You've been racking up your miles for as long as you remember. Knowing this, you are trying to plan ahead for your next vacation, and want to use your miles for a comfortable, business class seat. If you are like most people, you are probably thinking about buying an economy class ticket and upgrading it to a business class ticket. However, ValuePenguin's study found that this is a highly uneconomical practice. In reality, it's much more advantageous to use a little more miles to redeem for a business class ticket instead of upgrading an economy class ticket.
Using Miles for Business Class: Redeem vs Upgrade from Economy
To analyse this problem, we collected data from Singapore Airlines in terms of their economy ticket prices, miles required to upgrade an economy ticket to business class, and miles to get an entire business class ticket for 8 different destinations from Singapore. For instance, it requires 30,000 miles to upgrade an economy class ticket from Singapore to Korea, where as it requires 43,000 miles to get a new business class ticket.
Then, we converted miles into dollar values using a conversion rate of S$0.01 per mile. By adding the cash cost of an economy ticket from Singapore to each destination and the value of miles required to upgrade it into a business class, we were able to calculate roughly how much this method costs in total. Then, we compared such cost to the value of miles required to get a new business class ticket for each destination. Our conclusion was quite simple: on average, redeeming your miles for business class was about 33% cheaper than purchasing an economy class with cash and using miles to upgrade it to a better seat. Not only that, we found that this difference was much more pronounced more distant locations like Korea and Melbourne, compared to closer locations like Hong Kong or Thailand.
Miles Are Worth More When Redeeming for More Expensive Tickets
This is because miles are worth more when they are used for more expensive tickets. For instance, we found that 1 mile is worth about S$0.04 for business class tickets and S$0.08 for first class tickets, significantly higher than the average value of S$0.01 for economy class tickets. This logic is also true for distance, where miles used for long-haul tickets are worth more than their counterparts for short-haul tickets. Because of this, although business tickets can cost multiples of what an economy class ticket would in terms of their cash value, it's not necessarily the same case for using miles to get a business ticket. Often, business class seats cost only 50% more than economy tickets in terms of miles.
Rack Up Miles, but Use Them Whenever Possible
Given our findings, two things become apparent. First, it's advantageous to rack up as many miles as possible so that you can redeem it for high cost items like long-haul, business class tickets, instead of using them for economy class tickets or for upgrades. Though many people save miles from their previous trips, it might be a good idea to get a proper miles credit card so that you can earn bonus miles on your daily expenditures. In fact, the author of this article is personally going on a vacation next week with miles he earned by doing exactly this.
Secondly, however, it's also important to remember that it's generally inadvisable to hoard your miled for too long. Unlike your cash savings, miles don't accrue any interest or returns because they can't be invested in a security or a savings account. However, cost of air tickets and hotels tend to increase over time because of inflation. If you have tens of thousands (if not hundreds of thousands) of miles saved up that you aren't using, their value is literally evaporating into thin air the longer you wait to utilise them. So next time you are planning your vacation, make sure to be proactive about your using loyalty points. After all, they are free and you've earned it.