I was watching the TV show Undercover Boss the other day and they profiled Diamond Resorts International. They sell timeshares. In one part of the episode, the owner of the company was at a call center where he discovered his employees were not being properly trained. One caller didn’t have enough points in their account to reserve a room and the phone agent didn’t offer the customer the opportunity to buy additional points so they could complete their reservation. This made me wonder how many people actually buy points, and to what extent.
Let’s use Hyatt Gold Passport (HGP) points as an example. At face value, you can buy 1,000 HGP points for $24. In other words, you’re buying points at 2.4 cents each. The problem with that is that redemption values with Hyatt typically fall between 1.5 to 1.8 cents per point. Using the low end of that spectrum, you’re losing 0.9 cents per point, or $9 per 1,000 HGP points. This represents a loss of 37.5% on your $24 investment. If you’re less than 1,000 points shy of booking your reservation and it’s for a special occasion, then chalk it up to an opportunity cost and go for it.
On the flip side, if you’re short several thousand points, then you’re really pushing it. As the cost of points increases, the gap between paying for the points or simply paying out of pocket for the room decreases. Let’s say you need 4,000 points. That costs $96. How much does the room cost? Ninety-six dollars is probably a pretty significant portion of your room rate. Factor in the 37.5% loss and you’re probably going to be better off just paying out of pocket for that one extra night.
All hotel loyalty programs will overcharge you when you buy points directly so in general, it’s not really worth buying points. Every once in awhile you might see a sale on points but the higher savings threshold will only be available at larger volumes. If you can buy the points for less than their standard redemption value, then you should consider it if you have the disposable income. Otherwise, save your money.