Yesterday, I spent some time critiquing Chris Elliot’s editorial against frequent flier programs.    Towards the end of the post I gave a somewhat cryptic manifesto:

My advice is for the deadbeats out there who want to travel for free.    To them I say; Join me in finding the maximum value from credit card, hotel, and airline loyalty programs.   Learn the difference in value between Starpoints and Skypesos.    If you are an infrequent paying customer, like me, you can be airline agnostic when you are shelling out actual dollars for a plane ticket.     When flying on your own dime, choose your carrier by price and service, not loyalty points.

When choosing a credit card to earn or redeem loyalty points with, choose an airline that has actual availability to your destination at reasonable redemption rates.   All of these skills cost nothing but your time and effort in learning them.

Allow Me To Expand

Join me in finding the maximum value from credit card, hotel, and airline loyalty programs.

Frequent flier miles, hotel points, and credit card reward programs are collectively referred to as loyalty programs.    All loyalty programs are not created equal.   In fact, there are massive disparities in value between various reward programs.

Learn the difference in value between Starpoints and Skypesos.

To illustrate the difference in value between loyalty programs, I would like to contrast two different currencies.   On one hand we have Starpoints issued by Starwood hotels, whose most well know brands include Westin and Sheraton.    Starpoints are the gold standard in reward card point for several reasons.    First, the points can be redeemed for any hotel stay at any available room with no capacity restrictions or blackouts.   If they have a room available for purchase with cash, you can choose to redeem your points to stay there.   Next, you can redeem Starwood points for miles on dozens of airlines.    Better yet, you get 5,000 bonus Starpoints every time you redeem 20,000, so that the transfer rate is 25% better than 1:1.     For example, if you spend $20,000 on your Starwood American Express card, you will receive 20,000 Starpoints that can translate into 25,000 miles on American Airlines.    In contrast, if you were to spend the same $20,000 on your Citibank AAdvantage card, you will get only 20,000 AAdvantage miles.    Clearly a Starpoint is worth more than an AAdvantage mile.   I currently value my Starpoints at around 3.5 to 4 cents each, but I can sometimes receive more than 5 cents per point in value.

In practice, a Starpoint is worth more than just about any airline’s mile, as the inherent flexibility of transferring between different airlines is extremely valuable.   When it comes time to redeem an award, you can choose to transfer miles to an airline that actually has availability to your destination, rather than the one you have been earning miles with for years.

Finally, Starwood customer service is the best in the business.  On the rare occasion that I have needed to contact them, they have always satisfied my concerns promptly and effectively.   In most industries this would be the standard you would expect, in the travel industry it is a rare exception.

What About SkyPesos?

Now let’s contrast Starwood points with Delta SkyMiles, which I will refer to as Skypesos for reasons that will become clear.    Delta may be the largest airline in the world (for the moment), but they have a lot to learn about providing value to their loyalty program.    Last year Delta went to a three tiered system for points redemptions, high, medium and low.  The high and medium tiers have broad availability, but at redemption prices far above other programs.   For example, a medium tier round trip business class award from North America to the Middle east is 230,000 SkyPesos.     If you look at US Airways Star Alliance partner chart, you will see that the same business class award is a mere 120,000 Dividend miles, just more than half the Delta award.    Don’t even get me started on the High tier in which your Skymiles are more like Zimbabwean Dollars than even pesos.   Delta does pretend to offer a Low tier business class award for a mere 120,000, but there is a big catch.  It may be easier to find a Sasquatch petting a Unicorn than to find Low tier award availability using their online search engine.    First, their online search engine is broken, a fact they were forced to admit when the Wall Street Journal found they had little to no award availability at the Low tier.   Even if you choose to call Delta, you will incur an “award reservation fee” for having to deal with their poorly trained overseas call centers.   Many people report that they have to hang up and call back several times just to find a representative who will make a decent effort to find award seat availability.   Finally, when you have problem with Delta, contact customer service often results in the reception of a series of form letters that make it clear that nobody has even bothered to read your complaint.

