Points 101 (2): What Are Airline Miles and Hotel Points?

 Beginner’s Guide:

Introduction to Points Systems

Points 101 (2): What Are Airline Miles and Hotel Points?

Points 101 (3): The Three Major U.S. Credit Card Points Systems

Even though OneDayMore is now a big fan of miles and points, when I first came to the U.S. I firmly believed that cash was king. I preferred cash-back credit cards, and every time I saw 1%, 2%, or sometimes even 5% cash back, I got excited. But as I learned more, I realized that points credit cards can offer much greater value. If you know how to use points well, you can get far better returns than with cash-back cards, and make your travels much more convenient too. Still, many people do not know how to enter the world of points. They feel that points and miles are too intangible and that direct cash back is easier to understand. Over the past few years in the U.S., OneMoreDay has learned a lot about points through online research and personal experience, and I really want to share that knowledge with everyone. Today, I’d like to write a beginner’s guide to points and help readers gain a clearer understanding of the system.

A Simple Points System

Actually, miles and points are not that complicated. At their core, they are basically a kind of privately issued game token. For example, Starbucks has its own loyalty program, and its “game token” is the little star. Each transaction earns you one star, and once you collect 12 stars, you can redeem them for any Starbucks drink. Note that these stars can only be used at Starbucks. Twelve stars can get you a $5 cup of coffee, but they cannot be exchanged for a $5 gift card from some other store. So this kind of program is really a way to retain customers. After all, every purchase earns stars, and if you do not use them, it feels like a waste. But to redeem them, you must collect all 12 stars; even one short will not do. That creates an incentive to keep spending there.

Starbucks’ star system is a simple loyalty program. Hotels and airlines also have their own loyalty programs, except instead of rewarding you with stars, they reward you with points and miles. There is also another part of loyalty programs: elite status. For example, if you spend enough or stay enough times, you might earn Gold status. That is a separate topic, and we can talk about it another time.

What Are Airline Miles and Hotel Points?

Airlines and hotel groups have points systems that are basically a slightly more complicated version of the Starbucks star game. When you spend money with an airline or hotel, they give you a little something in return to keep you as a customer. That “something” is airline miles or hotel points. What can you do with them? Just like Starbucks stars, they can only be used with airlines and hotels; they generally cannot be turned into cash or gift cards. So if you rarely fly and rarely stay in hotels, then these points and miles may be essentially worthless to you. (Of course, you could try selling them on the secondary market, but I personally do not recommend that.)

For people who play the points-and-miles game, the goal is usually to redeem for a wonderful trip for themselves or their family, while also broadening their horizons. When your flights and hotels can be covered with points, you can use the money you save on better food, more activities, and a richer travel experience. That is how points can improve the quality of your trips.

How Many Miles or Points Do You Need for a Plane Ticket?

That depends on the rules each company sets for its own program. On the airline side, 35,000 UA miles can get you a one-way ticket back home, while 60,000 ANA miles can get you a round-trip ticket back home. In future posts, we will also talk about redemptions with British Airways and AA. Each airline’s award chart and redemption rules are worth several blog posts on their own.

Hotels are a bit simpler (after all, there are only a handful of major hotel groups). Here I recommend a very useful website: www.awardmapper.com. You simply enter the destination you want to visit in the upper-right corner, and after you hit Enter, it will show all the chain hotels in that area and how many points are required for each redemption. It is very convenient. For example, if I want to go to Miami, I can enter Miami and choose “Miami, FL, United States,” and it will display all hotels in the area along with their locations and hotel groups, as shown below:

The panel on the right shows each hotel’s category and the number of points required. You can also use the small box in the upper-left corner to filter by your preferred hotel group. It is very easy to use.

Why Can’t I Redeem the Flight I Want?

Many readers build up lots of airline miles, only to complain that they cannot book the ticket they actually want. For example, someone might want to use UA miles for a nonstop flight from New York to Shanghai in June, only to discover that there is no 35,000-mile one-way nonstop ticket available at all. As you can see from the image below, the search results may show flights connecting in Europe or itineraries with two or three connections before you can get back home, which is exhausting. And this is for major city pairs. If you are trying to go from a smaller U.S. city to a second- or third-tier city in China, it is even harder to find award space.

Why does this happen? It comes down to how airlines release award seats. Airlines have full control over whether to release award tickets on a given flight, how many seats to release, and when to release them. If a flight is selling well, the airline naturally wants to sell every seat rather than have those seats redeemed with miles, because that is more profitable. In that situation, the airline will not release award space. June is peak season for U.S.-China routes, so it is perfectly normal not to find award tickets. Another reason is that many people travel back home in June, and those who are skilled at using miles often book early. Demand exceeds supply, so if you are only starting now, you may want to look at award space for next year instead.

If that is the case, then why do airlines release award seats at all? Besides being a marketing tool, another reason is that they do not want empty seats to go to waste. From the airline’s perspective, the operating cost difference between a full flight and a flight with a few empty seats is negligible, since fuel and service costs are roughly the same. But if those otherwise empty seats are released as award seats, the airline can absorb the miles it has issued to customers at a very low cost. So, a lot of award availability often means the airline thinks the flight is not selling well.

Does that mean summer is a bad time for award tickets? Not necessarily. If your schedule is flexible, it can still work. By July, fewer people are heading back home, so there can still be quite a bit of award space. Another option is to wait until June to book business-class flights departing within two weeks. At that point, economy may still be selling well, but many business travelers are already on vacation, so business and first class may not sell as well. And the better the airline, the more likely it may be to release premium-cabin award space at the last minute. ANA, Lufthansa, EVA Air, and Cathay Pacific all often do this. So if you are patient and wait until June, you might be pleasantly surprised!

What Does Points Devaluation Mean?

When the money supply increases, currency loses value. The same logic applies to airline miles and hotel points. When more miles are issued, or when a company feels it has already attracted enough customers through promotions, it may change its redemption standards. In other words, you will need more miles or points to redeem the same flight or hotel room. It is like how 12 stars used to get you one cup of coffee, but later it might take 15 stars for that same drink.

For example, Club Carlson recently eliminated the last-night-free benefit for co-branded credit card holders, and UA changed its redemption rates last March. Points devaluation is the long-term trend, and the best way to fight it is not to hoard points. Points only have value once you use them. When you have enough points for your goal, go ahead and redeem them. Use them and enjoy them—that is one of the core rules of playing the points game well.