Should You Book Hotels with Cash or Points?

1 month ago 10

When it comes to booking hotels, we often have to make a choice between paying with cash or redeeming points for a stay, assuming there are some available for use.

It’s not always entirely clear whether one is more advantageous than the other, and there are always many factors at play.

In an ideal world, we’d all have a bottomless pit of points that we could use to save money on all of our hotel stays. However, the reality is much different, and we must strike a balance between redeeming points to save money or paying with cash to save points.

Let’s take a look at some elements of the decision-making process of when it’s better to pay with cash than points.

The Move Towards Dynamic Pricing

Over the past few years, many hotel loyalty programs have gone through a number of significant changes, including the adoption of dynamic price instead of fixed pricing. In many cases, historical sweet spots have become more bitter, the ease of acquiring points has lessened, and the number of points required for stays has gone up.

Collectively, these changes have made it quite a bit tougher to extract value out of hotel points. With the value proposition being squeezed on both the earning and redeeming sides of the game, there are more and more situations in which we’re reluctant to part with our points and would rather pay the cash rate instead.

Take, for example, a mid-range hotel in a major North American city, like the Marriott Portland Downtown Waterfront. In the distant past, this hotel was an old “Category 6” property, and would have cost 30,000 points. That’s not a bad deal for a hotel that might go for $300 (USD) a night plus tax.

Now, that same hotel can cost upwards of 60,000 points per night in the summer, which is double the amount that it previously cost. With cash rates for the same night at around $350 (USD), the value proposition from a points redemption is much less clear-cut.

After all, if hotels keep costing more points for a free night, and if those points are harder to earn, it’s wise to be tight-fisted with those points and save them for when you can get truly outstanding value.

Now, let’s be clear: devaluations such as these aren’t surprising in the slightest, because the landscape in this game we play is ever-changing. Whenever too much outsized value can be obtained, then the loyalty programs will seek to neutralize them and restore some equilibrium into the ecosystem.

In the meantime, there haven’t been many alternatives that have opened up to access hotel programs. As it stands, the only remaining options for outsized value are in programs like Hilton Honors, World of Hyatt, and IHG One Rewards.

Of course, there’s always the option to not redeem points at all, and pay cash for accommodations instead.

The Added Benefits of Paying Cash

There are a few added benefits when paying the cash rate for hotels that you might not otherwise get if you’re redeeming points. These are useful to keep in mind because they can often tip the scales in one direction or the other if you’re having trouble deciding between the two.

First off, just because you’re paying the cash rate for a hotel doesn’t mean that the cash actually needs to come out of your pocket. Indeed, we have many fixed-value travel rewards programs available, like Scene+ points from the Scotiabank Passport® Visa Infinite* Card, CIBC Aventura Points from the CIBC Aventura® Visa Infinite* Card, and TD Rewards from the TD First Class Travel® Visa Infinite* Card, to name a few.

Fixed-value points are particularly useful for stays at independent hotels and in situations when you can’t redeem points for a stay. Even if you can’t cover the entire cost of the stay with points, you can at least offset it so you don’t wind up paying 100% of the price.

Furthermore, paying the cash rate also allows you to earn additional points towards the next occasion when you feel it’s worthwhile to redeem points for a stay. This is true for both the credit card that you use for the purchase, as well as the points you earn from the loyalty program itself.

For example, Marriott Bonvoy members earn 5–10 points per US dollar spent at most properties, with elite members benefiting from a bonus multiplier depending on their elite level.

On top of that, paid rates are often eligible for points promotions, in which you stand to earn extra points on paid stays, whereas points redemptions are not eligible. These bonus points, earned on hotel stays you would’ve made along your travels anyway, can really add up quickly.

For example, Hilton Honors puts on many promotions throughout the year, sometimes offering double the number of points on paid stays. If you pair a promotion like this with status and the right credit card, you can earn up to 44 Hilton Honors points per US dollar spent.

Taking it a step further, if you pit the number of points that you earn against our Points Valuations, which currently value Hilton Honors points at 0.5 cents per point (USD), it equates to a theoretical 22% return on your spending.

