BBC: Why It Doesn’t Pay To Be Loyal (To Loyalty Programs)

21 Comments

This is a second article within a week on “regular” media about the state of the loyalty programs. The previous one was the New York Times article “Bailing Out Of Frequent-Flier Programs” that you can read more here.

BBC Why it doesn't pay to be loyal

This BBC article is again based on the Delta’s latest move to start awarding SkyMiles based on the dollar spend instead of miles flow.

You can access this BBC piece here.

Delta’s move should prompt even casual members of loyalty programmes to reconsider how they react to incentives and rewards that seem to regularly decline in value. Unlike cash at the bank, which at least has the chance to earn some interest, earned miles are only worth less over time.

People tend to greatly overvalue the hotel and airline miles that they are awarded. Cash is always king. You can spend it the way you like.

Indeed, over the last few years, as airlines have consolidated and maximized capacity through a combination of changing flight schedules and cutting departures, they’ve been shifting their reward programmes to favour customers who are necessarily more loyal to the company’s bottom line: those who spend the most on tickets.

Here’s another dilemma. Those that often pay for full fare tickets are no necessarily loyalty to any airline at all. They or their company just pays for the most convenient transportation. Why would you care about the elite benefits if your company pays for business or first class every time you fly?

Credit card companies, banks and other partners send billions of dollars annually to airlines and hotels, buying points wholesale to entice brand-loyalists to open a new brokerage account (Get 25,000 miles when you deposit $10,000!) or charge up a storm (20 bonus miles per dollar spent on Valentine’s Day!). Our once meagre points balance supercharge on the backs of bananas and dry cleaning. But when we’ve finally accumulated enough miles for a ‘free’ flight, those ‘saver’ awards are long gone or only available to remote locations, in the off-season, or at 5 AM.

Airlines are very good at over promising and under delivering when it comes to loyalty programs and Delta is the worst when it comes to these so called ”saver” awards.

If you think it’s a challenge trying to spend down points — and get the best value — there’s a reason for that. Because it is. While you’re accumulating and planning for a points splurge, the airlines and hotels are very focused on eliminating your balance in the most efficient and profitable way (for them) possible. That’s because, like debt and other bills, customer miles and pre-sold points sit on company balance sheets as a liability yet to be paid.

And the fastest way to lower the future liability of the unredeemed miles is to tinker with the award chart and require more miles for the same award tickets.

Conclusion

It is about the time to have more critical writing about the state of many loyalty programs. As it was noted on the BBC piece, you can buy most of the elite benefits ala carte up to the check in.

My personal opinion is that it makes no sense to be blindly loyal to any one airline or hotel program. Just use them to your own advantage.

If you enjoyed this article, get our blog updates for free!

Previous articleU.S. Travel Association’s Daily Getaways 2014 Preview Starting On May 12
Next articleSriLankan Airlines Joins Oneworld May 1, 2014 (CONFIRMED)

YOU MIGHT ALSO LIKE