Frequent Flier Miles and Hotel Loyalty Insanity

by AJTrenkle on Monday, February 25th, 2013 | No Comments

Across many of the travel blogs the last week there has been a lot of chatter over award chart devaluation. Of particular concern has been the increase in costs for redemptions at hotels, with all of the major programs upping their requirements over the last two weeks. Just about every blog, from Thepointsguy.com to ViewFromtheWing.com, to One Mile at A Time went guano over the whole affair.

But why? It’s no secret, especially to the savvy, that these kinds of mass devaluations and whole-sale slaughtering of awards charts are frequent and brutal. Over just the last two years, several of the major programs completely altered their redemption rates and systems, with British Airways moving from a standard award chart to a distance based system that makes long haul front cabin redemptions much more expensive.

So why the grief? Miles junkies have been basically playing three moves over the years:

1) Recognize that the airlines and hotels have a marginally generous award system designed to reward frequent business travelers/road warriors and thereby drive steady business
2) Realize that the average person can tap into these programs, through points earned creatively outside of frequent travel
3) Leverage the bank’s credit card signup bonus and various spending programs to obtain points and miles. Then, once acquired these miles are reverse engineered to deliver value on the award charts of marginal generosity.

The problem comes when the reverse engineering process takes too long, or those playing the game can’t execute their moves in time. Valuing miles as an alternative currency with access to thousands of dollars in value at high end resorts and first class tickets, they get viscerally upset when the value of this currency changes suddenly and inflation explodes overnight and without warning.

I mean no moral judgment here, I have played the game a bit myself and plan on at least paying attention to the opportunities in the future. That being said, one must recognize this game is stacked in the house’s favor and against the points junkie. The programs can devalue at any time. They can change the terms of earning the points, and require larger and larger minimum spending requirements that require more and more "creativity" to meet (witness the hysteria over the opportunity with the Bluebird prepaid card and the equivalent sorrow at its demise).

Some can probably always figure out a system and play the game well. Increasingly though, and speaking as a player myself, I wonder if the vast majority are as good at the game as they think. Do you really resist the temptation to foolishly lay out a few extra hundred bucks in spending to meet the signup bonuses? Do you really come out ahead after all of the yearly annual fees and the opportunity cost of not earning miles on the trips you do take? Would you really be better off with a flight in business class that lasts 8 hours or so and then is finished, over cash or some item of tangible long term value even if its "cent per mile" redemption rate is technically less?

Also remember what you are really doing is exchanging cash currency for mileage currency. Unless you can make your moves and turn miles into tickets with extreme haste to save money, this exchange is a poor choice. Even considering the declining value of the dollar over time, it makes almost no rational sense to divert your dollars into an odd fiat mileage currency of less substance than most banana republics.