UPDATE: Since there appears to be some confusion about my intentions with this post, allow me to clarify that it is not meant primarily as a criticism of Chase or Ultimate Rewards. I find their advertising language amusing, but I find lots of things amusing and it’s only meant as a personal comment by way of introduction to the main topic: the results of the poll. I could edit out the first half of the post, which is mostly commentary and opinion, and it would not change the ending, which is that the average respondent to my poll would accept a discount if were possible to redeem United miles in reverse for Ultimate Rewards points.
So, I apologize for (1) the initial mistake with the headline, since corrected, and (2) my apparent mistake in including an opinion on Ultimate Rewards’ choice of marketing language. In the interest of transparency I’m not trying to hide those mistakes. But if you can over look those, the rest of the post is quite harmless. It provides the results of a poll, helps assign a specific number to the premium Ultimate Rewards points ought to receive for their flexibility, and reminds readers that one should think carefully about which transfer partner provides the most utility for their Ultimate Rewards points. END UPDATE
A little over a month ago I was debating with myself — and some readers — on the new value of Ultimate Rewards points after several devaluations by their airline and hotel transfer partners. You guys raised a lot of good points, and I’m going to revisit the question, but today is just a fun little math exercise.
I find it hilarious that Chase advertises its Ultimate Rewards program as letting you transfer points at “full 1:1 value.” How much is a point worth? One point. Well, how much is that one point worth? One point. The only thing worse than marketing spin is meaningless marketing spin. I couldn’t care less if I get one point for another point. What I care is what I can do with my points.
And this is where things get tricky. You can transfer Ultimate Rewards to lots of different programs, but each of those programs has, in turn, loyalty currencies of different value. 100,000 points transferred to United Airlines will get you a round-trip business class ticket to Europe on Lufthansa — if you book today. Or you could transfer the same 100,000 points to Hyatt and get 5 free nights at a Category 5 hotel. After February 1st you’ll have to transfer 140,000 points for the same award flight. But you can still get 5 free nights at Hyatt for just 100,000 points.
Did the value of Ultimate Rewards points go down? Stay the same? It clearly depends a lot on what you want to do with them. I don’t even have to transfer them if I don’t want to. Ultimate Rewards points by themselves are worth 1.2 cents each for a flight booked through their travel agency.
So, points do not transfer at equal value, regardless of what Chase says. There are generally two ways of valuing Ultimate Rewards points. The first is to assign them the value of the most valuable transfer partner. If a Hyatt point is worth 1.5 cents and a United mile is worth 2 cents, then I’d say an Ultimate Rewards point is worth 2 cents. Transferring points to United actually increases their value. The second way is to assign a slight premium, say 2.2 cents, because Ultimate Rewards points are flexible. I can’t turn a United mile into a Hyatt point, but I can transfer my Ultimate Rewards points wherever they have the most utility.
I am in the first camp. I value them pretty much the same as the most valuable transfer partner in most cases. However, given a choice I will obviously choose Ultimate Rewards points. That flexibility has value. It just doesn’t have very much for me because I only ever transfer to Hyatt or United and already have lots of both.
So I set up a question for my readers: How many United Airlines miles would you exchange for exactly 1,000 Ultimate Rewards points? If you said 1,000, it means you assign equal value. If you said 1,001 (like me) it’s probably because you assign equal value but are willing to part with a symbolic mile to gain the extra utility of Ultimate Rewards points. And if you said 1,100 or more, it’s because you believe that United miles are discounted relative to Ultimate Rewards points — you would give up United miles for the flexibility of Ultimate Rewards points, even if that flexibility means you might end up transferring them back to United some time in the future (and ending up with fewer miles than you started with).
I collected over 300 votes. Here’s how they were distributed:
As I suspected, a plurality said 1,000 (equal value), a few would offer the symbolic 1,001, and another large portion offered 1,100 (a slight discount). But a not insignificant number were willing to depreciate their United miles by 33% by offering 1,500 or more for only 1,000 Ultimate Rewards points. “Depreciation” assumes you’ll be converting them back to United eventually. You may have tons of United miles and want to do something else with them.
I went ahead and calculated a weighted average of these responses to determine the value of an Ultimate Rewards point with respect to United miles. Because you can’t calculate a qualitative answer like “more,” I lumped this group in with “1,500.” The result is 1,146 miles. Turn it around the other way, and
1 Ultimate Rewards point is worth only 0.87 United miles 1 United mile is worth only 0.87 Ultimate Rewards points in the eyes of the average person polled. Hardly a 1:1 exchange.
Of course, many factors go into determining the value of miles and points. A fixed-value rewards program like Southwest Rapid Rewards tells you X number of points times Y valuation = Z dollars toward your next ticket. Zone- and category-based awards used by most airlines and hotels say you can fly a certain route or stay at a certain hotel for X number of points, but the actual cost of that flight or hotel room may vary widely. And almost any time you book award travel, you are giving up some flexibility and sacrificing any additional points or miles you could have earned on a booking paid with cash.