As long as you can fork over the cash for the stay, it can make sense to accumulate a large number of points during promotions and then redeem them at a higher value somewhere down the line.

Of course, you can always keep an eye out for cash back earned through various portals to get a more tangible return on your paid hotel stays. If you were already on the fence about paying cash vs. redeeming points, then stacking as many money-saving techniques as you can get your hands on can really help to sweeten the deal.

Taking Advantage of Good Hotel Deals

Lastly, in terms of which hotel to stay at, you’re able to choose from all the properties in a particular place with cash stays, rather than being stuck with a particular brand on a redemption.

Most hotels can be booked through a preferred partner program, which gives you extra benefits, such as free breakfast, an upgrade, early check-in, and late check-out, while paying the same rate as you would have otherwise paid. This gives you the option to try out, say, a Park Hyatt property, to see what it’s like to be a Hyatt Globalist, when you would have otherwise chosen a Marriott property due to your status.

Many preferred partner programs also offer exclusive deals, such as getting a free night after staying for a specified number of days. In these cases, the cash rate is almost always much more favourable than a points redemption, allowing you to save your points for a higher-value stay.

There are also some intriguing Amex Offers available, which give you a statement credit for stays booked with cash. In some cases, you can stack the Amex Offer with a preferred partner booking, giving you the best of both worlds.

Lastly, it’s also wise to pay attention to any particular promotions from destination marketing organizations, such as Stay Vancouver, Visit Richmond, or Edmonton’s Best Hotels. If you can get a prepaid credit card which can be used to directly offset the cost of your stay, then paying cash is most likely a much better idea than redeeming points, since your out-of-pocket cost becomes negligible.

Evolving Tastes As You Maximize Points

When many travellers begin to focus on accumulating hotel points, the prospect of staying in nice hotels for free is unbelievably appealing.

Indeed, many of us can recall the first redemption made using hotel points. Perhaps there was an upgrade from a base-level room to the next level up, maybe getting a small welcome amenity such as chocolates, and being extended the honour of checking out at 1pm instead of noon.

When we first start to dabble in points, we might certainly be tempted to redeem them at a high value for the most luxurious hotel experiences possible, like the overwater villas of the Maldives or an opulent five-star hotel in the heart of a major city with all sorts of nice amenities.

But let’s face it: once we get a taste of the good life, be it luxury hotels, business class flights, or fine dining, it’s much easier to justify paying a premium for a better experience afterwards.

Once we become accustomed to staying at nice hotels, there are many aspects within the hotel experience to which we attach a greater importance.

For starters, the privacy of a hotel room is worlds away from the chaos of staying in hostels with shared bunks or in poorly constructed properties that make it hard to get a good night’s sleep. This is especially important after a long flight, when all you want to do is rest up and adjust to the time difference.

Moreover, elite benefits can be a very enticing pursuit, as you stand to enjoy epic breakfasts, upgrades to much better rooms, and maybe even access to a nice lounge to unwind with some food and drinks.

And most importantly, the consistency of the hotel experience within the same brand is something that, say, Airbnb can’t deliver. For every perfectly pleasant Airbnb stay, there might be another one in which the bedsprings are loose and the bathroom smells funny.

When you’ve indulged in the comforts of the St. Regises and Ritz-Carltons of this world, it’s harder to go back to Best Westerns. With this in mind, it may be wisest to pay cash for the more modest hotel stays along your travels, and save your points for the occasions when they’ll earn an outsized return on a truly special and unique experience.

Conclusion

Whenever you’re booking a hotel, it’s important to consider the pros and cons of paying with cash or points.

In some cases, you can stand to get outsized value from a points redemption, which is usually accomplished by booking at high-end, pricey hotels. In these cases, you not only wind up saving money, but you also are rewarded with an incredible experience.

In many other cases, such as when you don’t have enough points or there aren’t any properties that participate in loyalty programs, you’re left to pay with cash instead. By offsetting the cost of the stay with fixed-value points, taking advantage of preferred partner programs, and keeping an eye out for promotions, you can offset the cost of your stay and save points for a higher-value redemption.

Read Entire Article