Hotel Loyalty Conundrum: Solved (For Now)

I regularly go back and forth about hotel loyalty. I’m on the record as saying that Hyatt has the best hotel loyalty program and its points are worth the most. Of course, Hyatt also has the smallest footprint, with under 1,000 hotels. Also, Hyatt skews upscale, which is a nice departure from chains like IHG, which really only have a few hundred Kimptons or Intercontinentals and then make up the difference with like 3,000 Holiday Inn Expresses. A small footprint can work fine when your location is flexible and you’re looking for a resort that suits your needs, or traveling to the downtown area of a major metropolitan area. It doesn’t work so well when you have a fixed location (wedding, family event, meeting up with friends) on the outskirts of the city or by the airport and it‘s necessary to be close to a given location.

Current Situation:

As of right now, I have about 5 nights in the hopper. It’s not much, but they’re mine, and I’ll take them. 1 night in Seattle, 2 nights at a beach destination within driving distance, 1 night in Salt Lake, and 1 night in LA (maybe 2 more). Of those potential nights, I can do 4 at Hyatt: the beach vacation (2), LA (2), and Salt Lake (1). Of those 4, Hyatt is only cheaper at LAX. So all things considered, 1 for-sure night at Marriott, 1 maybe night at Hyatt, 3 could go either way. Let’s take a look at the pros & cons of loyalty vs. flexibility and what I’ve decided to do. 

Seattle - 1 night

 In a couple weeks, we may be going to Seattle for a friend of my wife’s birthday party. She throws a bash. She’s a friend of my wife; she barely speaks to me, but I like her husband and her parties, and I need a trip, so of course I’ll go, but it’s not up to me. We’re only going if my wife decides she feels comfortable flying. If we go, we’ll be staying by the airport. Fly in on Saturday and out on Sunday. There’s no point staying downtown as we really won’t have time to do anything. The nearest Hyatt to the airport is the one by the Boeing 737 factory and is a good distance from the airport. We’ll likely stay at the airport Marriott. I’ve always wanted to stay there; it seems like it’s got a rustic charm and has been recently renovated. I checked IHG and Hilton and their points values are ridiculously overvalued for the price and the Marriott is $107, so all in all, it seems like a pretty easy decision. 

Park City - 1 night

Our next opportunity is a bit of a toss-up and may even lean toward Hyatt. I at least am going to Salt Lake for a family event over July 4. If my wife decides Sshe feels comfortable flying, then we may do a night in Salt Lake or Park City at the end of the trip. Right now, points for the best Park City hotels are astronomical. The St Regis is 85,000 and the Hotel Park City isn’t even accepting points. However, the Sheraton Park City looks like a reasonable $85 for the night. The Hyatt Centric is $185 for the night, so Marriott has the edge here, too. 

Beach - 2 nights

Next, we will likely drive to a beach. Living in Atlanta, we are blessed to have the Florida Gulf Coast about 5 hours away, as well as the Atlantic coast a little less than 5 hours away. There are 3 good options: The Dunes Resort (A Destination hotel), the Sheraton Panama City, or the Westin Jekyll Island. The points value for the Hyatt is without a doubt the best. 20,000 points a night or $500 a night (including $112 in taxes and resort fees), giving a 5 cent per point value. The Westin is 70,000 points per night and reminds us of an updated version of the Moana Surfrider on Waikiki (one of the oldest hotels on Waikiki). However, it charges $254 a night, so at $512 would give us a value of .07 cents per point, which is pitiful. I expect better of you, Marriott. The final option for this trip is the Sheraton Panama City Beach. It also has a classic beach vibe and I frankly don’t even believe it was built to be a Sheraton, but I’m glad it was. It is just 50,000 points for the weekend, is about 20 minutes further drive than the other two, and is $530 for the weekend, giving it a value of $0.011 cents per point. 

It’s clear that The Dunes is the better value. While the Sheraton is not as great a value in points, when I look at the value of the points I’m spending, the Sheraton comes out on top. I value 40,000 Hyatt points at almost $800, so I’m still getting a deal on the room, but the opportunity cost for me is not being able to stay at the Park Hyatt Sydney or Park Hyatt Vienna or Grand Hyatt Kauai. On the other hand, I value the Marriott points at right around $500, so I’m spending less for arguably a better location (I’m more familiar with the Gulf Coast) and it’s a lower percentage of my overall amount of Marriott points. 

LA - 1 night

Finally, I’m planning to go to LA for an event at the airport. Due to the location, I’ll want a hotel by the airport. The Hyatt Regency is competitively priced to the Marriott and the Sheraton. This is the only time there’s not a clear-cut decision for me. I stayed at the Marriott last year and the Regency and I thought both were good. I got a good night’s sleep at both, while staying at each for one night. 

