Are Loyalty Programs A Complete Sham? I Don’t Know Anymore

This post may contain affiliate links; please read our advertiser disclosure for more information.

Loyalty Programs A Complete Sham

Champagne and juice sent up by the manager.

Are Loyalty Programs A Complete Sham? I Don’t Know Anymore

We have been discussing loyalty programs a lot the last few weeks and I think that is normal at the end of the year.  People are trying to wrap up the last nights or miles needed to lock in their status for next year.  But the more I think about them the more I start wondering, are loyalty programs a complete sham? Is it like a Vegas casino where they make you think you are winning even when you are guaranteed to lose? Yeah I lost $500 but I got a comped room and a few beers so it wasn’t all that bad. How are hotel and airline loyalty programs any different?  Trust me, companies don’t do anything that loses them money for long.

Now before we get any further I should say if you get status off of your employers back you are doing it right. I am not talking about earning status when someone else is paying.  I am talking about us hobbyists that chase status with a fervor for our upcoming vacations. I think you could even throw in the people that get their status via credit card spend if your bandwidth is near limitless.

Ways That Loyalty Programs Are A Complete Sham

Before you write me off completely let me make my case.  The more I think about it the more I question our sanity. Let’s walk through this together and then share your thoughts in the comments section.

Do We Spend More To Stay With or Fly Them?

The first one is obvious to everyone. We will go out of our way to fly or stay with a particular brand.  They condition us to pay more for their goods.  Sure it is $25 or $50 more but I will get upgraded or it comes with free breakfast etc.  In a one off situation it doesn’t seem like a lot but when you add up those $20 bills over a year we start talking about Benjamins and not Jacksons pretty dang quickly.

This is the worst when you are in the earning phase because you have the blinders on until you reach your desired level. At least that is what happens to me and I am sure I am not alone there.

Loyalty Programs A Complete Sham

But I Use Points So It Doesn’t Cost Me Anything

The comeback to this is that I use points for my flights or stays so it doesn’t cost me anything. But let’s dig into that a little deeper.

Are you using transferable currencies like Chase Ultimate Rewards to book your flights through the portal?  Could those points have brought you more value than the 1.5 cents per point you get going that route?  That has cost associated with it we often overlook.  Or would it have cost you less miles to book an award flight but you skipped it because that would not have earned you MQMs or MQDs etc?

For hotels was there a comparable hotel with another brand that you could have booked for less points?  Was there a comparable non chain hotel you could have booked through a portal for less?

I have a feeling the answer to all of these questions is yes more often than we would like to admit.

Upgrades Outweigh My Cost

Here is the kicker argument, my upgrades definitely outweigh my cost.  This first class flight cost several hundred dollars more than what I paid for my coach ticket.  That may be true but would you have paid the difference if paying cash?  If not was it really worth that much? Or was it worth $50 more or whatever the number is that you would have paid for it?  The difference between those two numbers is probably quite wide for most of us.

For hotels would you have really booked that suite for just yourself?  Especially on those one night stays where you got in late and then have to get up early to catch a flight?  What is it worth if you didn’t really use it or need it? That brings me into my next point.

Loyalty Programs A Complete Sham
Andaz Mayakoba Beach Suite patio and plunge pool.

Could You Live Without It?

I usually get upgraded when I don’t really want or need it. The truth of the matter is I can live without the upgrade most of the time. When we are traveling as a family it is a life saver to have that separate room for sure.  But when I am traveling solo or with a buddy or my wife I don’t really need it.

For flying it makes life way more comfortable for sure but it isn’t a comfort I would pay for most of the time. International trips are better lying down, no doubt. Those are also the most difficult upgrades to come by. But for those domestic upgrades is it all that valuable on a two or three hour flight?

Flexibility Is Key

Another great perk of status is flexibility, especially with airline status.  Free standbys and award changes are key. But can’t we replicate this some with our knowledge?  I love that Delta allows top tier elites to cancel their award flights, it is a great perk. But what if you book that same flight with Virgin Atlantic miles you can cancel the ticket and only lose the taxes.  The same goes for American Airlines and British Airways Avios. So you have some options to replicate status here. Granted partnership programs don’t show as much availability as the main programs do but it can lessen the sting some.

Can You Replicate Status With Credit Cards, Money & Points?

