Are Loyalty Programs digging their own death ?
 

Greetings All,
I am certainly one who has taken much opportunity to earn many millions of miles and points in a large variety programs all over the world.
My true start and passion for travel and programs came as a result of reading Inside Flyer years ago and then moving into the Flyer Talk arena.
My thanks to all out there in this new year for your valuable contributions to this forum each and every day.
I owe a debt of gratitude to many out there.

Today I have to question much of the program strategies out there
As well as their substantial health & future Also to survive and fully prosper in the real long haul.
To continue to deliver great value perception and bring profits and market share to companies

The first shock wave was with Diners Club with the charging for the transfer of miles.
Then this new year with but certainly not limited to the Starwood and Hilton program changes.Not to mention airlines
Also the serious eroision of some of their valuable partnerships.
We have even seen some retract the very foolish terms and conditions they set out to enforce only to cower with the outpour of anger.A comedy show but not very funny.
That is not to say its all doom and gloom out there.

Maybe I am being over reactive but it will be interesting in time to see if people will accept these changes readily perhaps forget. And purchase as they have in the past & become or remain brand loyal.

It would seem to me like never before consumers will become more and more ready to forego a lot of these offers and continue to by price over brand loyalty.
Something these programs were designed to reverse in the first place.

Some of these major changes are in a way taking back a lot of what program members have earned and or got in bonuses for their loyalty in the first place.

Hyatt Gold Passport is starting to look like one of the the best out there.Especially with there unlimited free nights promo.
I believe it warrants a nomination or an award.
Perhaps they are over compensating to a degree for what is some of the deficient aspects of the program and properties at large

At Cornell University this summer in the PDP program it was the view point by one of the leading professors in marketing about the end of loyalty programs in time.
I debated this strongly in theory.
There now seems to be quite a bit of truth to his predictions and it is my belief the idustry is knee jerking in more then a few areas.
I welcome your feedback if any to my topic
Programs are becoming less important to me as there noose becomes tighter around their own necks
Happy New Year to all Happy Safe Travels
And Great Rewards????!!!!!

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AA & Starwood,Marriott Platinum
Hyatt, Hilton Diamond
Swissotel Club Gold
U/A 1k



[This message has been edited by 777 global mile hound (edited 01-10-2003).]

I'm unsure whether loyalty programs are ensuring their own demise, but I am certain that the recent dillution/reductions in program benefits is causing many FT to rethink the value of their participation.

Consider the HHonors program, many of my fellow road warriors and I used to drive a few additional miles to stay at a Hilton property to accrue extra points. With the 75%increase in HHonors points needed for a resort stay the additional effort to stay at an out-of-the-way Hilton isn't worth it. Instead, we're choosing to travel on a per diem basis, pocketing the difference between a Hilton stay and a lesser property. Before the changes we would have driven a little further, expensed the Hilton stay and pocketed the points.

Let's just say the Freddie Awards this year should be verrrrry interesting....

The funny thing is theres not much inspiration out there to vote for this year
Nobody really stands out.
Jet Blue perhaps And I don't fly them....
And they have a poorly conceived program.
The desperation lets pick somebody award goes to ??
Will the best airline program please stand up
Continental / Delta ? US AIR? United Rising?
American? SouthWest by default?
Because it hasn't gotten anyone as angry yet!
Thanks for the comments

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AA & Starwood,Marriott Platinum
Hyatt, Hilton Diamond
Swissotel Club Gold
U/A 1k

Eventually all Hotel programs points must go upward. 10 years ago it was easy to find a hotel under $100, now it seems 150-200 is a range for the good hotels. That is an increase in price of hotel rooms. To offset that, they Hotel Cos cannot afford to still give you the same redemption rate. A better way to factor prices rising is a breakdown of points to dollars. If the ratio is still favorable then there can be no complaint.

I am part of the migration away from loyalty programs. Two years ago I would have never considered priceline and in the past year I have had over a dozen priceline stays. I still want the nice hotel, but it gets old scrounging for points or miles at the low end with Holiday Inn Expresses, Hampton Inns and Fairfield Inns. I stayed in a Hyatt last night on priceline for a lot less than the Marriott-website booked Fairfield Inn cost me the night before. Unless there is some extra incentive, I'll forgo the loyalty program benes and just settle for any ole 3* or 4* hotel. Although all my hotel stays are expensed, it's just the right thing to do.

It's simple economics. Times are tough. Revenue is down. Uncontrollable costs (security, insurance, fuel) are up.

"Loyalty" programs (read: "marketing programs") are a controllable cost.

