How I Hack – Arbitrage Through Alaska’s Acquisition of Virgin

A while back, I wrote about an Arbitrage Opportunity with the merger of Marriott and SPG and while some folks have been reporting that you can only get the 7 Nights and 120,000 Mile Package, I can 100% confirm that you can successfully get the 5 Nights and 120,000 Miles Package.

For those still looking to take advantage of this opportunity and not having any luck, I would suggest you HUCA (Hang Up and Call Again).  It really seems to be up to the CSR as to whether or not they allow you to redeem for this package.  As I had stated in my previous post, the offer is intended for Marriott Vacation Club Members (I am not a member) but if you find the right CSR, you will be able to redeem as I have been able to.

Alaska Airlines Purchase of Virgin America

For those of you that stay up to date with the travel news of the day you’ll know that Alaska Airlines purchased Virgin America for $2.6B in April of this year.  After a bunch of government oversight, the deal finally closed 6 days ago, making Alaska the 5th largest airline in the United States.

The acquisition of Virgin left a lot of Virgin Elevate Members with a lot of questions in terms of what happens to their status, points, benefits, etc.

During the government approval process, Alaska worked with Virgin to determine the fair value of an Elevate Point and it was determined that Elevate Points would transfer to Alaska Miles at a ration of 1 to 1.3, so for every 1,000 Elevate Points you could exchange them for 1,300 Alaska Miles.

Arbitrage and the Opportunity

Arbitrage is defined as the simultaneous buying and selling of securities, currency, or commodities in different markets or in derivative forms in order to take advantage of differing prices for the same asset.

Again … what does that mean in English?

Well, it means that in normal times, you could expect to exchange 1 SPG point for 1 Alaska Mile but because of this merger, you can now exchange at a much better rate.

Now stay with me here because there are a few steps involved and a bit of math.

SPG Points

SPG Points are points that are earned through the Starwoods Preferred Guest Program through stays at SPG Properties (Westin, Sheraton, W, Aloft, etc) or through the sign up of the American Express SPG Personal and American Express SPG Business cards.

Sidenote … I just now realize I haven’t done a review of the AMEX SPG Business … I’ll rectify that tomorrow.

SPG Points are probably the most powerful points in existence because of how many airline programs (36) you can transfer your points to.  Many of these transfers are a 1:1 basis so you have extreme flexibility when it comes to redeeming for flights.  You can also use the points for hotel stays at SPG Properties, of which there are, at the time of writing, 2,084 hotel properties worldwide.

The other big bonus is that if you transfer your points in 20,000 point blocks, you receive a 25% bonus.  In other words, your 20,000 SPG points transfer to 25,000 airline miles (assuming the airline has a 1:1 transfer ratio with SPG).

Now that we understand the background, let’s look into how we can take advantage of both the SPG Program and the recent purchase of Virgin by Alaska.

SPG to Virgin Elevate Miles

The transfer ratio of SPG to Virgin is at a 1:1 ratio.

Let’s imagine we have 20,000 SPG Points for our calculations.

20,000 SPG = 25,000 Virgin Elevate Points

Remember, if we transfer in 20,000 blocks of SPG, you automatically receive 25,000 points into the program you are transferring to (assuming they have a 1:1 transfer ratio).

Now that we have 25,000 Virgin Elevate Points, we transfer them to Alaska Miles.

Virgin Elevate Miles to Alaska Miles

Based on new published information from Virgin and Alaska, you can now transfer your Virgin Miles to Alaska Miles at a ratio of 1:1.3.  It’s a bit hard to find so I’ll highlight the pertinent information below.

Now because we have 25,000 Virgin Elevate Miles from our SPG transfer, we can now convert these miles with a 30% bonus so:

25,000 Virgin Elevate Miles = 32,500 Alaska Miles

Benefit Calculation

So we started with 20,000 SPG Points, transferred them to Virgin Miles and then transferred those miles to Alaska to end up with 32,500 Alaska Miles.

32,500 / 20,000 = 1.625

This means that we receive 162.5% of the original SPG points we cashed in but in Alaska Miles … a 62.5% bonus on our original points.

That’s a pretty darn good rate of return right there folks.

Why Does This Matter?

As I mentioned in my post yesterday, Alaska is quickly becoming the best loyalty program for fliers, especially those based on the West Coast.  They continue to actually improve their program by doing things like reducing the miles required for redemption and providing some of the best benefits for elite members including the waiving of change fees, even on partner awards.

I know that I haven’t covered off Alaska’s program in much detail but I intend on doing more in the future as I have expanded my points portfolio to include a substantial portion of Alaska Miles.

Conclusion

If you though the arbitrage opportunity from SPG to Marriott to Alaska was a good deal, this one is almost just as good.

In the previous example, we cashed in 78,333 SPG Points for 235,000 Marriott Points and then redeemed for 120,000 Alaska Miles and a certificate for 5 nights at a Category 1-5 Marriott Property.

If we look at the points, we receive 153% of the SPG Points we cash in for Alaska Miles (120,000 / 78,333).  Depending on how you value your 5 Night Certificate, this arbitrage opportunity might actually be better for you, especially if you don’t have enough points to take advantage of the Nights and Flights Program with Marriott.

The nice thing about this opportunity is that you can take advantage of it with as little as 20,000 SPG points.

Keep in mind that according to the Press Release cited above, Elevate Points holders won’t have a mechanism to transfer until after January 9th, 2017.  I expect that on that day, you will be able to log into your Elevate account and instantaneously transfer your points to Alaska … but that’s just an assumption.