The Loyalty Decision:

Product Comparison

I like Hyatt. I like it a lot. I think its bedding is better, I think its service is better. As a Discoverist, I was upgraded to a suite on a one-night stay at the Grand Hyatt Atlanta earlier this year. That has never happened at either SPG or Marriott as a Gold. I think Hyatt Place and Hyatt House are way better than Marriott’s limited-service properties (although much rarer). I PREFER staying at Hyatt vs. a Marriott or Sheraton. I think most Marriotts are old and need to be renovated. I’ve never liked Marriott’s or Sheraton’s bedding. It’s always too hot and heavy; I usually end up stripping off the duvet and getting the blanket that’s meant for the pullout couch and putting it on the bed to get the temperature right.

What we are is SPG people. To date, all of the best vacations we’ve been on involved SPG. We’ve been to Adelboden, Split, Bora Bora, and Zagreb on vacation and stayed in SPG hotels and loved them all. We are Le Meridien people. We’ve taken every opportunity we’ve had to go into a Le Meridien, eat at them, walk around them, even if we weren’t staying there. When faced with a choice between Le Meridien Bora Bora or St. Regis Bora Bora, the Le Meridien was a no-brainer. They have been part of some of our best vacation memories. As yet, we have some good memories at Hyatt; we stayed at the Hyatt Centric Waikiki and loved the “Wet” bathroom (the tub fills from a spigot in the ceiling - it’s magical); the Hyatt Centric Long Beach is good, too. We just haven’t had the opportunity to go abroad and stay at Hyatts like we have SPG / Marriott.

Le Meridien Bora Bora Infinity Pool & View of Overwater Bungalows

Value Comparison

However, Hyatt’s points are better. The program is more trustworthy. When Covid hit, Hyatt delayed moving forward with its peak / off-peak pricing, while Marriott moved full-steam ahead. The credit card earning is better. If 1 Hyatt point = 2 Marriott points (this roughly works), then Marriott’s dining bonus on its ultra-deluxe premium card is 25% worse than Hyatt, offering just 3 measly points per dollar. Additionally, Hyatt lets me earn 2 elite nights for every $5000 I spend. Marriott is just a fixed $75,000 on a card. For my lifestyle and budget, that’s just not likely that I’ll put $75,000 on a credit card in a year. However, I can spend enough to get 10 more elite nights on the card, putting me right into no-man’s land. 

Projecting Outcomes

So this is where I’m at: 15 elite nights on Hyatt, so far (I feel like it should be 21, but they’re deferring to Chase and I can’t get in touch with them). I can likely get up to 25 nights (or 31 nights & Globalist if they give me what I want) without another stay in one of their hotels. If they don’t give me what I’m reasonably asking for, and assuming I will be at 25 nights without another stay, then 3 nights (Sucking up spending the points at The Dunes & the night at LAX) puts me 2 short of Explorist and I’ll need to find 2 nights somewhere.

For Marriott, I’m currently at 27 nights and it’s a big jump to get to 50 from here. There’s no way I’ll put enough nights in a bed (even if my wife lets me go gallivant around the country for a couple days like she did last year) to get 23 more nights. I could start a company and get 15 nights that way, and it’s something I may explore, but I’m not going rely on it. Realistically, with what I’ve got right now, I’ll be at 30 Marriott nights and 28 Hyatt nights. Even if I had decided to stay at Marriott earlier in the year, that would put me at 22 Hyatt nights and 38 Marriott nights. Again, nowhere to go. 

I should also point out, that I have 2 free Marriott nights from my Amex Bonvoy Brilliant card that I can use this year. So I already have 27 nights, 3 more scheduled, and 2 free nights to use somewhere.

As of Saturday when I spent probably all-too-long contemplating this, I decided that it makes the most sense to be a bit of a free agent between Marriott & Hyatt. I expected to be in no-man’s-land with both programs. I’ll continue to put my credit card spend on the Hyatt card to get 2% back per point and get those 10 elite nights, thus earning me some more club-level rooms I likely won’t use, but more importantly, something like 35,000 Hyatt points (just a guess).

The Hotel Elite Wars Have Begun

Marriott Changes Everything

And then today, like mana from heaven, Marriott let us know that it would bestow us with half as many nights as the tier we qualified for last year. So I’ll be getting 13 nights. 13 nights!!! My eyes lit up like Scrooge McDuck’s with dollar signs. Now, I’m at 45 nights and on the cusp of getting the best all-around status (not the best status, but you know, for the work). I’ll need 5 more nights, on the margin. I may just find a nice, warm resort somewhere and book a 5th night free reward and we’re there. We’re living that executive club life. On further retrospection, I’ll still be putting the spend on the Hyatt card this year. We’ll see what happens next year. 

There are obviously some wrenches that can be thrown into this plan. How does Hyatt respond? Their 3x points promotion is pretty good, but obviously requires spending for hotels, which is not something I intend to do much of for the rest of this year. But will they counter? Even if they do, I was only discoverist last year, so assuming the same terms, I’d only get 5 extra nights (which is what I feel they owe me anyway), so that would push me over the limit for Explorist and I still wouldn’t even need to do anything. I tend to think that Marriott Platinum > Hyatt Explorist. 

