Is Award Travel Really Free? The Four Great Debates, Part 2

Even when redeeming miles and points for travel, there is still opportunity cost for your time, the ability to cash out many points for at least $0.01, and ancillary costs like parking, Uber/taxis, and food while traveling.

But, if you love to travel, then you’re doing what makes you happy, so it is totally worth more to you than redeeming your points for cash and buying something that you won’t enjoy as much. As studies have shown, you’re much better off spending on experiences than material things.

Figuring out how much I am “making” on my travel card hobby turned out to be a more complex question than I expected. Once I started keeping spreadsheets I quickly discovered why there are such strong philosophical disagreements on what we mean by “free” or “savings”.
The basic question is, what is the goal of travel hacking? Is it to do the same type of travel you would have done anyway but for less money, or is it to enjoy travel experiences you would never be able to afford otherwise? For me it is mostly the first goal, but occasionally the second. Mostly we use our points to fly coach and stay in Holiday Inns or Super-8s. But occasionally we use points to splurge on business class to Europe or a few nights in a really fancy hotel. It’s true that we never would have paid $900 per night for that hotel suite in Hawaii if we’d been paying cash, but what the heck, if that’s what the room would have cost that’s what I enter in my spreadsheet. I can see an argument for just entering what you would have spent if you were paying cash, but that’s over-thinking it too much IMHO.
Using a mix of points-earning and cash back cards confuses the question even more. It’s easy to see that you saved $431 in airfare for a particular flight by using airplane miles, but if you have to pay cash for the taxes and fees then the flight isn’t free. BUT… if you maintain that the money you used to pay the fees came from cash back on your Amex BCP, then you could call it 100% free. Or you could go the other way and point out that you would never have bought that full-fare Delta ticket if you hadn’t been forced to in order to use the Companion Fare.
Rather than focusing on the individual trip, I keep a spreadsheet of rewards and expenses from all my credit cards. I started this to make sure that I wasn’t actually LOSING money by getting suckered into all those Annual Fees. Clearly, that has not been a problem. In 4 years of seriously collecting reward cards my husband and I are about $38K to the good. That’s compared to paying for everything with cash and checks, the way we used to do. So even if we splurged on a few vacations we would never have thought about if we hadn’t had awards to burn, we are coming out ahead and having a lot of fun.

With a decent numerical credit score and an airline/hotel points chart, points and miles are actually quite easy/take very little time to accumulate and spend. That is the science. I find that most of the real time, energy, and research expended is in finding the highest and best use for those same points – the art.

A person can arrive at a rough estimate of what their “time” is worth by what they are actually being paid/have been paid by their company, customers, or clients. I think a person first has to decide if travel is meaningful to them. If the answer is “yes,” and they don’t have to come out-of-pocket for a desired trip, then it is probably safe to say it is also “free.” It then would also NOT be free if they instead worked at their jobs for a period of time to accumulate enough funds to take that same trip.

I recently spent 4 nights at the lovely Miraval Arizona Resort & Spa in Tucson. My girlfriend and I both signed up for the Hyatt credit card (when it still offered 2 free nights) and consolidated them for a joint trip. Hyatt honored the $1,400 resort credit (for 2 ppl) normally offered when booking a room without points, so a few very nice spa treatments (each) were included. Transportation to/from the Tucson airport; 3 delish yet healthy meals, snacks, fruit/nuts, smoothies; interesting activities and insightful break-outs; and an incredible villa and beds with Santa Catalina mountain views (including taxes and resort fees), were also included. Our invoice at check-out was less than a $100/each only because we chose some spa add-ons. Tipping on the property isn’t even allowed! The stay would have instead cost us about $6,000 ttl had we instead paid and not used our free nights. Miraval has been on both our bucket lists for 10 years, but we just never saw clear to spending that kind of money to go.

The time it took me to read that Miraval is now: part of Hyatt; included in Hyatt’s loyalty program; available to use with Chase free nights; and finally booking a stay was insignificant compared to the time I would have had to spend earning that same money. For somebody making $60,000/year, for instance, a high-end trip such as this would represent 10% of their gross salary, or a month and a half’s after-tax pay! Granted my friend and I effectively split the “costs,” but my point is that this award travel was definitely free to us, because it was a luxury experience we really wanted to do but wouldn’t have without a LOT of help (finally offered up by Chase)!

Even in the financial crisis of 2008/2009, Americans still took vacations. Maybe not as long or frequent, but people tended to get away even if they did staycations or borrow money. I think if they were armed with the right knowledge and tools about award travel, they would have certainly preferred it to raiding their dwindling investment and savings accounts (at the time), even if it may not always be entirely free for many of the reasons previously posted. Time is money, however, so it is sure nice to experience a few, true home runs now and then.

This is a funny point in my household because my husband and I have polar opposite opinions. He thinks it’ts not free because you have to buy stuff to get the points. The way I see it is, I am getting points/money/miles for the spending I would do anyway (we have to eat, have clothes, maintain a car, etc) so, to me, that comes free. Now, when using those perks for travel, if I had a $1000 in my bank account, and after I paid annual fees, taxes, and whatever related to a trip, I have the same 1000 in the bank, then, I consider it free. I agree with the people that said if the time you use for this hobby (that is what it is to me) replaces time you would have been spending on leisure then, still free.
I have the perfect example, I have a friend that uses a debit card for everything so she doesn’t get any points at all. I only buy with credit cards that give me some benefit in some type of currency. In September, we had to evacuate because of hurricane Irma and we spent a week in hotels in Georgia and Mississipi. I used points for all my nights, not a penny out of my pocket. She made the decision to stay because she could not afford a few nights at a hotel, in the end, we got spared but it is a tough position for a family to be in.
Last point I want to make is, because we are 4 people in my family and I am the only one actively in this hobby, we mostly use the benefits to reduce the cost of out travel, we would rather not wait to be able to take a free vacation and use the benefits as needed.

