People often ask me how they can squeeze the most value out of their frequent flyer miles. I begin my answer by stating that maximizing monetary value and actual value are two very different things and ultimately there is no magic formula that tells you whether you are effectively using your miles.
I find the biggest waste of miles is to use them to purchase consumer products, like spending 200K miles on a $700 television set when those miles could have been used for two business class tickets to Europe with a stopover, with a sticker price of over $8,000. But some people I know travel for work or rack up tens of thousands of miles each month spending for their small business and simply have no desire to travel any more than they already have to. For them, blowing 100K miles on an iPad does make sense.
But I digress. I booked a honeymoon trip for a couple yesterday traveling to Africa and just wanted to share why I believe miles are best spent for premium cabin redemptions. When you book an award on Continental.com, you can see the price of your selected flights in economy class and business class when you get to the payment screen, just in case it might be more economical to purchase the tickets outright. Take a look at the numbers for the tickets I booked yesterday:
Now to be fair, the outbound was on one carrier and the inbound on another carrier without codeshare agreements, so you are seeing the full-fare one-way pricing above, but think about the value this couple is getting for their miles. The flight times and connections were perfect and the couple will be flying on two top-notch airlines. Of course most people would never spend over $30K on airline tickets, but just stop and think for a moment how valuable the concept of award tickets are–the chance to try out multiple airlines in premium cabins all on the same ticket.
Maybe I am making too big a deal out of this, but the more I work with frequent flyer miles, the more I appreciate what a value they are and what they allow us to do and see.
Without a doubt! I booked a RT for 240k miles (for 2 people) from AUS-LAX-NRT-HO CHI MINH CITY-HANOI-SIN-SYD-LAX-AUS that came up as $31,000 as well. All business class, and all the best carriers in the world – ANA, Asiana, and Singapore. 12 cents a mile versus 1. Remember though that very few people would actually spend $30,000 on the same ticket; so you’re not technically getting that value because you wouldn’t have had to purchase that ticket anyway. I figure I would, however, spend $10,000 or so on it, so 4 cents is probably a more realistic figure. Regardless, international biz class beats the stuff out of any other redemption option. And I’m sure it’s good for the airlines to let you burn miles that way anyway since they have calculated those seats are likely to be non-rev, regardless.
I agree that using miles to redeem for travel is very good value, but the idea that you are getting $30K of value (or even half that) is not realistic.
I don’t know why people keep saying things like “I am getting a $20K ticket with my miles. Huge value!” Miles open up an opportunity to try something that is unattainable with cash, for most people, the alternative to a business class miles award is not the cash equivalent cost, but rather traveling in coach.
Also, remember that with an award ticket, you are traveling when the airlines release seats, on the flights and routes and times that they choose. With cash, you choose exactly when you fly. There is a convenience factor. That being said, if you can find dates that work, using miles for business class is an excellent solution compared to paying cash.
If you still need to assign a value, I would assign a ‘fair value for business class’ and a ‘convenience discount’ to the award. Since a business class award is usually 40-100% miles more than coach (varying by mileage plan) maybe you should take the lowest coach fare from ITA and multiply by 150% or so. And then discount that by 20% or some factor to account for the fact that you can ordinarily pay the fare every day, whereas the mileage value is less convenient and you travel when airlines want you to, on days they expect to have open seats. So, if your normal coach fare would be $2000, your business class equivalent is ~$3000 rather than the (say) $8000 face value of the ticket, and then you discount to (say) ~$2400 for the convenience factor.
Well, in reality people are getting a $20K ticket because that is what it would cost them if they purchased the ticket outright.
Nevertheless, I certainly don’t dispute (and indicated in my post) that people would be foolish to literally value a ticket at those levels.
In fact, I’d be even more conservative than you–on even my greatest awards I would not have paid more than $2200 if I was paying out of pocket.