Possible Options for Hyatt to Change My Mind

Hyatt would need to come out with something special. They often come out with double elite night promotions in the late summer or early fall at specific chains like Ziva. It would have to be open to all Hyatts everywhere, and maybe double nights for non-cardholders and triple nights for cardholders, because at this point, we’re looking at having free breakfasts and suite access. The Points Guy values Marriott Gold status at $2,655 in benefits against Hyatt Explorist at $995. So the dollar value is pretty clear, allowing my wife and I to lockdown suites on our trips and save money on breakfast.

What else could Hyatt do? I think Hyatt should take a look at our nights last year and give us half of those. I think that would be pretty generous. I expect to be somewhere around 25 elite nights with Hyatt at the end of the year, as things stand. If they gave me 13 nights based on my stays last year (and rounded up on the half), that would put me pretty comfortably as an Explorist with 38 nights for the year, something I was expecting to earn this year, anyway. I’m actually not sure what they could do at this point to convince me to switch my stays from Marriott. I’m so close to an incredibly valuable status (and the best status I’ve ever had) that I would have to hit 50 and have nights leftover. 

Even then, I see an opportunity to go for Titanium. With a total of 10 more nights in a hotel above what I’ve got planned, I could maneuver things to actually get Titanium. I’m at 27, with 5 planned = 32; 32+13 = 45; 5 nights needed for Platinum. 5 nights as Platinum Choice = 55 + 15 for business credit card = 70; 5 more, and I’m there. United Silver status, here I come (might as well)! In reality, I see myself locked into Marriott for this year. No matter how generous the promotion they come out with, I can’t imagine any scenario with Hyatt where Globalist comes within reach. 

Conclusion: 

Ultimately, Hyatt’s points are more valuable and their top-tier is aspirational, but for my lifestyle, not achievable. With Marriott’s gift to us all, I can realistically achieve Platinum status this year and continue spending on my Hyatt card to get as many elite nights as possible without actually going out of my way, while still saving up for aspirational resorts like Grand Hyatt Kauai and Park Hyatt Sydney. It would be nice to have suite upgrades when we go, but it’s not likely. I’m sure we’ll be treated well enough that I wish I could have with Hyatt what I have with Marriott. Alas, Marriott has the memories and the advantage (for now).

How to find award space on Delta Air Lines

Introduction

Once you’ve decided where you want to go, you need to look for tickets (duh). The primary rule during this stage of the game is flexibility. You either need to have flexible airline miles or you need to have flexible dates. Having both would be ideal. This post will show you how to look for space on Delta and its partners to get where you want to go.

 

I’ll leave it to other blogs to point out the sweet spots. I think UpgradedPoints.com has some of the best posts out there on the best ways to get the most value out of your points, so I’ll send you to them. Here are a few that I’ve found particularly helpful:

·        12 Best Ways to Redeem Delta SkyMiles

·        17 Best Ways to Redeem Flying Blue Miles

·        12 Best Ways to Redeem Virgin Atlantic Flying Club Points

Delta Redemption Overview

Finding Space on Delta can be challenging. Delta’s miles can be a good value in some cases; in other cases, you should consider using their partners. I’ll show you how to look for and confirm availability on Delta and its partners. Delta’s partners (Virgin Atlantic and Air France) are both extremely useful for flying ON Delta. Delta’s SkyMiles are extremely useful for flying on its partners and for low-level economy domestic flights.

 

So, now you’ve earned lots of points and you’re getting ready to go on a honeymoon or yoga retreat or to visit your family in Japan and you need to find space. I have 3 rules of thumb that I generally follow to help me narrow down where to search first:

1. If I’m flying domestically, Delta & Virgin Atlantic are my best bets.

2. If I’m flying internationally and want economy, Flying Blue is the best place to go

3. If I’m flying internationally and want business, Virgin Atlantic is the best place to go

 

Normally, the easiest way to search is to pay for the $9.99 subscription to Expert Flyer. If you don’t want to pay for the subscription, you can always pay me to search for you, but you’re here because you want to know how to do it yourself.

 

However, at the time of writing, Expert Flyer was not showing Delta award availability. The next best thing to do is to things the old-fashioned way. You won’t even need to log-in to search Virgin Atlantic’s inventory. However, you will need to log in in order to search inventory on Flying Blue. I searched through months of Atlanta to Austin, switched to Virgin Atlantic, and on the second search found some space available for Atlanta to Los Angeles. 

Keeping Track of All Your Accounts

In order to be flexible, you’ll need to have accounts with most of the programs you’re likely to use. You probably already have a Delta account and are likely to consider transferring to them first, but you will also need a Flying Club account and a Flying Blue account in order to transfer your points to them. Also, Gary Leff at View From the Wing suggests creating an Air France Flying Blue account sooner rather than later, because they’re known for shutting down accounts that open and then immediately have points transferred to them. He suggests allowing your account to be open for 90 days and ideally crediting a flight.

