The Points Guy believes that credit cards can transform lives, helping you leverage everyday spending for cash back or travel experiences that might otherwise be out of reach. That's why we publish a variety of editorial content and card comparisons: to help you find a great card to turn your goals into reality.
Our site may earn compensation when a customer clicks on a link, when an application is approved, or when an account is opened with our partners, and this may impact how or where these products appear. While we don't cover all available credit cards, our editorial team creates and maintains all of the analysis of these cards, and our content is not influenced nor subject to review by any credit card company, bank or partner prior to (or after) publication. Please view our advertising policy and product review methodology for more information.
Advertiser disclosure
The Points Guy believes that credit cards can transform lives, helping you leverage everyday spending for cash back or travel experiences that might otherwise be out of reach. That's why we publish a variety of editorial content and card comparisons: to help you find a great card to turn your goals into reality.
Our site may earn compensation when a customer clicks on a link, when an application is approved, or when an account is opened with our partners, and this may impact how or where these products appear. While we don't cover all available credit cards, our editorial team creates and maintains all of the analysis of these cards, and our content is not influenced nor subject to review by any credit card company, bank or partner prior to (or after) publication. Please view our advertising policy and product review methodology for more information.
News
How credit card companies are saving the travel industry during COVID-19
Chris was a reporter at The Points Guy, where he covered the intersection of credit card rewards and travel. At TPG, he wrote a broad array of stories ranging from in-depth features and reports to trending travel news as it related to loyalty, card benefits and consumer behavior.
August 4, 2020 • 7 min read
The cards we feature here are from partners who compensate us when you are approved through our site, and this may impact how or where these products appear. We don't cover all available credit cards, but our analysis, reviews, and opinions are entirely from our editorial team. Terms apply to the offers listed on this page. Please view our advertising policy and product review methodology for more information.Editorial disclaimer: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.
Comments
By commenting, you agree to our Community Guidelines to help create a positive space for conversation. The responses below are not provided or commissioned by the bank advertiser, our partners, or The Points Guy (“TPG”). They have not been reviewed, approved, or otherwise endorsed by any of these parties. All responses are submitted by individual contributors, and neither the bank advertiser, our partners, nor TPG are responsible for ensuring that all posts and/or questions are answered.
Related stories
Quick summary
Airlines and hotels are facing severe financial challenges due to reduced travel demand, with government relief funds running low.
Travel companies are raising emergency funds by selling large quantities of loyalty points and miles to card issuers, providing a critical cash infusion.
These pre-purchased points help stabilize travel brands and may lead to more attractive card offers and bonuses for consumers.
However, there is a risk that an oversupply of points could eventually lead to loyalty program devaluations.
What to consider
Some offers mentioned in the article are no longer available.
While increased point sales can lead to better card offers, they may also heighten the risk of loyalty program devaluation if not managed carefully.
The strategy of pre-selling points is intended as a long-term solution for both travel companies and card issuers.
What you'll miss from the article
Detailed insights into how the sale of points and miles impacts both travel company finances and the value of loyalty programs for consumers.
Generated by AI with support from our editorial team.
Update: Some offers mentioned below are no longer available. View the current offers here.
It’s no secret that airlines and hotels are hurting. Almost daily, there are additional reports of schedule cutbacks, employee furloughs or organizations on the brink of bankruptcy.
Yet travel companies are persisting in this challenging environment. The injection of funding for the aviation industry from the U.S. government under the CARES Act has also kept employees on payroll and put a band-aid on significant losses.
Want more credit card news and industry intel straight to your inbox? Sign up for our daily newsletter.
(Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images)
However, the $50 billion in CARES Act funding for airlines, as well as the $350 billion set aside for small businesses and hospitality, is running dry. As Sara Nelson, president of the Association of Flight Attendants said in an interview with TPG, a second round of coronavirus relief is needed to save tens of thousands of jobs in the airline sector.
