I have long wanted to see the Anne Frank House, and recently the stars aligned to make a quick trip to Amsterdam potentially viable in a few weeks. So I made a reservation at the InterContinental Amstel Amsterdam, where the cheapest room during my timeframe was priced at €500 (about $680) per night. While I am frugal, I don’t believe that price and value are synonymous. The cheapest option doesn’t necessarily offer the best value, and in this case I think a splurge is justifiable. Situated on the Amstel River and considered the premiere hotel in Amsterdam, the InterContinental is where the champagne-and-caviar crowd lunches.
Of course I’m kidding. I’m not paying $680 per night. But before getting to what it cost me (hint: nothing) we have to slog through the “how to.”
InterContinental Hotels Group (IHG), whose brands are pictured below, is running the Big Win promotion through April 30, 2014.
Big Win is fairly complex as hotel promotions go, and analyzing its value is further complicated because each participant receives a personalized set of “challenges” to complete in order to earn points. Your offer will most likely differ from mine, perhaps vastly. However, if you’re not currently an IHG Rewards Club member, signing up (which is free) will likely get you a generic new-member offer similar to this:
One strategy is to complete this challenge in four nights to earn 34k Big Win points.* The key to coming out ahead is rate arbitrage: pay for stays at cheap hotels to earn points, then redeem those points at expensive hotels to save cash. So the analysis boils down to (1) what is the cost for those four nights, and (2) what is the value of the points earned?
- Four nights can be had for under $400 quite easily. The challenge above doesn’t specify any brands except Holiday Inn (which is one of the cheaper brands anyway). In many locations it’s common to see sub-$100/night rooms at the lower-cost brands. It won’t be in midtown Manhattan and it will be pretty Spartan, but it is do-able.
- Valuing points is subjective, but I generally value one IHG point at $0.007. My actual redemptions are usually much better than that (as we’ll see on my InterContinental Amstel booking), but hotel points are an illiquid asset so I discount their value relative to cash.
In this scenario, after spending $400 on four nights we earn 38,000 points valued at $266.
If you have no other reason to buy four hotel nights then it’s not worth it. Why convert $400 in (liquid) cash to $266 in (illiquid) hotel points?
But…if you have travel plans that require hotel nights anyway, and IHG properties would meet your needs, and there are no superior hotel promotions available to you in the same timeframe, then you leave points on the table by ignoring this promotion. Even if you only need one or two nights and don’t complete the entire challenge, you can still earn points for individual components.
As I mentioned, each member gets a customized challenge based on their stay history. Analyzing my offer is not particularly meaningful in that the offer only applies to me, but it illuminates what is possible when you play the miles and points game and will hopefully help you evaluate your own offer.
My offer is for about 150k points. I can complete it in four nights for under $400 by playing strategically. (By strategically, I mostly mean slumming it at Holiday Inns versus staying at InterContinentals). Since I travel often, I am always needing hotel stays so I would need those four nights regardless.
In addition to 150k Big Win points, I can earn another 20k points or so from the same four nights through a combination of base earnings (every paid stay earns 5 to 10 points/$), bonus earnings (because of my membership level), and other combinable promotions. (I also earn 5 credit card points/$ but for simplicity I have omitted those in the analysis.)
So I earn 170k points valued at $1,190 (assuming 1 point = $0.007) from spending $400 on four hotel nights.
(By the way, absent this promotion, I would’ve shifted my business to another hotel chain and earned points there. This happened to be the best promotion available to me this quarter, but it’s always good to know and evaluate your options.)
So, what did the InterContinental Amstel cost me?
If I spend $400 and earn 170k points, my acquisition cost is $0.0024/point. A reward night at the InterContinental Amstel costs 40k points/night. At that rate, I’m effectively paying $96/night (40k x $0.0024).
$96 is less than the rack rate of a Holiday Inn located 27 miles from the city center on the same dates.
I’d argue that the InterContinental Amstel stay actually cost me nothing. Because my $400 was not spent on acquiring hotel points, but on four needed hotel nights.
This is why I play the miles and points game. 😉
*An alternative strategy: complete the challenge in as few as three nights by forgoing the “Change your view” component. Doing so would earn only 31,000 Big Win points but would require one less paid night.