• How Do I Calculate Cost Per Point (CPP)?

    Posted by Keagan on February 1, 2024 at 5:00 pm

    Can anyone please clarify how to calculate cost per a point (CPP) correctly?

    I understand it is the cash amount divided by number of points.

    My question is if we fly out on economy award one way on X airline and return on business class award on Y airline, how do you calculate the CPP?

    I saw on a different post that because a one way ticket is always more expensive, the cpp should be calculated based on a roundtrip cash value.

    Does that mean I should price out R/T in economy on X airline, divided by 2 and then divided by the number of points?

    And do the same for the business class award on Y airline?

    I am just curious regardless of the result.

    Any input is greatly appreciated.

    Dimitri replied 1 year, 5 months ago 2 Members · 6 Replies
  • 6 Replies
  • Monty

    Member
    February 3, 2024 at 10:44 am

    My view – CPP should only be used if you realize that it is a seriously flawed formula, yet it is a helpful measure when there is nothing else.

    CPP is a one-sided valuation measure, it only values what you spend in points/miles vs. would have spent in cash; it ignores the cost of the points/miles that you used.

    For example, if I earned 100K UR points from a SUB, and another 100K from native spending, I now have 200K URs – if I spend 100K URs today, and 100K URs tomorrow, both for flights retailing at $3K, was the CPP equal for both award bookings?

    Not in my view.

    The first 100K URs were earned easily while the second 100K URs were earned the hard way.

    Now, add to that inflow of miles and points earned via shopping portals, bonus offers, manufactured spending, and the valuation of the points used is ever more complex.

    Think of it this way – if you find a $100 bill on the street and buy a set of headphones, and you also buy a second pair with $100 from your paycheck, did both headphones cost you the same?

    On a “CPP” basis, they did; but in reality, one pair was “free,” while the second pair cost you hours from your life as well as the overhead of earning a living.

    It’s the same for award travel – the valuation should include consideration of the value / cost of your inflow point/miles along with your purchased retail value – no one can come up with a universal formula that would work b/c we all have differing inflow costs.

    So my approach is, I buy what I want, when I want it to travel when, how, and where we want to travel, on points/miles simply booking the best deal I can find – and never looking back.

    30+ years totally “free” now.

    And honestly, we care zero about CPP, of course I don’t act totally stupid or uninformed, but what I care about is inflow, if inflow > outflow, I’m winning.

  • Flavio

    Member
    February 5, 2024 at 5:21 pm

    That’s entirely up to what it is you are trying to learn.

    If you want to learn the cents per point of what you paid for the entire trip, then you would add the two points costs together the two cash prices together, and the two taxes and fees together, and then plug those total numbers into the equation.

    If, however, you want to learn the cents per point of each flight, you do the equation twice, once with each flight’s numbers.

    If you care to learn what you are paying compared to a round-trip price, then, yes, you would do 1/2 of a round-trip price (or, yes, discover the round-trip price, divide by 2, and plug into the equation).

    Basically, what I’m saying is, to figure out the question you are asking first, and then set up the math to answer that question.

  • Matilde

    Member
    February 6, 2024 at 4:34 pm

    Personally, I’d use the highest cash amount I would have had to pay if it wasn’t for points.

    For economy flights, I try and get above 1-2 cents a mile.

    • Dimitri

      Member
      February 12, 2024 at 10:48 am

      I agree with this.

      I will consider a round-trip price divided by two.

      But it ultimately comes down to how you value the flights.

      If your round-trip business ticket is $10,000, $5,000 each way, and the one-way ticket in Business is 80,000 miles, that’s 6.25 CPP.

      But would you really have forked over $5,000 for that ticket??

      If not the value probably isn’t really 6 cents a point then.

      This makes calculating value so difficult, and why everyone has their own value for points.

  • Lorna

    Member
    February 7, 2024 at 5:34 pm

    I mean, it comes down to how you value the flights.

    But yes, your way is probably a reasonable way to approximate.

  • Zola

    Member
    February 12, 2024 at 9:59 am

    CPP = Cash Price – Taxes & Fees of Award Flight / Points I don’t use RT value if I’m only going one-way.

    It’s not applicable to me because regardless I was never flying RT on that route so if I paid cash it would have been the ONE WAY fare.

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