For as customer-friendly of an airline as Southwest is, that doesn’t seem to extend to the frequent flyer program. Southwest Rapid Rewards has devalued points overnight, with no advance notice, in the middle of a pandemic (or I suppose towards the end of a pandemic, hopefully?).
In this post:
Southwest Rapid Rewards points are worth 6%+ less
Southwest Rapid Rewards is a revenue-based frequent flyer program, so the number of points required for a ticket is directly correlated to the cost of a ticket when paying cash. Historically points values have been roughly as follows:
- Southwest Airlines Wanna Get Away fares cost 76-78 points per dollar
- Southwest Airlines Anytime fares cost 78 points per dollar
- Business Select fares cost 78 points per dollar
Well, it would appear that Southwest Airlines has increased the number of points required for flights by roughly 6%, and you now need 83 Rapid Rewards points per dollar of airfare. In other words, each Rapid Rewards point gives you roughly 1.2 cents of value towards the cost of a Southwest ticket.
Revenue based programs shouldn’t devalue
When you have a frequent flyer program with an award chart, I can kind of understand how there needs to be a devaluation every so often. After all, the cost of travel increases over time, so in order to match up with paid fares increasing, you also need to increase the number of points required for an award.
That same principle doesn’t apply with revenue based frequent flyer programs, as the cost of award tickets will naturally increase over time as the cost of paid tickets does as well. If I need 76-78 points per dollar of airfare, and if airfare increases by 20% over several years, then the cost of awards will also increase by 20%.
Frequent flyer programs are about building relationships with your customers, and that has to be done in good faith. It’s bad enough that people aren’t earning any “interest” on points that they hold onto, but it’s even worse when you consider people are getting double penalized — they’ll pay more points not just because the cost of airfare goes up over time (which is fair enough), but also because each point is worth a lesser dollar amount.
And then you add in the pandemic, which only makes it worse:
- Many people have been holding onto their points for over a year, ready to plan a post-vaccination trip, only to find their points are worth less
- Last year Southwest was encouraging people to convert vouchers into Rapid Rewards points at a “special” rate, but now those points are already worth less
Southwest’s communications strategy
It’s kind of interesting how Southwest went about communicating these changes. Usually when a loyalty program makes a negative change without notice, the program doesn’t bother communicating, and we find out hours later when readers notice something is a bit off.
In this case, it looks like Southwest officially informed at least one outlet of the devaluation before it went live, which I don’t think I’ve ever seen before in all the years I’ve been following loyalty programs.
The Points Guy was the first to report on this change at around 5 AM Eastern. This devaluation was made “overnight” and with no advance notice, yet someone over there spoke to Southwest’s Managing Director of Marketing about this. Unless that call happened at 3 AM, it sure seems like they got a heads up.
I suppose this was an attempt at damage control, and perhaps it’s not an unreasonable strategy, because I think the take on these changes over there is pretty “soft.” The devaluation is called “your run-of-the-mill, no-notice loyalty program devaluation,” and while it’s said that “this stinks,” there’s no bigger acknowledgement of:
- How unacceptable it is that there’s no advance notice being given to members, and that the timing of this is even worse than usual, given that we’re in a pandemic
- The fact that there’s no need for a devaluation to a revenue based frequent flyer program to begin with, since points requirements naturally increase as airfare increases
Rather they just pass on what they’re told, about how the change isn’t related to the pandemic, and how this could have happened either way:
“I had a chance to discuss this latest adjustment with Jonathan Clarkson, Southwest’s managing director of marketing. As Clarkson explained, this week’s 6% hike isn’t directly related to the pandemic — there hasn’t been in adjustment in three years, so it could have happened around this time either way.”
I’m not sure that makes Rapid Rewards members feel much better.
Bottom line
Southwest Rapid Rewards has just devalued its points overnight by roughly 6%, in a no-notice devaluation. While all points devaluations are awful, I find it especially bad when a revenue based frequent flyer program devalues, because there’s really no need for that to happen.
The number of points required for awards in these programs should naturally increase over time, to reflect higher airfare. Southwest Airlines is known for being such a customer friendly airline, so this sure is incredibly disappointing.
