[USA Today] Travel loyalty programs 'need to get better.'

iSeatz

Sep 2, 2022 8 minute read

This story was originally published by USA Today. Read on their site here.

What's the point of participating in a travel loyalty program anymore? Frequent travelers like Joel Smiler can't think of one.

"There is little to no value in status anymore," said Smiler, a retired veterinarian from Lakeville, Michigan. "There are few upgrades, no dedicated customer service lines that get you to a representative sooner, and no early boarding in some cases."

He says he's done being loyal and will no longer actively participate in any program.

There have always been travelers like Smiler who don't follow the herds of consumers collecting points and miles. But now there's evidence their ranks are growing. And that has people wondering if loyalty programs have a future after the pandemic.

"Travel loyalty programs are on the decline," said Humphrey Ho, managing director of Hylink Digital USA, a digital marketing agency. "Many programs are experiencing post-pandemic inflation, and there's been a decline in users."

A report by travel technology company Arrivia found that less than half of Americans think points are important to travel, and only 42% used their awards to lower the cost of a trip. Even executives agree that their loyalty programs are lacking, with nearly one-third admitting that they struggle to demonstrate the value of their rewards.

Most problematic: Younger travelers don't seem to be that loyal. Only 35% of Gen Z travelers participate in a travel loyalty program, according to research by Morning Consult. The industry average is 43%. "Their awareness of loyalty programs is low," said travel analyst Lindsey Roeschke.

This travel trend is a long time coming. The pandemic made many travelers take a hard look at their loyalties. What they often found were programs that weren't that loyal to them. And although there are notable exceptions, it seems we are headed to a reckoning of sorts when it comes to loyalty programs.

Travelers started questioning their loyalties during the pandemic

Travel loyalty programs are at the center of America's travel industry. Millions of people slavishly collect points so they can later reap the rewards of "free" travel. They often do so without asking basic questions like, Who's paying for this? And who is the real beneficiary?

The economics behind the system are troubling. Customers pay for these "free" perks with fees and inflated travel prices. Airlines earn billions of dollars a year from selling miles to credit card companies, which pass them along to their customers for "free." Airline loyalty programs are routinely valued at more than the airlines themselves. Unsurprisingly, the biggest beneficiaries are airlines and hotels, and the credit card companies that buy their points.

But now, cracks are starting to form in the wildly profitable loyalty scheme. Early in the pandemic, frequent travelers began to ask questions the travel industry didn't want them to ask. Some concluded that loyalty programs just weren't worth it.

Tim Pylant, a tech industry manager from Austin, Texas, is among them.

"It is difficult being tied to a particular airline because of the restricted schedules," he said. "And with less business travel and credit cards that let you use your points on any airline, you don't have to."

Pylant had hoped airlines would seize the moment during the pandemic to make themselves more relevant and valuable to their top customers. But instead, they fumbled by delaying and canceling flights and too often not even trying to make it up to their customers.

Passengers like Plyant don't even care about the dubious economics of loyalty programs. They just want the travel companies to take care of them as they promised. But they didn't. And that is why some frequent travelers believe loyalty is dead.

How much are your points worth?

Another reason travelers are losing interest in loyalty programs is that they have realized that their points are worth less. Travel companies removed many perks during the pandemic or made it more difficult to redeem their miles for "free" tickets. That led to point inflation, which means it sometimes takes more points to get the same award ticket or room.

Scott McMurren, an Alaska Airlines frequent flier, was stunned when he read about his airline giving 90,000 miles to each employee.

"I've got a sinking feeling," says McMurren, who publishes TourSaver.com, a coupon book for visitors to Alaska. "It appears the airline is self-fueling inflation for its travelers – including me – who use miles to get tickets. In my mind, the airline is simply harvesting the substantial equity it's built up with the program."

Alaska Airlines said the mileage awards to its employees were a "one-time" gift in celebration of the airline's 90th anniversary. A representative said it plans no award pricing changes related to it.