 

I use award wallet (awardwallet.com) to keep track of all my credit card points, airline miles, and hotel points. It will alert me when my miles are within months of expiring or if I have a hotel free night expiring, or even an airline credit. I think it’s about $5 for 6 months, so it’s absolutely worth it in order to keep track of all your points and miles. An additional benefit that I use all the time is the password manager. It stores my passwords and allows me to login directly from award wallet, so I don’t have to remember all of many very unique passwords.

 

Once you’ve got your Virgin Atlantic and Flying Blue accounts set up and put into award wallet, click on the Virgin Atlantic account and it will take you straight there.

Once you click on the Virgin Atlantic account, it automatically logs you in (the first time you do this, you’ll need to download the extension, which is straightforward and takes just a couple of minutes). 

Domestic Travel

If you’re looking for domestic travel, Delta always has the capability of being lower. The lowest SkyMiles will go is 5,000 SkyMiles, but Virgin Atlantic is limited to 12,500. So, on cheap short-haul flights, you’ll have the best luck looking at Delta. However, on longer or more expensive fights, the general rule of thumb is to look at Virgin Atlantic.

 

 

In the upper left of the Virgin Atlantic search, you can switch between one week and four-week calendar view. You can see there are two rates available 12,500 and 25,000. What’s interesting is that on this particular route, Delta is cheaper by 1,000 miles. However, on the days that Virgin Atlantic is 25,000, Delta is selling for a minimum 29,500. As you can see, Virgin Atlantic is a strong and competitive option for domestic travel. At the same time, Air France is selling their lowest flight at 14,500, which is generally uncompetitive

 

In form and function, Virgin Atlantic search works just about the same as the Delta search. You don’t even have to log in to search. You can either search on delta.com or virginatlantic.com. You know if you see 12,500 on virginatlantic.com there could be cheaper prices on delta.com, so it’s always worth checking both. Thanks to its award chart, Virgin Atlantic is prix fixe at either 12,500 or 25,000; you know that the space is available on Delta and just need to check that Delta isn’t offering something lower than 12,500.

 

International Economy

If you’re looking for international economy, look no further than Flying Blue. Last summer we were looking to go to Japan to visit my wife’s family who was stationed in Osaka. I had searched high and low for, ideally, business class across the pond, but we didn’t have enough points to take care of that and a future trip to Bora Bora, as well.

 

Seeing the need to economize, we decided to fly economy non-stop to and from Japan. Delta had its brand-new A350 flying non-stop to Tokyo from Seattle. It was charging 47,000 SkyMiles for the privilege, per person, each way. However, checking Air France, I found the same flight for 27,000 points per person, each way. Even better, American Express had a 30% transfer bonus, so our actual price was 21,000 points per person each way. More than half off!

 

Unlike Virgin Atlantic and Delta, you will need an account just to search Flying Blue. Flying Blue has a lot of potential upside, with flights to Asia half or more off compared to what SkyMiles would charge. Unfortunately, things are in a lot of flux right now. I wasn’t able to find anything to validate rule #2 for Asia. That said, Air France’s prices are competitive (and would be better with any kind of transfer bonus from Amex or Citi). One other thing to remember is American Express charges a small tax for any transfer made to American carriers (Delta, JetBlue), so if the prices are equal, go for Flying Blue and prevent having to pay even a small amount of money more.

Once you've logged into your Flying Blue account, switch from "Purchase a Trip" to "Use Your Miles"

From here, enter your search criteria like you'd normally search for a flight. Be sure to enter the correct number of seats you're looking for and the cabin class you want. Then click search. If you get a hit, it will take you to the Flight Availability screen, seen below. One hiccup that Flying Blue has is that you can’t see a full week, just the day you selected, so you may want to check Delta first for cheap SkyMiles prices then go to Air France to hone in on the specific day. What Flying Blue does show that Delta doesn’t is the business class fare next to the economy fare. 

International Business

As you can see in the screenshot above, Flying Blue charges 72,000 points for flights to Europe. That’s not bad! It’s not great either. Now that we have positively identified that availability, let’s check out our options.

 

This is where the partners should really shine. According to Delta, they’ll sell you that seat through Minneapolis for 80,000 SkyMiles.

Here’s the kicker: that same flight is available through Virgin Atlantic for 58,000 Flying Club Points. Virgin Atlantic also has frequent transfer bonuses from American Express, I think about twice a year at either 25% or 30%, so there’s potential here for a lot of savings.

However, when I clicked through the link, what I found was surprising and honestly, preferable. Virgin is showing Delta’s flight non-stop from Seattle to Amsterdam available for 58,000. I would much rather take a 12 hour flight to Amsterdam and then back track an hour in economy compared to flying in economy 3.5 hours with 8 or 9 hours in business class. For me, this would absolutely be the winner. 

 

 

Also interesting is that Virgin is also offering their own flight non-stop for 67,500. Neither SkyMiles nor Flying Blue showed that availability. They’re offering seats on their own metal for so cheap (70,000 is an imaginary threshold in my head for "cheap")! I would probably still take the flight via Amsterdam though since the connection isn’t bad and nets me a little bit longer flight and saves almost 10,000 points. That decision is up to you.