But it’s not just the government that is providing an immediate cash infusion. Some airlines and hotels are receiving funds another way, too -- from credit card issuers.
While it’s not a new concept, the sale of points and miles to card companies during this particular economic downturn is giving a significant boost to travel companies in urgent need of capital.
Cobranded credit cards rely on a relationship between an issuer (i.e. American Express) and a marketing partner (i.e. Delta). Consumers then sign up for a card if they have an affinity to a certain brand, loyalty to an airline or simply want to make use of the card’s perks and bonuses.
For issuers and the marketing company, it can also be a potentially lucrative relationship -- especially if the marketing company (i.e. Delta) already has a built-in audience. All in all, if things go right, it can be a win-win-win for consumers, travel companies and the issuing card company.
In 2018, cobranded credit cards generated $990 billion in purchase value. That’s up 7.9% from 2016.
How card issuers are helping travel companies now
In its earnings call last week, American Express announced its most recent travel currency purchase, the latest in a slew of sales in recent months. Amex renewed a multi-year agreement with British Airways and parent company International Airlines Group (IAG), in a deal it said was worth $955 million.
IAG, which also owns other European carriers like Iberia and Aer Lingus, is reportedly losing 200 million euros per week. Analysts speculate that IAG’s liquidity is down to four billion euros, from 10 billion at the end of April. A deal of this nature provides temporary relief for cash-strapped corporations.
(Photo by Fasttailwind/Shutterstock)
Like with most of these cobranded deals, Amex pre-purchased British Airways travel currency, Avios points. The up-front purchase of points are “a way for us to help out our partners but also to help out our shareholders as well,” said American Express Chairman and CEO Steve Squeri.
At a macro level, the International Air Transport Association (IATA) expects the global airline industry to lose $84.3 billion in 2020 alone. Hotels aren’t faring any better. Through the end of 2020, a report from U.S. Travel Association estimates $505 billion in losses for the domestic travel industry, including hospitality.
Additionally, Hilton’s sale of Honors points to Amex totaled $1 billion earlier this year. Amex is said to be using those points for future promotions, rewards and incentives.
In all of these instances, travel companies pre-sold points and miles to raise emergency funding.
Interestingly, consumers -- at least for American Express -- are actually spending more on cobranded cards compared to proprietary Amex cards, including The Platinum Card® from American Express, American Express® Gold Card or the Blue Cash Preferred® Card from American Express.
“When I look at the Delta [card] and when I look at the Hilton card, these are cards that were actually performing even better than some of our proprietary cards,” said Squeri.
(Photo by Eric Helgas/The Points Guy)
That means card issuers stand to gain from buying points from travel companies -- perhaps even in the shorter term -- if consumers continue to gravitate toward cobranded cards.
With that said, points and miles sales are considered a long-term strategy. “Over the life of these deals, these will be good things for our shareholders and good things for our customers,” Squeri added.
However, this also comes at the risk of devaluations as TPG’s Ethan Steinberg details. Instead of flooding the market with points, keeping them in reserves by the banks may drop the risk of a loyalty program devaluation.
Bottom line
With U.S. GDP down 9.5% in the second quarter of 2020, consumer confidence and spending won’t return in the immediate future as the pandemic lives on. However, card issuers are helping dig travel companies out of a deep hole by pre-purchasing points during a period of economic distress.
Moving forward, it wouldn’t be surprising to see other travel programs take a similar approach to receive a dose of emergency funding from card companies.
For the rest of us, we can only hope that means better card offers and bonuses without an impending devaluation in what our points are worth.
Comments
By commenting, you agree to our Community Guidelines to help create a positive space for conversation. The responses below are not provided or commissioned by the bank advertiser, our partners, or The Points Guy (“TPG”). They have not been reviewed, approved, or otherwise endorsed by any of these parties. All responses are submitted by individual contributors, and neither the bank advertiser, our partners, nor TPG are responsible for ensuring that all posts and/or questions are answered.
