When should you redeem points for hotel stays?

When should you redeem points for hotel stays?

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Previously 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 to 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 is not. So let’s discuss some of the things you should consider.

Redeeming points versus paying cash for a hotel stay

Admittedly, in some cases the decision 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 the Alila Ventana Big Sur, if your stay would otherwise cost $2,000+ per night. Other times, the calculation is not so simple. For example, should you redeem 80,000 Hilton Honors points for a night at the Waldorf Astoria Bangkok, if the rate is $400 per night?

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

How much does a hotel stay cost in total?

The first thing you should consider is the total amount a hotel stay will cost you if you pay in cash. This may sound obvious, but there are a few things to consider:

  • Look at taxes, fees and service charges, as these are usually charged if you pay in cash, but not if you redeem points; some places have taxes and service charges approaching 30%, so in those situations it can greatly change the equation
  • Consider any resort fees or destination fees charged by hotels; some hotel loyalty programs (including Hilton Honors and World of Hyatt) do not charge these when you redeem 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 fee

The cash price is $451, so you “only” get ~0.77 cents of value per point.

Ritz-Carlton Cancun cash cost

However, if you look at the total cost, you will see that after taxes and service charges, the stay will cost $589 if you pay in cash. You now get ~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 main hotel points currencies. I certainly don’t claim that 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’ve earned points for next to nothing, and that’s what I appreciate, too,” that’s fine. At a minimum, I know it’s helpful 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 do you lose if you redeem?

Calculating how much value you’ll get from your points with a hotel stay isn’t just as simple as dividing the revenue cost and the point cost. When redeeming points, you also need to consider the points you lose by redeeming points instead of paying with cash.

For example, as a Marriott Bonvoy Titanium member with Marriott Bonvoy Brilliant™ American Express® Briefly (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 bonus of 75% points, which is an additional 7.5x Bonvoy points per dollar spent
  • For paying with the Bonvoy Brilliant Card, I earn an additional 6x Bonvoy points per dollar spent

I value Bonvoy points at ~0.7 cents each, so for me a return of 23.5x points per dollar equals a return of ~16.5%. All of this assumes that there are no additional bonus points opportunities, as the major global hotel groups sometimes have additional promotions.

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

What are you giving up by redeeming points?

Today, most hotel groups are good at honoring elite benefits and awarding elite nights for award stays, so there usually won’t be much of a difference on that front when it comes to paying cash vs. to redeem points.

If you are staying at an exclusive hotel, another consideration is whether your stay will qualify for a program that offers additional benefits 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 will be $460 per night, and for booking you will receive a one-time $100 hotel credit per stay, daily complimentary breakfast (which Marriott Bonvoy Platinum members and above do not otherwise receive at the Ritz-Carlton), a room upgrade and more.

Everyone will value these benefits differently, but they can add a lot of value, and can make paying cash better.

Book the Ritz-Carlton Cancun with Marriott STARS benefits

What do you give up by paying in cash?

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

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

On top of that, loyalty programs like Hilton Honors and Marriott Bonvoy offer a fifth night free when redeeming awards, while it’s usually not offered when paying with cash. So you should also factor that math into the overall equation when deciding what represents a better value.

The bottom line

There is no absolute right or wrong answer as to whether it is best to pay cash or redeem points for a given hotel stay. In general, I recommend comparing the all-in cost when paying with cash (including taxes and service charges) to the cost of points, then determining how much you value points, and then subtracting the points you’d give up if you redeemed points.

There are some other possible considerations, like if you’re staying at a luxury hotel, where a program can give you extra benefits at no extra cost to you, when it’s not possible for those redeeming points.

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

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