The other thing I have been wondering about is can we essentially replicate status with credit card perks, money and points? If you want that upgrade use more points for it. You want that free checked bag then get a co-branded airlines credit card. Can you throw a little money on top of your points stay for an upgrade like I did in Orlando? It cost me $50 a night to move from a regular room to a suite. How about when Delta offers you a first class upgrade for $100 or $200 on an award booking when you go to select seats?

I know that we can replicate status with these things but the question would remain, can you do it for cheaper than you spend chasing status?  If you want an upgrade every trip then this won’t work. But if you look at your travels and say I really only need a bigger room 4 times a year.  Or I only really want status for those 2 trips overseas each year etc. Is chasing status really worth it for that limited of a scope?  Or could you replicate it for cheaper with miles, points, credit cards and a little bit of money and actually spend less than you are now?

Loyalty Programs A Complete Sham

Are You Just A Gambler Justifying Your Decision?

I have to say all of this brings me back to the gambler I spoke about earlier.  And I feel like loyalty programs had a little bit of their birth place in the casino.  If a casino saw you gambling big back in the day they would offer you a room, a show or dinner.  It didn’t matter if you were winning or losing just how much you were gambling because they knew the edge was in their favor and sooner or later it all ends up on their side. It was dependent on the pit boss back then and now they have of course moved to a completely automated system. But the idea remains the same…they want you to feel good about spending your money with them.

I enjoy gambling, as many of you know, and I see the parallels to current loyalty programs.  But what I really see is the gamblers itch.  The justification we make in the chase of status.  Gamblers do the same thing.  They talk about their big wins, their free dinners and all of the cache that comes with their “status”.  What they don’t normally talk about is how much they spent (lost) to get there.

I think we do a lot of the same things with hotel and airline status.  We take worse routes, spend more on our preferred brand versus alternatives and overvalue the perks we get.  The loyalty programs are the casino and they keep pumping us full of free drinks and are laughing all the way to the bank.

Final Thoughts

I am not here condemning status or people that value it.  What I am trying to do is implore all of us to take a good look in the mirror and look at the true value we are getting from these programs.  Not the face value but the true what would I pay for this, do I really need this value.  And then consider how much extra in cash, points, miles and time you spend chasing it. Do the numbers still come out on your side?

To be honest I don’t even know what the answer is for myself and I think many of us are scared to run the numbers. We tend to focus on the good and ignore the bad, it is in our nature.

I chase status less than most in this game.  But when I hear all of these end of the year status and mattress runs etc. I have always wondered, is it really worth it? Or are we just that person sitting at the slots justifying our continuous cold streak with free rooms, show tickets and dinner?

Are loyalty programs a complete sham? Share your take on it in the comments section.

Mark Ostermann
Mark Ostermann is a father, husband and miles/points fanatic. He left the corporate world after starting a family in order to be a stay at home dad. Mark is constantly looking at ways to save money and stay within budget while also taking awesome vacations with his family. When he isn't caring for his family or taking a weekend trip, Mark is working towards his goal of visiting every Major League Baseball ballpark.

More Like This

30 COMMENTS

Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

30 COMMENTS

  1. I have been doing the miles game and maintaining my website on same since before the word blog existed. I have over 3.3 million miles and lots of hotel points. (This means that I have not been traveling enough, even though I take 2-4 trips/year, usually in business class.) Yet I have no status with any airline or hotel chain. (Since I usually always fly business class, I really don’t see the use of status. I am always given entrances to airline lounges.) I rarely pay many actual dollars for flights or hotels. Miles and points have almost always come from various bonus offers, currently from credit cards. They have always been mega cost effective compared to a 2% cash back card. Such deals still abound today.

  2. I am a Business Consultant, a septuagenarian, AA Platinum Pro (600K miles), Bonvoy Lifetime Platinum Elite (1.5mm points) and a happy camper. I generally fly First or Business. I plan to semi-retire in 2020 and begin using these benefits (including 500 mile upgrades) to travel with my wife to a number of places we want to visit. In discussing our plans with both AA and Bonvoy, the flexibility of traveling at non-peak times allows us to take advantage of both flights and properties that would normally not be available with points / miles or require much larger quantities of each. We can also use these for long weekend trips to various locations. I also use the points to pay for the Airline Club. So it appears the Loyalty Programs will work for us. I’ll let you know how this works out.
    Like Bill, I generally stay at the same properties in my Clients’ locations (primarily Residence Inns) and have “Family Status” with each property. I am on the road 150+ nights per year.
    Any ideas how I might re-think the use of these benefits?

