News Flash, Loyalty Programs Don’t Care About You Or Your Loyalty

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Loyalty Programs Don't Care About You

Loyalty Programs Don’t Care About You Or Your Loyalty

We had a couple of big changes announced yesterday. That rolled on top of the long dreaded Hyatt peak and non peak pricing going into full effect.  First Marriott told everyone their points are going to be worth less because they are going to fully dynamic pricing come 2023. Then American Airlines made an interesting update to their program where people can spend to status, somewhat similar to the system Delta offers. Some people will love that one, but some will hate it. You know who the people that hate it will be? The ones most loyal to American Airlines and that fly them often, because actually flying on the plane isn’t that important anymore. The message is loud and clear, loyalty programs don’t care about you!

The Money Isn’t In Loyal Customers Anymore

Wait, but loyalty programs are huge profit centers. The companies make billions off them and even use them to secure loans etc. How can they not care about the people that are in them? You know the people essentially making them this money?  Joe Brancatelli said it best on Twitter:

The Bigger Picture

This goes beyond the changes at American Airlines though. Most loyalty programs are beholden to the only customer that matters, the banks. See these banks buy massive amounts of points and miles to give to their credit card and banking customers. Whether it be via co-branded cards or through their transferrable currencies, like Ultimate Rewards, they pay the hotels and airlines big bucks to secure these points.  So much so that these partnerships have been one of the things used to keep the airlines in business during tough times.  Would it surprise you to learn that Delta cards are American Express’ most popular cards? That is in spite of the fact that they offer some of the worst return on spend for Amex’s customers.

Loyalty Programs Don't Care About You

People Are Sheep

Most consumers are not savvy. They think that one Delta flight they earn every 2-3 years from their regular spend is amazing. They totally ignore the fact that most of their purchases are racking up 1.1% in return. Those same people could do leaps and bounds better with a simple 2% cash back card. But, that doesn’t feel like “freeeeee” travel if I use cash back to pay for my flight. This line of thinking is exactly what these programs thrive off. People regularly ignore the fact that money, or savings, is fungible. People forget that more is more and a better return is a better return, it isn’t rocket science. The profit the banks make off this line of thinking trickles down to the airlines and hotels. The banks and loyalty programs continue to count their cash from selling end consumers these always depreciating assets.

At this point it feels almost like owning an NFL team. An NFL owner makes money regardless of ticket sales because of endorsements, TV rights and profit sharing etc. They sell tickets because they can, not because they have to. Have airlines gotten to the point where selling miles are the main focus and people flying with them is an afterthought? Is it to the point where airlines essentially need to have flights available so people want to earn their loyalty points? An interesting question at least. This is all while they continually reduce the value of the program and cut back on perks that elite members get. Yeah, you know, the people that actually fly or stay with them most often.

Loyalty Programs Don’t Care About You – Final Thoughts

This was a mini rant that I needed to write up for myself as well.  We sometimes fool ourselves into valuing loyalty programs and elite status. All while these programs continue to show us that they don’t really care about loyalty at all. They care about continuing the profit center the programs have become thanks to the banks. If they can do that while reducing their exposure, hello devaluations, then even better in their mind.

We are all deal hunters here. So this isn’t to say that these programs are worthless or that elite status is a fools errand. It is simply a reminder of where we sit in the pecking order of things. And a reminder to crunch the numbers each and every year as things change and see if it still actually makes sense to you. Are you paying more than you could flying other carriers to get perks that are not actually worth the cost and effort? Have your patterns changed but you are stuck in that endless status earning wheel just because it is what you have always done? Those are the questions we need to ask, and answer, on a more regular basis. Because the airlines, hotels and banks are hoping you don’t and the status quo stays intact. All while they burn it down around you.

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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.

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32 COMMENTS

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32 COMMENTS

  1. Well written article (rant). We just flew American to LAX and our flight was delayed 9 hours (Monday following the “Great Outage of 2021”). We bailed and flew another airline. The return trip on American was picture perfect. Averaging those two flights puts them at 50%. I’ve gone to totally cash-back credit cards and I’ll shop for the best deal on flights. Time to move on.

    • I think many will be doing the same over the next few years as programs continue to drive the value down towards a penny, especially domestically.

  2. American, more so than others, quit caring about passengers sometime before the merger with the second worst airline after them, US Air. The CEO wouldn’t know the flight to Paris was 10 hours late but he would know if the website (i.e. sales site) was down for ten minutes. It isn’t about flying you someplace it is about collecting money from you and the banks and if you manage to get to someplace at some time even close to what the schedule was, that is fine. Ask yourself why AA grossly overschedules flights that they cannot possibly fulfill.. Could it be because they get your money and, if you complain, will give you a “credit” good for one year. Sounds like millions, if not billions, in interest free loans by the suckers who paid for flights that were cancelled.

