Holiday lessons (2): ‘Earn and burn’ is not always your best strategy
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I spent 17 nights in the Middle East over Christmas and New Year. I had to use a variety of techniques to get the cost of this trip down, since we booked at short notice and hotel costs were not far behind what you would pay in the Maldives or Barbados.
Instead of reviewing each stage of the trip, I want to focus on lessons worth sharing.
The first article in this three-part series was called ‘Avios is not always the answer’ and you can find it here. It explains why – on specific routes and in specific flight classes – other airline schemes can offer far better value even if you have an Amex companion voucher.
This is the second of the three articles. I am trying to keep the story in chronological order, so at this point we have checked out of the Burj Al Arab after three days to spend three days at The Ritz Carlton Al Wadi Desert Resort in Ras Al Khaimah (website here).
A full review of the resort will follow in a few days, so I won’t cover it here.
Let’s call today’s topic:
‘Earn and burn is not always the answer’
One of the general principles of collecting miles and points is ‘earn and burn’.
By ‘earn and burn’ I mean don’t let your balances build up. 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 70,000. It is only five years ago that Hilton capped rewards at 50,000 points per night – now it is 95,000.
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.
The Ritz Carlton Al Wadi Desert WAS a blockbuster redemption.
Irrespective of the UK weather over Christmas, it is a great time to visit the Middle East. With a daily peak of 26-27 degrees, it is pleasantly warm but not excessive. It is good enough to sunbathe but you are unlikely to get burnt. You can walk around without breaking into a sweat. Unless your sole intention is to burn your body to a crisp, the climate is ideal.
Here is the maths
We booked Al Wadi for three nights and took two rooms, since my kids are too tall now to spend much time on rollaways or sofa beds.
A ‘room’ at Al Wadi is basically a house. If you look at the first picture above, each block is two semi-detached units. They connect seamlessly so if you have two you end up with a massive 3,400 square foot detached house. Each has its own private pool – so we ended up with two!
This doesn’t come cheap at peak periods.
The cash cost for three nights, per room, was Dhs 11,432 including taxes. This was £2,429 at the time we booked, so for two rooms the cash cost would have been almost £5,000 for three nights.
Using Marriott Bonvoy points, it averaged out at 200,000 points for each room, so 66,666 points per night.
To save you getting your calculator out, this worked out at 1.2p per Marriott Bonvoy point.
My usual valuation of a Marriott Bonvoy point is 0.5p. I usually say that if you get an opportunity to redeem at this level then you are doing OK. I got well over double my recommended value here.
Why ‘earn and burn’ would have meant a disaster here
The snag was that I needed 400,000 Marriott Bonvoy points to book this.
The reason I had so many points sitting around is that, for a decade, I have been earning far more than I have been spending.
My Bonvoy points are primarily from the old Starwood Preferred Guest days, where the best value was for mid-market hotels. We don’t stay in many mid-market hotels, given a choice, so the points mounted up. Most of my redemptions were for tickets for concerts in the SPG Suite at the O2 in London, or other SPG Moments events.
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 Al Wadi Desert 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 1.2p per Marriott Bonvoy point then I 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 massively beat my recommended points valuations and so should not redeem 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 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 (the Crowne Plaza Sheffield doesn’t cost much for a week in August)
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.
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. If you are free to travel when you want, you may want to stick with ‘earn and burn’ because you will never find yourself needing a room at a peak period somewhere.
Feel free to share your thoughts below.
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. Marriott does the same, albeit there are more loopholes for hotels to exploit. 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. For much of 2020 we saw bigger discounts and longer promotional periods than usual. The final article in the series will look at this.
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