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Long Term Value of miles/points with Airfare Inflation

Long Term Value of miles/points with Airfare Inflation

Old Oct 24, 2016, 2:58 pm
  #1  
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Smile Long Term Value of miles/points with Airfare Inflation

Does anyone think this is accurate saying that points and miles gain value over time as airfare inflates faster than rewards charts? I know the article is a little old, but looking for some of your expert opinions

It kind of makes sense, but some data also backs up the opposing argument.

http://qz.com/345644/the-simple-reas...more-valuable/

http://www.foxnews.com/travel/2014/0...-counting.html

Last edited by mia; Oct 24, 2016 at 4:20 pm
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Old Oct 24, 2016, 7:22 pm
  #2  
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Originally Posted by mjgoldstein9
Does anyone think this is accurate saying that points and miles gain value over time as airfare inflates faster than rewards charts?
No, because airfare is cyclical - mileage values decrease monotonically.
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Old Oct 24, 2016, 9:41 pm
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I have been flying the same city pair for 30 years. Cash price is the same or less now. 5 minutes ago I booked this city pair for less cash than I did 30 years ago.
In 1985 flew SYD-SFO (on PanAm) Cash price today is less.

The freq flyer miles & cash surcharges (where applicable) have continued to rise over the time I have been a member of ffp's (1993)
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Old Oct 27, 2016, 9:14 am
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Internationally, I'm seeing a lot of fares coming back into their traditional ranges. Not quite as sky-high as 2-3 years ago, perhaps thanks to stronger LCC competition on routes that didn't have them before.

I think the original premise holds true in limited areas. Simple U.S. and U.S./Canada is one example where ten years ago I'd have never redeemed an award but now I do semi-often. Lack of competition has driven prices high, but the airlines have so much marketing capital invested in the "25,000 mile award" that they haven't yet adjusted that part of the award chart. They can (and do) tighten availability, but if you're flexible you can get your seats. Fly a less-popular route where a monopoly exists and you can get over 2cpm without working too hard.

The problem with the rest of the award chart is that if airfares go up too much they'll just reset the chart. They never featured the "90,000-mile J seat to North Asia" in their mainstream credit card offers, so it was easy to crank up the miles required without anyone noticing (except us, of course).
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Old Oct 27, 2016, 9:35 am
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When airline miles were awarded mainly based on distance flown, inflation wasn't an issue

but with credit card miles (not even looking at sign up bonuses), you are earning more miles as prices of stuff you buy goes up. so if credit card and portal miles (not sure how revenue miles would work) remain a large fraction , then yeah, inflation on the charts ...
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Old Oct 27, 2016, 12:10 pm
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This game can continue forever if banks increase cards' earning rates to 1.5 or 2 miles per dollar and keep increasing it in step with award chart inflation.
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Old Oct 28, 2016, 7:46 am
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Originally Posted by pinniped
Internationally, I'm seeing a lot of fares coming back into their traditional ranges. Not quite as sky-high as 2-3 years ago, perhaps thanks to stronger LCC competition on routes that didn't have them before.

I think the original premise holds true in limited areas. Simple U.S. and U.S./Canada is one example where ten years ago I'd have never redeemed an award but now I do semi-often. Lack of competition has driven prices high, but the airlines have so much marketing capital invested in the "25,000 mile award" that they haven't yet adjusted that part of the award chart. They can (and do) tighten availability, but if you're flexible you can get your seats. Fly a less-popular route where a monopoly exists and you can get over 2cpm without working too hard.

The problem with the rest of the award chart is that if airfares go up too much they'll just reset the chart. They never featured the "90,000-mile J seat to North Asia" in their mainstream credit card offers, so it was easy to crank up the miles required without anyone noticing (except us, of course).
LCCs and more carriers flying internationally to/from the US, so I'm increasingly seeing prices being lower this year than say five years ago. But I'm also seeing a change in travel demand to/from Euorope so that is a big part of the price drops.

Domestically, my flight costs have become more extremely varied, but on average I'm paying more than 5-8 years ago when it comes to non-award tickets.

