Originally Posted by
DownUnderFlyer
This happens when you basically have a Frequent Shopping Program. The number of QF Points in the system are so high that you get inflation. That there is an increase to both the cash component as well as the points component is very disappointing.
Some of the Classic Reward redemption categories are going up by even more than 20% (just slightly), J SYD-SIN for example.
The saving grace is that you now have to pay more for seats you were never able to find in the first place. And that isn't changing.
Maybe you're right about "inflation". Maybe not. Points are not a cash currency and to treat them as such can be misdirecting.
Perhaps is just about the profit. And that ultimately depends upon the perceptions of QFF FF members.
QF FF sells points to partners. Partners allocate points to consumers to encourage business. The consumers need to perceive value in those points otherwise they won't be motivated to spend with program partners to earn the points. It's all in the perception of the consumer.
Most consumers never do the math, they're committing their spend for trivial (e.g. 1%) net return (e.g. low earn credit card / Everyday Rewards without bonus offers). On average a QFF FF member earns about 12000 points per year (QF Financial Report) - they may scoop one $50 gift voucher or an economy (potentially 2 short distance domestic flights on JQ under the new scheme). Of course there is a vast spread in actual distribution of points earned - that's just a gross average.
(Meanwhile, travel blogs misdirect their readers by putting their focus mostly on just the redemption end
in absentia of the earn end. They can be purveyors of credit cards - reality check - ongoing earn rates on Aussie credit cards deliver meagre net returns. Even using the bogus point valuations of some blogs, you end up with a net return of about 2% before allowing for transaction fees and annual fees - not a great story).
A devaluation addresses the forward liability on the books set aside to offset the future cost of supplying a reward when points are redeemed. Bingo. Instant profit.
Meanwhile, more reward seats are being put into the mix anyway (additional airline) partners added.
Bottom line - QF FF will price their reward seats according to what the market will accept (noting it cannot undermine the value of the points its sold to partners in the
perception of the consumers). It's proven a higher price point is sustainable with the success of Reward Plus. Consumers are already accepting trivial net returns.
It's certainly not clear that a simple explanation of "inflation" captures the machinations of QF FF and how its economics actually works behind the scenes.