However you do the math, they need to help the bottom line. So they hike the fees and trim the benefits.

Remember, these programs are based on giving stuff away for free. Do you honestly expect that during a slump they will give away more free product?

The travel industry as a whole is facing a shakedown. Lots of business models will be changing, and that includes a re-evaluation of our beloved free lunch (read: "loyalty programs"). http://www.flyertalk.com/forum/smile.gif

[This message has been edited by Rut Dog (edited 01-11-2003).]

True, but I think the perspective you give is very short term. I don't think that Starwood and Hilton realize that once I go over to Princeline/Hotwire, I'm not coming back. Burn me once shame on you, burn me twice shame on me.

Airlines are going the same direction, I'm afraid. If American takes away the benefits that I value most (upgrading any fare and double mileage bonus) my loyalty will shift to the bottom line, even if it's a $5 difference.

NW Worldperks.

Still unlimited domestic elite upgrades.

Didn't follow on the charge for standbys.

Vote for them, even if you don't use them...it might send a message.

(Well, yeah, probably not.)

Until 3 years back, I was collecting miles/points on every known program. Then I sat down and decided on two. AA and HH.

For AA, I had to forego HK49 and wider aircrafts for only 500 mile upgs.(I have never been an EXP). In terms of HH, I had to forego the sheer quality of hotels. After crunching numbers, it was clear that HGVC's fixed costs would ensure that I pay today's dollar cost for a hotel room 7+ yrs in the future.

Looking back, I am glad that I made the right decision. If you are looking for a long term relationship, the bottomline of the company is as important as its loyalty program.

I don't know about other programs, but my favorite airline and hotel are not digging their own death. http://www.flyertalk.com/forum/smile.gif

[This message has been edited by Bourne (edited 01-11-2003).]

I don't know if I would go as far as saying they are giving stuff away for free, no matter how good the cost per mile to you, you provided revenue to the airline for a seat that could have likely gone unsold.

Loyalty programs, or more appropriately dubbed in England as "loyalty schemes", are the only thing the airlines have going for them now. As passengers we have put up with heightened security, more taxes, reduction in schedules, additional fees, more taxes again, etc. Without miles, the miles we already have invested plus our benefits would be worthless and everyone would be flying Southwest.

It is an unregulated lottery as we do not know the odds of winning, or if we could lose it all! Also hard to believe that Mileage Plus made money for United whereas selling tickets didn't. http://www.flyertalk.com/forum/eek.gif

All in all, I think the trend is to find one good program you like with an alliance or good partners and then have one back up airline you qualify on as Gold or Silver just in case. Should be a bumpy ride this year no matter what.



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"Fly me to the moon and let me earn alot of miles."

Loyalty programs DO NOT provide any current competitive advantage to airlines or hotels because they ALL have them. Not having a program would obviously place the airline/hotel at a competitive disadvantage, but since, everyone has a program, it all washes out.

I believe that FF programs actually cause a significant decrease in the efficiency of the airline industry. If I want to fly, for example, between BOS and SLC, the carrier that can get me there at the least cost to itself is Delta, with its nonstop flights. But if I were a UA FF, I would fly to ORD or DEN and connect. I would have to be handled twice and far more fuel and other resources would be needed to move my same butt from BOS to SLC on UA than on DL. The converse is true if I were flying from BOS to SFO... UA could get me there more efficiently than DL with an inherent connection.

What would happen if everyone took the flights that were the most efficient? How much money could be saved by the industry, the passengers (extra time, misconnects)and the government (less ATC resources would be needed!)?

I haven't been driven away from earning points and miles, but I think the big lesson learned from last year was to spend your points and miles soon after you earn them.

Since the value of points and miles can be changed at any time with or without notice, it really exposes people who have large balances. Seeing companies behave the way Starwood does and retroactively announce program changes and qualification requirements (read the Starwood board, they're still not done announcing 2003 changes yet) should be a wake-up call that these things can be instantly devalued overnight.

I used to bank my miles. I used to say to myself, "Why should I spend 50,000 miles to go to Europe when I can just buy the SFO-CDG ticket on a $400 promo fare?" With continued program changes and carriers in questionable financial health (I had most of my miles in UA until a few months ago), I will continue to earn points and miles, but I'm going to make more of an effort to use them quickly before they're worth less than I hoped or perhaps nothing at all.

I also echo people's comments about Priceline. I try to use them whenever possible. I stayed in my share of $27 Hyatts and $40 Hiltons last year. The price difference is so huge, I can't imagine paying 4-5 times that for the same hotel.

