January 3, 2017 Update: Hotel points are no longer allowed to earn the Companion Pass.
This article is going to look at if it’s worth it to transfer large sums of points to Southwest hotel partners in order to reach the threshold for earning the Companion Pass. This analysis should really be helpful to those people who for whatever reason aren’t able to earn that last ~30,000 Rapids Rewards needed for the Companion Pass. I’m not going to focus on small quantities of Rapid Rewards in order to prevent readers from getting lost in a ton of numbers and calculations on this post, so if you’re in need of of just a few hundred or a couple thousand Rapid Rewards, your analysis might be different.
I will assume a 2.2 cents per point value for Ultimate Rewards and will assume that someone is trying to earn 30,000 Rapid Rewards and is contemplating the best method for them to come up with those points.
Ultimate Rewards Hotel Transfer Partners
There are basically only two Ultimate Rewards hotel partners that you can transfer points from to Southwest: Hyatt and Marriott/Ritz Carlton. Ultimate Rewards transfer to all of these hotels at a 1:1 ratio so if you’re going to funnel your Ultimate Rewards through one of the hotel programs you want to make sure that you’re getting the maximum value.
By looking at the transfer ratios below, you can see the percentage of value maintained in the points transfer. In other words, the higher the percentage, the less value you are losing.
- 5,000 Hyatt Gold Passport points for 2,400 Rapid Rewards Points (48%) or
- 50,000 Hyatt Gold Passport points for 24,000 Rapid Rewards Points and receive a bonus of 6,000 additional Rapid Rewards Points for a total of 30,000 Rapid Rewards Points (60%).
You can purchase up to 55,000 Hyatt points in a calendar year.
- 10,000 Marriott Rewards Points = 2,000 Rapid Rewards Points (20%)
- 20,000 Marriott Rewards Points = 5,000 Rapid Rewards Points (25%)
- 30,000 Marriott Rewards Points = 10,000 Rapid Rewards Points (33%)
- 70,000 Marriott Rewards Points = 25,000 Rapid Rewards Points (35%)
- 140,000 Marriott Rewards Points = 50,000 Rapid Rewards Points (35%)
You can only purchase up to 50,000 Marriott points in a calendar year, limiting the amount of purchased Marriott points to the equivalent of 12,000 Rapid Rewards.
The best bang for your buck
As you can see, transferring to Hyatt and then to Southwest at 50,000 Hyatt Gold Passport points would be the most efficient way to use Ultimate Rewards to meet your requirement for the Companion Pass, as it preserves 60% of the value after converting.
However, before you decide to transfer 50,000 Ultimate Rewards you should decide if this is going to be the best return on your investment.
For this example we are assuming the following:
- You are transferring 50,000 Ultimate Rewards to Hyatt Gold Passport points for 30,000 Rapid Rewards Points
- You value Ultimate Rewards at 2.2 cents per point.
- You value Rapid Rewards at 3.0 cents per point since you’ll have the Companion Pass (read more about how much I value the Companion Pass here).
Thus, you’re essentially exchanging 50,000 Ultimate Rewards worth $1,100 for 30,000 Rapid Rewards worth $900.
That seems like a $200 loss of value but you have to remember that because you will have the Companion Pass now you also gained huge value because the remaining 80,000 points sitting in your Rapid Rewards account just doubled in value from $1,200 to $2,400 due to the Companion Pass. So there’s an additional gain in value of $1,200.
So you started with $1,100 worth of value in the form of Ultimate Rewards and ended up with $2,100 worth of value in the form of Rapid Rewards ($900 in value from the 30,000 new Rapid Rewards + $1,200 in value from the doubling effect of the 80,000 points already in your Rapid Rewards account).
That means you’ve gained $1,000 worth of value. Congrats.
It’s important to note, however, that had you transferred Ultimate Rewards to Hyatt and then to Southwest and not obtained the Companion Pass you’re losing $650 worth of value since $1,100 – $450 (30,000 Rapid Rewards value at 1.5 cents per point) = $650. In other words, if you’re not getting the Companion Pass, this is not a good move.
Should you purchase Hyatt points instead of transferring Ultimate Rewards?
Buying Hyatt points at a normal rate
Hyatt Gold Passport points can be purchased in increments of 1,000, up to 55,000 points per calendar year. 50,000 points could be purchased at 2.4 cents per point for a total of $1,200. Again, at 2.2 cents per point, the value of the 50,000 Ultimate Rewards would be $1,100, so it wouldn’t make economic sense to purchase 50,000 Hyatt points instead of using Ultimate Rewards.