Conclusion

The nicest thing about Delta’s partners is that it’s super easy to earn their points. You can collect via Amex, Chase, Citi, Marriott, or CapitalOne. You should never be earning just 1 point per dollar spent – you can have the Chase Freedom paired with a Sapphire card or the Double Cash paired with the Premier or Prestige card; either way, you should be earning 1.5x or 2x on everything you spend.

For finding flights on Delta, I find there are in general 3 rules of thumb; 2 of these I was able to prove out in this post and the other one may have been eliminated since last year. One, SkyMiles are best for incredibly cheap, short flights. Flying Club is likely better for longer / more expensive domestic flights. Two, Flying Blue and Delta are about on par for international economy. I’d say Flying Blue gets the slight nod despite its prices being slightly higher just because there’s no additional tax, it collects from five different banks / sources, and there are often transfer bonuses that have the potential to get much better value. Three, Flying Club absolutely rocks for Delta flights in Business Class. These rules obviously won't hold true all the time, but this is the way I think about them when I'm shopping for flights. It helps me keep things organized and know where to start looking.

 

Which program do you prefer to use to book your Delta flights? Let me know in the comments! 

Why You Should Use Your Points to Fly on Partners

Introduction

I was literally in the middle of another post when I realized I should write this post first. Several years ago, one of my favorite blogs addressed this question, albeit anecdotally. I thought I could shine a little more light on this relatively unknown and misunderstood area. Most people I know are very surprised when I tell them that you get better values on flights you want through partners than on the airline you want to fly on. The best values are often using an airline’s partner’s miles to fly on the airline you want. In this post, I’ll explain the economics behind why airlines give their partners better deals and give some common examples of the deals you can get with a partner.

 

Types of Miles Given for Flights

First, let’s start at the very, very beginning. This post will quickly go from Loyalty 101 to Loyalty 455, so bear with me while I get the basics out of the way to make sure we’re all on the same page. When you fly, an airline awards two types of miles: elite-qualifying miles and award miles. The elite-qualifying miles are typically based on how far you fly, with a distance bonus based on your cabin. Typically, you should expect a 50% distance bonus for premium economy and a 100% bonus for business class internationally. Obviously, these bonuses vary by airline and are not something I’m ever very concerned about because I don’t buy business class tickets with cash.

 

The second type of miles are the ones that we are most concerned with: award miles. Depending on your airline, you’ll commonly receive 5 miles points per dollar if you have no status and it goes up from there, typically 2 more miles per dollar for per status tier. As you know, you’d be rewarded with greater award miles for more expensive flights. Buying a $500 round-trip ticket (before taxes), would net you 2500 miles. This can be greater than the distance of the route if you’re flying up and down the coasts, but would be less than the distance, if you’re flying coast to coast (Seattle to LA is 1100 miles, while New York is 2400 one-way).

 

Free miles vs. Paid Miles

When you are awarded points for flying, the airline recognizes these as “free miles”, because they are giving them to you in exchange for your butt in their seat. They cost the airline money. They need to save a certain percentage of the value of your ticket based on the number of miles awarded (cost) and the value of their miles. Airlines recognize this liability as a cost of doing business, but would prefer not to have them, which is why more and more often, they’re tied to the ticket price. If an airline values its miles at 0.95 cents, for instance (which is probably a little on the high side), then for each dollar you spend, they’re putting away a percentage of that, which I believe is determined by the DOT. While not all airlines value their miles the same amount, a couple of years ago, the DOT mandated that they all measure them and calculate the liability the same way.

 

This is also why airlines let your miles expire. If they allow them to persist, they have to keep them on their books as a liability. Expiration dates vary but are as low as 3 months (Spirit) and 24 months (typical) to not expiring – like Delta and JetBlue, and recently, United. The closer a program is to “revenue-neutral” or “like cash”, the less liability an airline incurs, so they can afford to let your award miles persist.

 

Starting with the creation of the Chase Sapphire Preferred card early last decade, we have had the ability to earn flexible currencies and transfer those to the airline of our choice. Airline loyalty has less to do with it and flexibility is paramount. Banks will pay between 1 and 1.8 cents per point, depending on the partner. In this sense, the bank is “buying” miles from the airline. It is often better to earn airline miles using a flexible currency versus using an airline co-brand card. Since the bank is paying for the miles, these are obviously the preferred miles that airlines like to have. They still must put the money away for liability, but they still also recognize revenue. It’s important to note that for most programs, transferring your points to an airline will reset the expiration date, because it counts as account activity.

 

When you use your points to buy a ticket on your favorite airline with your miles, your airline doesn’t get paid for that ticket. They get to remove liability from their savings account of loyalty deferral that I mentioned before. So when you use your points to purchase a 5,000 mile ticket on an airline, they get to recognize a small fraction of what they could have otherwise sold that seat for, which probably covers the marginal cost of the flight, but likely doesn’t cover the cost of the flight if they could have sold that seat at full price (the bid price). It also doesn’t cover what you would otherwise have paid for that flight (dilution).