Very interesting comments.
I was thinking along the same lines in many cases.Thank you for helping me reinforce what I was already thinking

Out of Town states " I am part of the migration away from loyalty programs
2 years ago I would have never considered priceline Now I have over 2 dozen stays"

Ken in Phx states " the average hotel is inching up to 150 -200 per night........
Hotel companies can not afford to still give you the same redemption rate.

ender83 states "I don't think that Starwood and Hilton realize that once I go over to price line and hotwire, I'm not coming back.
Airlines are going in the same direction"

Anyone else out there seeing the bigger picture here??
I believe I have been seeing/ feeling this somewhat before & prior to 9-11

It is my belief that the program reward redemption increases (not limited to by any means to the hospitality business) are contributing to part of the run away inflation problem and higher ADR in the first place.
Companies are faced with having to make it back each and every booking with what they poorly communicate to their customers in the first place

Most consumers I speak with tell me they feel they are being asked over the market prices for hotel rooms.
When taking in brand quality and adr into consideration.

The ability to find fair rates even for brand loyalists becomes more and more difficult for the business or leisure traveler especially in these difficult times

Jumping through hoops and smoke screens on over designed,cluttered & poorly functioning websites that deliver anything but a strong profitable bottom line or a complete list of ALL available rates.
Its situations like this that are causing a part of the mass exodus to other third party sites as well
Or other avenues and means to secure a better perceived value.

Bravo Jet Blue for the most clear and logical site .
Now if you would build a equally great world class program you might have something

The airlines, car rental companies and hotel groups have pulled back from each other driven by declining revenues.
Even having the gall in some cases to charge for the earning of miles.......
Hello Hertz.

The highly popular award winning Mileage Plus and American Advantage reward discount program for hotels and rental cars ended a world class open door to each others partners and a great opportunity

What an opportunity they both enjoyed to drive consumers purchase behavior into their brands for a brand experience that was easily repeated over and over again.
They no longer have this effective and easy opportunity to aquire new clients and retain pre existing ones.

They failed to understand the power of these opportunities they all took for granted after time
It was a magnet that drove consumers often to buy their brand and remain loyal to the programs in satisfaction and gratitude
This poster included

Who would believe 1 year ago a coach ticket would now take 40,000 miles or in reality 50,000 to redeem for a free economy ticket within the Domestic US.
On the lowest saver award .
Or 80,000- 100,000 anytime award for a domestic US ticket.
Thanks to the Starwood and United Mileage Plus marketing agreement
effective 1-1-03 its a reality today.
Any woders consumers are looking elsewhere??

It certainly isn't going to help either program attract or retain customers easily
One would have to be a die hard loyalist to put up with some of those changes
Ok I have said enough your turn...............
Any good marketer today knows what the cost of bringing in one new client is
Let alone just the cost of one new call to their centers for an inquiry.
With that information at hand it should be obvious the value of these former pre existing partnerships.

Here we live in an incredible time with the power and far reaching effect of the
internet.
Many of these companies are worse off after their huge investments communicating their brands and rates then they were a decade ago.
More exactly customers will choose price over brand as a result

This again is exactly what my proffessor was
going for in his delivery or predictions.

I will be attending in Europe next month a conference with many of the hotel companies and airlines marketing people.
I plan to bring up many of these issues if time permits.
There focus is on Retention,Acquisition,ROI,Funding and so on
If any of you have more to add that you would like me to bring up to these folks please feel free to share your observations and concerns.
I plan to increase our communication on these issues if that it is all possible.
And perhaps there are some solutions out there.
Besides driving clients away in some cases
Thanks again for all the valuable input
Cheers

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AA & Starwood,Marriott Platinum
Hyatt, Hilton Diamond
Swissotel Club Gold
U/A 1k


[This message has been edited by 777 global mile hound (edited 01-11-2003).]

With Southwest, you get both. WN will win the Freddies this year. And not by default: they won last year even before the latest take-backs. The Southwest board is the only one not saturated with gripes about changes.

Southwest's biggest take-back of 2002 was deletion of Diet Dr. Pepper from the beverage carts in November. A cruel blow, that. But you still get double credit for on-line bookings, and you still earn a free, unrestricted round trip for 16 credits. You can't beat that.

Northwest will come in second, because their program was strong before and their changes were less than the others'.

I'm sure that the airline executives don't give a rat's about winning the Freddies; they want to know how the program is affecting their bottom line. Otherwise Freddie winners wouldn't eliminate awards and devalue their programs 2 months after winning, something that has happened with depressing regularity. Southwest has so far proved that it is different in this respect. More power to them.

