The entire miles game pivots around one fundamental question: what’s your valuation of a mile?
That’s because your valuation of a mile underpins every action you take, whether it’s paying a 3% foreign currency transaction fee, choosing between 5% cashback on Shopback and 3 miles per dollar on KrisFlyer Spree, or spending your miles at 0.66 cents each on KrisPay. You can’t make any of these decisions without a clear picture of what a mile is worth.
Unfortunately, there’s no black and white answer here because the value of a mile is subjective. And although there’s some maths we can do to establish the upper and lower limits, where you fall within that continuum is entirely dependent on you.
Ever since I started The Milelion in 2015, I’ve been using a 2 cent valuation in my calculations. But a lot has happened since:
- There were two KrisFlyer devaluations in March 2017 and Jan 2019
- Numerous platforms like RentHero and CardUp have sprung up, allowing you to buy miles from 1.2 cents each
- Banks have launched their own payment facilities (e.g. Citi PayAll and SCB EasyBill), offering miles from 1.25 cents each
- Credit cards have launched limited-time promotions allowing customers to buy unlimited miles from 1.7 cents each
In light of this, I think the existing 2 cent figure needs a refresh, and in this post I’ll talk about how I came to my new valuation. Keep in mind, this isn’t a purely mathematical exercise- the valuation of a mile is as much art as it is science. Some people will disagree with my valuation, and that’s just fine. More important is that you come away with a figure that makes sense for you.
|tl;dr: The maximum price I’d pay for miles is 1.8 cents each, and the minimum value I’d accept for redemptions is 2.0 cents each|
How do we value a mile?
Setting the floor for our KrisFlyer mile valuation isn’t that difficult. We know that SQ’s Pay with Miles function allows you to pay for revenue flights with miles at a value of 1.02 cents each.
Needless to say, this is terrible value, but at least it tells us that we shouldn’t accept anything less than 1.02 cents for our miles.
|What redemption options would give you less than 1.02 cents per mile?|
|•Paying for Scoot flights (0.95 cents)||•KrisFlyer vRooms (0.8 cents)|
|•KrisShop (0.8 cents)||•KrisPay (0.66 cents)|
It also means that you can’t lose if you’re able to acquire miles for anything less than 1.02 cents each- it’s basically arbitrage.
|If buying miles below 1.02 cents sounds overly optimistic to you, I’d like to state for the record that there have been instances where this was possible. Back in June 2017, Citi PremierMiles Visa customers got the opportunity to buy miles at 0.76 cents each. More recently, Grab sold 10,000 Grab points for $10 and cut the price of KrisFlyer transfers by half, yielding an effective price of 0.44 cents each.|
Similarly, finding the ceiling value of a mile isn’t difficult. The ceiling should be the maximum possible value you could get for a mile based on the most expensive revenue flight available*. This works out to be around 7 cents (see working below).
*this is a theoretical maximum because of the implicit assumption that you’d otherwise have been willing to pay cash for this flight, but it still helps set the ceiling
So we know the value of a mile must fall between 1 cent and 7 cents. Where do we go from there?
One way of thinking about the value of a mile is to consider the price at which you can buy them. For the record, here’s a rundown of all the ways you can currently buy miles in Singapore:
|Method||Income Required||CPM||Annual Miles Limit|
|SCB Visa Infinite Tax Payment (Spend >$2K p.m)||$150K||1.14||Tax bill|
|UOB Reserve/DBS Insignia with RentHero||Invitation||1.14||Rental amount|
|HSBC Visa Infinite Tax Payment (Spend >$50K p.a in prev year)||$120K||1.2||Tax bill|
|BOC Elite Miles World Mastercard with RentHero||$30K||1.21||Rental amount|
|CardUp TAX199 1.99% Promo Tax Payment with DBS Insignia/Citi Ultima/UOB Reserve||Invitation||1.22||Tax bill|
|HSBC Premier MC Tax Payment||AUM: $200K||1.25||Tax bill|
|Citi PayAll with Citi Ultima||Invitation||1.25||Bill amount|
|CardUp TAX199 1.99% Promo Tax Payment with BOC Elite Miles World Mastercard||$30K||1.30||Tax bill|
|UOB PRVI Miles/SCB Visa Infinite (>$2K p.m)/UOB Visa Infinite Metal with RentHero||$30-150K||1.30||Bill amount|
|HSBC Visa Infinite Welcome Gift- Premier customer||$120K + AUM $200K||1.39||35K|
|CardUp TAX199 1.99% Promo Tax Payment with UOB PRVI Miles||$30K||1.39||Tax bill|
|SC EasyBill with SCB Visa Infinite (Spend >$2K p.m)||$150K||1.43||Bill amount|
