Does It Make Sense to Buy Hotel Points?

Should you buy hotel points? A lot of hotel programs typically sell their points, and during certain times of the year, they'll have a bonus for purchasing points. 

A good example of this is Hyatt; between now until Aug. 9, there's a promotion to get up to 40% bonus points. 

Hyatt points promotion

Hyatt points promotion

What are hotel points?

All the different hotel chains have their own respective points system. For example, if you have your eye on a suite, you can usually upgrade to a suite using points. 

One important factor is you're converting cash into points, and the points can't be converted back to cash. You can only redeem points within the respective hotel ecosystem. Some points like SPG Starpoints can be redeemed for flights. 

When does it make sense to buy hotel points?

1. If you have a specific booking in mind If you need to top off and it makes sense in terms of redemption. Let's say you need 25,000 points for a free night and you're at 24,000 points. It makes sense to buy 1,000 points.

Another factor to consider is if you can transfer another point system like Chase Ultimate Rewards and convert them to Hyatt points.

2. Arbitrage. If a hotel is having a sale and you can get outsized value from points compared to cash, it might make sense.

With the current Hyatt promotion, you can buy 25,000 points for $432. 25,000 points can be redeemed for a night at the Park Hyatt Maldives. The current retail price for the Park Hyatt Maldives is $638/night; we've seen the price go up to $1,000 night. Even at the $638/night rate, you're saving $200 by buying points.

via Google search

via Google search

Obviously, you need to consider if it makes sense to buy the points based on how you value the hotel stay. 

Why you shouldn't buy hotel points

Unless you have a specific redemption in mind, I do not recommend buying points. This is especially detrimental if you're saving points and the points are devalued in the future.

Even if you are trying to top off a balance for a redemption, I would recommend transferring points from Chase Ultimate Rewards because you aren't spending cash. 

The final point to consider is if you sit down and do the math, it typically doesn't make sense given the point valuations. For example, most people value Hyatt points at 1.5 cents per point; here's why it doesn't make sense to buy points:

With the 30% bonus, you're buying 5,000 points and getting 1,500 bonus points, which equates to a total valuation of  $97.50 (6,500*1.5 cents per point), but you're paying $120 (losing $22.50)

With the 40% bonus, you're buying 10,000 points and getting 4,000 bonus points, which equates to a total valuation of $210 (14,000*1.5 cents per point), but you're paying $240 (losing $30).

Hyatt points calculations

Hyatt points calculations

On the surface, this promotion looks like a great deal, but once you do the math, it doesn't make sense in our books.  

What are your thoughts on this promotion?