    • Congrats on the upcoming semi-retirement Ron and you have a nice nest-egg of points set up for it. Do you think you will do enough travel in semi retirement to continue to maintain AA status or are you thinking of maxing out the value over the next year before it goes away?

      I think focusing on non peak travel times is a great plan that will stretch out your AA and Bonvoy miles and points.

      • Hey Mark,
        Thanks for the rapid reply and Happy New Year!
        I will have enough to maintain AA Platinum Pro this year (2020). That, with planned travel, should take me through 2022. I’ll have to max out AA at that point. My Bonvoy will never disappear until I use them, however the plan seams to be volatile so I have to keep a sharp eye on that one.
        We have trips planned to Hawaii, Vegas, Seattle and Chicago with overseas trips to Amsterdam (start of Rhine River Cruise to Milan) and South Africa (start of 14 day Safari in three different countries during migration). Points will be used to keep us at least Business Class.
        I’ll keep a sharp eye on your blog for updates and expanded opportunities.
        Thank You! Ron

        • Happy New Year to you too Ron! Sounds like some amazing trips are upcoming. The Rhine River cruise and safari especially. Make sure to let us know what you think of those when you complete them.

  3. I think the gambling comparison is quite apt. There is still value here, but very few people are doing the “actual” math and prefer to trick themselves with value inflation in order to justify their decisions. The blogs of course encourage this with there XX cents per mile valuations and tales of luxury.

    It reminds me of a conversation from a couple years ago on a Vegas forum where someone was asking about the Total Rewards (now Caesars) credit card. There’s an argument to be made that this zero annual fee card is worth acquiring, but there is no justification for using it for daily spend. It was shocking to see the number of people jump to the card’s defense and how much “cheaper” it made their Vegas vacations. One person even admitted that while he understood it was a bad decision, it forced him to “save” for the trip. Many people in the miles and points community are using similar flawed logic and either don’t realize or don’t want to think too hard about it. XX cents per point, yes!!

    • I see that exact same sentiment with the Disney card and regular people. This helped me save for my Disney vacation. Me – you realize you would earn more with a normal 2% cashback card and you can use that money to pay for Disney. Them – I don’t care this works for Disney. It drives me crazy lol

  4. I find the real benefit is flying in first, or biz class, on overseas flights with points/miles. The fare difference is normally not something I would pay, but with points/miles it is a no-brainer.
    Hotels are another matter. It is easy enough to find a quality hotel without chasing a chain for points.

  5. Every devaluation makes me happier to be shifting most of my credit card spend to a 2% cash back card. I do like having a few 100k of various points lying around for emergency / opportunistic flights. But I’m no longer starry-eyed about big bonus new account cards.

    • I have been thinking about this more and more Robert. About still padding accounts with large welcome offers but shifting more to cashback. Something I plan to write about at some point in the future…maybe once I figure out my game plan.

  6. I wish the programs would just admit that they’re offering a rebate scheme….that’s pretty much how I view them after all of the devaluations. Loyalty is deader than fried chicken, and I exercise my choices on value and an optimized travel experience all the time now….and am SO much better off for it. I’ve got lifetime Platinum on AA and haven’t been on their metal in 5 years. My Marriott nights are down 75%, despite having over 2000 nights with them. These 2 brands (among others) have killed my loyalty, for sure. At the same time, I’m an informed traveller and now simply purchase 1st class on the best routing. I’m in the middle of a 2-week European vacation, booked via Chase for discounted biz airfare and staying in local hotels. Life has turned out pretty great not sole-sourcing marriott.com and aa.com. It’s been refreshing.

    • And those are the two biggest names in travel and have probably driven the most people away from their programs. I guess the larger they get the more out of touch they get.

      I think a lot of people find it freeing when they finally go with the best available option versus trying to stick with their favorite loyalty program all the time. Hope you have a great finish to your trip!

    • I agree – it depends on the program and how easily you are able to obtain it. But I do think sometimes we get caught up in the game and make decisions that aren’t the best in search of status.