Buying Hyatt points at a bonus rate
However, sometimes Hyatt will run promotions for purchasing points. One recent promo gave a 30% bonus allowing you to purchase these points at about 1.85 cents per point. 1.85 cents per point would amount to $925 worth of value. Thus, if you valued Ultimate Rewards at 2.2 cents per point, you would actually be getting a larger return on your investment by purchasing Marriott points during a promotion, since you’d be exchanging $925 cash for $2,100 worth of Rapid Rewards instead of $1,100 of Ultimate Rewards for $2,100 worth of Rapid Rewards.
And if you purchased the points on a Sapphire Preferred you’d also earn 1,850 Ultimate Rewards on that purchase (worth $40). So factoring in that additional $40, your starting point would essentially be $885 ($925 – $40) and your gain in value would be $1,215 compared to the $1,000 worth of value you gained from transferring Ultimate Rewards.
The issue with spending $925 to buy these points is that a lot of people don’t like to use cash instead of points even though economically the numbers would support doing so because you’d be saving $215 in value. Spending “free money” rarely ever feels the same as spending your hard-earned cash. I think the question you should ask yourself is “would I normally spend $925 on Southwest air fare in the next two years?” If the answer is yes, then you might want to consider paying cash if it would save you on money you would spend anyway.
Non-Ultimate Rewards Partners
Just for kicks, I also listed the other hotels who aren’t partners with Chase Ultimate Rewards. Since these programs don’t transfer from Ultimate Rewards, their conversion rates aren’t as meaningful and the focus on them is how much overall value they would bring.
Rapid Rewards Members who are also Club Carlson members have the option to redeem their Gold Points® for Rapid Rewards Points in the following increments:
- 2,000 Gold Points = 200 Rapid Rewards Points (10%)
- 50,000 Gold Points = 5,000 Rapid Rewards Points (10%)
- 100,000 Gold Points = 10,000 Rapid Rewards Points (10%)
You can only purchase up to 40,000 Gold Points per account, per calendar year. Therefore the maximum Rapid Rewards that could be bought in a year would be 4,000, which is not anywhere close to what we would need. Thus, for these purposes, they are ruled out.
Rapid Rewards Members who are also Choice Privileges members have the option to redeem
- 6,000 Choice Privileges® points for 1,800 Rapid Rewards Points (30%).
This is the best conversion rate for the non-Ultimate Rewards hotel partners. However, they still don’t really compare to Hyatt.
48,000 Choice Privileges® points would cost you $528 and would earn you 14,400 Rapid Rewards, which would still leave you well short of your desired goal of 30,000. Since the maximum you can purchase in a calendar is 50,000, Choice Privileges isn’t a practical solution for trying to rack up 30,000 Rapid Rewards.
Rapid Rewards Members who are also Best Western Rewards members have the option to redeem:
- 5,000 Best Western Rewards points for 1,200 Rapid Rewards Points (24%) .
1,000 points will cost $10 so you’d pay $50 for 1,200 Rapid Rewards. That comes out to 4.1 cents per point, which means that you would pay $1,250 to get 30,000 Rapid Rewards Points. Assuming you could even pay for 125,000 points in a year (which I don’t believe you can), it’s still not as good of value as Hyatt.
La Quinta Returns
La Quinta Returns members also have the option to redeem:
- 6,000 Returns points for 1,200 Rapid Rewards Points (20%).
You would need 150,000 La Quinta Returns points to get 30,000 Rapid Rewards. A maximum of 40,000 points can be purchased in a year so you’d be way short of the goal. In any event you could purchase 35,000 Returns points at a current discounted rate of $288.75. That would be 7,000 Rapid Rewards points for 4.1 cents per point, which would come out to a total of $1,237.5. Again, not as good of a deal as buying Hyatt points.
Transferring Ultimate Rewards to hotel partners in order to accumulate Rapid Rewards will normally cause you to lose significant value in your Ultimate Rewards. However, if you’re in need of a final 30K or so Rapid Rewards to obtain the Southwest Companion Pass, then obtaining those final 30K Rapid Rewards via Hyatt will not be a bad idea because you are drastically increasing the value of those points. And sometimes, it might even make economic sense to purchase the points with cash from Hyatt.
Daniel Gillaspia is the Founder of UponArriving.com and creator of the credit card app, WalletFlo. He is a former attorney turned full-time credit card rewards/travel expert and has earned and redeemed millions of miles to travel the globe. Since 2014, his content has been featured in major publications such as National Geographic, Smithsonian Magazine, Forbes, CNBC, US News, and Business Insider. Find his full bio here.