gatorlitigator

How did they come up with the prices for the new Travel Packages?

Discussion created by gatorlitigator on Jul 8, 2018
Latest reply on Jul 11, 2018 by mnimmer

So there has been a lot said on Insiders about how the new Travel Packages aren’t as good as the old – something each of us can tell by a quick glance at the new chart. However, I was wondering just how bad they are and when looking at the values, the gaps between categories on the new packages seemed quite odd, so I did the math. 

I thought I’d share it on here to start a discussion and hopefully have someone else tell me that I did the math incorrectly.

A couple assumptions I used so that I don’t have to list more columns -

Assumption 1) – You want to maximize the number of miles you get, meaning you choose a 120,000 mile package under the old system or a 100,000 mile package under the new.

Assumption 2) – You always use a multi category certificate for the maximum value allowed meaning a category 1-4 certificate is used at a category 4 and a category 1-5 certificate is used at a category 5.

Assumption 3) – You choose an Airline under the old Package 1 or 3 (Aeromexico, Air Canada, Alaska Airlines, American Airlines, British Airways, Copa Airlines, Delta Air Lines, Frontier Airlines, GOL/Varig, Hawaiian Airlines, Iberia Airlines, Virgin Atlantic, Southwest).

United is the same as above, except it adds 10% to either old or new packages, so the benefits to choosing that particular airline are similar under either system.

Choosing a different airline gave you only 85,000 miles under the old program (except JetBlue which was even worse) for the same cost, but gives the same 100,000 miles under the new system. As a result, they are worse under the old system than the above airlines under the old system.  Therefore, for those airlines, the new system is worse than the old, but not as much worse as for other airlines.

However, the airline you choose isn’t the point of my post.

Now the math.

There are two ways to do the math.

  1. Determine the value in points of the certificate and then subtract from the total and see how cheaply you are receiving the miles.
  2. Determine the cost of transferring points straight to miles, and then subtract that from the total and determine how cheaply you are receiving the certificates.

I chose the former because I find the data easier to evaluate and compare.

Since we get the 5th night free, a seven night stay would cost the per night points rate multiplied by 6, so if we subtract that number from the total, then we see the cost of the 120,000 or 100,000 miles.

Old system – 120,000 miles

Category 1-5: 270,000 – 150,000 =120,000 points for 120,000 miles

Category 6: 300,000 – 180,000 = 120,000 points for 120,000 miles

Etc. etc. it is always the same, but as you see below, that is not true in the new system:

New System – 100,000 miles (using standard pricing rather than peak or off-peak)

Category 1-4: 330,000 – 150,000 = 180,000 points for 100,000 miles

Category 5: 390,000 – 210,000 = 180,000 points for 100,000 miles

So far, so good . . .

Category 6: 510,00 – 300,000 = 210,000 points for 100,000 miles

Hmmm, that’s odd. . .

Category 7: 570,000 – 360,000 = 210,000 points for 100,000 miles

Category 8: 750,000 – 510,000 = 240,000 points for 100,000 miles

Wait. . . why?

So in addition to seeing the difference between points per mile for new system compared to old system, we see the difference between new system at one category level and at another.  

Considering that under the new system, you can transfer 240,000 points for 100,000 miles anytime there is no benefit to buying a category 8 travel package if the certificate will be used during standard pricing.

So why? To be clear, this question is not why have they devalued the packages? (we all know the answer to that whether we agree with it or not), but rather why have they been devalued at different rates?

My only thought is that at the higher levels the peak pricing is a larger increase per night beyond the standard pricing and maybe that is being factored in.

Outcomes