For international award tickets, the value I see out of miles is now the worst on average than it's ever been.
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Old Oct 28, 2016, 9:55 am
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Originally Posted by nsx
This game can continue forever if banks increase cards' earning rates to 1.5 or 2 miles per dollar and keep increasing it in step with award chart inflation.
thats an interesting thought
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Old Oct 28, 2016, 3:54 pm
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Originally Posted by nsx
This game can continue forever if banks increase cards' earning rates to 1.5 or 2 miles per dollar and keep increasing it in step with award chart inflation.
BAnks buy the miles from airlines, so for this to happen they have to pay half which airlines won't do, or pay twice, which banks won't want to do. In the end, they'll effectively be giving away 2% cashback, in which case they might as well just tempt people with 2% cashback cards.

Now there are smoke and mirrors where they can fool consumers into thinking they're getting over 2c of value per $1 spent (and some get that value) but most never see that return from miles.
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Old Nov 1, 2016, 10:10 am
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Originally Posted by nsx
This game can continue forever if banks increase cards' earning rates to 1.5 or 2 miles per dollar and keep increasing it in step with award chart inflation.
In a way this already happens with some cards such as Hilton HHonors. The Amex card earns 6x points per $1 for gas, restaurants, and groceries and 12x booked directly with Hilton. Credit Card companies will have to increase or add new multipliers to keep up with changing award charts to keep people wanting these types of rewards over cash back.

If an airline mile devalues to 1c, do you want 10,000 miles or $100 cash back? Obviously, the cash back is a much better value at that point unless you're the earning potential is great enough.
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Old Nov 1, 2016, 10:25 am
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The big U.S. legacy airlines have largely normalized around what 1 mile means. For better or worse, they've created this system and it'll be hard for one of them to really break hard from it. They've long used the notion of the 25,000-mile domestic award in their marketing, and they've mostly aligned other "big" rules and primary facets of their award charts with each other. We find bigger variances in partner award charts, but that's more of a niche case compared to the everyday awards that most users redeem.

Thus it won't be easy for them to reset the whole thing down (or up) a notch. Too much marketing capital built-in already.

Hotels, for whatever reason, never coalesced around a single standard or baseline award. There's no regularly-marketed level that people associate with hotel points (e.g. 1 room equals 10,000 points or something like that) industry-wide. Thus nobody (aside from nerds like us) really thinks about how 1 HH point relates to 1 SPG point, and the programs have greater freedom to rapidly adjust up or down with huge promos/bonuses and huge devaluations when necessary.
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Old Nov 1, 2016, 12:53 pm
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Originally Posted by mjgoldstein9
In a way this already happens with some cards such as Hilton HHonors. The Amex card earns 6x points per $1 for gas, restaurants, and groceries and 12x booked directly with Hilton.
Amex has two different Hilton HHonors cards. It sounds like you described the $75 AF Surpass card, not the no-AF card (but you didn't say so).
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Old Nov 1, 2016, 1:19 pm
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Originally Posted by sdsearch
Amex has two different Hilton HHonors cards. It sounds like you described the $75 AF Surpass card, not the no-AF card (but you didn't say so).
Yes, I was using the surpass in my example.

I believe carriers have created an interesting dynamic where they keep the economy award prices low, which is great for people who earn miles via credit cards. The inflation affects the premium cabin space, but people who book those awards usually are flying for business, and therefore are now earning more miles than ever before. If the award costs 20% more miles, but your earn them 50-100% more per flight then why is that a bad thing?

Yes it's much harder for the average joe to save up for a premium award seat, but there are a lot of people who would rather fly 2x in economy vs 1x in first.
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Old Nov 1, 2016, 1:22 pm
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Originally Posted by mjgoldstein9
Yes it's much harder for the average joe to save up for a premium award seat, but there are a lot of people who would rather fly 2x in economy vs 1x in first.
Those are the people who aren't sitting on hundreds of thousands of points. I used to be one of those people.
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Old Nov 1, 2016, 1:31 pm
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Originally Posted by nsx
Those are the people who aren't sitting on hundreds of thousands of points. I used to be one of those people.
Am I not correct in thinking that people who travel for business earn more, so it offsets the inflation of award charts, but leaving the 25000 economy award alone works great for credit card earned miles?
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