Buying Points - Almost Worthwhile?
Last week I wrote, " Don't Buy Miles. It's a Ripoff." Airlines and hotels are eager to sell you their miles and points now because they're hurting for revenue. Selling points puts money in their coffers now, and they don't have to deliver the goods (i.e., the flights or rooms) until later, when people start traveling again. Travel companies are all taking turns offering bonus promotions on their points to encourage you to buy. As I showed in that previous blog on this topic, though, the offers are generally not a win for you, the customer, as even with the bonuses added on top you'd be paying more than you could typically make the points worth.
Today I saw an offer that's maaaybe not a ripoff. It's still hardly a bargain, though.
The offer comes from Marriott. They're touting a 60% bonus when you buy as few as 2,000 points. Their normal price is $12.50 per 1,000 points, for a unit price of 1.25cpp (cents per point). With the 60% bonus the cost drops to a bit over 0.78cpp.
That number caught my even when I calculated it because for a long time I've considered Marriott points worth 0.8cpp. This offer would be a way to buy points at slightly less than what I consider their par value. Here's the thing, though... actually, three things:
1) Buying points at slightly below par value isn't worth it in general. Points are a locked currency, usable only with one company, and that company can devalue its currency at anytime by unilaterally increasing its prices. Generally I would look to buy points at a 20% discount below my par value for these reasons. A 2.5% discount is not worth it.
2) My par value of 0.8cpp is already harder and harder to achieve when redeeming points. Opportunities to redeem points at or above that threshold are rare. Much more common are opportunities to get 0.6 or 0.5cpp. So buying at a cost of 0.78 is not worth it! (Also, the fact that they're selling points for 0.78 suggests that my valuation of 0.8 is too high.)
3) The case where it can make sense to buy points close to average value is when you have a specific redemption planned for the near future that you know is worth well more than the cost of the points. I don't have anything planned right now with Marriott (Coronavirus lockdown is a big reason why) and even if I did I already have quite a mass of points at my disposal- over 500,000!
Today I saw an offer that's maaaybe not a ripoff. It's still hardly a bargain, though.
The offer comes from Marriott. They're touting a 60% bonus when you buy as few as 2,000 points. Their normal price is $12.50 per 1,000 points, for a unit price of 1.25cpp (cents per point). With the 60% bonus the cost drops to a bit over 0.78cpp.
That number caught my even when I calculated it because for a long time I've considered Marriott points worth 0.8cpp. This offer would be a way to buy points at slightly less than what I consider their par value. Here's the thing, though... actually, three things:
1) Buying points at slightly below par value isn't worth it in general. Points are a locked currency, usable only with one company, and that company can devalue its currency at anytime by unilaterally increasing its prices. Generally I would look to buy points at a 20% discount below my par value for these reasons. A 2.5% discount is not worth it.
2) My par value of 0.8cpp is already harder and harder to achieve when redeeming points. Opportunities to redeem points at or above that threshold are rare. Much more common are opportunities to get 0.6 or 0.5cpp. So buying at a cost of 0.78 is not worth it! (Also, the fact that they're selling points for 0.78 suggests that my valuation of 0.8 is too high.)
3) The case where it can make sense to buy points close to average value is when you have a specific redemption planned for the near future that you know is worth well more than the cost of the points. I don't have anything planned right now with Marriott (Coronavirus lockdown is a big reason why) and even if I did I already have quite a mass of points at my disposal- over 500,000!