Why ‘earn and burn’ is not always your best hotel points strategy
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Many people believe that the general principle of collecting miles and points should be ‘earn and burn’.
By ‘earn and burn’ I mean don’t let your balances build up too high. The idea is that you try to spend at roughly the pace you earn.
Airlines and hotels love to devalue their reward charts. I can remember when all InterContinental hotels were 30,000 points per night – now many are 120,000. It is only 15 years ago that Hilton capped rewards at 50,000 points per night – now they often hit 150,000 points.
You can take this mantra too seriously though.
There is a lot to be said for sitting on your points until a blockbuster redemption comes along.
Last summer we spent five nights at The Bodum EDITION resort (website here, review here) which is part of Marriott Bonvoy. This WAS a blockbuster redemption.
Here is the maths
We booked The Bodrum EDITION for five nights. This doesn’t come cheap in August.
The cash cost for five nights was around €10,000.
We used 425,500 Marriott Bonvoy points per room, so an average of 85,000 points per night.
We usually value Marriott Bonvoy points at 0.5p per point. This deal worked out at 2.0p per point.
Why ‘earn and burn’ would have been a disaster here
The snag was that I needed 425,500 Marriott Bonvoy points to book this. Luckily I did.
The reason I had so many points sitting around is that, for a decade, I had been earning far more Bonvoy points than I had been spending. I did a small American Express Membership Rewards transfer as a top up too – Marriott transfer from American Express are instantaneous.
If I had taken a strict ‘earn and burn’ approach, redeeming whenever I could have got 0.5p per point, I wouldn’t have been able to do The Bodrum EDITION redemption.
Who should do ‘earn and burn’?
I do understand the contradiction here.
I keep telling you in articles that a certain value per point is ‘acceptable’, but then I keep telling you that I managed to redeem for a substantially higher valuation.
(I don’t do myself any favours here. If I pretended that it was easy to get 2.0p per Marriott Bonvoy point then we could probably sell a lot more Marriott Bonvoy American Express cards, given the 20,000 points sign-up bonus.)
Who should ‘earn and not burn’?
The following groups should be able to beat our recommended points valuations and so should not redeem hotel points until they find a blockbuster deal like mine:
- People with children, or teachers, because you are tied down to school holiday redemptions and prices are generally higher, so redemptions offer better value
- People who like to travel at peak periods because that is generally when the weather is better and more attractions are open, or because you travel to see ‘peak period’ events
However, if you fall into one of the following categories you are unlikely to get blockbuster returns from your hotel points:
- People who are free to travel at any time of the year and so can target periods when hotels and flights are cheaper and attractions quieter (the irony of travelling at peak periods is that you pay more but generally get worse service and poorer upgrades)
- People who travel mainly to second-tier cities where peak pricing doesn’t really exist
There IS a risk from ‘earning and not burning’
Clearly you are taking a risk by not redeeming whenever you get the opportunity. As sure as night follows day, you can be sure that a loyalty scheme will devalue over time.
This is why you need to be sure that you will get an opportunity to do a ‘blockbuster’ redemption if you are going to hoard your points. There is no point turning down a Marriott redemption worth 0.5p per point because you think you might find one worth 0.6p per point in a year. This level of saving can be wiped out in a devaluation. It’s not a gamble worth taking.
If you are turning down a Marriott redemption worth my target of 0.5p, you need to believe that you can get 1p+ at some point two or three years down the line.
If you have children or otherwise travel at peak periods, this is a sensible view. For example, I tend to visit New York once per year and this is a city where you can be sure that hotel rates will be high and redemptions worthwhile.
If you are free to travel when you want, you may want to stick with ‘earn and burn’ because you will rarely find yourself needing a room at an expensive peak period.
PS. There is a difference between hotel points and airline miles here, I think. A hotel is more likely to have a room for points at peak periods than an airline is to have a flight for miles.
Hyatt guarantees you can book on points if a standard cash room is available, irrespective of the cost of that room. Across all chains, hotels are incentivised to open up reward rooms on peak nights because, if occupancy is 95%+, the loyalty scheme pays them the full cash rate for your room rather than a nominal $25-$50.
PPS. Another factor to consider is your ability to buy miles and points cheaply if a blockbuster redemption comes along or (for Marriott and Hilton) transfer American Express Membership Rewards points. You don’t need to worry about keeping a high Marriott Bonvoy or Hilton Honors balance if you have a large Membership Rewards balance.
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Want to buy hotel points?
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