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Starwood – Pros & Cons of Buying and Gifting Points

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Should You Buy Starpoints? Is it Ever a Good Value?

January 2018

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You see the email come into your inbox - Starwood Preferred Guest (SPG) is offering a discount on Starpoints you can purchase for yourself or gift to someone else. It’s a sale - it must be a good deal! Hmm… or is it?

Starpoint discounts are based on tiered purchase levels. Therefore, the more you buy, the larger the discount. 

Starwood typically offers a 25% discount to buy or gift Starpoints several times a year, so if you plan to buy points it's always best to wait for a sale. 

Each calendar year SPG members can buy or receive as a gift a maximum of 30,000 Starpoints. And to buy or receive Starpoints as a gift, new accounts have to be open at least 14 days.

The Valuations:

As you know from prior trvlvip Perks and Tips, we believe the value of a Starpoint is 2.2 cents per point, which is the value we would be willing to pay for Starpoints if we could buy them for cash. It is also the minimum value we feel you should expect before redeeming your points.

Without a bonus, Starpoints cost 3.5 cents per point to buy or gift, which is a very expensive way to acquire points. With a discount of 25%, which is typically only offered when Starwood has a sale and if you buy 20,000 or more Starpoints, you will pay 2.6 cents per Starpoint.

Does a purchase make sense?

Maybe – we don’t suggest buying points speculatively, but rather advise you to purchase only with a specific award stay in mind.

Here is a quick calculation to help you decide:

  1. Find an award stay.

  2. Determine the full price of that stay if you were to pay cash including all taxes and fees.

  3. Divide that amount by the number of Starpoints required for the award stay (for Cash & Points award stays, subtract the cash outlay for the stay from the total in #2 before dividing by the points required).

  4. If the value per Starpoint exceeds the price you are required to pay, you’ve found a good deal and, if not, we suggest you don’t buy the points.

The Choice:

It only makes sense to buy Starpoints if you plan to use those points to secure a specific award stay and the point to dollar conversion value is higher than the cost of the points. 

Let’s walk through a Starwood hotel award example:

  1. SPG is having a discount on the purchase of Starpoints and you can save up to 25% if you purchase 20,000 Starpoints (this is the most typical offer we see from SPG) and we know Starpoints cost 3.5 cents per point without a bonus.

  2. If you qualify for the 25% discount on 20,000 Starpoints, the cost is then reduced to 2.62 cents per Starpoint (but still exceeding the 2.2 cents we consider each Starpoint to be worth).

  3. Let’s assume you plan to use the 30,000 Starpoints for a stay in a category 6 hotel.

  4. For the purchase of 20,000 Starpoints to be a good value, the cash price for a Starwood hotel night that costs 20,000 points must exceed $525 (Starwood all-point awards cover the base rate of the room and taxes) and the more the cash outlay exceeds $525, the better the value.

And let’s walk through a Cash & Points award example:

  1. Let’s assume you plan to use the 20,000 Starpoints for a two-night Cash & Point award stay at a category 6 hotel, which requires a cash outlay of $180 and 10,000 Starpoints each night – so $360 and 20,000 Starpoints (Cash & Points awards cover the base rate of the hotel only and taxes have to be paid by the SPG member); and let’s assume the total amount in taxes you are required to pay for the two-night stay is $50.

  2. For the purchase of 20,000 Starpoints to be a good value at 2.62 cents per point, the cash price for the two-night Starwood hotel stay must exceed $935 (take the $525 you paid for the 20,000 Starpoints and add $360 + $50 in taxes) and the more the cash outlay exceeds $935, the better the value.

And here is a real-life example: We recently purchased 20,000 Starpoints during the most recent 25% discount sale for 2.6 cents per point. We used those points to secure two nights at a category 6 hotel: the Sheraton Maldives Full Moon Resort & Spa. The full cash price for two nights was $2,500. The Cash & Points rate was $360 ($180 x 2) plus tax of $40 for two nights so we will paid $200 each night. $2,500 minus $400 divided by 20,000 Starpoints yields a value of 10.5 cents per Starpoint, so buying them for 2.6 cents per point worked out to be an exceptional value!

Another Consideration - Transfer Starpoints to Air Miles:

You can transfer 20,000 Starpoints for 25,000 airline rewards miles on most airlines. With this 25% discount and the extra 5,000 mile incentive on the transfer of 20,000 miles, the cost is reduced to 2.1 cents per mile for a 20,000 point purchase and transfer.

We value most airline rewards miles at 1.5 - 2.0 cents per mile so this can be a good way to score some extra airline award miles for much less than you can buy them for from the airlines with or without a bonus, but it is still more than we feel the miles are worth. If you have a special airline award in mind where the value per mile exceeds 2.1 cents per mile, it could be a good economic purchase decision.

The Wrap-Up:

It rarely makes sense to buy or gift Starpoints until you’ve chosen a location, picked your dates, have taken the steps to ensure award availability and Starwood is having a sale on points. Make the small effort to crunch the numbers to ensure the point purchase makes good economic sense - you will be very happy you did!

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