 

Low Level “Saver” Awards

This tension between getting a deal and displacing someone who would have paid full price or paying more yourself is why airlines have multiple tiers of pricing. The airline industry invented dynamic pricing in the early 1980s and have spent nearly 40 years trying to figure out how to personalize the system to the person to know exactly how much they’re willing to pay. In the meantime, we have the current, still imperfect system that has different price points and that’s a simplification of prices vary so much day-to-day. As they’ve developed more advanced revenue systems, they’ve tried to peg awards to the same revenue system, thus making them “revenue neutral” as mentioned above.

 

The more points you redeem, the more liability they get to remove from their books. Some are linked to the fare class, so there is “arbitrage”, or the opportunity to get out-sized value from your points. Some airlines knowingly build arbitrage into their tiers, while others do whatever they can to prevent it at all costs and generally lock you into a fixed return. JetBlue and Southwest have no arbitrage opportunities available to their average members. Their points are fixed at 1.3 to 1.4 cents per point and that’s all you should expect to redeem them for. Others, like United and Delta, have some arbitrage opportunities, but you must go searching for them and they’re in place differently. Alaska is an example of an airline whose strategy is to allow some arbitrage, since it gives their miles extra value.

 

In most cases, an airline has multiple tiers based on the selling value of the ticket, or the likelihood that the plane will sell. I’ve never experienced this side of the equation and don’t understand when or how they release saver space. At some airlines, it’s less complicated to predict than others. If the fare that’s being sold is in a “low bucket” such as something like K, G, T, and R, then you’re likely to see the saver fare. In these cases, the arbitrage arrives when the ticket is in the highest fare bucket of the tier. The number of points continues to rise as we move higher up the fare buckets. Traditionally Y, M, and B are the fare classes where you’ll see the equivalent highest charge for points. This likely means you’re booking late in the booking curve and the flight is mostly sold out and / or there are only a few days left before the flight. A fare class of Y typically represents a full-fare, refundable ticket; in order to get an award ticket when only Y seats are available will require the highest amount of your points.

 

This rule does not always hold true and I don’t know or understand all of the exceptions, but it generally works for me as a quick rule of thumb when I’m searching for an award. You may see a $250 fare and think, “why is this 30,000 points? That’s bonkers. This trip isn’t worth 30,000 points!” You should check the fare class. You would need to look at the fare class chart and see where it sits; it’s likely that this is on the lower edge of the range that the airline set. The fare class corresponds to a few factors. Primarily, how full the plane is. Each fare class has a certain number of seats allocated to it. When those seats are sold, then it typically moves to the next price range. To be sure, there are other factors that affect the price, but projected demand is the primary factor.

 

Meanwhile, the prices and the award tiers are set separately. A pricing analyst sets the fares for an individual market, but they don’t set the awards for an individual market, those are mapped and then left alone, for the most part. An inventory analyst will decide which fare bucket to have open, again typically based on the projected demand for a flight and other factors. The bucket that the inventory analyst has open will determine will link to the mapped price of the award. This is where we can get outsized value: high prices with low expected demand. This is most obvious with business-class tickets. An airline may sell a business class ticket for $6,000 and have saver availability open for 60,000 points. Business prices aren’t super dynamic – there are typically only 3 or 4 business class fare buckets (J,C,D & I) , while there can be 12 or more economy fare classes.

 

Why Partners Are Better

Now that we’ve discussed the airline economics of miles and how award tiers generically function, let’s switch gears and discuss where you can really get the value that makes this hobby worthwhile and why the airlines allow it. Let’s say for instance, a ticket on United to Hawaii is $255 one-way, and that’s in a low bucket, so their cheapest award or “saver” space is open. That would cost you 22,500 one-way giving you a return (255/23000= 1.13 cents per point). If you take that award on United, you’d be playing right into their hands. That’s not a good deal.

 

However, as I’ll write more about in a separate post, one of the best ways to get a domestic flight on Delta is through its partners Virgin Atlantic and Flying Blue (the loyalty arm of Air France / KLM). While prices are currently depressed, it may not make as much sense to purchase awards as use cash, but the examples are useful for comparison.

 

For instance, you can transfer points from your credit card to Virgin Atlantic, and get a seat for 12,500 points, when Delta would charge 21,500. The fare for the flight below is $574, so already represents a great value of 2.6 cents per point; however, with Virgin Atlantic, you can get an even better value! Transferring your credit card points to Virgin Atlantic will give you an astounding 4.6 cents per point for an economy ticket.

