I hate it when travel bloggers write things like, “I redeemed 67,500 American miles for a one-way first class flight to Hong Kong on Cathay Pacific which retails for $8,000; therefore, I got a value of over 11 cents per mile!” This is completely wrong.
For one, you didn’t get 11 cents of value per mile if you never would have paid $8,000 out of pocket for that flight. If you’re not willing to pay the retail value in cash, then you didn’t value you it at at least $8,000, so there’s no way that each of your miles was really worth 11 cents to you.
In theory, everyone has an inherent value for every thing in the world. I have a valuation for that first class flight, for a hotel night, for the pen sitting on my desk. Things are then bought/sold/traded/bartered when there’s a more efficient allocation in the world, i.e. I value something that you have more than you value it, so I’m willing to give you something that you would rather have so that you’ll give me that thing, and we’re both happier as a result.
Thus, when trying to determine how much value you get per mile or point, you should try answering the question, “at what point would I be indifferent between having the miles and having some amount of cash?” Note that this is not the same as, “how much cash would it take to buy the exact same product”.
If some travel blogger is really getting 11 cents of value per mile, then he should be willing to purchase miles at any price less than that. For example, I should be able to sell that travel blogger 67,500 miles for $7,000, since that’s less than what his supposed valuation is since he claims he can get $8,000 of value with those miles.
In truth, he wouldn’t buy miles at this valuation (and if he would, call me! I would definitely be a willing seller) because his valuation of miles is not actually this high. It’s perhaps closer to something like 2 cents per mile, which means he’d be willing to pay at most $1,350 for that flight, or that he’d be indifferent between having 67,500 miles and $1,350 in cash.
In the future, any time you see a travel blogger write one of these inane statements like, “I got a value of x cents per mile!”, then you should offer to sell them miles at slightly below that valuation. If he says no deal, then you know that he’s full of it.