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:
Airlines invented Elite status in frequent flyer plans to ensure that best customers, real frequent flyers, were rewarded.
American's Loyalty Points is unsubtle admission that banks are airlines' best customers. Flyers, no matter how frequent, are merely skin sacks with plastic
— Joe Brancatelli (@joesentme) October 26, 2021
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.
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.