Should you be converting your Citi PMs to HHonors?

Earlier today, I wrote about a Citibank PremierMiles limited-time offer to convert Citi PMs to HHonors points on a 1:2 ratio (the normal transfers are at a 1:1.5 ratio). While there are obvious benefits to conversion, it is now time for some math, to see if such transfers are worth it, in the first place.

When Citibank issued the PM card, there was a stated value of Rs 0.50 per PM for airline redemptions. That meant that if a ticket had a retail / cash cost of Rs 6,000, you would require 12,000 Citi PMs for that redemption. Sadly, effective 1 February 2015, Citi devalued this by 10%, so PMs are now worth only Rs 0.45. So that same ticket of cash cost Rs 6,000 will now cost 13,333 PMs. What this tells us is that for its basic use, a Citi PM is worth Rs 0.45. 

Now let us look at the current 1:2 conversion offer in light of the above valuation. I'm making some assumptions here, so feel free to update as you go, if you believe differently.

I've written before, that the value of a mile (or indeed, a point) isn't fixed, but changes with the person holding those miles and their intended use. Given that a Citi PM is otherwise redeemable for a value of Rs 0.45 per PM, any conversion that yields less than that value results in an inefficient use of PMs. So it is useful to look at the value you'd get for HHonors awards nights, before redeeming PMs for HHonors. For this purpose, I've only identified HHonors properties in India, but you could apply the logic to any other hotel.

Analysis

Now look at the table below.

According to me, the best use of Citi PMs under the current offer is for the first 6 hotels, where the PM new value column is highlighted in green. That's because, by converting Citi PM points under the current 1:2 offer, you maximise the value of a PM, to upwards of Rs 0.54 per PM (that's a 20% upside), going all the way to Rs 1.80 per PM (400% upside)!!!

How did I get to those numbers? In the above table, take for instance, Hampton by Hilton at Vadodara. A room night here costs Rs 5,000 in cash (best available rate or BAR). However, it costs 5,000 HHonors points, which you can easily get by converting 2,500 Citi PMs into HHonors points at a 1:2 conversion rate. Those 2,500 Citi PMs in turn are valued at Rs 0.45 each, or Rs 1,125. So what you could've used for redeeming, say air tickets, for Rs 1,125, can get you a room night that's otherwise sold for Rs 5,000. You'll appreciate that's a significant benefit.

If you look at it a little differently and go by cash value saved (instead of value per PM), your best bet is to use the 1:2 conversion offer to book a room at the Hilton Jaipur, where I stayed last year. That's because you need only 10,000 Citi PMs (valued at Rs 4,500) to book a room night that has a BAR of Rs 11,000, which is a "saving" (or at least a lower cash outflow) of Rs 6,500. What I mean, is that if you were to use Citi PMs for booking this hotel for 3 nights and paying cash for air tickets, you will be better off than paying cash for the hotel and using Citi PMs for those same air tickets.

If DoubleTree Pune is where you want to stay, then you're better off converting PMs to HHonors now under the 1:2 conversion offer, than at 1:1.5 (standard conversion rate).

Hilton Trivandrum stands on the cusp of things. Under the current 1:2 conversion offer, you will be able to squeeze out a value of Rs 0.45 per PM by converting PMs to HHonors points, and booking award nights using those points.

Finally, the ones in red. Those are the cases where converting PMs to HHonors offers a benefit less than Rs 0.45 per PM. In other words, you're better off redeeming your PMs for air tickets, rather than converting them into HHonors points.

Illustrative example

Assume 2 pax traveling to Agra, with flight tickets costing Rs 8k each. A room at the DoubleTree Agra costs Rs 6,000 a night. Let's assume a 3 nights stay. They could therefore spend either:

a. Rs 16,000 in flight tickets plus 15,000 PMs (which will convert to 30,000 HHonors points that can be redeemed for a 3 nights stay at DoubleTree Agra); or
b. Rs 18,000 for 3 nights' stay and 35,556 Citi PMs (to redeem for those tickets).

Naturally, (a) is preferable, as it results in far less outflow of Citi PMs as well as a reasonable cash saving.

Conclusion

I've said it before, and I'll say it again. While it is possible to approximate the value of a point / mile, its real value is never fixed. Rather, it depends on who wants to use it, when, and where.

And to answer the question that this post asks - Should you be converting your Citi PMs to HHonos? My advise would be "It depends where you're planning to stay". If you want to stay at Hilton properties in Jaipur, Goa, Shillim, Vadodara, Agra or Pune, then converting Citi PMs to HHonors points makes sense, but not otherwise.