  3. Mark – As a Million Miler on both Delta & AA, I totally agree with you and the service at check-in, gate or on board can be terrible as well.
    The only real reason I still fly with AA, I live in Fort Worth.
    I keep my status as best I can, as I like the small perks when I fly to Europe like club access.
    The dedicated phone line for EXP is no longer a perk as you can wait 3 hrs. for a call back.
    When I retire I will move to the best price with schedule, and not worry anymore about chasing the points. The new loyalty points is a total money grab from the AA and the CC companies.

    • I think more and more people will move towards booking the best available option and skip perks etc. going forward.

      • We are elite members in United (Platinum) and Marriott (titanium). What do you feel is the best card to get for all around travel? Our last reward trip to Hawaii was almost double the points.

        • It depends on where your largest spending areas are. I personally love the Amex Gold for 4X grocery, 4X restaurants and 3X for airlines. But that may not be the best for everyone. The Sapphire Preferred has gotten better after the revamp and is a partner with United if you are looking for more United miles etc.

  4. They really don’t. Every program is solely designed to increase your spending with the brand and to choose them over another airline or hotel when booking your trip. They want to offer the least value of perks & benefits possible to get you to book with them. And, they are willing to lose customers if it is a net financial gain for the company.

  5. For background, I have both a SWA Rapid Rewards Visa and a Delta Platinum AX. Through my business and personal spending I always have enough Rapid Reward points for reward travel. I also travel for free as a companion with my husband whenever we fly together. It’s a different story on Delta, though. They raise the required points so often, we can never seem to get what we need. Finally, after 3 years, we accumulated enough points to fly to South Africa business class. Granted, I use SWA domestically most of the time, but we’ve flown to Puerto Rico, Costa Rica and Mexico on them too. I only occasionally fly Delta domestically. There’s no comparison in the two loyalty programs. Rapid Rewards delivers while Skymiles rarely does. SWA gives 2 free bags and is so easy to make changes to a flight itinerary or cancel a flight, especially when using rewards. Covid has made Delta more user friendly when it comes to cancellations and changes, but I’m sure that will all go back to the $200+ fees. I know SWA doesn’t have as many direct flights where I usually fly, but there are just too many other reasons to fly with them. Some people don’t like the boarding and seat assignment model SWA uses, but I ALWAYS get the seat I want without having to pay more with just a little alarm set on my phone. Unfortunately, if you want to fly first or business class you have to go elsewhere. Bottom line, I love the Rapid Rewards program and I literally despise Skymiles.
    Regarding hotels, if you don’t have to be in luxury, I really love the Choice Hotels Choice Privileges program. I do not have their credit card, but I do stay enough nights a year with work to qualify for their Elite Diamond status. Because they have an option to use points plus cash for reward nights, my points last all year for personal travel too. I do pay a little each stay, but $35-$40 a night is so much better than $125. I also get a welcome gift, preferred parking and early and late checkout almost every time. I have Marriott Bonvoy and World of Hyatt memberships, but I can never rack up as many free or very cheap nights with the same amount of stays.
    Just my 2 cents worth.

    • I think a lot of people will start digging into Choice more with them being added to ThankYou points.

    • Very good suggestion. I also spend most of my hotel dollars at a Choice Hotels, with the same reasons you mention, and it works out very well for me.

    • I agree, SWA has a great rewards program. I use the credit card to earn enough points to fly free once or twice a year, and not paying extra for checked bags is wonderful. We just booked 2 flights on 2 different airlines….nice ticket prices, but add $35 for checked luggage, $40 on one to carry on a piece in the overhead bin, and $6 to $35 to pick your seat. That’s a minimum of $162 on top of the “ticketPrice”. Really? And, I will never fly American again….had to cancel (obviously) a Vegas flight in the early days of Covid…it was a non refundable ticket and I had to fight for a credit. We rebooked one ticket ($270 flight) with a $530 credit and had to pay 20 extra…fees? They refused to honor the other ticket that was valid through December 2021 as stated on their website, so I will do nothing but share my negative experience with anyone who will listen.

  6. I have been an AA flyer for over 40 years, running a small business and flying for meeting, conventions, etc. I have been life time Gold for years, however, I achieve Platinum once and and was given Platinum once as a response for poor customer service at an Admirals club in DCA. I have accumulated 36 one-way upgrades over the years and due to CK, EXP, and Platinum, I will never get an upgrade, even on those rarely used destinations. Six years ago, I switched from flying any coach seat to only flying in First. AA has made a mess of their service, so I am now flying Delta. Their service has also gone down, but not as bad as AA. I used my accumulated miles for trips or upgrades, so I only have about 136,000 miles remaining. The article is correct, airlines do not care for their customers via loyalty or via cash spent of full fare first class tickets, their first and foremost customer is the banks. I now check all carriers even if I do not belong to their program for First Class fares before I buy. The fare that is most competitive with the shortest layovers or direct will get my business. I not longer care about earning miles as they are really worthless.

