I’m confident in the future of points and miles — here’s why you should be, too
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The coronavirus has basically halted all but essential air traffic. With stay-at-home orders and government travel restrictions, no one’s really traveling right now, which is terrible news if you’re in the airline or hotel industry. We’ve seen airlines scrap almost all their international flying and reduce domestic networks to skeleton operations.
As such, airlines are bleeding cash and hotels aren’t filling rooms (unless they’re hosting medical personnel). These unprecedented times are so bad for the travel industry that the airlines are getting a massive $50 billion bailout.
Now — and for the foreseeable future — airlines and hotels are going to need to convince travelers to get back on the road. One way they’ll likely go about that is by offering incredible sales, but another way to drum up demand is with their loyalty programs.
And that’s exactly why I’m so bullish on points and miles right now. Read on for more.
Increased award availability
I’ve been in the points and miles game for a really long time. Over the past few years, we’ve seen airlines move away from traditional award charts in favor of dynamic pricing models. In general, this has stripped much of the outsized value from many carrier’s loyalty programs. Though you can now redeem miles for just about any seat on the big 3 U.S. carriers, you’ve traditionally needed to pay a lot for that privilege — like over 400,000 SkyMiles for the one-way flight from Atlanta (ATL) to Johannesburg (JNB) in Delta One.
But now that demand’s near zero, airlines are looking for ways to fill their planes — and loyalty programs are a great way to do just that. In all my years, I’ve never seen so much saver award and upgrade space across all the major airlines. Personally, I just booked business-class awards on United’s nonstop from Newark (EWR) to Tel Aviv (TLV), which is never usually available. And I didn’t just see the two seats I booked. Rather, there were at least nine saver awards for many dates for the rest of 2020 into 2021.
But don’t just take my word for it. Our TPG Points Lab crunched the numbers early in the coronavirus outbreak and found that an average award search for a flight departing from or arriving into the U.S. is 64% more likely to be successful nowadays than it was the first week in January. And the team has since uncovered many other gluts of award inventory:
- Visit Europe’s Christmas markets with great business-class award space
- Spend New Year’s Eve in Dubai with Emirates availability for two
- Book American Airlines Flagship First Class to Japan for just 55,000 miles
- Spend Thanksgiving in Europe with wide-open American Airlines upgrade space
More earning opportunities
We’re about to see a slew of earning opportunities to go along with the dramatic increase in availability. Airlines and hotels are in a cash bind. With revenues drying up and refunds being issued (sometimes begrudgingly), these travel companies are looking to raise some money. Historically, one of the best ways of doing that is by selling massive amounts of points and miles to banks and credit card issuers at a significant discount.
And that’s exactly what’s happening. Delta and United have reportedly been in talks with Amex and Chase, respectively, to discuss the possibility of selling points. Hilton was able to raise a billion dollars by pre-selling Honors points to its cobrand card partner, Amex. Though this is a great way for banks to acquire points at a significant discount to their already discounted price, it’ll also be great for consumers invested in the points and mile game.
According to the SEC filing related to Hilton’s points sale, “American Express and their respective designees may use the points in connection with the Hilton Honors cobranded credit cards and for promotions, rewards and incentive programs or certain other activities as they may establish or engage in from time to time.” As such, it’s clear we’re going to see lots more earning opportunities than ever before. It may be starting with Hilton and Amex, but there’s certainly much more to come.
Increased flexibility to change or cancel your award booking
In an effort to encourage you to book future travel, airlines (and some hotels) are allowing you to change new nonrefundable bookings without charge. This move is something we’ve never seen before and underscores how uncertain people are in planning upcoming travel. For a while, these change fee waivers only applied to revenue or paid tickets. But now, we’ve seen all the major U.S. airlines extend that courtesy to award tickets.
This is great news for points and miles collectors. If you ultimately decide to cancel a paid ticket that you book today, don’t expect to get your money back — unless the airline cancels your flight. But, with these waivers, you can get your points back, even if you decide to cancel! Combined with the insane amounts of award availability, it may make much more sense to redeem points as opposed to paying cash for future travel.
But it’s not just these temporary waivers that increase the value of your points. In light of the coronavirus, American and United have reduced the fees to change and redeposit your awards across the board. American’s changes are a bit more nuanced than United’s, since AA awards previously had some built-in flexibility. Now, AA will let you change or cancel any award for free 60 or more days before departure, while UA will waive all redeposit fees for cancellations made more than 30 days before departure (for the rest of 2020).
Limited-time promotions and sign-up bonuses
As travel companies look to drum up business, expect to see lots more lucrative promotions than we’ve seen in the past few years. Instead of simply discounting airfare and hotel rates, we’re going to see more offers tied to points and miles and cobranded credit cards.
For example, American Airlines announced a potentially lucrative promotion earlier this week, allowing you to earn Million Miler miles from credit card spend. This hasn’t been possible since AA changed its program in 2011. United, on the other hand, is sweetening the deal for those looking to earn status through credit cards by allowing members to earn up to quadruple the Premier Qualifying Points (PQPs) than normal. Lastly, Hyatt’s out with a similar offer giving three (instead of two) elite-qualifying nights for every $5,000 of spend on the World of Hyatt Credit Card — plus additional elite-qualifying nights for new cardholders.
These three promotions are just the beginning. As economies restart, I’m sure we’ll see even more. I also wouldn’t be shocked to see increased credit card sign-up bonuses and targeted spend bonuses. Issuers are going to have a surplus of points to offload, and travel companies are going to need as much business as they can get.
Transferable points are insurance against airline bankruptcies
Ever since I’ve taken on the change/cancellation beat here at TPG, I’ve gotten tons of emails and Instagram messages with individual questions (I encourage you to do the same). Perhaps the inquiry I get most often, though, is whether I’d be nervous to accept an airline voucher because there’s a chance they go bankrupt.
In general, the major U.S. airlines don’t have much to worry about, since they’re receiving federal financial support. However, bankruptcy is definitely a possibility for some of the smaller international carriers. While I personally have no concerns about my mileage balances with American, Delta and United, I can understand someone’s hesitation about collecting miles or buying points with some of the smaller airlines.
And that’s exactly why transferable points currencies are more valuable than the average of their individual transfer partners. Hypothetically, if Virgin Atlantic went bust and immediately suspended operations, Flying Club miles could become worthless. However, Chase Ultimate Rewards would still have nine other airline transfer partners.
That’s why now’s a great time to ensure you’re collecting points in the right programs, starting with those that can be transferred to many different partners.
We’re living in unprecedented times. Some international borders are closed, and demand for travel has essentially hit rock bottom. As we slowly begin recovering, one of the best — and most effective — strategies to getting people back on the road is through airline and hotel loyalty programs.
We’ve already seen tons of award availability and flexible change and cancellation waivers, but there’s almost certainly more to come. Furthermore, it’ll likely be much easier to earn points though limited-time promotions and sign-up bonuses. And to hedge against the risk of an airline going bankrupt, be sure you’re collecting transferable points.
And that’s why the future is so bright for points and miles.
All photos by the author.
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