But McMurren's complaint raises a bigger question about the value of these programs. When an airline can do whatever it wants – raise redemption levels, change the rules, even confiscate all the miles – then what's the true value of the program? How much are your points even worth?

Some are doubling down on programs

Not everyone is a skeptic. Heather Prestanski, who owns an interior design firm that specializes in historic renovation projects, said she's all in on her travel loyalty programs.

"I've doubled down on our travel loyalty programs," she said. "I've shifted from only using my credit card rewards program to becoming more loyal to specific hotel brands, car rental brands, and flight carriers to collect more points, enjoy faster check-ins and receive a higher level of service while traveling."

Prestanski said her loyalty has saved her time and money. For example, she found a discounted block of rooms in Las Vegas for a recent company meeting, thanks to her status. Prestanski even scored "free" airline tickets. "And we extended our stay for a personal vacation," she added.

Companies are investing in their loyalty programs, too. Expedia Brands, which currently has 154 million loyalty members, reportedly adds several million new members each month. Next year, Expedia is rolling out its One Key platform, which will allow frequent travelers to redeem their rewards across flights, hotels, vacation rentals, car rentals, cruises and activities.

"Loyalty programs aren’t dying," said Jon Gieselman, president of Expedia Brands. "They just need to get better."

But even mileage skeptics would point out that loyalty programs are created for frequent business travelers like Prestanski. And for them, loyalty programs do have a future – and rightfully so.

The end is not near until this happens

The rest of us would be forgiven for any acts of disloyalty. After this summer's airline service failures and the substandard service many hotels and car rental companies gave their customers, is it even appropriate to show a travel company any kind of loyalty?

So when will the end come for travel loyalty programs? I asked Hal Brierley, a loyalty program consultant who helped create American Airlines' AAdvantage program. He said it would take a dramatic shift in consumer behavior – either a bank that offers a rewards-less credit card or a significant number of consumers who say they no longer want points or miles.

"If these programs are at risk, the first sign will be a drop in the number of consumers paying significant annual fees to earn their miles and points," Brierley said.

Sharon Anne Kean, head of global expansion at the financial services company Wise, said it's an idea they're considering. A card that made all fees transparent, showing how much you pay for services like currency conversions and transactions, might appeal to some minimalists who want to save money.

"We want to help customers see how they're being ripped off by the banks," she added. "That would be cool."

What about that generation gap? Brierley said he's heard the same argument about the younger generation rejecting loyalty programs for years. But he's not worried.

"As they get older and start traveling," Brierley added, "the kids will want their points and free tickets. I'm sure of it."

How to choose a loyalty program that won't lose value

Conduct a loyalty program audit: That's the advice of frequent traveler Brad Chase. He checked his loyalty portfolio recently and concluded that some of the hotels he'd worked with were not reciprocating the loyalty he showed them. One hotel chain in particular "nickel-and-dimed" him despite his elite status. "Hilton takes excellent care of me, particularly at the Waldorf properties, so I'll keep that one and enjoy it," said Chase, who runs a communications firm in Seattle.
Focus on a flexible program: Pick programs where points don't expire, said Tim Hentschel, CEO of HotelPlanner.com. "That way, you never feel pressure to travel because of a 'use it or lose it' deadline," he said. "If your customer loyalty is meant to last forever, your points should too." Hentschel also advises you to choose a program that allows you to use partial points for added flexibility and accessibility. For example, Hilton Honors allows travelers to pay for hotel stays with a combination of points and dollars.
Look beyond the points: Ultimately, you have to ask: What's in it for you? "For vacationers, the quality of their experience is the bottom line," said Kenneth Purcell, CEO of iSeatz, a loyalty technology company. "Not the return they get on their status. Purcell says the most valuable loyalty programs meet this demand with personalized options. These include supplementary rewards and products, such as tours and activities, car rentals and food delivery."

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