How Does the Economy Affect the Value of Points and Miles?
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TPG reader Eric tweeted me to ask:
@thepointsguy- “With all the major devaluations recently, I was wondering if there are often positive valuation changes when the economy weakens?”
I’m generally a positive person, but I feel like lately I’ve been a Debbie Downer, writing constantly about devaluations, programs making negative changes to benefits, and becoming less lucrative in general. With devaluations, it takes more effort to earn points, and when you’re ready to redeem them, you get less value in return.
So if the economy takes a turn for the worse, does that create better or more points opportunities for consumers? When the economy weakened a few years ago, I did see some great promotions, like several from hotel companies hoping to fill rooms. Recently, earning points has been much more difficult, promotions have been weaker, and more hotels have opted out of promotions. Even airlines used to offer a lot more double points and elite qualifying mile promotions that are no longer available.
Many hotels readjust their points categories to reflect the current value of rooms. When the economy was hit hard, we did see some point valuations going up, because it became less expensive to use points for certain rooms. However, this happens not just when the economy weakens. For example, points valuations increase when an airline joins an alliance, since those points are suddenly unlocked from a single carrier, giving the consumer more power.
I think one of the biggest upward movers this year has been the Citi ThankYou Rewards program, which added several new transfer partners. The economy isn’t going down, yet we’ve seen that currency become much more valuable. I have a feeling that they’ll be adding more transfer partners as well, and ThankYou points will continue to rise in value.
Despite the recent doom and gloom in the points and miles world, clearly the news isn’t always bad across the board, which underscores the need to diversify and reward programs that are providing more value instead of taking it away. When a program consistently devalues, and you don’t take away your business to penalize them, you’re implicitly telling them that the devaluations are okay with you. Loyalty should go both ways, so if your program of choice is going downhill, consider changing to another that you feel deserves your business. Hopefully that way we can fend off future devaluations and show companies that loyalty should be rewarded, not punished. Let’s hope for more positive, rather than negative changes!