Casualty of 2020: These loyalty programs likely face major devaluations
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The coronavirus pandemic hasn’t stopped airlines and hotels from making adjustments to their loyalty programs. Though elite members should rest assured that their status is being extended across the board, it’s a different narrative for those looking to earn or redeem their points and miles.
That’s because some programs have used the downtime to implement stealth devaluations by removing award charts or adding new fees for booking award travel. Other programs haven’t made any customer-unfriendly changes during this period. Instead, they’ve sold points at the lowest rates ever and made it possible to earn miles while sitting on your couch.
As such, this begs the question: should we be expecting major devaluations soon?
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The supply of points has sharply increased
With travelers stuck at home and revenue drying up, loyalty programs have launched incredible — and worthwhile — sales on points. These promotions have been well-received, especially Air Canada’s first-ever sale. With miles sold at just 1 cent each (well below the TPG valuation), it’s no wonder that the Montreal-based airline sold out in seconds.
In addition to sales on points, we’ve seen travel providers get creative with their flexible booking policies. Among others, Air Canada, Qatar and Southwest now offer the ability to convert your ticket value into points. These conversions are being processed at lucrative rates, making it worthwhile for some to get their vouchers converted into points.
It’s not just customers who have more points to burn. Credit cards issuers do too. Major hotel programs have pre-sold billions of dollars worth of points to issuers in an effort to raise cash. Though we haven’t yet seen any increased sign-up bonuses, they’re likely coming in the future along with transfer bonuses.
With a sharp increase in the supply of points, there needs to be a rebalancing in the loyalty market — and that will likely come in the form of devaluations.
Some devaluations have already been implemented
As I mentioned, some airlines and hotels have already implemented negative adjustments to their loyalty programs during the global health crisis. American raised award fees and removed the legacy search tool, as it likely gears up to remove its award charts. AA is putting the puzzle pieces together for a widespread devaluation.
United, on the other hand, has been the worst offender here. After making it harder to earn status through partner flights, it then proceeded to remove Star Alliance award charts and raise partner award rates by 10% across the board. These changes certainly strip value from the MileagePlus program.
Recently, IHG greatly expanded dynamic award pricing. Though it’s good news now when room rates are low, the narrative is going to be a lot different once the industry recovers from the pandemic and room rates return to pre-COVID levels.
Others are likely waiting for demand to recover
Aside from the travel providers who’ve already made devaluations, it will likely — and hopefully — be a while before we see other major (negative) changes from loyalty programs. With travel demand is predicted to recover slowly, loyalty programs will be a big lever in differentiating between providers.
After all, loyalty programs were built as a way for companies to win business. If they’re going to devalue during a pandemic, what’s stopping you from choosing another airline or hotel once you’re ready to get back on the road again?
In the short term, airlines and hotels will need to incentivize business. While it might be easy for a program to “pull a fast one” by making points available at the lowest cost ever and then quickly devaluing them, it will almost certainly take some time for the market to rebalance.
Just because your points are likely safe for the next six to twelve months, that doesn’t mean things won’t change next year. When travel recovers (and the economy hopefully does too), we’ll likely return to a time when programs take away benefits and make it harder to use miles — just like we’ve seen in the period leading up the coronavirus pandemic.
Related: When will we start traveling again?
There’s one program that’s ripe for a devaluation
If there’s one program that’s most likely going to undergo a devaluation shortly, it’s Air Canada Aeroplan. In addition to offering deep discounts on purchased miles, the carrier has made it super easy to earn miles and status while grounded.
Though Aeroplan has been one of the best at engaging customers while at home, that doesn’t mean it’s immune to a devaluation. With the launch of an all-new loyalty program at some point this year, we’ll likely see some sweet spots eliminated, along with some other changes. Fortunately, the carrier has promised to maintain a partner award chart.
Nevertheless, with all the positive news coming from Air Canada, I’m more excited than ever about the new program — even if there will likely be some negative adjustments at the outset.
As the travel industry embarks on the road to recovery, loyalty programs are going to be more important than ever in charting short-term success. They’ve long been one of the most powerful marketing tools and it will be imperative to keep it that way.
Though we’ve already seen some devaluations from American, United and IHG, points and miles collectors are likely in the clear for the next year. What happens in 2021 will depend on the recovery of the travel industry and the broader economy. But in the meantime, I’ve got no hesitations about taking advantage of some of the best offers we’ve seen so far.
Featured photo by Zach Griff/The Points Guy
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