When Should You Redeem Points For Hotel Stays?

When Should You Redeem Points For Hotel Stays?

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Earlier I wrote about how to decide whether to pay cash or redeem miles for flights, and in this post I wanted to take a look at how to decide whether to pay cash or redeem points for hotel stays.

I often see people on the fence about whether they should pay cash or redeem points for hotel stays, especially as hotel loyalty programs move closer to being revenue based. While the math is sometimes straightforward, other times it isn’t. So let’s discuss some of the things that you should consider.

Redeeming points vs. paying cash for a hotel stay

Admittedly in some cases the decision of whether to pay cash or redeem points for a hotel stay is obvious.

Of course you should redeem 30,000 World of Hyatt points for a night at Alila Ventana Big Sur, if the stay would otherwise cost $2,000+ per night. Other times the math isn’t so straightforward. For example, should you redeem 80,000 Hilton Honors points for a night at the Waldorf Astoria Bangkok, if the rate would be $400 per night?

Let’s go over some of the things that you should consider when trying to decide.

How much would a hotel stay cost total?

The first thing to consider is the total amount a hotel stay would cost you if paying cash. This might sound obvious, but there are a few things to consider:

  • Look at the taxes, fees, and service charges, as these are generally charged if paying cash, but not if redeeming points; some places have taxes & service charges approaching 30%, so in those situations that could greatly change the math
  • Consider any resort fees or destination fees being charged by hotels; some hotel loyalty programs (including Hilton Honors and World of Hyatt) don’t charge these when redeeming points

For example, say you want to book the Ritz-Carlton Cancun (let’s save the Ted Cruz jokes) for one night, and it costs 59,000 Bonvoy points.

Ritz-Carlton Cancun redemption cost

The cash rate is $451, so you’re getting “just” ~0.77 cents of value per point.

Ritz-Carlton Cancun cash cost

However, if you then look at the total charges, you’ll see that after taxes and service charges, the stay would cost $589 if paying cash. You’re now getting ~1.0 cents of value per point, which is much better.

Ritz-Carlton Cancun cash cost

How much do you value points?

I’ve shared my valuations of the major hotel points currencies. I absolutely don’t claim my valuations are correct, but I think everyone should consider how much they value points based on their own situation.

If your answer is “I acquired points for next to nothing, and that’s also what I value them at,” that’s totally fine. At a minimum, I know it’s useful for people to at least hear someone’s valuation as a starting point for how to decide whether to pay cash or redeem points.

How many points are you forgoing if you redeem?

Calculating how much value you’d get from your points with a hotel stay isn’t just as simple as dividing the revenue cost and the points cost. When you redeem points, you also have to consider the points that you’re forgoing by redeeming points rather than paying cash.

For example, as a Marriott Bonvoy Titanium member with the Marriott Bonvoy Brilliant™ American Express® Card (review), I earn 23.5x Bonvoy points per dollar spent with Marriott:

  • I earn 10x Bonvoy base points per dollar spent with Marriott
  • As a Titanium member I earn a 75% points bonus, which is a further 7.5x Bonvoy points per dollar spent
  • For paying with the Bonvoy Brilliant Card, I earn a further 6x Bonvoy points per dollar spent

I value Bonvoy points at ~0.7 cents each, so to me a return of 23.5x points per dollar is equivalent to a ~16.5% return. This all assumes that there aren’t further bonus points opportunities, as the major global hotel groups sometimes have further promotions.

Using the same Ritz-Carlton Cancun example above, if I were to pay cash I’d earn a total of ~11,500 Bonvoy points (23.5x points on the $451, plus 6x points on the $138 in taxes & service charges), which I value at ~$80. In other words, I’d consider that hotel stay to really cost me $509 rather than $589.

What are you giving up by redeeming points?

Nowadays most hotel groups are good about honoring elite benefits and awarding elite nights for award stays, so there’s not usually going to be a huge difference on that front when it comes to paying cash vs. redeeming points.

If you’re staying at a high-end hotel, another consideration is whether your stay would qualify for a program that offers additional perks on paid stays at the flexible rate. For example, this could include everything from Amex Fine Hotels & Resorts, to Hilton Impresario, to Hyatt Privé, to Marriott STARS & Luminous, to Virtuoso.

Let’s use the same Ritz-Carlton Cancun example above. The Marriott STARS rate would be $460 per night, and for booking that you’d receive a $100 hotel credit once per stay, daily complimentary breakfast (which Marriott Bonvoy Platinum members and above don’t otherwise receive at Ritz-Carlton), a room upgrade, and more.

Everyone will value those perks differently, but those could add quite a bit of value, and could make paying cash the better value.

Book Ritz-Carlton Cancun with Marriott STARS perks

What are you giving up by paying cash?