What do you make of Southwest’s devaluation?
I think it terrible especially with everything going, they took away what we were already getting/earning and started charging us extra for it. All around the same time they created a "Wanna Get Away Plus" Category to charge extra for what we were already earning, raise their prices and devalued the points we had already earned without notice! It's a really crappy thing to do and I've always flown my family on Southwest which we...
I think it terrible especially with everything going, they took away what we were already getting/earning and started charging us extra for it. All around the same time they created a "Wanna Get Away Plus" Category to charge extra for what we were already earning, raise their prices and devalued the points we had already earned without notice! It's a really crappy thing to do and I've always flown my family on Southwest which we tend to fly about once a month since we moved so far away from our family for work and with 5 people to fly their price increases have got me looking at all the other airlines now. We may have to either take more time off work to drive and cut back on how much we see our family now. Other airlines are cheaper and some aren't after they charge crazy high seat fee's. Bottom line is when booking through Southwest before we felt we were treated fairly and given the best rates but unfortunately were not feeling the "Love" anymore, so we will have to start looking at all our options now.
What used to be a 25,000 point trip RT to Florida, sometimes less, just doubled. I won't reach 100,000 points for the two of us to go there to catch a cruise for our 50th the rest of our lifetime. Disappointed in SW. Been loyal cardholders for 20 years. My saved 34,000 points are pretty much worthless especially with the cost of purchasing more points.
You write that "Historically points values have been roughly [...] 76-78 points per dollar". Actually, when Southwest started using points, they were 60 points per dollar, with base earnings of 6 points per dollar. At that level they were "fly 10 flights, get the 11th of equal value free". And that was a huge devaluation from the earlier "fly eight flights, get the ninth of possibly much greater value free". Now we are at "fly...
You write that "Historically points values have been roughly [...] 76-78 points per dollar". Actually, when Southwest started using points, they were 60 points per dollar, with base earnings of 6 points per dollar. At that level they were "fly 10 flights, get the 11th of equal value free". And that was a huge devaluation from the earlier "fly eight flights, get the ninth of possibly much greater value free". Now we are at "fly 14 flights, get the 15th free", which is what 84 points per dollar comes to.
Yes, Southwest gives extra points in some cases to motivate behavior it considers desirable, such as earning 35,000 butt-in-seat points (that is, spending nearly $6000 on seats) in a year, or paying premium economy prices (Business Select) for its basic economy travel. That doesn't change the overall effect, a steady transition from one of the most generous frequent flyer programs to one of the least generous.
Hi Ben, I have qualified for the Companion Pass during the last 10 years. I have not spent enough money to keep pace since January 1st and do not anticipate that I’ll reach the 125k benchmark by the end of 2021. As you know, SW spotted established CP flyers 25,000 points in January to jump start the quest to the 125,000 goal. Question: Have there been any rumors that SW will make a second bonus...
Hi Ben, I have qualified for the Companion Pass during the last 10 years. I have not spent enough money to keep pace since January 1st and do not anticipate that I’ll reach the 125k benchmark by the end of 2021. As you know, SW spotted established CP flyers 25,000 points in January to jump start the quest to the 125,000 goal. Question: Have there been any rumors that SW will make a second bonus deposit of points before the end of the year, to help loyal Companion Pass customers make a realistic run to 125K? Thanks
This is incredibly annoying. I too did the conversion last year thinking would be a good place to park the unused tickets. Now live next to an airport SWA doesn't serve (EGE) and they do this. I remember reading the SWA book "Nuts" back in college - they have clearly lost their way
Really could have been a lot worse. No one likes rising prices, but SW can still be a bargain. My wife just got a companion pass through the Chase card offer, so I am not going to complain about a 6% rise in the cost of her ticket when I am flying for free.
Even with the devaluation I still have enough points on WN for 2-3 "free" roundtrips. Just noticed at the grocery store today that certain quality steaks just went up $2 per pound. I eat way more than I fly (but not steak, sticks in my teeth) so which is the bigger rip-off?
at the end of the day, there will be a line of suckers (a lot of us haha, i dont fly SWA, but i still sign up for other program's cards) still applying for their credit cards, still purchasing an airline ticket, and still redeeming their points. the airlines know they can get away with it. what other option do we have?...
