Everyone knows that booking an award seat in premium class represents best redemption values. Depending on your destination, you can get 6, 12, hell, even 20 cents per mile if you redeem in Business and especially the First. Compare that to lame 1.5-2 cents on a mile in lousy domestic economy. Well, maybe 3 cents if you’re really lucky.
The thing is, you need to be careful about what you “know”. Your Mileage May Vary indeed.
Let’s try and revisit one of our beloved programs: Chase Ultimate Rewards. Why them? Because they are the only program that combines the ability to transfer points to airline and hotel partners with getting cash at 1:100 ratio. This is the only program that allows you to legitimately cash out on your points or miles with reasonable ratio. Still, everyone knows that cashing out UR points is a terrible idea, right?
Let’s try to find out exactly how terrible?
If you use UR points for a roundtrip ticket to, say, Tokyo, you will pay this:
70,000 United miles vs. $700-1000 in economy, about 1-1.4 miles per penny;
130,000 miles vs. about $5,500 in Business, about 4 miles per penny;
160,000 miles vs. about $4,500-$16,000 in the United Global First, about 3-15 mile per penny. I was surprised myself with the crazy range of fares available for the United First.
I picked Tokyo because I wanted a longer flight with good United Metal availability. I didn’t want to go into the whole Partner Business/First Class extravaganza because pricing for those is so insanely skewed after the devaluation that illustrating my point would be too easy.
So how’s the value with the new United? Still looking good? I didn’t think so!
But let’s say, you can find a really great redemption in business or first, like 10-12 miles per penny. That’s not impossible if you’re less lazy than me and look hard enough. Surely, this kind of value is a no-brainer, right?
Well, just bare with me for a little longer. Let’s do a simple mental exercise.
Imagine that you’re about to board the plane, your United Business boarding pass in hand when the gate agent tells you this:
Sir, we are overbooked. If you agree to fly to your destination in an economy seat, we are prepared to pay you a compensation in the amount of $600 for your trouble.
What are you gonna do? You’ll laugh, perhaps. You would expect a much higher compensation. Perhaps, you’ll refuse anyway, since you’re already in the mood for some serious pampering. Good food, top-shelve booze, a flat bed, some nice movies. You have been looking forward to the experience. Even though United Business class doesn’t get close to the quality and service of our favorite Asian and Middle Eastern airlines–seriously, how bad can it be?
I, on the other hand, will start cracking up numbers in my head. Mostly because I’m a cheapskate.
The flight between New York and Tokyo is 14 hours long. That’s a lot of time in coach. I’m a big guy, and I have a trouble sleeping on an airplane. Even in a flat bed, it’s kind of difficult for me.
On the other hand, $600 divided by 14 hours is roughly $43 an hour. Basically, you are offered to be paid $43 an hour to stay in your seat and do nothing! You can even have some work done on your laptop. Or you might catch a good movie or something along the way.
For $43 an hour… You’re still getting to your destination, you know.
Now, try to answer this to yourself. Do you make less than $40 an hour or more? If more, then how much more? $10 more or $360?
There are people who can afford to pay zillions of miles or even cold, hard cash for the best experience that miles or money can buy. Are you one of those people?
You could say that this scenario is absolutely ludicrous, and you would be right. Even so, let me offer you another scenario, even more ridiculous than the previous one. Forget about your trip. What if someone called you and offered you $43 an hour just for flying in a United economy seat for 14 hours. Would you take it?
No? How about $80?
The thing is, by paying 130,000 Ultimate Rewards points for a business class seat on United (instead of 70,000 for coach), you’re effectively blowing away 60,000 UR points. You could easily cash them out for $600, and that would still be a terrible redemption. I think most frequent fliers would agree that a UR points are conservatively worth about 2 miles per penny.
So how about that? Do you believe that transferring your UR points to United for Business or First Class seat redemptions is still worth it?
Seriously, it’s a real question. Say what’s on your mind.
Photo Credit By: Richard Moross