For all the lame animal videos and (awesome) reader photos I post, I try to once in a while put some thought into a post. This is one of those posts where I had that intention. Well, at least about two weeks ago, when the idea for the post first came up. It was actually prompted by thought provoking comments left by some readers.
When I have an idea for a post I’ll usually create a draft in my WordPress dashboard with the topic, give it a bit of thought, and then write the post same day. This is one of those posts that has been sitting. And sitting. And sitting. Not because I haven’t thought about it. Quite the opposite, actually — the topic has been on my mind every day. But I just can’t decide how I feel. Yes, that’s a first, because anyone that knows me knows I have an opinion. On everything. Always.
A couple of weeks ago I wrote a post about how Emirates is releasing less and less first class award space as of late, and there were a few interesting comments left. Pardon me for quoting them entirely, but I think they’re pretty insightful as they really got me thinking.
Robert left the following comment:
Award space with {insert name of airline} has greatly decreased.
Number of points required for a “free” room with {insert name of hotel chain} has greatly increased.
Ability to churn ccs with {insert name of bank} has been greatly cut back.
We’ve had a great run though, haven’t we? We will all be able to tell our grandchildren about the “good old days” when you could fly FC, and stay in aspirational hotels and resorts, nearly for free… 🙂
Joe responded with the following:
What is really going on here is not a surprise, and it’s only going to get more and more difficult the more bloggers such as yourself continue to profit off of an increasingly over promised, and arguably misled, public.
The “highly valuable” credit cards that you, lucky, and others keep pushing on people (on behalf of the banks) are, as you have tacitly acknowledged through posts like this (and whines about hotel program devaluations, etc.), becoming less and less valuable.
Airline award inventory is a limited commodity due to the fact that it is largely intended to incentivize customers to loyally fly a particular airline (or partner airline grudgingly) by offering up seats that might otherwise go unsold. Airlines simply don’t benefit but so much when a million people are “churning” credit cards in an attempt to turn a couple of $95 annual fees into a $10,000 free award ticket. The math doesn’t add up.
You are spot on, however, in your frequent use of the word “aspirational”. It is aspirational for people to play this game, but when a million people aspire to the same one or two seats, it ultimately becomes a different game…with lottery-type odds and six connections to some random lame a** destination (Dubai, anyone?!) just so one can experience sleeping for two hours and enjoying a marginally better meal at 35,000 feet. The real “value” (not the retail cost) of this experience is actually pitifully little.
Where there is real value, as you have discovered lucky, is in promoting these credit cards.
I eagerly await an honest blogger illuminating their readership to these realities. It would be great if it were you, lucky.
Then Robert responded with the following:
So easy to blame the “bloggers” for the end of the good times. In fact, it’s simple economics.
As jet fuel prices went thru the roof, and business travel dried up due to the recession, airlines cut back their number of flights and concentrated on filling every seat with a paying customer. AA actually flies TA from Boston to Paris with a mere 757. How many fewer seats is that than if they were still flying a 763?
Likewise with hotels, who previously had empty rooms they could give away without losing any income. Now that business travel is booming back, giving away rooms they could otherwise sell really cuts into their bottom line.
And you can hardly blame bloggers for the credit card explosion. I see ads on TV for the Chase Sapphire constantly. And after just one stay at a Hyatt in my life, I get an email every two weeks from Chase touting the Hyatt cc as a way to get “free rooms”.
The airlines and hotels were the ones who pushed this so hard, since when business was slow they were making money hand over fist selling miles and points to the banks, who also profited from giving away cheap miles and points to generate new accounts.
Of course, with airlines removing FC from planes, and putting in new lie flat J seats that take up 50% more room than the old ones, while flying fewer planes overall, award availability is going to have to decrease.
But one can hardly blame all of this on Lucky. Nor even all of the travel bloggers combined. It’s understandable that those of us who have been benefitting from the previous generous state of affairs lament the loss. But pointing a finger at travel bloggers as scapegoats isn’t going to make any of this better.
If it keeps getting harder to book premium award seats, and aspirational hotel rooms, {and it will}, it’s less because of “too many people with too many miles”, and more because there are simply fewer seats and rooms unsold, and especially fewer premium seats even being flown.
