Loyalty programmes often don’t work for people because they make a simple mistake, they don’t understand that the miles they receive have value, and they don’t know what a mile is worth to them. In a future post I’ll describe how I value my Avios and why – perhaps that will be a guide for your own decisions regarding what an Avios is worth to you. But for now, I want to explain why everybody needs to know what they think a mile is worth to them.
Often when looking at airfares for their desired holiday or weekend destination, people just look for the cheapest price and book whatever airline that happens to be. It’s hard to argue with that, unless that person wants to be a Flying Piggie, aspiring to fly somewhere exotic in style using miles.
But because I value the miles I would receive from flying with British Airways, I enter that into the equation for deciding which airline to fly. Easyjet might fly from London to Barcelona and offer you the cheapest price at say £100 return. If BA is charging £105, I wouldn’t hesitate to take BA, because I know I would receive over 1400 Avios as a gold member (ignoring the other service elements where BA are clearly more pleasant than Easyjet) and 1400 Avios are worth more than £5 to me.
OK, so we know that Flying Piggies aren’t big fans of low cost carriers, but what about comparing to other decent airlines. Again, maybe Delta Airlines is the cheapest to say JFK airport in New York. But if you’re going to get 7000+ Avios, you should take that into consideration if the BA or AA option is just a bit more expensive. But at the same time, quantify the value of your loyalty instead of giving it blindly. Just because you collect Avios is no reason to spend an extra £300 on that economy class flight with BA when the value of the miles you will receive is nowhere near that!
Miles or Cash?
That’s beginner stuff really. Where it gets more complicated is when deciding whether to use Avios or to pay cash for a given holiday plan. As an example, recently I booked with Avios to fly from Paris CDG to Kuala Lumpur, costing me 120,000 Avios and about 350 euros tax for a return flight in business class on the new Airbus A380. Then I saw a fare sale come up, where a return in business would essentially cost me 1700 euros (£1450) and earn me 13,000 Avios (+ some precious tier points for status purposes). So I reckoned that this was a good deal for me, and cancelled my Avios booking and booked with cash, as those additional 1350 euros (the cash price less the taxes on the Avios booking) would save me 133,000 Avios, which I’m sure I can put to better use elsewhere.
That example shows why I don’t tend to use my Avios for Reward Flight Savers, those European flights where taxes are capped at 42 euros (or £35) in economy class (return). Taking Barcelona as an example, it would cost 15,000 Avios + 42 euros for me, when I can normally find a cash ticket for 100-150 euros (and I would probably change my plans if the flight was too expensive). That analysis surely changes if a trip is vital, the cash cost is 300 euros and yet there is still Avios availability. Having a good idea of what your Avios is worth to you makes that analysis second nature, and helps avoid you spending those precious Avios on that weekend trip you could have delayed or bought with cash, whilst flying to the Caribbean stuck at the back of the bus…
Another example of where it is vital to know your valuation of a mile is those fantastic Tesco promotions I explain here. In order to know whether it is in your best interests to pay £3 for a CD you will probably throw away or give to charity, you need to understand whether those 360 Avios are worth more than £3 to you. Having a clear idea of the level at which you’re willing to “buy” Avios or Flying Club miles via Tesco promotions, means you can jump on the good ones quickly, and watch your Clubcard balance skyrocket, hopefully in advance of another transfer promotion!
And finally, I think it’s also useful to have an idea of what a mile is worth to you when looking at booking hotels, particularly for those like me who don’t see too much value in hotel chain status. As I explain here, booking with hotels.com will usually get you around 10% in cashback from the likes of Quidco, and another 10% from their Welcome Rewards scheme. When looking at booking a hotel, knowing the value of a mile comes in handy, especially since the cost of the hotel night is often the same on the hotel chain’s website and booking websites such as hotels.com. So for that £60 1 night stay at a Hilton in the UK, getting those 1000 Virgin Atlantic miles plus some Hhonors points is probably worth foregoing the £12 that hotels.com would give you. But for that £500 stay at a Sheraton property, you’re probably better off getting the £100 in cash back from hotels.com than the 1500 SPG points you’d receive at 2 points per USD.
So, as you can see, knowing how much a mile is worth to you helps you to make informed decisions when booking travel plans.