Excellent comments thus far just like last week.

OK so my 2 cents worth which applies only to our situation. I only started collecting points/miles about 5 years ago. Prior to that I used my debit card or non-point earning credit cards so I look at the points/miles earned as a mostly free bonus.

I first signed up for Delta and Hilton cards since those are my primary suppliers I’ve used travelling on business. I eventually started to signup my wife for several cards. I only do them in a planned fashion where I figure out how to move my spend around to meet the minimum spend to get the signup bonus. Occasionally if a special signup comes along I will get that card if possible (Chase is difficult) to get that bonus. I also look at the benefits of the annual fee vs. the charge. Do I get any ongoing value from the fee or not. As an example I have the Delta Reserve card $450 annual fee. Well that card lets me get into Sky Clubs for no charge (when I travel on business) and I prefer the creature comfort. What really makes me keep the card is the annual companion pass which allows booking in First (Platinum card allows only economy) and I’ve used that benefit for my wife and I for some long haul domestic flights basically paying roughly $1100-1200 round trip for 2 people in First from Florida to the Pacific coast. So yes I had a cash outlay but probably equal to buying coach tickets and got to travel in comfort. I use my hotel points but then many times end up paying for an upgraded room which to us is worth it.

Now in regards to “Free” travel I don’t ever look at it that way. I’m able to use my points/miles and card benefits to really upgrade our trips. I do count a lot of incidentals as cost because the sightseeing tour or transfers are cash outlays. Also we are foodies so on trips we look for nicer special restaurants so I consider that as an expense that is greater than eating at home. But again it’s our choice and what we like to do. Without the redeemed points/miles we wouldn’t be able to do some of the trips and certainly not in the upgraded style.

Mark thanks again for the series and looking forward to next week.

I think it can be free. But most of us need to admit a couple things. We are spending on paid travel we might not do to earn points, status, free nights, and some of those calculations work out, some don’t. Also, even when things aren’t free we might be tempted to spend more because of benefits we have, upgrades, 4th night free, etc. I’m perfectly happy with the travel I’m doing and that I’m doing a ton more both paid and free but I must admit my travel budget has gone up not down. I enjoy it a lot more, have more opportunities to stay in hotels and go places I never would have gone. But overall I’m spending much more. On the other hand some of my trips are totally free.

To me, the award flights are never really free…but certainly can be qualified as reduced cost!

Looking forward to parts 3 and 4!

I don’t even try to make trips free. I am all about the experience of the trip and the location. I use the points to save me as much as possible and when possible enhance the experience. If I want to go someplace and I have to pay for the experience I do so. If you take a trip and it is all covered by rewards I would view that as a free trip. I think of a latte that I get with a reward gift card as free so why not a trip.

I think you can get close to free if you take your assumption you would pay for food/transportation at home (which I don’t totally buy into) but my problem is the activities on the trip. I love museums, concerts, plays, tours etc when I travel. Some of those you are going to have to pay cash. So there is a choice between cash back or miles/points. Arrival can only do you so much good. I tried to pay for the Tower of London for three adults this summer and it did not code travel, same with Harry Potter Studios tickets. I had to have some cash to pay for that and other things. Most of my spending I choose miles/points. I don’t manufacture spend etc. for many reason. I am getting points only on my real life. So there is a trade off. I always need some cash for my trip. So my trips I don’t consider free, cheaper yes and sometimes the only way I can travel, but not free.

Definitely not free. When I stay in the office and work diligently, I would bill about $4-6K a day. Minus my overhead costs and taxes, that’s about a $2-3k day. Then there are the health costs as I drink way more flying premium class. And I can’t stay somewhere not nice and have to party with bottles. I don’t care about eating fancy. So add in another $1,500 a day in costs. Plus the time not spent with friends and potential business generation. It’s a huge cost. But then I don’t like the miles sitting idle.

Booked a 7 day stay at Hyatt all inclusive, free airport shuttle, free food and drinks and free flights…..only spent small money on tips, pretty close to free.

Mark,

Very though-provoking article. I’m a newcomer to the points/miles arena, but I’ve already come to realize that nothing in life is free. Hopefully I’m not too off base here, but I figure that all we are doing is exchanging information, time, and money to card issuers and merchants for discounted travel and/or perks.

For the regular and incentive points earned on a card via your day-to-day spend, there is value in the information that you provide the issuer and the merchants you patronize in order to accumulate said points (allowing them to pull your credit report, access/track your spending habits, control inventory, etc.) While it may be difficult for you or I to assign a dollar value to your credit history, or the reason you chose to buy Widget X over Widget Y with your credit card (especially when loyalty programs/portals are factored in), the companies to whom you give your business place a premium on such information. And make no mistake about it, it is not “free” to swipe our plastic/metal – the transaction fee the issuer charges is passed on to us.

Additionally, I think we can all agree that there is a certain value to the time that we devote to the quest for points/miles. Researching offers, shopping through the “right” portals, developing strategies to maximize the return on our spend, etc. all take time. (Clearly, we must all believe that the return on our time investment must be worth it, or we wouldn’t be here…)

Ultimately, looking beyond dollars and cents (and “sense” sometimes…), we are providing information, devoting time, and spending money (albeit usually the money we would usually spend) in the quest for “free” travel/perks offered by the businesses we patronize. I’d argue that we are simply trying to maximize the value of those travel/perks, depending on the values we assign to them (whether it be the straight up cost, quality of travel experience, etc.)

Thanks – I look forward to other opinions on this topic, as well as Part 3!

In looking at your four hot topics, and then re-reading your first post on “Opportunity Cost” I am trying to figure out when the value of my time will be discussed as a factor.