USA Today‘s Charisse Jones has a piece on the things you can do with your miles besides taking flights.
There are the obligatory examples of using miles to purchase “Tumi luggage and MacBook Pro computers” as well as spending them at auction for experiences like Rod Stewart concerts.
The piece offered two of my thoughts.
“More options are good for frequent fliers,” says Gary Leff, co-founder of the frequent-flier community Milepoint.com, who’s noticed the trend building over the past three or four years. “Not everyone wants to fly throughout the year for business and be rewarded with another flight. Sometimes they’d just like to stay home and use their miles for a retail treat.”
… Unique experiences, however, could be perceived as a better deal, Leff says. “When you’re leveraging the connections, the sponsorship, or other clout that a multibillion-dollar business has to open doors you can’t open on your own,” Leff says, “there tends to be much greater value.”
Why Miles are Almost Always Best Used for Travel
Miles are almost always best spent for travel. That’s because earning miles isn’t just a rebate on your travel or credit card spend. If it were, it would be the sort of revenue-based program where you get 10% back to spend on future travel at then-prevailing ticket prices.
No, miles are a rebate combined with the leverage of bulk purchase of distressed inventory.
You take the basic rebate and then pair it with the program’s ability to spend it for distressed inventory (seats that will go out empty, purchased at a deep deep discount relative to retail as a result) and which are purchased in bulk quantities (a program isn’t just buying one seat the way that a customer might, they are buying millions of those distressed inventory seats from the airline).
That’s the sort of leverage you get redeeming miles for travel. You get your rebate to spend on things you get to buy for pennies on the dollar.
When you redeem miles for merchandise you are generally using them just as the rebate — a program buys you merchandise. And you give up the leverage.
Miles for Merchandise Tends to Be a Very Bad Deal
Aeroplan used to offer LCD toasters for 10,000 miles each, and towels for 24,000 miles. Blenders might run 25,000 miles.
A domestic coach saver award ticket might cost a frequent flyer program less than $50. But if you’re going to redeem the same 25,000 miles for merchandise they’re going to have to buy that merchandise.
The program is actually stretching, in some sense being generous, if you get an item that retails for $89 — even though it doesn’t seem like a very good deal to you since the same 25,000 miles could buy you a cross country ticket that would have been priced at $500 or you could have saved your miles and spend 100,000 to go business class to Europe (perhaps $8000).
I don’t often suggest using 25,000 miles for a domestic coach award because it isn’t a very good value. But it’s even worse when using the points for merchandise. 24,500 Aeroplan points will buy you a KitchenAid Architect Coffee Maker.
The Shopping Channel sells that same coffee maker for $89.99 (or 3 easy payments of $29.99..!).
That’s about 1/3rd of one cent per mile in value.
So When Does Redeeming Miles for Merchandise Make Sense?
I believe there are three times when you should consider miles for something other than travel.
- You genuinely don’t value more travel
- For accessing experiences you couldn’t obtain on your own
- Or redeeming a small number of orphan points
If you don’t want more travel, consider using the miles to fly friends and family to you before buying a new toaster.
But if you have a small number of miles in an account — and I usually suggest earning more rather than cashing out — it can make sense to redeem. I had about 4500 Etihad Guest miles and no particular expectation that I would earn more. And I needed a new wallet. Etihad has some of the most extensive miles for merchandise redemption options, and I currently have a new wallet on the way.
Still, a new wallet is hardly a reason to remain loyal. Miles have been able to give me the sort of travel and experiences that I would never be able to afford in my entirely life. I travel more, and well beyond my means, because I’ve had access to these programs. I’d never trade them for merchandise, not even a lawn gargoyle.
But that doesn’t mean there aren’t things you can redeem for that provide outsized value. I don’t like using miles just as a rebate. But if, instead spoiling inventory, you combine it with other clout you can still get leverage for your redemptions.
Airlines, hotels, and credit card companies have sponsorship arrangements with sports franchises. They do deals with music companies. They make arrangements with theatres. Multi-billion dollar corporations generally have access and connections that you or I simply couldn’t replicate ourselves. So if we can put those connections to work for us, it can wind up a good personal value. Here I’m thinking about where you use your points for experiences that don’t have a market price, you can’t just go online and buy the item.
Pizza in Motion, for instance, redeemed Starwood points so his wife could have tennis lessons from Andre Agassi. That may not be your cup of tea, but if there’s an adventure or time with a star, and a program can provide it for you, it might be a good redemption for you.
Usually these things are priced a bit high for my tastes. When they’re auctions they tend to suffer from the winner’s curse (whomever wins does so because they’ve overpaid). But it’s a much better approach, I think, than ordering a new coffee maker in lieu of a business class ticket to Asia.