Here’s my rebuttal to a recent post by Your Mileage May Vary arguing that calculating cents per point (CPP) or cents per mile (CPM) is an “awful” way to value award points.

Yes, Looking At Cents Per Point (CPP) Is A Smart Way To Value Award Points…

At the outset, let me concede that how you value your miles and points is inherently subjective. I tend to give them more value than others, placing the value of most airline and flexible point currencies at two cents each.

As YMMV notes, think of CPM or CPP like this:

CPP = (Cash Price in Cents) ÷ (Points Required)
Example: $100 cash rate (10,000 points) → 100 ÷ 10,000 = 1 CPP

In short, you take the cost of a travel reservation and divide that by the number of miles or points required to make the same reservation.

YMMV reasons, “The issue I have with this valuation method is that it doesn’t take into account if the cash price of your award is artificially inflated.”

I think “artificially inflated” is the wrong term, but the point is that sometimes we can say stupid things like, “Oh, I got 10 cents per value on my Lufthansa First Class redemption,” when there is no way we’d ever even consider paying the cash price.

That’s a fair criticism…

I also think that just because we might only actually be willing to pay $1,000 out-of-pocket for a Lufthansa First Class ticket (versus the $10,000 sticker price) does not mean that we are only getting one cent per point in value if we redeem 100,000 Aeroplan miles for the first class flight.

Because every transaction represents an opportunity cost, and if you earned those Aeroplan points at two cents per mile instead of using, say, a US Bank 4% cashback credit card, your actual “cost” for that ticket is $2,000.

And I think of it like this…one beauty of points is that you can enjoy the finer things in life without the liquidity others need to do the same thing. You do set aside cashback opportunities when you collect points, but if you view it all as a bonus, you’re still not paying much out-of-pocket for the flight or hotel, which itself is a fun part of the game.

I don’t redeem my points for Lufthansa First Class because it is the “greatest value” but because I really enjoy Lufthansa First Class.

Even so, CPP is a vital barometer for measuring value: if the ticket cost $1,000 or 200K points, there is no way I’d use points, no matter how much enjoyment it brought me, because those points are worth more than a half cent each.

There is a baseline value on points, and I think you’re foolish if you don’t get at least that.

YMMV laments about a recent 160,000-point Hilton redemption in New York City, saying, “What disappointed me was overestimating the value of my redemption by thinking the hotel I stayed at was worth the cash price they were charging.”

That too strikes me as a different matter…the quality of the hotel experience is also subjective, but that does not really impact the wisdom of using points versus dollars for the stay when faced with that binary choice. Instead, it simply impacts whether you should stay at that property (or fly that airline in that class of service) at all.

Ultimately, YMMV concludes, “If you’re happy with how you used your points, then it was a good redemption,” and I would agree with that. But that’s a different proposal than saying calculating CPP is an “awful” way to value award points.

image: Lufthansa