Rather than looking for someone to blame, I’m just very grateful I got in on the “good old days” of miles and points. As it keeps getting harder to score award flights and rooms, more people will become too discouraged to even try. While those of us who have honed our travel hacking skills will find ways to get whatever is still available. We are all lucky we have learned everything we have learned, and will continue to learn, from Lucky et al.
I think both Robert and Joe make great points. And I’m actually not responding here in an effort to be defensive against what Joe said, because he raises some excellent points. I’m responding because their comments got me thinking about our hobby. I’ve been playing this game for eight years, and I started thinking about what the “good old days” in fact were. Were they 30 years ago? Were they five years ago? Two years ago? Last week? Or are these really the good days?
I don’t claim to have the answer, but just my reflections. On one hand I look back longingly at 2005, when it was still possible to redeem Delta miles for Air France first class. Or 2007, when business class between the US and New Zealand cost just 90,000 United miles — not to mention Air New Zealand actually released business class award space between the US and New Zealand, which is virtually unheard of nowadays. Nowadays that same award would cost 50% more, and it’s almost impossible to find award space on Air New Zealand.
And let’s not forget the days where Lufthansa released a ton of first class award space. They frequently had eight first class award seats per flight. Now they only release space to partner airlines 15 days out, if that. Or the days where Swiss often made all eight of their first class seats available for award redemptions. Nowadays they don’t release any first class award space to partner airlines.
Or what about the days where Aeroplan charged just 120,000 miles for first class between the US and Asia, you could route via Europe, you could have two stopovers, and there were no fuel surcharges?
And let’s talk about hotels for a second. For several years in a row Hyatt ran a “faster free nights” promotion whereby you would make two stays at any Hyatt property in the world, and get a free night at any Hyatt. Two nights at your local airport Hyatt for $70 a piece would net you a free night at the $800+ per night Park Hyatt Paris, for example. But that’s not all. These were also the days of “Gx” bonuses, whereby Hyatt offered up to an additional 2,000 bonus points per stay, a promotion that’s gone in the meantime as well.
There’s no point in denying it, the mid-2000s were great for points addicts. The economy sucked, and the unique things about airlines and hotels is that the marginal cost of an additional guest is next to nothing. So (just about) any revenue generated is better than nothing. Not only did airlines and hotels have crazy promotions, but they added all kinds of benefits as well.
Let’s look at the hotel industry for a minute. We take elite benefits for granted, but complimentary breakfast, complimentary internet, and guaranteed late check-out have only been around for a handful of years. So in addition to crazy good promotions the hotel programs also made the guest experience better long term.
And now the travel industry has largely recovered. Hotel occupancy is extremely high, and the airlines have consolidated to the point that they don’t have to worry about whether they can afford to fuel their planes the next day (well, at least for the most part). Where does that leave us?
Why the future of airline programs looks better than hotel programs
If you’ve been following the industry at all this year, you’ve probably noticed that so far 2013 can be summed up as the year of hotel devaluations. With the exception of Hyatt, most of the major hotel programs greatly increased redemption costs. Meanwhile we haven’t seen too many devaluations on the airline front. There’s a reason for this.
For those of you that don’t understand how hotel programs work, for the most part the hotel chains don’t actually own the hotels, but rather they have management contracts for them. Back in the mid-2000s most hotel chains got rid of blackout dates on award redemptions. Previously there were capacity controls, and they’d only open up award nights if they expected they’d have empty rooms. Then they got rid of those capacity controls, and now for the most part as long as a standard room is available, you can redeem points for it.
So the way that they balance the best interests of both the hotel and the loyalty program is by charging based on how full a hotel is. Typically if a hotel is 90-95%+ full, the loyalty program will compensate the hotel for the room night at around the average daily rate. Meanwhile if the hotel isn’t full, they compensate them at only slightly above the marginal cost.
In the mid-2000s that wasn’t an issue because hotels weren’t full. But now that hotels are full and rates are up, can you imagine how much Hyatt is spending on an award night at the Park Hyatt Paris in the summer, for example? And for that matter, just how many rooms they’re having to pay for?