While there are some advantages to paying with cash, there are also situations where there are further benefits when redeeming points.

For example, World of Hyatt Globalist members receive free parking on award stays, but not when paying cash. Similarly, World of Hyatt Globalist members can make Guest of Honor bookings when redeeming points, but not when paying cash.

Beyond that, loyalty programs like Hilton Honors and Marriott Bonvoy offer a fifth night free on award redemptions, while that’s not generally offered when paying cash. So you should also factor that math into the overall equation when deciding what represents a better value.

Bottom line

There’s no absolute right or wrong answer as to whether paying cash or redeeming points is the best value for a given hotel stay. In general, I recommend comparing the all-in cost when paying cash (including taxes & service charges) to the points cost, then deciding how much you value points, and then subtracting the points you’d be forgoing if you redeemed points.

There are some other potential considerations, like if you’re staying at a luxury hotel, where a program could score you extra perks without it costing you extra, when that’s not possible for those redeeming points.

What’s your approach to deciding whether to redeem points or pay cash for a hotel stay?

Conversations (18)
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  1. Owen Guest

    Re: What are you giving up by paying cash?

    The program I’m most familiar with is Marriott, and at least with them one significant advantage is that points reservations usually have generous cancellation policies while the cheapest cash rates do not. So if you book the cheapest cash rate you’re giving up flexibility.

  2. Bagoly Guest

    re How many points are you forgoing?
    There is no need to put a value on them ex ante - just add them to the number of points before doing the division.
    So choice is pay $589 and receive 11,500 points, or pay 59,000 points.
    Value per point = 589 / (59000+11500) = 0.835c

  3. Mike Guest

    You also need to consider what other properties are available in the area and what their cash rates are, unless the hotel itself is the destination. So, sure if you are dead set on staying at that particular hotel in Big Sur, then it maybe you’d be willing to pay $2000 cash and that is the right figure to use to calculate your value. But for Bangkok? There are a hundred very nice properties all...

    You also need to consider what other properties are available in the area and what their cash rates are, unless the hotel itself is the destination. So, sure if you are dead set on staying at that particular hotel in Big Sur, then it maybe you’d be willing to pay $2000 cash and that is the right figure to use to calculate your value. But for Bangkok? There are a hundred very nice properties all throughout the city. I would never pay $400 a night to stay there. So, that isn’t really the right way to calculate my benefit. It is the same type of thing I have to do to decide about whether a business class airfare redemption is worth it or not. I would never pay cash for a $7500 ticket, so how much would it have cost me to fly in economy plus how much to do personally value the upgraded experience.

  4. stvr Guest

    Your example is wrong, though, because the 59K redemption will have a resort fee tacked on. So it's more like 0.9 cpp. Not a huge difference, but 10% is a pretty significant math error, I'd reckon.

  5. iamhere Guest

    I think it is is really simple. Divide the numbers.
    FOR EXAMPLE: If the hotel you usually redeem for costs on average $1000 per night at 85,000 and you think that's the best deal then when a hotel costs $200 for 25,000 you can figure out if it is a good deal or not.
    As most of us are not sitting with millions of points, it is a question of if we save...

    I think it is is really simple. Divide the numbers.
    FOR EXAMPLE: If the hotel you usually redeem for costs on average $1000 per night at 85,000 and you think that's the best deal then when a hotel costs $200 for 25,000 you can figure out if it is a good deal or not.
    As most of us are not sitting with millions of points, it is a question of if we save our points for an expensive redemption or not. We should not hoard the points because they lose value, but if you spend on too many smaller purchases you will not have enough for the bigger purchase.
    Uniquely with Marriott you do earn nights on redemption stays.
    This post has all the formal calculations which is unnecessary and most people aren't really going to do it.

  6. Hepworth Guest

    I think there is another consideration here, which is the individual’s ability to generate points and how many they redeem in a year. I don’t disagree with your valuations (I think they are more honest than most), but you also have the ability to generate a lot of points. I’m lucky enough to make a good income and be able to pay taxes with a credit card. But I also do a lot of travel...

    I think there is another consideration here, which is the individual’s ability to generate points and how many they redeem in a year. I don’t disagree with your valuations (I think they are more honest than most), but you also have the ability to generate a lot of points. I’m lucky enough to make a good income and be able to pay taxes with a credit card. But I also do a lot of travel with family. So, for example, if I could generate 1 million++ points a year it would be simple math of whether I get 1.5 cents per point at a Hyatt. But since I can only realistically generate about 600k/year across all types of points, I won’t redeem Hyatt points unless I’m getting at least 2.5 cents per point. Classic supply and demand, I have less supply so my demand curve shifts.

