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Given the current global travel situation and the new opportunity to transfer Avios freely to/from Nectar, it makes sense to take a step back and consider what are Avios worth in 2021?
What are Avios worth?
Assigning value to something that lots of people use in all sorts of different ways is naturally going to involve a degree of subjectivity. That said, it is certainly possible to establish a sensible range. If you are getting less than the ‘floor’ value of that range from your Avios, that’s bad. If you’re (genuinely) getting more than the top of the range, that’s great.
Given that hardly anyone has done much flying in the last year, there’s an argument that the value of Avios (and all other airline points/miles) has taken a big dive. If you can’t fly anywhere, aren’t Avios effectively worthless?
No – the situation is more complicated.
Most high-value redemptions have always involved saving up a big stack of Avios. That takes most people quite a long time, and saving up for a year or two isn’t at all uncommon. COVID-19 travel restrictions may have delayed plans for some, but if you were in the saving part of your Avios cycle, not being to use them in the last year is largely irrelevant.
There is an issue though. Cash fares are likely to be considerably lower (for quite a while) than they were pre-covid. We are already seeing some incredible deals, and with business travel unlikely to reach former peaks for many years as a result of the revolution in work-from-home and virtual meetings, airlines will be competing hard to fill premium cabins. So, if a Business Class flight that used to routinely cost £2,000 could be easily booked over the next couple of years for say £1,500… It becomes difficult to argue that the saving derived from using Avios to book the flight is the same as it used to be.
It is therefore reasonable to argue that Avios have suffered a reduction in value. The medium-term extent of that remains to be seen though. It is also possible that loyalty programmes may respond by lowering redemption rates, introducing award sales, etc.
Avios have always had a ‘floor’ value, and that floor has just been raised considerably. Before the Nectar deal, it was about 0.5p per Avios, by redeeming for things like wine or hotel stays.
Now, 250 Avios transfers to 400 Nectar Points. Nectar Points are worth (a minimum) of 0.5p each when redeemed at retailers like Sainsbury’s, Argos and eBay.
Therefore, you have the option of getting 0.8p of value per Avios (via Nectar) when buying just about anything! Given the range of retailers, for most people, that’s as good as cold hard cash.
Pre-covid, we used to argue that the ‘fair value’ of Avios was approximately 1p each, with a range something like 0.8p-1.3p, depending on personal circumstances. We now conclude that the value of Avios should be reduced to 0.9p, with a range of 0.8p-1p
The interesting thing is that although the range has been narrowed and the headline value reduced, the floor value is now much firmer, and that’s an important consideration. Due to the Nectar partnership, there is really no reason to ever accept a redemption that generates less than 0.8p of genuine value per Avios. That is regardless of how many you have, or how much your circumstances change – surely quite a reassuring thing for collectors.
In fact, you can even argue things a step further. For many casual Avios collectors (who may have previously got bad value redeeming for long-haul Economy flights), it is likely that the ‘real value’ of their Avios stockpile has actually gone up during lockdown, thanks to the new Nectar transfer option. Why get 0.5p worth of flights per Avios, when you can get 0.8p worth of shopping instead?
What are Avios worth to you these days?