Changes in the programs, changes in airline level of service, and changes in airline financial conditions have all contributed to me dramatically changing my outlook on loyalty programs. Since much of my travel is personal, I decided shortly after 9/11 that I was better off travelling less frequently and trying to get more from each trip. At that time is was mostly because of concern about that hassle factor at the airport. I think that has mostly been resolved but I am still taking the same approach because the cutbacks in service have made getting somewhere far less enjoyable. When I did the math for my situation I decided that I was better off buying fewer tickets, sometimes discounted business class, flying where I want, when I want and ignoring the loyalty programs to some extent. The programs are still a factor but I am not trying to get status, they are more of a tiebreaker in my decision. I get most of the benefits of status by buying business class anyway. The airlines may look at this and say that I am sometimes paying more for each ticket which is clearly want they want people to do but I am also buying fewer tickets and spreading the purchases over many more airlines. I don't know whether this is good for them or not and I really don't care. The bottom line for me seems to be that the erosion of benefits and just am importantly the erosion of services on airlines has made me unwilling to tie my future travel plans to any airline, I want those choices to remain in my hands as long as possible because there is simply no way to know what the airline will be offering as a travel experience and at what price 6 months from now.

Northwest has much going for it in their marketing relationships.
Also great promotions that American And United used to be more active in.
More important they appear to be less targeted and more for all to participate in.
My only concern with the program is complaints I have heard with regard to reward availability
Something that surely helped cook Continentals goose at last years Freddies.
Besides the much disliked changes to the program.
According to their big chief
That wasn't going to change http://www.flyertalk.com/forum/smile.gif
It took many years for a lot of Continentals customers to catch on because they were banking large amounts of miles in a program they couldn't redeem on or really hadn't tried to in some cases.
Southwest seems to be a big favorite out there.
Thanx!


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AA & Starwood,Marriott Platinum
Hyatt, Hilton Diamond
Swissotel Club Gold
U/A 1k

[This message has been edited by 777 global mile hound (edited 01-11-2003).]

The only disadvantage is pricing, not operations. FF programs reduce competition on price and scheduling.

It does not require far more fuel to fly you BOS-ORD-SLC than BOS-SLC. I don't have exact numbers in front of me, but I wouldn't be surprised if it's actually less fuel. The reason is that the longer the flight, the higher the average load of fuel on that flight. Carrying around more fuel increases weight and thus fuel burn. In other words, after a certain point, flying longer burns more fuel, not less.

Also, for an airline that is not very small, hub-and-spoke is a much more efficient system than all non-stops. Southwest's route system is efficient for operations, but it usually requires a stop if you're not going a long distance.

For the big airlines, the choice is whether to have a few large hubs (UA ORD and DEN) or many small hubs (WN HOU, PHX, LAS, MDW, MCI, ...)


Besides, Delta doesn't fly BOS to SLC just to fly you to visit Salt Lake City. SLC is a Delta hub, meaning other people are changing planes while you leave the airport.

Other than it effect on price competition, I don't think FF programs inject inefficiency. After all, most people (sane people, that is) will choose an airline that is not their preferred carrier when the price is right.

.
Loyalty is out the door for me. My loyalty has been rewarded with the prospect of more trips in the back of the bus and a derelict SkyMiles program.

I have been flying Delta for over 20 years but it did not take me long to book my first flight on United for my first trip in '03. United seems happy to have me and Delta does not care.
.

The only way for all of the airlines to do away with their programs would be through illegal collusion.

There would just be too much incentive--either from the perspective of "soft" business calculations or more quantitative economic game theory considerations--for an airline to be the only one with a program.

That being said, I do believe that there is a real danger of the various programs beginning to administer spiraling rounds of benefit dilutions to see how much they can get away with--up to the point where their customers make it very clear to them that these actions have become counterproductive. This is why Delta elites must make clear to Delta management the negative consequences to them of the recent changes in your program--and nip this nonsense in the bud!

Watchful, I was thinking the same thing; I think I will give NW my best ratings in the Freddies for airline programs.

Hotels; I'm still deciding; Right now Marriott but its not written in stone yet.

Trojanhorse
A little off my original topic
Have many friends that stay Marriott and I do too.
Compared to the other programs I participate in I would say its my least favorite program.
And not all that rewarding.
Would be interested in hearing why you might consider voting for it as a contender for this years Freddies
I do Like the fact that they have added the welcome ammenity for Platinums to include 500 points or other choices.Long Overdue....

Clearly prefer Hyatt, Hilton and Starwood at the top levels over Marriott.
Hyatt for its free nights with the number 1 promotion of the year(and no category restriction on level of property) and free breakfast
Hilton because of Diamond award availability with no additional ovr charge on points, breakfast, superior pricing over Marriott and Starwood
Also the Hilton Garden Inns that I prefer to Courtyards when I stay on a budget.