They’ve gotten rid of the ability to control the number of redemptions, so the only thing that can be done to balance out the cost is to raise redemption rates (though Hyatt has been good about not doing that so far).
Airlines are a totally different animal. They open up award space when they think there will be empty seats. Aside from (in theory) member satisfaction, monetarily they don’t really care whether there are 100 billion or a trillion miles in circulation, because members are competing for the same finite number of award seats. Yes, sometimes there are standard awards or “high” level awards, but in general the airlines don’t have much of a need to raise award costs. That’s not to say there won’t be inflation over time, but if I had to invest in either an airline or hotel currency, I’d invest in the former.
Why it’s not all doom and gloom
Do I think we’re better off than “X” years ago in our little hobby? Maybe not. But I also don’t think we’re worse off, necessarily. As I reflect on the trips I’ve taken in the past year, I’ve redeemed miles for premium cabins on about two dozen airlines. Here’s why I don’t think we’re totally screwed:
Premium cabin products are better than ever before
Yes, it’s true that there are fewer premium cabin award seats out there than in the past on the whole. That’s partly because there are fewer premium seats out there than before, and that doesn’t just apply to award tickets. We’re now seeing business class products that are as good as first class products were a few years back. Obviously this means fewer seats, so that also translates to less award space.
But seriously, nowadays we’re able to redeem miles for first class suites that have doors, double beds, and even products that have a separate seat and bed. How damn cool is that?
We’re seeing more partnerships than ever before
While each individual airline may be releasing fewer first class award seats, you’re able to redeem your miles on more airlines than ever before. Look at all the airlines that have joined major alliances in the past few years, and that’s not even factoring in the outside-alliance partnerships we’re seeing, like the one between American and Etihad, Delta and Virgin Australia, etc.
We’re able to earn more miles than ever before
I don’t care how you earn your miles, the reality is that you have access to more miles than ever before. Going back five years there was almost no such thing as a 50,000 point sign-up bonus on a credit card. You weren’t earning 2-5x points for every dollar you spent thanks to category bonuses. A variety of airlines weren’t consistently selling miles for less than two cents each. Even those that have never stepped foot on a plane can cheaply acquire a seven digit points balance without all that much effort.
The routing rules are better than ever before
Speaking of the “good old days” when Lufthansa would release a handful of first class award seats per flight, let’s keep in mind that it wasn’t possible to route from the US to Asia via Europe, or US to Australia via Asia, for that matter. While redemption rates may have gone up, let’s keep in mind that some of the very best redemption values weren’t around back then.
The bottom line…
I could go on and on, but my conclusion is pretty simple. There’s no doubt miles are becoming more of a challenge to use for the average traveler. I see it daily firsthand through my award consulting service, where I get emails almost every day from people saying “I had no issues booking this myself last year, but this year I’m not seeing space.” And that’s very true, I won’t argue the point for a minute.
The bottom line is that you’re having to plan smarter than ever before, and if you’re able to do that, you have access to more things than ever before as well. Going full circle to the Emirates example, yes, it’s true they’re releasing less award space than in the past. But in the past there’s no way I would have ever even been able to get my hands on a points currency that could get me into Emirates first class. Now I have three points currencies that I can efficiently redeem for Emirates first class. Yes, there might not be a ton of space, but at least it’s a possibility.
The awards are out there. Cathay Pacific releases at least two first class award seats on most of their flights. Singapore releases at least two first class award seats to their own members on most of their flights, and even two Suites Class award seats per flight on many routes. Virgin Australia has good award availability to Australia, and unlike in the past, doesn’t impose fuel surcharges. Delta miles can now easily be used for travel to Asia thanks to China Southern. Unlike in the past, one can redeem American miles for travel on British Airways between the US and Europe, though there are fuel surcharges. Etihad Airways releases a ton of first and business class award space to the Middle East, a region that was previously very difficult to get to on OneWorld, at least in style. I could go on and on.
So while I wouldn’t mind going back to 2008 or so in some ways, I don’t think I’d trade it for what we have today.
What do you guys think? Is this “game” completely over, or are we no worse off than in the past?
Membership is free and takes no more information than commenting as a guest. Earn status points for good contributions, and see fewer ads as your status grows.