Queue Darth Vader (or name-of-airline-with-rewards-program): "I am altering the deal. Pray I don't alter it any further."
In another article: “Here are more opportunities to trade cash for ever-devaluing miles and points!”
I don’t get the mindless hate for TPG. Sure they are less transparent about their conflicts and post suboptimal SUB links, but they have some good contributors like Summer, Zach, Richard... If the research is good, don’t knock the source
@Ben TPG knew about it for a while. I watched a IG video of theirs yesterday where they mentioned that an ‘unannounced’ devaluation is coming up ‘tomorrow’. They had ample notice.
To be specific, you need to adjust the redemptions over time if you have an award chart *and issue points based on revenue* -- so like what many hotel programs do, or what AA does now.
If you have an old-school airline program, like what AA did 10 years ago or Alaska still does now, where both earnings and redemption are disconnected from prices, in theory you shouldn't need to adjust the award chart...
To be specific, you need to adjust the redemptions over time if you have an award chart *and issue points based on revenue* -- so like what many hotel programs do, or what AA does now.
If you have an old-school airline program, like what AA did 10 years ago or Alaska still does now, where both earnings and redemption are disconnected from prices, in theory you shouldn't need to adjust the award chart because in theory 10 2,500 mile-earning trips cost more over time in parallel with the increased value of the free flight you can get with 25,000 miles redeemed.
I'm glad the Gen Xer who wrote the first comment has this space to work out some of his insecurities :)
@Ben - sort of. However, the difference between the voucher example you've given is that with the points, the number outstanding/issued has continued to grow at the same rate but with far-reduced opportunities to redeem them as would be available in a normal environment. As another poster pointed out, they've effectively printed more funny money than their central bank may have been able to stand behind, at least from a financially-healthy perspective. The rates at...
@Ben - sort of. However, the difference between the voucher example you've given is that with the points, the number outstanding/issued has continued to grow at the same rate but with far-reduced opportunities to redeem them as would be available in a normal environment. As another poster pointed out, they've effectively printed more funny money than their central bank may have been able to stand behind, at least from a financially-healthy perspective. The rates at which they were paid by Chase for the points probably did not contemplate a year where their consumers mostly hoarded the points they continued to earn. And SW didn't raise airfare for everyone, as your voucher example suggests - they simply made the vouchers less valuable to those who have them based on their expectation that the "voucher holders" (i.e., people with points balances) are going to want to redeem them after an extended period of not doing so.
Pent up travel demand + a greater supply of outstanding liability to pay for that travel in a way that does not compensate the business = I get it. But they probably knew this was coming and could have let everyone know a few months ago.
@ Lucky...Not a huge fan of TPG site anymore. They closed off being able to make comments and there just isn’t a lot of “meat on the bone” despite that site churning out a ton of articles. I learn more from your site. I like that we can make comments and you will routinely respond to many. Many commenters will point out things in your stories that need to be updated and you thank them....
@ Lucky...Not a huge fan of TPG site anymore. They closed off being able to make comments and there just isn’t a lot of “meat on the bone” despite that site churning out a ton of articles. I learn more from your site. I like that we can make comments and you will routinely respond to many. Many commenters will point out things in your stories that need to be updated and you thank them.
As for Southwest I’m glad I haven’t gotten their credit card. They are flying to Savannah which is nice, but I have to be picky of the cards I pickup given how many I have now and this devaluation isn’t not pushing me closer to getting their card.
Ugh, the worst part is that they let you turn your vouchers from flights that were cancelled due to the pandemic into points. Seemed like a great deal at the time, and now I can't even get the same flight back with those points.
A few years ago I jumped into Southwest and started earning companion pass and A-list yearly. With less flying in 2020 I spent enough on Chase cards to earn both for 2021. But now Southwest is trying to push me away. They extended my 2020 status over the top of what I had earned and have not yet extended my 2021 status. If I were Chase I'd be mad that Southwest is not only devaluing...
