Loyalty programs of all colors have taken a substantial hit over the past twelve months or so, be it through devaluations or simply because of mediocre availability, actually to use the points as desired.
Many consumers are rightfully questioning if points-based loyalty programs as we know them today are still a worthwhile endeavor or if it’s a lost cause and one should go for best-price or cashback instead.
Those of us who have been in the loyalty game for a long time (myself since 1998) have seen lots of ups and downs, especially when it comes to frequent flyer programs and hotel loyalty points.
One issue has certainly been that the required amount of points for individual awards went up across the board, and there are multiple reasons for that. For one, the number of available points on member accounts swelled up to higher numbers over the years as many people tend to save them up for a long time rather than following an earn&burn strategy which is really the best way to handle any loyalty scheme.
The North American credit card market, both in Canada and the U.S., also has a lot to do with this hyperinflation of awards. In recent years we’ve seen absurd amounts of sign-up bonuses on credit cards, oftentimes up to 160,000 points for a new account. That was unheard of even 10-15 years ago when 40,000 miles for a new credit card was actually a decent bonus.
What is the result? Well, for one, most programs have now moved to dynamic pricing award schemes with many redemption options displayed to customers in a search are likewise as absurd with several hundred thousand miles required for a common ticket.
Here are some examples from frequent flyer programs:
American Airlines AAdvantage
Air Canada Aeroplan
United Mileage Plus
Or alternatively, as we move to hotel awards, a one-night stay for a Hilton Honors property in Tokyo:
Of course, the reason for these high award levels is that standard award availability in the lowest available award class has dwindled down to pretty much nothing in most instances but even IF there is something like in the case of the Hilton Tokyo Bay we’re still talking about 80,000 points for one night here. And this is not a very prestigious or luxurious property.
World of Hyatt has the same issue relative to the number of points earned. Points earned through actual consumer-company transactions are so dismal you have to spend a lot of money on both hotels and flights to even remotely come close to being able to redeem an award.
Credit card companies had become the lifeline to loyalty programs and, therefore by extension, to the company ever since the post-9/11 period when hospitality and transportation entered a period of economic struggle. Banks paid hundreds of millions, eventually billions of dollars, to airlines and hotel companies, and the core points earning business shifted from staying at hotels and flying a plane to applying for and swiping a co-brand credit card.
Twenty years later, this has developed from pandora’s box to a black hole with award redemption rates of the like we see in the images above. Finding actual good deals on miles and points have become increasingly difficult. They are still around, but even for professionals in the loyalty field, it has become a challenge to piece something together.
For example, last week, I spent in excess of 20 hours working a trip which is simply excessive. I should have just bought the cheapest Economy ticket rather than trying to find a solution with miles. Sure, it’s a nice mind game like a crossword puzzle, but at some point, it becomes tedious and simply not worth the effort.
For the common consumer, we can increasingly make the case that it’s best to forego these loyalty schemes and rather purchase travel products based on best-price and use a credit card that provides you with a decent cash-back option. Save money straight away than enter a gamble of obtaining something in the future that might or might not materialize, let alone the constant devaluations of loyalty schemes.
This probably isn’t the message that those making their money with credit cards want to relay, but unfortunately, it has become the scenario we’re confronted with today.
Conclusion
The heightened travel demand post-pandemic, devaluations of loyalty programs, overall lack of availability on standard redemption levels as well as the introduction of dynamic awards have greatly diminished the opportunity for consumers with a small to moderate travel volume to get anything worthwhile out of the hotel and airline loyalty programs.
Unless one has the option of earning lots of points on credit cards or supplementing the balance through purchasing additional points, the consumer will be on the short end of the stick as long as availability for awards remains as scarce as it is at the moment.
Some loyalty programs still have sweet spots that are worthwhile to exploit (as long as they’re still there) but keep in mind that another way to save money is always to keep your options open, and opt for immediate savings rather than focusing on one brand or currency in the form of miles and points.