  7. Depends on if were talking status vs. the actual redemption of miles/points. Status is very questionable, and worthless-ish. Everything obtained with status is not impossible to obtain, rather you can’t obtain it for free. These perks are increasingly useless, as they are handed out without status – or people just buy-in to status with things like high-annual fee credit cards.

    Where we most hope for these benefits to be given; they are not available. E.G. – Ritz Carlton club lounge access, or breakfast at resorts.

    In this regard; status is for mostly for suckers. The exceptions being vouchers like AA systemwide upgrades, or Hyatt suite nights. The reason for exception is the ability to lock-in and confirm your upgrade at the time of booking, and your ability to honestly say you scored a tangible benefit that cost XYZ. Everything else is mostly based on luck.

    Low cost airfare is a blessing, and also a curse. In that it demonstrates the dismal value our points/miles. The only way to reap the benefits of status/points are to redeem in low-demand/high-price (e.g. a caribbean island) destinations.

    The proliferation of cheap airfare has probably negatively impacted hotel redemptions – as the demand for desirable properties increases (beit cash-paying customer, or people staying on points). Airbnb might be a saving grace, as cash paying customers have the luxury of choosing…..Airbnb. Without Airbnb inventory, some locations would have less hotel inventory to work with – further frustrating points/award users.

    Plus the ‘Walmartization’ of big-box hotels combined with hotel developers trying to squeeze in a hotel in any patch of land they are offered; it should come as no surprise that some guests leave properties not all that impressed. Andaz hotels for instance – they have no brand standard per se, and this allows hotels to deviate in ways that can be positive; but basics like bed quality begin to vary from property to property.

    Ultimately, I don’t think the 3 big hotel chains can keep up with consumer trends. These big chains are left chasing real estate, and rushing to throw up hotels/establish themselves.

    The more you chase status, the quicker you realize that the ‘real status’ is not acquired through frequency of stays or spending amount with a particular brand. Real status is the wealth to make the choices that allow for the best vacations. These vacations require air carrier flexibility (e.g. return flights from a particular destination are best when flown on XYZ carrier, due to their connections/direct-flight/flight times, or staying at a hotel that has the best property for your needs). None of us are getting free breakfast and suite upgrades at the Aman, Belmond or Six Senses.

    And that is a closing thought; the Walmartization of 5 star hotel brands has created a “new category” of private brands. Ultra-luxury brands….that don’t want points. They want $1500-2k/nt. There isn’t a 6 star hotel category; but these brands live in it.

    • Great comments Ryan. I agree with almost everything you wrote, especially with “Real status is the wealth to make the choices that allow for the best vacations.”

      The only thing I disagree with is: “None of us are getting free breakfast and suite upgrades at the Aman”. I have received complimentary upgrades every time I have stayed at an Aman (From garden villa to ocean villa, etc).

  8. my wife and I started to travel with points and miles about 6 years ago. We belong to delta, american, and southwest – which we have had the companion pass for 6 years. we belong to radisson, marriott, and hyatt. The highest status we have with anyone is gold with marriott, because I have the Brilliant CC. We always fly in coach, and get what we get for rooms. We couldn’t be happier with our travel, except we wish my wife had more vacation days. We pretty much fly from Wisconsin to Aruba, mexico, hawaii, and florida every year with very little cost. We have stayed at many hotels that would cost $500-$900/night, something we would NEVER do without points. Normal people who know little about CC points would say I’m crazy to spend $1000 a year on CC fees, but when it returned me $18,000 + in free travel and hotel stays last year, they usually say NO WAY! To those who chase status, fine. Were happen with our coach seats, and our rooms have always met our expectations, and that occasional ocean front upgrade is only icing on the cake!

    • I think that Hilton and Caesar’s give away Diamond status for free (as long as I’m willing to prepay Hilton resort vacation expenses in the form of Amex Aspire annual fee(s)). And that’s a smart thing for them to do because it substantially increases the likelihood that I will stay at their properties and spend money in their restaurants, pool bars and casinos (not to earn/maintain status but just to enjoy the perks). Free breakfasts at Conrad Singapore; free valet, free shows and celebration dinner at Caesars properties in Las Vegas—that’s real value. The only silly thing would be try to earn Diamond the old fashioned way (unless employer paid).