    • I think more and more will go to cheapest price available and focus on best return on cards / spend via cash back and cash out

  7. Great article Mark. I’d take it a step further. For example I can think of certain travel blogs that initially saw readers as customers but now it’s clear that their biggest and most important customers are the banks. To paraphrase the twitter post, the readers are just skin sacks with a browser. Thanks for not being one of those blogs and for occasionally pissing off the banks.

  8. While I agree completely that on a certain level, loyalty programs don’t care about me, I think that that’s a pretty black-or-white perspective. Loyalty programs exist to make people make irrational decisions to favor one company over others. Having a loyalty program that offers value goes a long way toward making those choices. I’m a big Hyatt fan, spending around $80K a year on their card, plus maybe two dozen nights a year on points and a dozen or two (depending on cash vs. points price) nights on cash. I do this because Hyatt offers compelling value for Globalist members and that means I’m willing to park my loyalty largely with them. If Hyatt offered crappy loyalty benefits like IHG, I would barely bother with them. Maybe I’m an outlier here but if a company offers me value in exchange for my loyalty, I’m gonna take it. I say this while taking my first international vacation in almost 2 years while staying at a Hyatt.

    • My point was more and more companies seem to be getting away from driving that feeling. They are getting so much money from the banks and credit card companies etc. that they are putting less and less effort into driving individuals to make irrational decisions. They continue to devalue their points and programs because they are selling them like hot cakes out the back door.

  9. Regarding hotels, the only true loyalty that matters is not via the loyalty programs. It is via individual properties. The individual property owners — who ultimately control one’s benefits — do not care about a person’s loyalty to the network. They care about your loyalty to their specific properties. If one is fortunate enough to become a regular at a property and to get to know the staff, then that property will reward you — sometimes in ways you can’t imagine. Rewards from a hotel NOT belonging to a loyalty program — think about it. And, if you’re regular enough, you can negotiate your rate with the property — who needs points? This has been my experience.

    As for airlines, I’m a CK at AA — paid for out of my own pocket. I am treated very well — very high touch — and I am grateful for it. For me, loyalty IS two-way. It might well be the same for individuals similarly situated at Delta and United — I don’t know. But, reading comments, I know many others who are not so situated — perhaps most — might not feel the same. Where one stands depends on where one sits.

    • I think that is true but outside of a job that takes you to the same area over and over I don’t think many people can achieve that level of recognition with an individual property.

  10. Loyalty programs don’t care about loyalty because most people who are loyal do so to maximize their reward and aren’t very profitable for chains. All the business travelers staying in $129 a night hotels who earn points won’t make money for the chain or hotel when they use them for a 5 star resort with their families (using suite night perks and free breakfast). The ones who care most about changes to these programs tend to be the worst customers for the chains. People who stay in 5 star hotels paid do earn more points but point balances and nights don’t equate to beneficial loyalty as too many earn through combrands and promotions like that conference gimmick where people booked a conference for 2 people and earned a disproportionate amount of points.

    • I would say loyalty programs can help drive business travelers to selecting a particular brand (when it is their choice which it isn’t always). But if you are given a travel budget and they don’t care where you stay you would probably pick one that can get you good leisure travel in the future as a perk of being a road warrior. That unlocks a lot of spend in a particular hotel group etc. The loyalty programs are profit centers for these brands as they move away from actually managing hotels and because of that they just want to sell points vs get you to actually stay at the properties because that doesn’t make them money any longer. Outside of keeping hotels in the brand and growing the loyalty program they have no need for you to actually stay anywhere.

  11. Here’s the other thing, AA has seriously devalued EXP status. Upgrades are routinely sold for $150 thereby eliminating upgrade availability. So really, the only thing I’m still getting for EXP now that anyone can cancel award tickets at any time is Group 1 boarding, upgrades on routes for shitty destinations, and SWUs. But I’ll probably go ahead and pay $150k in taxes on my AA card next year at a 1.99% fee + flying to keep EXP.

    • The free award cancellation was an awesome change for most people from the airlines but it did take a huge bit out of status for sure.

  12. I stopped caring about status the day I watched Delta offer my colleague a bump to first class on a domestic route to ATL from MSP for less than $50 bucks.

    Not a big deal and a win for sure for my colleague…but my take away is that rather than upgrade your most loyal customer, you’d rather sell the seat for almost nothing to someone who probably only travels on your metal occasionally.

    I understand that airlines are a for profit business but what’s the point of building loyalty in their program if they’ll sell the seat for almost nothing rather than giving it to someone who’s spending good money with them on a regular basis.

    • They should’ve at least offered you the chance to buy the upgrade for $50. I’ve heard that they may only give those types of offers to non frequent flyers, which is really a slap in the face to their most frequent fliers ‍♀️

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