also generate points, and so you need to figure that into the decision making too.
Good point – if you have status with IHG then that can improve the return basis still further. You can quite easily get in excess of 15% in ‘points back’.
Currently the BA shopping portal is giving 6 Avios per £ at IHG hotels. On your £240 booking that’s up to 1,440 Avios (worth £14.40 if you value Avios @1p each). You’d also earn around 3,000 IHG points (basic rate is 10 pts per USD spend – calculated at a 1.25 exchange rate). If you were a Diamond Elite member, as many on here are, then you’ll get a 100% points bonus for a total of 6,000 pts. At a 0.4p nominal valuation that’s up to £24 of IHG points. The actual returns will likely be lower as they are calculated on the pre-tax cost, but I don’t know what taxes apply and hopefully you get the idea…
Finally, for IHG you should also be trying the special railcard corporate rate (assuming you hold one) by inputting code 786996886 in the corporate rate option at booking stage. Sometimes you get nowt and others its up to 20% off, so that can really swing the decision in favour of a cash booking!
As an example, we are off to the IC Barcelona next month and using our Ambassador 2-4-1 weekend night certificate but I have to tack on a third night. Points rate is 61k (equivalent to £244 at 0.4p/pt). Refundable member cash rate £328 reduced to £301 (£27 or 8% off) via the above discount rate. App says I’ll earn 6.8k IHG points as Diamond Elite (another £27.20 worth @0.4p). So on the face of it there was a big difference between cash and points – £328 v £244 – but once discounts and rewards are factored in it becomes effectively £274 v £244. I’ll probably still burn the points as I have quite a few but otherwise I may prefer to save them for a better value redemption, as you say above…
Phew, I’m knackered just reading all that!
Just to add to the confusing cost/benefit analysis, strong rumours of another 15% off reward nights from all local midnights tonight…
Book and stay from September 12th
Stay by October 26
15% off all award night redemptions globallyInitially for Elites, but eventually for regular Joes too.
Just to add to the confusing cost/benefit analysis, strong rumours of another 15% off reward nights from all local midnights tonight…
Book and stay from September 12th
Stay by October 26
15% off all award night redemptions globallyInitially for Elites, but eventually for regular Joes too.
That’s pretty specific for a rumour!
Guernsey Globetrotter makes some very important point that few people understand. The post may be long, but it’s well worth reading if you want to maximise your value.
Essentially, the crude pence per point calculation needs to be adjusted in three ways:
1. The cash price needs to be reduced to the most you would be willing to pay in cash.
2. The cash price needs to include all relevant discounts and cash-back offerings.
3. The points required for a redemption booking need to be increased by the number of points that would have been earned on the cash booking.These three things often make a difference of 20% or more in the value calculation. Other factors often overlooked include the value of any status uplift foregone and the cost of any credit card vouchers used.
Guernsey Globetrotter makes some very important point that few people understand. The post may be long, but it’s well worth reading if you want to maximise your value.
Essentially, the crude pence per point calculation needs to be adjusted in three ways:
1. The cash price needs to be reduced to the most you would be willing to pay in cash.
2. The cash price needs to include all relevant discounts and cash-back offerings.
3. The points required for a redemption booking need to be increased by the number of points that would have been earned on the cash booking.These three things often make a difference of 20% or more in the value calculation. Other factors often overlooked include the value of any status uplift foregone and the cost of any credit card vouchers used.
I agree except for the part in 2 where c@shb@ck is mentioned. Since these pay out so unreliably on hotel bookings, the more realistic approach is to value them at zero and consider any eventual payout a bonus
Just to add to the confusing cost/benefit analysis, strong rumours of another 15% off reward nights from all local midnights tonight…
Book and stay from September 12th
Stay by October 26
15% off all award night redemptions globallyInitially for Elites, but eventually for regular Joes too.
Rumour was wrong if it was starting from today. Just checked the one I was about to book yesterday and it’s gone up by 1400 points/night. 🙁
Just to add to the confusing cost/benefit analysis, strong rumours of another 15% off reward nights from all local midnights tonight…
Book and stay from September 12th
Stay by October 26
15% off all award night redemptions globallyInitially for Elites, but eventually for regular Joes too.
That’s pretty specific for a rumour!
Because it’s from my blog post yesterday… And yes it is live now.
Guernsey Globetrotter makes some very important point that few people understand. The post may be long, but it’s well worth reading if you want to maximise your value.
Essentially, the crude pence per point calculation needs to be adjusted in three ways:
1. The cash price needs to be reduced to the most you would be willing to pay in cash.
2. The cash price needs to include all relevant discounts and cash-back offerings.
3. The points required for a redemption booking need to be increased by the number of points that would have been earned on the cash booking.These three things often make a difference of 20% or more in the value calculation. Other factors often overlooked include the value of any status uplift foregone and the cost of any credit card vouchers used.
Thanks for the shout out @jj – you summarised the key points more succinctly than I ever could! 😀
Nope can’t see any change in rate as a diamond ambassador
Is there a special link because it’s not live in the UK as far as I can see. It’s dropped back by 800 points/night since 7.40 this morning but still higher than it was on Sunday.
Not seeing any difference when signed in.
This is live currently. 15% off 2 night stays?
https://www.ihg.com/content/gb/en/deals/member-offers/savemore
Edit – booking from 23 September. Not sure why the page is visible now.
This is live currently. 15% off 2 night stays?
https://www.ihg.com/content/gb/en/deals/member-offers/savemore
Edit – booking from 23 September. Not sure why the page is visible now.
That’s a cash stay offer. The one mentioned unthread is for reward stays.
I agree except for the part in 2 where c@shb@ck is mentioned. Since these pay out so unreliably on hotel bookings, the more realistic approach is to value them at zero and consider any eventual payout a bonus
absolutely — the risk of a SNAFU on the kickback is very high… if the costs were a dead heat, TCB might swing me towards a cash booking, but don’t bank it in any calculation
15% off reward stays is currently only for co-branded credit caard holders which we are no longer. Should be open to Diamond and Plat in a day or so.
The offer is now live for Diamond/Platinum. No 3 night max as reported elsewhere.
Getting 0.9p on a P+C booking where it was 0.65p yesterday
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