A few years ago I jumped into Southwest and started earning companion pass and A-list yearly. With less flying in 2020 I spent enough on Chase cards to earn both for 2021. But now Southwest is trying to push me away. They extended my 2020 status over the top of what I had earned and have not yet extended my 2021 status. If I were Chase I'd be mad that Southwest is not only devaluing points value but also the value proposition of putting spend on their cobranded credit cards
@Marc, That's pretty old news. They are, however, the best/only carrier for direct flights if you're not traveling from/to hubs. And for anyone without status, comparing flights has to include ancillaries like now being forced into paying more for seat assignments as well as the checked bags you noted. EarlyBird is still a complete bargain compared to AA paid seat assignments, for example, if you want a seat towards the front of the aircraft.
...@Marc, That's pretty old news. They are, however, the best/only carrier for direct flights if you're not traveling from/to hubs. And for anyone without status, comparing flights has to include ancillaries like now being forced into paying more for seat assignments as well as the checked bags you noted. EarlyBird is still a complete bargain compared to AA paid seat assignments, for example, if you want a seat towards the front of the aircraft.
As for the article at hand, this is still SUPER shady from Southwest. I'll be surprised if there isn't litigation on them pushing customers to convert their vouchers to points, and then devaluing the points. They had the forethought to push this into the news cycle via the dirtbags at TPG, so there's little doubt in my mind that they knew they were going to devalue back when they were pushing these Voucher->Points conversions.
I'm not always a fan but this TPG article seems pretty fair, no? "That said, this devaluation really stinks, especially for customers with a large balance of Rapid Rewards points, and anyone who opted to take the airline up on its (seemingly generous) points conversion offer last year."
The CSR card is worth 1.25 cpp when redeeming through ultimate rewards portal rather than 1.5 cpp? Thats news to me if that change was made, I dont see such after some google searching.
@ Luke -- Nope, 1.5 with the CSR, 1.25 with the CSP. Nothing has changed there.
@ Ben -- You should consider dropping the public grudge against TPG. Just act like he doesn't exist. He doesn't in my world. I don't read their inaccurate blog. If I want well-written, well-researched, thorough information, I turn to your blog.
@ Gene -- Fair enough, and usually I'd only go there if I want to read news from a couple of days ago. However, in this case I saw the story linked on Twitter, because it was the source, so it only seemed fair to give credit for the information (and then when I started reading I was shaking my head, so...). Anyway, appreciate the kind words!
I stopped reading TPG after he posted an Instagram photo of him stepping out of Marriott's limo at the Oscar's. (OK sometimes I glance, but I'm not proud and its only for the articles, I swear)
Southwest has masqueraded as a ‘low cost’ airline for years. I understand that bags are included in the ticket price. Notwithstanding, they are very seldom the low-cost option out of Chicago.
Looks like I had just booked my Southwest flights just in time! Booked two Hawaii interisland flights with Rapid Rewards last week for October. Still would have had enough points for this increase, but would have cost me at least 1,200 more RR points if I had waited.
I'm not sure which is worse - a no-notice devaluation during a pandemic or choosing to announce this information via TPG.
I think the answer to the "why" is in the TPG article - members have continued to earn points at roughly the same rate as they did pre-pandemic, but have not been flying, and thus redeeming, at the same rate. Thus, you have more points floating out there than you would in a normal environment due to an external shock. Obviously, that phenomenon was probably helped along by SW's CC partner, Chase, in offering lots...
I think the answer to the "why" is in the TPG article - members have continued to earn points at roughly the same rate as they did pre-pandemic, but have not been flying, and thus redeeming, at the same rate. Thus, you have more points floating out there than you would in a normal environment due to an external shock. Obviously, that phenomenon was probably helped along by SW's CC partner, Chase, in offering lots of spending bonuses in order to move the SW card to the top of the wallet where credit card spending had somewhat curtailed. That is not to say that it doesn't suck or that they shouldn't give notice, but I do get where they're coming from (their deflecting about the pandemic notwithstanding).
@ Rob -- But the whole point is that with a revenue based frequent flyer program, points are just another form of payment towards a ticket cost. Southwest has been paid in one form or another for all those points that have been issued in the past year while people haven't been flying. It's not like those points are being issued for free.
