What to consider when redeeming points

It pays to consider your redemption strategy

Many reward program members focus on earning points. This is quite understandable, as there are many ways to earn points. Nobody wants to leave any ‘on the table’, and who doesn’t love seeing their points balance accumulate day by day?

However, there is another aspect of reward programs that members should also focus on. And that is the redemption side of the equation. The value that you can get from your reward points is not just based on how many points you earn, but also on how you redeem them. Think of your business, for example. If you focus solely on the revenue you generate without considering expenses, it may not end well for your business.

Below, we take a look at some things to consider when redeeming your reward points.

Not all redemptions are created equal

If you have ever sought advice on how best to redeem your reward points, you may have been advised to stay clear of redeeming your points for a “toaster”. Why such advice? What have people got against toasters? The answer is quite simple.

The value per point that you obtain from redeeming your points on physical merchandise, such as a toaster, from reward programs’ shopping malls is nearly always inferior to what you can receive from redeeming them for flight rewards.

And in some cases, it can be almost 10x inferior, as is the case between redeeming for a toaster versus a one-way First Class long-haul flight redemption. This reason alone is why you should equally focus on the redemption side of the reward points ledger.

Does this mean that you should never redeem your Points for a non-flight reward? Definitely not. There are many reasons why flight reward redemptions may not make sense for you. Here are some examples:

So, don’t worry if flight redemptions aren’t your thing. You’ll still get great value from other redemptions.

Flight redemptions

But if flight redemptions are your thing, let’s delve into these in a bit more detail. The concept of maximising value per point can be extended to redeeming for flights.

There are typically two or three different types of flight redemptions within each airline program. While they are marketed differently, they usually have similar pricing structures. We’ll take a look at the three popular frequent flyer programs in Australia.

Qantas Frequent Flyer

Beginning with Qantas Frequent Flyer, this program has three different Reward Seat types.

• Classic Flight Rewards

• Classic Plus Flight Rewards

• Points + Pay

Classic Flight Rewards nearly always presents the best value flight redemption for a Qantas member, while the latter represents the least valuable option, with Classic Plus Flight Rewards sitting somewhere in the middle.

So why not always redeem for a Classic Flight Reward? The reason is that while Classic Flight Rewards generally offer the best value redemption, they also provide the fewest Reward Seats. On the other end of the availability spectrum is Points + Pay, which offers a seat if it’s also available to cash-paying customers. Sitting somewhere in the middle for availability is Classic Plus Flight Rewards.

Before we move on, please make sure to review the table below, taken directly from the Qantas website. This table highlights the main differences between Classic Flight Rewards and Classic Plus Flight Rewards.

The primary distinction to note between Classic Flight Rewards and Classic Plus Flight Rewards is the Number of Points Required. Notice that with Classic Flight Rewards, it is a Fixed amount all year round, whereas with Classic Plus Flight Rewards, it fluctuates with normal airfares throughout the year.

What does this mean? This means that in a small number of instances, the cost of a Classic Plus Flight Rewards redemption can be less than that of a Classic Flight Rewards redemption during a Qantas Sale. So, make sure to keep an eye out for any Qantas Sale fares to take advantage of not only competitive Classic Plus Reward Flight pricing during these times, but also the added number of Rewards Seats that Classic Plus Reward Flights offer.

Velocity Frequent Flyer

The Velocity Frequent Flyer program has two types of Reward Seats. These are known as:

• Reward Seat

• Any Seat with Points + Pay bookings

Reward Seats offer the best value redemption; however, the number of Reward Seats available is limited. Any Seat with Points + Pay, on the other hand, has a reward seat available whenever a seat is available for payment with cash, but the number of Velocity Points needed is much greater than that of Reward Seats, generally in the order of 10x greater.

Please refer to the table below for additional information:

Singapore Airlines Krisflyer

Like its Qantas Frequent Flyer counterpart, the Singapore Airlines KrisFlyer program has three distinct Reward Seat options. These are:

• Saver Awards

• Advantage Awards

• Mix KrisFlyer Miles and Cash

For Saver Rewards and Mix KrisFlyer Miles and Cash, these work exactly the same as Qantas Classic Flight Rewards and Points + Pay.

Advantage Awards differ slightly from Qantas Classic Plus Flight Rewards in that the increased pricing for greater availability of Advantage Awards is a fixed premium above Saver Awards. In contrast, the premium for Qantas Classic Plus Rewards over Class Flight Rewards is linked to normal airfares.

To upgrade or not to upgrade?

There was a time when the answer to this question was quite simple. It was always the best value option to upgrade from a paid fare than to redeem for a premium seat outright. This is because there used to be a substantial points discount between upgrading a paid fare and securing a premium seat outright.

Fast forward to today, and this relationship no longer applies. The differential between the number of points needed to upgrade a paid fare and purchasing a premium reward seat outright has significantly narrowed since the early days, it is now nearly always the better option to go with the latter.

Let’s take a look at an example.

We’re looking to fly one-way from Sydney to Perth on Qantas. The cheapest Red-E-Deal fare, available 4 months in advance, is $409, while the Flex fare is $727. Both these fares include all taxes, fees, and charges.

You have three options:

Therefore, the standardised costs for the three options above are as follows:

• Red-E-Deal Upgrade → 32,600 + (409 / 0.013) = 64,062 Qantas Points

• Flex Upgrade → 13,100 + (727 / 0.013) = 69,024 Qantas Points

• Classic Flight Reward → 43,600 + (57 / 0.013) = 47,984 Qantas Points

As demonstrated above, you are better off looking to redeem your Qantas Points for an outright Classic Flight Reward redemption rather than looking to upgrade a paid fare.

Know when to look for reward seats

Before searching for reward seats, ensure you know when they have been released by your airline. It’s no use looking for reward seats that haven’t been released yet!

Each airline program releases reward seats at different times, and even within the same airline program, the timing can differ based on your frequent flyer status with that airline.

Point Hacks has a great article that details when each airline programs release their reward seats. Click on the following link for further details: When do frequent flyer programs release reward seats?

Key takeouts

• Not all redemptions are created equal. Different types of redemptions generate vastly different levels of monetary value, with flight reward redemptions generally creating more value than for non-flight reward redemptions.

• The traditional discounted flight reward seats are not guaranteed.

• Each airline program has different flight reward types, which differ in cost and availability. Generally, flight reward fares that require more points to redeem also offer greater availability of reward seats.

• Each airline program markets reward fare types differently. For example, Qantas has Classic Flight Rewards, Classic Plus Flight Rewards and Points + Pay, while Velocity has Reward Seat and Points + Pay.

• The value of upgrading has diminished over the years to the point where it is now more valuable to redeem for a premium reward seat outright than to purchase a lower-class fare and upgrade.

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