Marriott has also insisted on paper certifactes to redeem making it difficult ,complicated and a waste of their companies money and our time and patience.
Their 2 free nights promo had a worse time window to earn and a low restricted hotel category redemption as well.
What value to you put on their program and benefits.
It would be very helpful to me to see the
positive aspects of this program that I might be missing that others seem to value more then I do.Thanks for your thoughts posted or by email

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AA & Starwood,Marriott Platinum
Hyatt, Hilton Diamond
Swissotel Club Gold
U/A 1k

Keep in mind that Southwest is a very different beast from any other major FF program. Much better in many ways, but impossible to compare to AAdvantage or Mileage Plus.

Southwest's program is based on free tickets between two cities served by Southwest (all in the continental United States) and nothing else. It does this award very well, giving it at reasonable cost with no lack-of-availability BS.

AAdvantage provides hundreds of categories of awards on many airlines worldwide. It doesn't do the domestic R/T ticket award nearly as good as Southwest (although it does serve many more cities), but some people accept that because they are after first-class seats to Australia, Europe, etc.

In a way, I almost think Southwest deserves a different category at the Freddies. Perhaps LUV, JBLU, and a couple of others belong in a "US domestic-only" service category. Not a knock on these airlines, just a recognition that they serve a totally different market than the global airlines.

I am one of those who have increasingly chosen the Priceline deals over the miles: I prefer the hard cash I save now over the miles. The changes being made to several loyalty programs only have reinforced this feeling.

Recent example: last week I booked a long weekend holiday on Priceline from Valentines day till Presidents day. Two economy tickets plus 3 nights in a category 4 2Tree hotel.
Total price (air for two + hotel) was less than what the hotel alone would have cost me if I had booked that through the Hilton website. Total savings at least 500USD: that's a no brainer to me, who cares about miles and points if you can save that kind of money.

Note: when bidding for vacations on Priceline you can actually choose the hotel you want to stay in. IMHO a major advantage over regular hotel bidding on PL.

I couldn't agree more with the theme of this thread.

Most of the bad taste expressed here is for changed award levels. I share that, but also I am upset about the unavailability of awards too.

Does anyone know of a website or publication that's providing info on award availability? It's tough to try to quantify but someone is going to do it.

Mountain Trader:

Some airlines websites (i.e Continental and American) tell you which routes are more likely to be able to upgrade in the upcoming month.

I agree with you, I stopped flying Continental from the UK to the US and Latin America last year, because of the difficulties I had trying to use my miles (over 100,000) for rewards. I have been Silver Elite 4 years in a row. Finally cashed them all in and gave my mother and cousin upgrades on a visit from Latin America to the UK, and said good ridance to Continental. I have switched to American Airlines.

My suggestion to anyone is to just keep one airline to accumulate miles. Keeping miles in more than one program today is not worth it. Find which are their partners and if you fly them bank the miles with your one airline of preference.

Mountain trader Thank you for your post
You brought up a great idea regarding current award availability information.Would be a great if there was one site that could be a source !!
Its a topic that should be discussed by the industry more.
However there may be a problem with sharing that information .
Some companies may have privacy issues releasing that info.
They may not want to let the public know the percentage of available inventory........
There should be a better way to communicate award availability to the member base.
Thanks for your post
You've given me some good input here
Your frustration is a place we have all been one time or another trying to redeem.


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AA & Starwood,Marriott Platinum
Hyatt, Hilton Diamond
Swissotel Club Gold
U/A 1k

[This message has been edited by 777 global mile hound (edited 01-13-2003).]

You've got to be kidding me. I haven't paid more than $65 a night with my own money in years by using Priceline. That includes Hyatts, Marriotts, Westins and Hiltons in downtown areas.

Who cares about hotel points when you are saving 70% off the price of the room?

No one has mentioned the huge benefit in the Southwest program that kicks in after earning/tranferring 100 flight credits: all of your awards are doubled in value with the Companion Pass.

That, along with the promo at Diners Club, would allow you to get a free, unrestricted round-trip ticket for every $6,000 you spend ($12,000 = 24,000 DC points = 1 RR ticket = 2 free tix with Comp Pass)

Some programs are getting better - you just have to know where to look.

$6000 for a ticket that would cost you no more than $600 on Southwest.

Of course, one needs to spend $120,000 for a First Class Saver ticket to Asia on UA (retail value, $12,000) so sauce for the goose and all that, I suppose.