It's like saying that airfare will be more expensive because there's a...
@ Rob -- But the whole point is that with a revenue based frequent flyer program, points are just another form of payment towards a ticket cost. Southwest has been paid in one form or another for all those points that have been issued in the past year while people haven't been flying. It's not like those points are being issued for free.
It's like saying that airfare will be more expensive because there's a ton of outstanding airline vouchers people are getting ready to use, due to not having traveled for the past year.
To be clear, I'm ultimately not too surprised, in the sense that programs do this because they can. But that doesn't justify it in any way, in my opinion.
People actually read The Points Guy? I guess all its readers will have to use more points now for gift cards redemptions.
@ Ben -- Another scum of the earth loyalty program devalues. What a shocker. This is called theft in every other setting.
If Southwest points are now worth 1.2CPM, why would anyone transfer Chase points (except for small top ups) vs using the CSP/CSR travel portal?
The CSR was already a better deal, but now even the 1.25 CSP redemption value is worthwhile.
@ William -- To answer your question, it's because many (most?) people don't know better. Also keep in mind that probably quite intentionally, you can't redeem Ultimate Rewards points towards Southwest flights directly through Chase's online portal.
other words, don't be a sucker and buy those discounted miles. I am looking at you, AS! Refuse to buy any miles from them till they announce new chart. Also you now know why Chase offer bigger WN sign-up bonus to soothe inevitable devaluation pains..
@ Philly380 -- Your frustration seems misguided? Alaska has said it will provide significant advance notice of award chart changes, and I also only recommend buying miles with a fairly short term use in mind.
You and Gary and others who say there's no reason to devalue a revenue-based program miss a factor - credit card signups. If (make it up) 20,000 people sign up for a Rapid Rewards credit card and each earn 60,000 rapid rewards points, that makes 1,200,000,000 new points out there searching for free tickets. Tickets which, of course, bring in no immediate revenue to Southwest. There is therefore a direct financial incentive for Southwest to...
You and Gary and others who say there's no reason to devalue a revenue-based program miss a factor - credit card signups. If (make it up) 20,000 people sign up for a Rapid Rewards credit card and each earn 60,000 rapid rewards points, that makes 1,200,000,000 new points out there searching for free tickets. Tickets which, of course, bring in no immediate revenue to Southwest. There is therefore a direct financial incentive for Southwest to devalue their points currency, in order to reduce the number of free tickets they're giving out.
So the same laws of economics apply - their currency will be devalued over time as long as they keep printing money. Or, in this case, points.
@ James K. -- Well of course programs ultimately devalue "because they can." They control both how many points they issue and how much each point is worth. However, these aren't "free tickets," as Rapid Rewards is being paid billions of dollars (over time) for those points. They choose to award more points through credit card bonuses because it's good money, and then after the fact they decide they want those points to be worth...
@ James K. -- Well of course programs ultimately devalue "because they can." They control both how many points they issue and how much each point is worth. However, these aren't "free tickets," as Rapid Rewards is being paid billions of dollars (over time) for those points. They choose to award more points through credit card bonuses because it's good money, and then after the fact they decide they want those points to be worth less.
No one is disputing that programs can't do this, I'm just arguing that it's wrong.
Ironically Delta SkyMiles sets a good example in this way. While I'm not a fan of the program transitioning to a revenue based one, I at least respect that the goal is to make each SkyMile worth a cent. That's literally a floor value, even though Delta is printing miles endlessly.
There is nothing at all surprising about The Points Guy acting like a marketing platform for business, rather than an actual insider service to points collectors.
If you have the CSR, cant you phone up and purchase WN flights for 1.5 cents per point? I remember at one point you couldnt do it anymore but I believe its back.
Absolutely no reason to "adjust" the value of points in a revenue-based system. It's bad enough that the points can't get you anywhere cool (sorry - CUN and PVR - you're not cool) but now devalued? No thanks - I'll keep flying United or AA. Cathay Pacific or Swiss business class is a much better redemption than cattle class to Jackson, Mississippi.