I think they are both, it's a difference in perspective. To the sponsor they are loyalty programs, to us they are rewards.

I agree that closing an elite member's account after only one year is foolish. I would expect the dormant lifetime to vary with the history, a so-called "soft-landing". To continue with the Hilton example, a base account might expire after a year, Silver after two years, Gold after three, and Diamond after four years of inactivity.

It's not only loyalty programs which do this. I just called to make a doctor appointment, and I am no longer listed in the patient database. I was sure I had been there "a couple years ago", but it turns out it was 2006 .