View Single Post
Old Nov 30, 09, 10:48 pm   #4
Randy Petersen
Founder of FlyerTalk
  
Join Date: May 1998
Location: Colorado Springs, CO
Posts: 6,536
Question 3

Question
With miles and points constantly being devalued, how do programs expect their members to stay loyal? I run everything through my program credit cads, and I focus on one airline program and one hotel program to maximize my status and points. Do I start over when a program (ahem Hilton HHonors) changes its structure...again? Or do I ride out the storm and hope the program managers come to their senses?
-- Jenni

Answer
A question of common concern for members of various travel loyalty programs and this may well be the one question that most viewers can relate to.

You’ve got a question about riding out storms of change which we’ll address but would like to first address your observation – “miles and points constantly being devalued”. The reason we like to start with this is to make sure you fully appreciate the unique differences of what creates value for your miles and points and to better clarify a common misconception of gauging “value.” One way to look at devaluation is when award charts change -- meaning that miles and points accumulated in the past now have less value because it will take more of them to achieve some goal of redemption in the future. The other is the discussion of what a mile is worth and when that changes downward, that can infer that your miles have been devalued. The current buzz is that a mile is only worth 1.2 pennies as compared to a mile being worth 2 cents per mile just two years ago. Logic might indicate that over the past two years your miles have been devalued. This is a single-sided observation because the very reason that a mile is worth only 1.2 cents per mile right now on average is because airfares are at historic lows. So while we see individual mile value down, so is the cost of acquiring those miles. Truly, you really can’t have it both ways … high mile value and low cost of earning miles. The two values work in conjunction with each other. If value per mile is high, so is the cost to earn them, meaning higher airfares. And because of this, it makes it important to actually manage your accrual and redemption of miles. Most savvy frequent flyers this past year made decisions to not cash in miles for travel, choosing instead to actually pay for trips they might normally use miles for, because airfares are so low. The reason is that it is likely airfares will rise in the future which means that the value per mile will rise making it more practical to use the miles then. Buy low, redeem high. As for the devaluation of when award charts are adjusted? No argument there but measure how easy it is for you to maintain an active account and add to your miles or points on a continual basis. But even in those situations there are some advantages. Who this year did not notice several award sales from United and Delta that offered up normal awards at a discount? There are balances to these things if you learn to manage and make use of the opportunities. Bottom line: The value of miles can fluctuate both up and down and you should learn how to take advantage of both opportunities.

As for how do programs expect their members to remain loyal? It may surprise you but a majority of members become fixated with the most convenient program and don’t spend the time as you have in asking questions or seeking advice. They become loyal to the convenience, and as a result blind to the choices.

As to the Hilton HHonors changes. Like you we’re not convinced they are totally necessary at the present time. However, HHonors is a rich program and these adjustments may be an admission that it's been a little too rich. For instance, last year InsideFlyer magazine did a comparative analysis of all the major hotel guest programs and HHonors on a consistent level of spend excelled in every category clearly rating the highest in payout of awards. No member likes to see a rich program reduced to being average and only time will tell if the current feedback from the members of HHonors (which has been less than positive (just like yours)) will make any difference. Generally, it remains a fairly good program, perhaps not as rich as before but often while a program may not rescind a change like this, it does force them to re-tweek other parts of the program to at least give back some of the takeaway. We'd say to ride with this one out for right now but do some research to determine if HHonors will be no worse than the other programs and if so, why change?

Assisting with this answer is one of the most traveled members of FlyerTalk, Kiwi Flyer, who has been known to fly halfway around the world to attend a few hours meeting only to return directly to New Zealand and also helps pen the official blog for FlyerTalk called The Gate. And, we have Pizzaman who knows as much about fine wine as miles and points and that is a whole lot.

Advice from Kiwi Flyer:
Great question Jenni.
Firstly, you have the right general strategy of concentrating in one hotel and one airline program to maximise benefits. Unless you are up in the air or on the road nearly every day, or have travel patterns that a single airline alliance or hotel chain do not serve well, this is the way to go.

Back to your question. There are many kinds of devaluations and so no standard answer. What I do is take a look at how it affects my travel pattern. Based on my typical travel paid flights and hotel stays how will miles/points earning be impacted for me? Based on my typical use of miles/points (awards or upgrades) what is the impact? Do the changes introduce new opportunities for me to improve earning or redemption? I also take account of any lifetime status in the program - whether I have earnt it or are getting close to qualifying.

Some program changes have a mixture of both benefit devaluations and improvements. Different people may see the changes as positive, negative or very negative depending on their own circumstances.

I find the trickiest types of changes to assess are where earning and/or redemption rates worsen at the same time as status benefits (or perhaps ease of getting or retaining status) are improved.

Jenni, in your question you have a hope that "the program managers come to their senses". While sometimes minor program changes are quickly reversed following adverse feedback from members, I think in most cases of significant change the program changes stick. There may be further changes after a couple of years, perhaps when ownership or senior management in the program has changed, but there are very few backdowns on major program changes.

Only you can tell if, in your situation, it is worth sticking with a program following devaluation. Some devaluations still leave the benefits better than the competition - some bmi Diamond Club devaluations this year spring to mind as an example of this.

In the case of Hilton HHonors, here are a few things you may consider:

- In most places you visit which chain hotels are located there? If there aren't Starwood Hotels (for example) at most places, then it is not worth considering SPG.
- If HHonors status benefits are important to you, how easily would you replicate them at other chains? For example Priority Club status benefits are much less than HHonors, unless you have Royal Ambassador (which requires a minimum level of stays in Intercontinental Hotels & so may not be easy to achieve or maintain).
- In the new award charts what is your typical earn : burn value equation? E.g. spend $500 to get redemption worth $150. How does this compare in other chains? Don't forget to allow for promos since some hotel programs are incredibly generous with them and they can double the value you get from the program.

Advice from Pizzaman:
Right now, with all the flux in programs,I think “stand pat” is a good strategy.” What does “right now” mean? Well, it’s probably 30-90 days. But, things are very much subject to change. I believe by the time renewals hit (February to April), some programs will come to their senses. In the mean time, I think it’s prudent to stay point and keep accruing in one program. There’s always safety in numbers (especially if you’ve already accrued points there), while leaving open your options to switch when, say, SPG, makes a drastic move.

Last edited by Randy Petersen; Jan 25, 10 at 5:17 am
Randy Petersen is offline   Reply With Quote