Delta charges 21,500 points (above), while Virgin Atlantic will only charge 12,500 (below)

 

So, why are partners usually the better deal? This is primarily because the partner will pay the airline, vs the airline removing liability. In general, an airline I know of looked at making saver seats available as a marketing cost and with full planes, have to justify lost revenue, believing that they would have otherwise sold that seat at the bid price (if below their load-factor goal). In contrast (while the agreements differ from partner to partner), partners typically have an arrangement to pay for redemptions either based on distance or class of service, or both. While banks pay the airline for the number of award miles transferred, an airline will typically pay its partner based on a set price within distance bands and class of service. So, whenever that low-level availability is open, the partner has access to it and pays for it. That’s why it’s much cheaper than using your SkyMiles.

 

Additionally, partners still have fixed charts for the most part. While some airlines have stopped publishing their award charts, their partners still have published charts on that airline, which means you know what to expect. There are pros and cons to published award charts. They don’t have the flexibility of revenue-based programs, so programs like Delta or United can price their own awards in accordance to the price of the flight. If a flight is $75, we may see awards available for 5,000 miles. However, if their cost of the award surpasses the price of the partner award, then we get extra value. Historically, there were two tiers to award charts – Saver Awards and Last Seat Availability, these have been modified today, so that even the most lenient airlines have 4 or 5 tiers, if they publish a chart at all.

 

Fixed award charts can potentially make your credit card points that much more valuable. For example, American Express and Citi frequently run bonuses with Virgin Atlantic. I recently made a Virgin Atlantic purchase on Delta between Atlanta and Seattle. At that time, American Express was running a 30% bonus on transfers to Virgin Atlantic. This meant I only needed to transfer 10,000 Membership Rewards to Virgin Atlantic to get their 12,500-point ticket, instead of using 18,500 SkyMiles.

 

Likewise, last year my wife and I flew to Tokyo on Delta. At that time, American Express was running a promotion with Flying Blue for a 25% bonus on transferred points. We flew from Seattle to Tokyo and Osaka back to Seattle for 21,000 points per person each way plus taxes. Delta would have charged us 46,000 SkyMiles per person each way plus taxes.  At that time, I never saw tickets on those flights drop below $2400, while we could have flown down to LAX and gotten a flight for between $800-1200, why would we fly 3 hours out of our way, just to backtrack? This highlights something I’ll have to discuss in a different post, but I value points at face value and don’t consider opportunity cost. Therefore, 2400/42,000 = 5.6 cents per points. Compared to the 96,000 SkyMiles Delta charges, I used less than that for two people!

 

Conclusion

Partners are often the best way to redeem your points for your chosen flight. Whenever you’re looking for a flight, you’ll need to have a flexible schedule or flexible choice of carrier but having flexible credit card points are essential to finding the right flight. It’s important to understand the partners you have access to through the transferable partners. At a minimum, understanding the alliances each transfer partner belongs to will open up options that you wouldn’t have considered before.

 

If you’re interested in making an award booking, I’m happy to discuss your options with you for a small fee.

Citi’s strategy for the new Premier Card

Introduction

For the past few years, I’ve considered the Premier card to be the most well-rounded and under-rated card for the modern person who imagines themselves to be a person about town and only wants to use one card. Its reward categories were expansive, and with frequent extra bonuses on shopping, it was designed with the intention that it would be the only card you needed to put all your spending on.

However, it had limitations, if you’re like me, you want to maximize your spending. Citi was a great value for travel, but not competitive to the Gold Card for dining and groceries. It fell further behind last year when they took away the travel delay protections "because people weren’t using it.” So, I would use this card for movies, gas, and other “other” travel, but not rental cars, because they only have secondary insurance. I stopped putting airfare on it when they announced they were getting rid of travel protections at nearly the same time American  Express announced they were adding this benefit.

In all, it was a well-rounded card with some best-in-class categories and some average categories. It has always been a card that was in my wallet because of its versatility.

 

Summary of Changes

Yesterday, Citi announced they’re making significant changes to the earning and redemption on the Premier card. When I first switched from the Reserve card to the Premier card in 2018, the thing that stung the most was the decrease earning on restaurants. It cut my monthly points earning by nearly a third, since restaurant spending is the bulk of my monthly spend, followed by grocery stores, which is why a couple months later, when the Gold card was reintroduced, I jumped on it the day it was released.

 

With the Citi Premier’s announcement today, it will become a powerhouse for earning overnight:

 

• 3x airlines and hotels
• 3x gas
• 3x restaurants
• 3x groceries

 

In a lot of ways, it was already the card to beat at its price-point when it comes to bonused spending and I’ve never really understood why it wasn’t the $95 card to get. With a general return percentage of 4.5%, it only beat the Sapphire Preferred by .03%, which is a negligible difference. In fact, even though its new bonused return is 5.6%, a popular travel blog still considers the Sapphire Preferred the king of the mountain. In the same week Citi announced these changes, they’re reminding you that the Sapphire Preferred with its 4.2% bonus is easier to use. The main reason why the Citi Premier card will will never be the IT card is because of their partners. Citi's partners potentially have better value than the Sapphire card but are not as easy to use. These limitations are what force Citi to necessarily be more aggressive with its card portfolio. It doesn’t have a single U.S.-based partner, except for JetBlue.

