Not sure where to post this, but...

Would it be fair to say that status programs are really equivalent, economically, legally, to bulk discount offerings?

Like, if you buy 50 flights, get one free.

Or if you buy 50 flights, get a few cheap J/F seats.

etc..

I realize various programs have differences, however, it appears there is one commonality: Buy more, get more stuff/discounts.

If there's an existing post/thread on this, I apologize in advance for any proliferation that I'm causing... feel free to merge, rescind, delete, etc...

Legally? No, not even close.

No, you're missing two big points:

1. Not all status are tied to buying more. For example, you can get Hilton Gold status with fewer one-night stays than nights on multi-nights stays, and it doesn't matter whether it's at a cheap hotel or an expensive hotel, and you can also get it by having the right credit card (yes, with an annual fee, but a set price for that annual fee, starting at $75 a year). In fact, most hotel programs award status for the number of nights and/or number of stays, with no consideration to rate paid. Some hotel programs have another option of status gained by base points, which is more likely to be proportional to paid rates, but that's not that common.

And lifetime status at airlines is still based on paid miles flown, regardless of whether you pay high or low fares.

And at many airlines, even annual status is still based largely (sometimes even solely) on miles flown, regardless of whether you pay high or low fares, even if redeemable miles are tied to purchase cost. Minimum purchase requirements for status is not the same thing at all as status being proportional to price paid.

2. Get more is also not very accurate IMHO. It's often more like "have a chance at getting more". Access to preferred seating is no good if the preferred seats are all taken by the time you buy your expensive last-minute flight. Upgrades to the front cabin are no good if the front cabin is sold out with paying customers, and/or if you weren't "first enough" in line to get the few remaining upgrades. System wide upgrades are no good if they're capacity controlled and time-limited, and in the time allotted none of the flights you take have upgrade availability. And so on.

And so since what you get for status is extermely variable and impossible to quantify, how is it like a bulk discount? And since status is not generally related to price paid, how is it like a bulk discount?

People don't always like to talk about this, but conceptually the programs were designed to provide a legal form of kickback to business travelers. That's at least part of the original reason that miles are not an asset, property, currency, tradable commodity, or a binding contract to the traveler. (There are other good reasons as well.) The liquid value of all of your miles and points is $0 - and that's by design. They're bits and bytes in an airline computer - nothing more.

So no, legally they are not a discount program or anything else implying a promise of future travel.

100% correct <<People don't always like to talk about this, but conceptually the programs were designed to provide a legal form of kickback to business travelers. >>

Points are discounts/rebates. Status typically is not.

Yes, they are legally rebates on purchases. That's why they are not taxed by the IRS. I would say this even applies to granted status as this is not taxed as a benefit the way life insurance over $50,000 given by a company is taxed.

Airlines would probably argue that they *aren't* rebates on purchases (or a promise of a future rebate). That implies that the miles have value, which they do not.

Miles are vapor. Which, while it has drawbacks like not being able to freely trade them on an independent exchange, is probably the best situation for fliers. Too many unintended tax/accounting/regulatory/infosec/etc. issues if it were any other way. Not to mention the fact that programs would quickly have to simplify down to a not-very-rewarding rebate scheme. Long-haul F awards at a reasonable mileage level would be a thing of the past.

Meh - in all my years as an auditor I never heard of managers and executives getting involved in kickback schemes. Not even the ones who forced staff to use sole source travel agencies when they could get better fare booking online.

And don't even get me started on "the liquid value" of those airline and hotel status programs. They keep management honest by not being forced to sneak their booze on the company expense report.

I also recently made a thread about how these aren't loyalty programs any more, rather they are merely an after the fact rebate for artificially high prices.

Miles are simply not bulk discounts (which I also thought as a potential comparison) because like rewards cards, if you buy 1 or 100 flights, you'll roughly get 1-2% back in the form of awards. So essentially it's just a way of disguising the "true" slightly cheaper price with a bunch of steps in between, and hoping a lot of people wont bother with the rebate. Status on the other hand could be in a sense, but at the same time unless you jump levels, the value you get is worse the more you fly. ie someone flying 100k gets twice as good a % discount per mile flown, than someone flying 200k.

Now where problems arise is clever people at FT and other places realize the arbitrage that can tke place, by getting 160k miles with $3000 worth of flights at 2 cpm, then redeeming for a mRTW in J valued at $20k.

I bet that sole source travel agency has some status comps to hand out. @:-)

And that's kind of my point: you can participate in mileage programs, receive status comps from travel agencies, and receive all sorts of bonuses and preferential treatment from hotels for booking meetings, and *not* be considered to be involved in an illegal kickback scheme.

But when these programs were conceived, effectively provided a legal way to provide this function. It really felt like you were getting "free" flights for yourself in exchange for funneling travel to one provider. This was also an era where the programs were *very* rewarding...you piled up free flights much more quickly than today, often thanks to bonuses-upon-bonuses and generally lower mileage requirements for long-haul J/F.

Now they're so ubiquitous that everybody accepts the programs as part of normal business. Large companies accept that all of their employees will participate. Everybody is generally aware that we're effectively paying for the programs in one way or another. And since everybody participates, the opportunity for huge rewards flowing to a small percentage of informed travelers is mostly over.

And airlines would argue a lot of other things that aren't really true.

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