Loyalty benefits for status members are shrinking but the awards game is hardly dying. As recently as 7-8 years ago virtually no US cards had big bonus categories. Then Chase came out swinging hard first with the CSP and then with the CSR to take down Amex, and the 2 have been at war since coming up with more and more bonus categories and ways to earn points to try and woo customers, and now with Citi and Capital One stepping into the game the competition between them is only going to get more fierce.
Have redemption cost in points gone way up, yes definitely, but so has the ability to rapidly earn points, in my opinion at an even faster rate.
As others have mentioned here the game is changing. Earning serious mileage through flying is really tough these days, and the days of mileage runs are pretty much over. Mileage programs now earn the
airlines big bucks from the CC companies buying points at 1.2-2c each. This will put the brakes on them devaluing awards too much, and ESPECIALLY devaluing partner awards too much because then people will choose to transfer into a different programs and they'll miss out. The loyalty programs should really now be though of more as points programs, as the airlines see points less as a way to reward FF and more of a way to generate revenue through having Chase,Amex etc buy the points.
Yes, right now there are only the big 3 airlines in the US but their FF programs are also competing with all the transfer partners in the world.
The big losers here are the CC companies that are trying to do everything to woo consumers to misspend their points on BS giftcards and other really bad redemptions, but it seems they are failing at this since most people realize that
the transfers present far more value.
How does this play out in the long run, i'm not sure, but there will always be partner award redemption sweet spots. Yes business class redemptions to south america are sometimes really cheap in cash, but they are sometimes really cheap in points too. You can fly from Mexico City all the way to Arequipa in the south of peru in avianca biz (a distnace of nearly 5000km) for only 25k united points or 20k avianca points.
ANA is probably the best Amex partner and is better used for redemptions to Asia such as 100k from USA to SE asia roundtrip. Those flights are nearly $5-7,000 in cash. OK maybe you see a 2x3x2 outdated biz with a mainland chinese carrier and 3 layovers for $1.7k RT on a brief flash-sale, but thats not apples to apples. Also, thats to say nothing of first class redemptions that no normal person can afford, i've been able to take 25+ hour first class flights on Cathay and Korean Air can cost 5 figures in cash and those awards are still relatively plentiful. I think the game is changing but its certainly not dead.