|HSBC Visa Infinite Tax Payment (Spend <$50K p.a in prev year)||$120K||1.5||Tax bill|
|DBS Altitude with RentHero||$30K||1.51||Rental amount|
|Citi PayAll with Citi Prestige||$120K||1.54||Bill amount|
|Citi PayAll with Citi PremierMiles AMEX||$80K||1.54||Bill amount|
|SCB Visa Infinite Tax Payment (Spend <$2K p.m)||$150K||1.6||Tax bill|
|CardUp TAX199 1.99% Promo Tax Payment with DBS Altitude/Citi PremierMiles Visa||$30K||1.63||Tax bill|
|Citi PayAll with Citi PremierMiles Visa||$30K||1.67||Bill amount|
|SCB Visa Infinite Welcome Gift||$150K||1.68||35K|
|CardUp with BOC Elite Miles World Mastercard||$30K||1.69||Bill amount|
|UOB Reserve VI Payment Facility||Invitation||1.7 (until 31 July 19)||Unlimited|
|UOB Metal VI Payment Facility||$150K||1.7 (until 31 July 19)||Unlimited|
|HSBC Visa Plat/Revolution Tax Payment||$30K||1.75||Tax bill|
|Citibank PremierMiles AMEX Annual Fee||$80K||1.78||15K|
|UOB PRVI Pay Facility||$30K||1.8 (until 31 July 19)||Unlimited|
|Cardup with UOB PRVI||$30K||1.81||Bill amount|
|HSBC Visa Infinite Welcome Gift- Regular Customer||$120K||1.86||35K|
|OCBC VOYAGE Tax Payment||$120K||1.9||Tax bill|
|Citibank PremierMiles Visa Annual Fee||$30K||1.93||10K|
|DBS Altitude AMEX/Visa Annual Fee||$30K||1.93||10K|
|KrisFlyer UOB Credit Card Annual Fee||$30K||1.93||10K|
|OCBC VOYAGE Payment Facility||$120K||1.9 or 1.95||Unlimited|
|SC EasyBill with SCB Visa Infinite (Spend <$2K p.m)||$150K||2.0||Bill amount|
|Cardup with DBS Altitude/Citibank PM Visa||$30K||2.11||Bill amount|
|OCBC VOYAGE Annual Fee- Option 2||$120K||2.14||150K|
|Citi Prestige Annual Fee||$120K||2.14||25K|
|DBS Altitude Tax Payment||$30K||2.5||Tax bill|
|OCBC VOYAGE Annual Fee- Option 1||$120K||3.25||15K|
What’s remarkable about this table is the extent to which it’s grown over the past few years. Back in 2015, many of these options didn’t even exist.
The way I see it, there are two main determinants of the acquisition cost of miles.
What’s your income?
It’s somewhat inegalitarian, but those those earning $120K and above have access to cheaper miles.
For example, the SCB Visa Infinite ($150K p.a) and HSBC Visa Infinite ($120K p.a) offer the cheapest tax payment facilities in Singapore at 1.14 and 1.2 cents respectively, as well as low-cost miles through their welcome gifts.
In the same way, the 1.6 mpd earn rates on the UOB Reserve, DBS Insignia and Citi Ultima (all of which have eye-watering $500K p.a income requirements) help bring down the cost of buying miles on CardUp and RentHero to as low as 1.17 cents.
Do you have bills to pay?
Even if you’re not earning at the $120K mark, you can still buy miles relatively cheap provided you have a tax or rental bill to pay.
For example, a UOB PRVI Miles ($30K p.a.) cardholder could take advantage of RentHero’s special 1.9% promotional rate to buy miles at 1.33 cents each.
Granted, not everyone rents, but almost everyone pays taxes- and a BOC Elite Miles World Mastercard ($30K p.a.) cardholder could use CardUp’s 1.99% income tax promotion (code: MILELIONTAX) to buy miles at 1.3 cents each.
The number of miles you can buy through such methods are capped at the amount of your actual bill, but there’s also the option of buying unlimited miles through a service like UOB PRVI Pay. The regular price is 2.1 cents, but numerous cardholders have been targeted for a lower 1.8 cent fee from now till 31 July.
If all that still doesn’t work for you, you could still buy miles through the annual fees of cards like the DBS Altitude, Citi PremierMiles Visa and KrisFlyer UOB Credit Card at ~1.93 cents.
In light of these developments, it’s very hard to argue that people should be paying 2 cents per mile anymore. I personally wouldn’t pay anything more than 1.8 cents based on where the market is right now.
The other way to think about the value of a mile is to consider the value a mile “buys” when used for an award ticket.
The general formula is
(Cost of revenue flight – Taxes and surcharges on award flight)/ Number of miles required= Value Per Mile
For example, if a flight on SIA from Singapore to City X costs either $1,000 or 30,000 miles + $100 of taxes for a Saver award, then the value per mile is
(1,000-100)/(30,000)= 3 cents per mile
It’s important to highlight the limitations of this calculation:
Award tickets are flexible
Award tickets can be cancelled for a small fee (except Spontaneous Escapes), while the cheapest revenue tickets are usually non-refundable. This added flexibility should increase the value of a mile, but we can’t objectively model it.