 

Limitations to the Good News

Unfortunately, the changes are not all positive. For existing cardholders, after April of next year, they will no longer bonus entertainment and other travel categories, leaving your Lyfts, Ubers, movies, and sporting events each earning a point a piece on the Premier card. On its face, this would be a devaluation. The Premier card has been my main card for “other” travel for the last 18 months. It had a place among my FIVE card maximization strategy. Just about every Lyft ride I took was put on my Premier card, every hotel night, and all parking lots, because the Gold card doesn’t cover other travel categories and it has higher bonuses than the Sapphire Preferred.

 

As mentioned above, the big drawback to Citi will always be its limited partner network. People like simplicity. They like being able to transfer to partners they understand and they don’t like taking care of different accounts with different requirements. Additionally, they are removing extra flexibility from the card - the ability to redeem points for 1.25 cents towards hotels or airfare. This cannot be understated as I think this is still an important benefit that the Chase Sapphire Preferred card still features.

 

In this post, I wanted to look at what I think Citi's strategy is with this latest card update.

 

The Competition

It’s no secret that chase has the most well-rounded card portfolio of any of the major US banks. Many of my friends have the Chase trifecta and use them to great effect. Some even have all 5 chase cards – Sapphire, Freedom, Unlimited, Ink, and Ink Preferred and rake in the points. Chase has several different ways to earn points on all your spending. It also has the easiest partners to use, even if better values can be found elsewhere

 

American Express has long had a different strategy. Arguably, they want you to pair their card with flexible spending with a co-brand card with richer benefits. The alternate theory for Amex is that they want you to put all your spending on one card and take the bonuses in stride, like the Premier card was originally meant for. Either way, no one Amex card has everything you need. American Express wants you to make trade-offs in your daily spending. They also have solid partners. They are the only bank that allows you to transfer points to Delta.

 

Over the last 5 years, we’ve seen Amex and Citi both revamp its cards, while Chase’s cards have remained stagnant. They would argue they’ve been focusing on their co-brand cards, which would be true: the Explorer card, Hyatt card, the IHG card, and Marriott Boundless all relaunched and they introduce a couple of new cards like the United Club Infinite and the Marriott Bold card. They haven’t been stagnant, but definitely distracted.

 

Historically, Citi hasn’t had a portfolio of cards, like Chase, or the 1-2 punch Amex is going for. They’ve had a mix of cards all meant to be the one card you use. Over the last 18 months, Citi has gradually added and made changes to the portfolio so that they work better with each other. Citi is taking that to the next level with these changes to the Premier card.

 

Citi's New Portfolio Gives Better Return than Chase's

It feels like the revamp of the Premier card was made to pair seamlessly with the Doublecash card. Interestingly, they eliminated all 2x earning, since the Doublecash card earns that by default, it always kind of seemed like an unnecessary overlap. Want to earn 2x entertainment at the movie theater? No worries, just use your Doublecash card. It doesn’t have an annual fee, so you don’t need to spend anything additional in annual fees. The relationship is clear: 3x on hotels, airlines, restaurants and groceries and 2x on everything else. Two card strategy implemented. The Doublecash has a built-in, non-bonused return of 3.6% to complement the Premier’s card’s return of 5.4%.

 

So, is Citi out-pacing Chase? To a certain degree, yes. Since Citi lacks many co-brand partnerships, they’ve made up for with a strong portfolio of bank cards with a flexible currency. The cards themselves are more rewarding. However, the onus is on the consumer to figure out how to get the best value from the cards. There are some well-known sweet spots that only Citi has.

 

Is this the right card for you?

I almost didn’t put this section in, because the answer is always “It Depends”, but I can tell you whether you should consider it. If you’re willing to put in the time to learn Citi’s redemptions sweet spots, or don’t want to pay a $550 annual fee, or don’t want to pay the $250 annual fee and jump through hoops to get the full value from the card, then this card is right for you.

 

The only other reasons not to get this card is if you’re loyal to Southwest, Hotels (specifically Hyatt since you should never transfer your Ultimate Rewards to Marriott or IHG) or 1.25 cent fixed point redemptions. These are the only things you cannot replicate with Citi. In any other case, you can use your Premier card, or consider a different two card strategy, so you need to decide if that’s enough to keep you with Chase, or maybe use the Hyatt card instead of the Doublecash card. Depending on your loyalty, that could be a solid combination for you.

 

Conclusion

Ultimately, whether this combination is right for you is if you want to put in the time to learn where the sweet spots are. It has a lot of the same sweet spots Chase does and I would argue some different and better ones. For example, transferring to Avianca is better than having access to United (Ultimate Rewards / Star Alliance) or even Air Canada (American Express / Star Alliance). Turkish (Citi / Star Alliance) has some fantastic sweet spots on United and the best way to get redemptions on Delta is through its partners’ award charts (All Cards / Joint Venture).

 

What do you think of the Premier card are the bonuses compelling at the price point? Let me know in the comments!