And as usual airfare and points value is up to the individual.
Just because an airline sells this business class airfare for ~$1,500 does not mean it is worth that much so the points should not be valued that high either. The value of the airfare and the points is what an individual is prepared to pay for that airfare.
For me, if an economy ticket PER-MEL costs ~$200 then a business class ticket is not worth more than ~$300 which would value the points at ~1c/point if redeeming reward outright or 2c/point if redeeming for points + cash using your example above.
And yes I do know you value business class airfares highly.
I could not agree more to this point. It does not make sense to calculate the value of points on the basis of what you would have to pay for the flight if you would never be willing to pay that much in the first instance. (Business class flight to the US and BNE/SYD/MEL - PER business class flights are heavily overpriced IMHO, for example.)
IMHO the only rational approach for calculating the value of miles that I could think of is the following (I have been doing it like this for years now):
1. Think about what you would like to do with your miles (origin, destination, cabin class, etc). [When thinking about this, be realistic. It does not make sense to dream of a 300,000 points award if you are never going to collect these 300,000 points in the first instance.]
2. Figure out what you would be willing to pay for this flight if it were offered to you for cash at the earliest point of time you could book your flight.
3. Find out what this flight would cost if you actually bought it for cash (at the earliest point of time you could book your flight).
4. Use the minimum of 2. and 3. and substract the taxes & fees that apply to award bookings of the same flight. Call this number the "base value". [If you have several ideas of what you might wish to do with your miles, use a weighted average of the corresponding "base values" and proceed with this weighted average as the new "base value".]
5. Figure out how many points you would need for buying your flight(s) with points. [Again, use a weighted average, if necessary. Also, take into account that you actualy need award availability for the flight(s) and the number of points you are having in mind.] Call this number "points burnt".
6. Figure out how many points you would reasonably earn if you could buy the flight(s) for the price of (base value + taxes & fees for awards). [This bit might involve some speculation if the number you got in 2. is way lower than the number you got in 3., so try to be realistic. Do not forget to include the cabin of service bonus and your status bonus.] Call this number "points earned".
7. Solve the following equation for DPP (= dollar per point):
base value - DPP * points earned = DPP * points burnt
DPP tells you how much value you should give to 1 point.
8. Double-check your calculation: if you are a rational person (and have no liquidity constraints with respect to your award travel plans), you should, in principle, be willing to buy points at the rate of DPP bucks per point (up to the amount of "points burnt") and book your award flight - because this is what you would consider a fair price. (Otherwise you might wish to adapt the numbers in 2. and/or in 6., and/or reconsider your award plans.)
The DPP can be used for answering at least five types of questions:
- for comparing the implicit price of different award flights,
- for calculating the real price (= net price) of a paid ticket,
- for deciding on whether (and to which extent) to make use of a points + cash option,
- for comparing different FFPs (by taking into account the net price of a paid ticket), and
- for deciding on whether it makes sense to buy points (by paying a credit card surcharge, for example).
Hope this make sense. I am interested in your comments.
on awards values them at 1¢ each. I'm sure that better value can be obtained.