Revenue tickets earn miles, award flights don’t
The above calculation ignores the miles earned on your revenue ticket. But those miles have a value, and this technically reduces your redemption value (because of the opportunity cost of forgoing those miles).
Saver award availability assumption
My math assumes that Saver awards are available. However, experience tells us that’s not always true. Your value per mile is reduced if you have to pay Advantage prices. A truly robust valuation would also estimate what percentage of the time you’d be able to pay Saver prices, and what percentage of the time you’d have to pay Advantage.
What are my realistic alternatives?
If I used the above formula for a First Class flight, I’d get a value of roughly 6-7 cents per mile. However, I can’t say that I value my miles at 6-7 cents each unless I’d have otherwise paid for First Class out of pocket.
To put it another way: you’re walking down the street and someone gives you a 10% off coupon for Tiffany. You go to Tiffany and buy a $10,000 diamond ring and say “wow, that coupon was worth $1,000!” That’s mathematically correct in one sense, but wrong in another unless you’d have bought the Tiffany ring anyway.
Similarly, if your alternative to redeeming a flight is to buy a budget ticket, then your redemption value is lower because, realistically speaking, the expense your miles are saving you from incurring is lower.
Long story short, this methodology isn’t perfect, but it at least gives you the range within which the redemption value of a mile must fall.
To calculate this, I took three destinations from each of SQ’s award zones* and looked at the value per mile in Economy, Premium Economy (where applicable), Business and First (where applicable) Class redemptions.
*except Zone 5 and Zone 8, which only have two cities each
|Zone 2||Zone 3||Zone 4||Zone 5|
|KUL, CGK, DPS||BKK, HAN, MNL||HKG, TPE, CTU||PVG, PEK|
|Zone 6||Zone 7||Zone 8||Zone 9|
|DAC, BOM, MLE||ICN, KIX, HND||PER, DRW||SYD, MEL, AKL|
|Zone 10||Zone 11||Zone 12||Zone 13|
|JNB, IST, DXB||LHR, CDG, FRA||SFO, LAX, SEA||EWR, JFK, IAH|
Here’s what it looks like for Saver awards…
…and for Advantage awards
Given that airfares have generally fallen over the past four years while award prices have increased, it’s not surprising that the value per mile has come down since the last time I looked at this.
The table below summarizes the seven different ranges, depending on cabin and award type.
|Saver Range | (Median)||Advantage Range | (Median)|
|Economy||0.4-1.7 | (1.0)||0.2-0.8 | (0.5)|
|Premium Economy||1.0-2.6 | (1.6)||Only saver awards are available for Premium Economy|
|Business||1.7-4.7 | (2.7)||0.9-2.7 | (1.9)|
|First||4.4-7.0 | (5.7)||2.4-3.9 | (3.1)|
In my case, I’d almost never redeem my miles for Economy (except on certain high-cost destinations like Koh Samui, or for partner airlines sweet spots like Alaska Airlines domestic USA flights) and I’d never redeem my miles for Premium Economy (because it offers marginal comfort over Economy Class for about 75-80% the cost of Business Class).
At the same time, although I always look to redeem Business or First Class where possible, I’m certainly not in a position where I could pay for those out of pocket. This means it’s probably an overestimate to look at Saver valuations, and a more realistic figure would be closer to Advantage pricing.
Based on this, my gut feel is that I’d look for at least 2 cents per mile when redeeming miles.
Bringing it all together
To summarize what I’ve said so far: I won’t buy miles for more than 1.8 cents, and I won’t take less than 2 cents when redeeming them.
Why the gap? Because we need to account for so-called “non-cost” factors. There’s an unspoken cost in playing the miles game:
- the time spent formulating your strategy (e.g spreadsheets, spreadsheets, spreadsheets!)
- the inconvenience of optimization (e.g. traveling further to a different furniture store because it accepts Paywave, or putting up with BOC’s antiquated internet banking for the sake of earning 3 mpd on overseas spending)
- the reduced options (e.g. picking your lunch based on who accepts GrabPay rather than who you really want to dine with, in order to earn 4 mpd via Citi Rewards top ups)
I simply have no way of putting a price on these, which is why I think it’s best practice that you set one figure for buying miles, and another, slightly higher one for redeeming them. Otherwise, it’s as if you implicitly understate your cost.
For what it’s worth, here’s what other sites have to say:
- One Mile at a Time: 1.4 US cents/ mile (~1.9 SG cents)
- The Points Guy: 1.3 US cents/ mile (~1.78 SG cents)
- Points Hacks: 1.7 Aussie cents/mile (~1.60 SG cents, based on acquisition cost)
Keep in mind that these websites are based overseas, and their valuation will naturally be different based on the opportunities to acquire and use KrisFlyer miles in their country.
At the risk of sounding like a broken record, you shouldn’t take my valuations as the final word. The valuation of a mile is inherently personal, and depends on your individual travel patterns and preferences.
Nonetheless, it’s an exercise you should frequently revisit as the market changes- the miles game isn’t static, and your valuations shouldn’t be either!
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