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Pay with points or cash? That’s always the question when you play the miles and points game. And usually the answer is, “Do you need stays for elite status?” or “Are you points rich and cash poor?” What works for you might not be the best solution for someone else and vice versa. That’s why there’s an easier way to figure out if you should pay for your hotel with points or cash. A way that works for everyone. Here’s what you need to know before you redeem points for hotel stay.
- What You Need to Know Before You Redeem Points for Hotel Stays
- Things to Consider
- How Much Are Your Points Worth
- When to Pay Cash, When to Use Points or Points + Cash
What You Need to Know Before You Redeem Points for Hotel Stays
I could give you general platitudes like, “Use points when hotels stays are expensive like during the summer or holidays.” or “Don’t use points if you’re saving them to use at a more expensive hotel.”
But how about some actual applications aka real-life examples. How much is it actually costing you to redeem points for your hotel instead of paying cash? I know you’re nodding your head and saying, “Bottom line it for me, Deb.”
Because isn’t that what it’s really about? How much it costs to use hotel points compared to paying cash. Because there’s a cost to using your points ‘cuz you didn’t get them for free.
Yes, you may have gotten them because of a big sign-up bonus. But you still had to make the minimum spend. Even if you didn’t really spend the money. You know what I’m talking about. Sssh, it’s like fight club. Or it used to be. But now it’s all over the internet!
Things to Consider
Before we get into the nitty-gritty of how much your points are worth, here are a few things to keep in mind when deciding to use points or pay cash.
When you redeem points for free hotel nights you won’t earn points. But you will earn points on the cash rate for points + cash reservations.
Taxes and Resort Fees
You don’t pay taxes or resort fees on award stays. However, there can be exceptions.
Elite Stay Credit & Status
When you use points for your hotel reservation you will not earn credit towards elite status. Exception: Using points at Starwood hotels counts towards elite stay credit. But you will earn elite stay credits when you book a points + cash stay.
Free Breakfast, Free Internet & Lounge Access
You get your elite status benefits such free breakfast, free internet, and lounge access when paying with points.
How Much Are Your Points Worth
Some people set an arbitrary value on their hotel points such as Starwood points are worth 2.5 cents. Just because someone else says points are worth a certain amount doesn’t mean that they are. You, yes, you should decide how much each point is worth. Or use my method. 😉
I don’t set a value on points. Instead, I decide whether or not to use points based on how much it would cost to buy those points.
So I do math (gasp) to see if it’s cheaper to pay cash or use points.
Check out this table to see how much it costs to buy hotel points:
|Hotel||Cost per point based on 1,000 point increments||Maximum amount of points you can buy a year|
|Best Western||1 cent||20,000|
Of course, you can buy points other ways. But you’ll pay $1 for each point buying gift cards with a hotel points earning credit card.
When to Pay Cash, When to Use Points or Points + Cash
Now that you know how much points cost, you can decide if it makes sense to redeem points for a hotel stay.
Let’s look at a couple of real-life examples.
For my Hong Kong and Australia trip, I evaluated the cash and points cost of each hotel before making each reservation. And yes, you know I bounced hotels every night. Hotel elite status hacks, y’all!
Hyatt Regency Hong Kong, Tsim Sha Tsu
I stayed at the Hyatt Regency Hong Kong, Tsim Sha Tsu for convenience (easy transportation from the airport and free smartphone use).
The Hyatt Regency Hong Kong, Tsim Sha Tsu cost $271 cash or 21,000 Hyatt points. Points + cash weren’t available for my stay.
You can buy Hyatt points for 2.4 cents per point in 1,000 point increments. So 1,000 points cost $24.
For this stay, it would have cost $504 to buy and redeem Hyatt points. (21,000 x $24).
Buying 21,000 worth of gift cards to earn points with your credit card would cost $210. PLUS your time and gas.
If the cost of your time and gas is less than $61, buying gift cards makes sense.
Verdict: For most people, it’s easier and more cost effective to pay cash for your hotel.
Grand Hyatt Melbourne
For my stay, the Grand Hyatt Melbourne was $221, 15,000 Hyatt points, or 7,500 Hyatt points and $94.
Buying Hyatt points would cost $360 (15,000 x $24).
Using Points + Cash was $94 plus 7,500 points.
Depending on how you get those 7,500 points your cost could be $169 ($94 + $75) or $286 ($94 + $192 buying points at 2.4 cents).
Gift card purchases would cost $150.
Verdict: You save $71 if you redeem points for your stay.
Radisson Blu Plaza Hotel Sydney
Because Sydney is the most frequently visited city in Australia, let’s look at a comparison of using paid stay vs using points for a future reservation.
We loved staying at the Radisson Blu Plaza Hotel Sydney when we visited Sydney. Using points for our stay was a no brainer. Because you got the second night free when you redeemed award points if you had the Club Carlson credit card. Sadly, they removed that great perk.
Staying at the Radisson on March 26, 2017, you’d pay $300, 70,000 Radisson points, or 20,000 points + $200.
Buying 70,000 Radisson points costs $490.
The points + cash rate would end up costing you $340 ($140 for 20,000 points + $200).
Verdict: You’d save money by paying cash instead of using points.
You could spend Thanksgiving weekend in Hawaii at the Westin Maui for $289 (plus taxes) or 25,000 Starpoints a night. Points + Cash aren’t available this weekend.
Buying Starwood points would cost $875. Say what!
Verdict: You’d save $586 paying cash instead of using points.
I’m a big fan and frequent user of miles and points.
There’s a huge advantage to paying with points when you stay at hotels. When you use points for your hotel you save money. And you usually don’t pay taxes or resort fees.
Plus all your elite status perks like free breakfast, free internet, and lounge access still apply. You also earn points if you make a points + cash reservation.
But there are times when it’s cheaper to pay cash than redeeming your hotel points. Simply put: Pay for your hotel when the cost of using points is more than if you paid cash.
Sure, you can throw out the argument, “You’ve already invested the cash to acquire the points.” And that’s a valid argument.
But if you’re playing the miles and points long term game, you should evaluate the cost of a paid stay versus the cost of using your points. And that means that sometimes you should pay for your hotel stays and save the points for a different hotel.
We’ll look at using airline miles for flights in another post.
What’s your theory on paying with cash or redeeming points for hotel stays?
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Featured image courtesy of Park Hyatt Maldives.
Traveling Well For Less has partnered with CardRatings for our coverage of credit card products. Traveling Well For Less and CardRatings may receive a commission from card issuers.