    I wish I’d gotten in on The Nature Conservancy deductions (sad for me, and my fault). Had I, I’d be looking at all AA flights from the perspective of whether I could get about 1.5 cents per mile. But since my ability to generate those miles is pretty limited, I won’t spend them unless I can get 3 cents+ value for an international flight I wouldn’t otherwise spring the cash for (or wouldn’t otherwise take the trip).

  7. UA-NYC Guest

    Lucky don't forget that Marriott is a terrible company, and you are still paying a resort fee on a points redemption, so have to take that out of the equation.

  8. TomLV Guest

    I've had some decent luck with Hilton points bookings lately. I'll only use the points if it's a 5 night stay to maximize the fifth night free, and usually works best with last-minute-ish bookings. Most recent was a booking earlier this week for the Edinburgh Hampton Inn for early August. Would be $1850 for 5 nights, or 160k points. So a value of around 1.2 cents/point. Zero complaints with that booking.

    1. Never In Doubt Guest

      My experience booking UK Hiltons has been that >$0.005/point redemptions are more frequently available on “mid range” hotels than in the US where I rarely see them.

  9. Robert Guest

    I got into this game to get free stuff, stuff that i wouldn't otherwise pay for... That's my criteria.

  10. D3kingg Guest

    Hawaii off season. No regrets spending 70K hilton honors pts per night instead of $200 plus tax plus whatever make pretend fees.

  11. Ralph4878 Guest

    Another consideration: what kind of room can one get for redeeming points/certificates? For example: for a recent trip to Oah'u, I could redeem a free night certificate (up to 50,000 Bonvoy points) + a not-so-insane number of points (7,000/night) for rooms at the Royal Hawaiian or Moana Surfrider, but the rooms were the least desirable rooms at each property, and both properties have a $45/night resort fee (thanks, Bonvoy...). While each room was going for...

    Another consideration: what kind of room can one get for redeeming points/certificates? For example: for a recent trip to Oah'u, I could redeem a free night certificate (up to 50,000 Bonvoy points) + a not-so-insane number of points (7,000/night) for rooms at the Royal Hawaiian or Moana Surfrider, but the rooms were the least desirable rooms at each property, and both properties have a $45/night resort fee (thanks, Bonvoy...). While each room was going for approximately $565/night before tax and resort fee, I chose to stay at the Residence Inn at Kapolei instead, which gave me a big, new room with a king bed, free parking, and no resort fee; rooms were going for $465/night plus tax (I know, insane, but it's Oah'u and I was booking only about a month out). As location on the island wasn't important to me but parking, a king bed, and a large room were, the Residence Inn was the way to go.

  12. stlsch02 New Member

    Whose Ted Cruz?
    What are these jokes?

  13. MG Guest

    I know this is far from official or scientific, but I base Hilton reward stays with points (mostly at non resort) properties by a certain value per 10,000 points. I.E if the room is for 20,000 points, I find it a good value for points over cash should the rate be >100, 30,000 If the rate is >$150, 40,000 if >200 and so on. I know pricing is dynamic, but you can end up finding a few that don't increase their price to point ratio, which can be a real steal!

    1. Never In Doubt Guest

      Yep. Hilton points are worth $0.005 max, and that’s what they sell them for.

      Their points sales run *almost* continuously. I won’t buy them in advance, but I often will buy just before booking.

  14. Clem Diamond

    For me, an important consideration is that hotel points are a LOT harder to earn than airline miles through credit card points transfer, since I'm not traveling enough to generate large amount of hotel points.
    In the US, we're lucky to have Chase, Amex, Citi, Capital One etc that transfer mostly to airlines so it is not all that hard to get enough points with a specific alliance. But the hotel transfer partners are...

    For me, an important consideration is that hotel points are a LOT harder to earn than airline miles through credit card points transfer, since I'm not traveling enough to generate large amount of hotel points.
    In the US, we're lucky to have Chase, Amex, Citi, Capital One etc that transfer mostly to airlines so it is not all that hard to get enough points with a specific alliance. But the hotel transfer partners are much more limited and almost never worth it, except for Chase/Hyatt. As such, I'm only using redeeming hotel points when I really, really need to, since they're a much hotter commodity than airline miles in my personal case.

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Bagoly Guest

re How many points are you forgoing? There is no need to put a value on them ex ante - just add them to the number of points before doing the division. So choice is pay $589 and receive 11,500 points, or pay 59,000 points. Value per point = 589 / (59000+11500) = 0.835c

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Owen Guest

Re: What are you giving up by paying cash? The program I’m most familiar with is Marriott, and at least with them one significant advantage is that points reservations usually have generous cancellation policies while the cheapest cash rates do not. So if you book the cheapest cash rate you’re giving up flexibility.

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Santos Guest

Nothing is free

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