It Is Up To You

You can be defeatist and decide that loyalty programs are a rip off,  conclusion many Delta travelers have reached, or take the smart path toward free travel as many Starwood aficionados have.    Starwood and Delta represent two ends of a spectrum of award availability.   Nevertheless, the Starwood program isn’t right for everybody, and even the Delta program still remains valuable to some.    If a few thousand dollars worth of travel is no big deal to you, skip loyalty programs and just pay cash, the rest of you can join me and travel for free.

Like most travel and reward card aficionados, I am a huge fan of the Starwood Amex.   My hunch is that there is a surprisingly large number of Starwood Amex holders that rarely use their card at an actual Starwood hotel, they just accumulate Starwood points with their card for free hotel stays or to convert to airline miles.     I am one of those people.

Using My Starwood Amex To Actually Stay At A Starwood Hotel

Last week, I did something remarkable, I actually paid for a hotel stay at a Starwood hotel.   Well, kind of.    I used 48,000 Starpoints to stay 5 nights at the Westin St. John in the US Virgin Islands, while my parents were generous enough to allow me to bill their stay to my Starwood Amex.   Each of my award nights was 12,000 points, but the fifth night of any redemption is free.     This hotel normally charges between $400 and $500 a night, but they paid $329.    They received the lower rate because I used a 50% off the rack rate coupon that Amex gives to it’s Starwood cardholders every year, with the rack rate being higher than most normally discounted rates.   They were able to realize a significant savings right there, because I had the Starwood Amex.

After taxes and resort fees, our bill ended up at around $2,000.    On the final night of our stay, we treated ourselves to dinner at the hotel’s restaurant, and charged it to our rooms.   Conveniently, all charges at a Starwood property receive the same allocation of Starpoints as your room stay does.     As I will demonstrate, that allocation is considerable.

Triple Word Score!

You know that great feeling in Scrabble when you can combine bonuses and your points really add up?    That is the feeling you get when you figure out how many Starpoints you get when you actually use your Starwood Amex to pay for a stay at a Starwood hotel.       Normally, you get two Starpoints per dollar spent at a Starwood, regardless of how you pay.    I happen to be a Starwood Preferred Guest Gold member, a title earned solely by spending $30,000 a year on my Starwood card.    To be honest, I had a little help last year from the US Mint if you know what I mean.    As a Gold member, I get another 50% Starpoint bonus, just on my stay, so I received three Starpoints per dollar spent when I checked out, about 6,000 Starpoints.

We Are Just Getting Started

When I get my credit card bill, the $2,000 spent at the hotel will result in double Starpoints; 4,000.    So as a Starwood Amex holder and a Gold level member, I went from 4,000 Starpoints I would have otherwise received, to 10,000.     In this case, the paid room cost $329 per night, plus $26 in taxes, for a total of $355 a night or $1,775 total.    The room paid with miles cost 48,000 miles and there was no tax.     Therefore, in this case, my miles spent were worth 3.7 cents each.    The miles earned from spending $2,000 at the hotel (room plus resort fees and meals) therefore had a value of $370.    Another way to look at it is that as a Starwood card holder and a Starwood Gold level member, I got about 18 cents on the dollar back.

But Wait, There’s More!

We also took Westin’s vacation timeshare tour.   I feared the promised 90 minute presentation would be an aggressive sales pitch, but it was actually a fairly relaxed tour of the property, albeit two hours long.    For my time, I received another 6,000 Starpoints.   Finally, they had an offer to forgo housekeeping for a day for 500 Starpoints or a $5 credit.    Since I have just proven that Starpoints are worth closer to 4 cents than 1, you will understand why if that offer of cash insulted my intelligence.   We took the 500 Starpoints voluntarily one day, and another day we received the points because they didn’t vacuum our room.    We finished our 48,000 point stay with 17,000 points back.    Not bad.   To put that in perspective, remember that a mere 20,000 Starpoints can be transferred to 25,000 miles on dozens of airline programs, enough for a free domestic round trip.

What To Take Away

As I said, I accumulate valuable Starpoints almost exclusively through their Amex card, and this was one of the first times I actually used my card to charge a hotel stay.   The results of using my Starwood Amex combined with my Starwood Gold status exceeded my expectations, even if the hotel itself did not.    If I was ever in a position again where I was traveling on business, I would probably go a great deal out of my way to make sure that I was staying in a Starwood, and charging my stay to my Starwood Amex.     You can never be too rich, too thin, or have too many Starpoints!