      • Very true Gus – I wonder if anyone earns Hilton status via nights anymore outside of a road warrior I don’t know why you would. And I agree that it adds value to the program as a whole and it is a big part of why they are my second choice for hotel stays even with their dynamic pricing.

        • I earn my Diamond status with the card and actual stays using my own money. I have been staying at a particular HGI since the place opened 10 years ago when visiting my children who live in the area. I stay an average of 20 nights a year at this property. One of my children was married at this property, and the reception was held there. They treat my wife and I like family.
          In turn, I always receive an upgrade to a 2 room suite. Breakfast comes comped but they will also include my daughter and her husband who often join us for breakfast.
          I use one of my vendors rates and pay around $100.00 per night which is comparable to a Ramada and Super 8 in the same area. That rate stays constant even in the summer months when rates go up 2 1/2 times the winter rates. The points I earn go towards other, more expensive properties using points or points and cash when on vacation. This year I have racked up 37 stays (Diamond the hard way) but also hold an AMEX card that gets me Diamond (the easy way).
          My decision to be loyal to Hilton is easy since I need the accommodations anyway and the Hilton includes more perks at rates that are comparable to lesser properties in the area.

          • That is a pretty nice set up and I love it when a hotel someone frequents actually takes the time to acknowledge that and reward them for it. When I traveled for work I stayed at the same hotel for 6 months and they did almost nothing for me which was annoying.

  9. Once I stopped traveling for business, I changed my optimization from maximum points to maximum cash savings, because I am now spending my own money.

    I fly non-rev and rarely pay anything close to hotel website prices. A 50-75% price premium for points is just not worth it. I logged nearly 50 leisure nights last year, planning on 100+ this year. That extra $50 a night for $10 in points and a morning bagel is real money.

    I do have the Hyatt card because it is worth $300 a year (my value for 2 free nights + 15k points – $95 annual fee – $300 opportunity cost of 15k in spend). However, of the 15 Hyatt nights I logged this year, I spent less than $10 directly at Hyatt, for a grand total of 48 points. Priceline and/or ID90Travel was significantly cheaper 100% of the time, plus a few award nights.

    • Do you find yourself staying at a lot of non chain hotels in your travels or are you just finding way better deals on Priceline? I am guessing via the name your price tool?

      • They have neutered Priceline Bidding to the point where I can bid all the way up to the Priceline Express price and still not get it.

        I almost always use Priceline Express (where you know exactly what hotel you are getting) + 10-15% off coupon codes, because I care about nice hotels but have the freedom to be brand-agnostic. I don’t care about the “experience” of the hotel, just give me a decent place to crash. Also, apparently Priceline has a “VIP” level where I get rates that even friends of mine who try to book rooms on the same site cannot get. I have no idea why, but some of the prices they throw me are ridiculously low. Like less than half price of the hotel’s website. And no, they cannot be price-matched.

        I am leaving later today to go from Florida to Chicago for this whole week (including NYE) for the single reason that I can fly non-rev (SO is cabin crew) and stay all week in a 4* hotel for around $100 a night all-in. The options are Palmer House, Hyatt Regency, Hyatt Centric Loop, Intercontinental, etc. I may break it up and give Hyatt.com a shot if they can match the price on 1 or more nights. I am building my spreadsheet now and will book it this afternoon. I used to play the points game when I stayed 200+ nights on the road, now I play the cash game.

        Since we have scheduling flexibility, we can also pick the cheapest time to travel and work the rate differences.

  10. It’s a sham when AA terminates my account and it’s impossible to get in touch with anyone to explain to me why.

    • They definitely went scorched Earth and I hate when companies won’t communicate with people when they close an account. We see it often from banks and loyalty programs unfortunately.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Sponsored

  • MtM recommended tool to track & organize credit cards
  • Best card offers personalized for you
  • Track bonus deadlines, fee dates & 5/24 status
  • Full Travel Freely overview

Free Sign-Up

moomoo - 2 Free Stocks!

Brokerage app moomoo is offering 2 Free Stocks! Just open an account and fund with $500 to get your stocks! Super easy.
Grab your 2 free stocks now!
BoardingArea

Subscribe To Our Newsletter

Join thousands of MtM readers who are subscribed to receive a once daily email with all of our posts. Never miss out!

You have Successfully Subscribed!