The year 2021 proved to be a period of significant upheaval and strategic maneuvering within the travel industry. As airlines and hotels grappled with the fluctuating demands of a world navigating a global pandemic, loyalty programs became more critical than ever. These programs serve as vital tools for attracting future business and maintaining a connection with customers during both peak travel seasons and periods of reduced demand. This article delves into the major overhauls and shifts in strategy that have characterized airline and hotel loyalty programs, examining how these changes are reshaping the landscape of earning and redeeming miles and points. It also examines how Airlines and Hotels Have Used 2021 to Shake Up the Miles and Points Game.
The Evolving Landscape of Loyalty Programs
In the face of unprecedented uncertainty, airlines and hotels have focused on keeping their brands relevant and top-of-mind for consumers. This involved a surge in promotional offers, extensions of elite status and benefits, and consistent communication with loyalty program members. These efforts aimed to encourage continued engagement even when travel was restricted or consumer confidence was low.
However, as the global economy began its recovery, many loyalty programs implemented substantial changes, placing their bets on the future of travel and how consumer behavior might evolve. While routine adjustments to program rules and benefits are commonplace, the scale and scope of these recent modifications by major players in the travel industry have been particularly noteworthy. These changes have the potential to significantly impact how travelers accumulate and utilize their miles and points in the years to come, including in 2022.
American Airlines: A Paradigm Shift in Elite Status
American Airlines, the largest carrier in the United States, has spearheaded a dramatic overhaul of its AAdvantage elite status program. Previously, qualification for elite status relied on a combination of elite-qualifying dollars and miles, factoring in both spending and distance flown, with an alternative option to qualify based on the number of flight segments. The new program, however, prioritizes spending as the primary determinant of elite status.
This shift is not solely focused on expenditure on flights. American Airlines is now rewarding loyalty to its broader brand and its network of partners. This includes spending on American Airlines co-branded credit cards, engaging with dining and retail partners, and other yet-to-be-announced partnerships. Under this revised structure, it is theoretically possible to earn elite status with American Airlines without ever setting foot on a plane, provided that sufficient spending is directed toward its credit cards and partner businesses.
While elite status is ultimately most valuable to frequent flyers, this approach incentivizes customers to consolidate their spending within the American Airlines ecosystem, even if their travel frequency is limited. The airline, in turn, benefits from a percentage of the revenue generated through these partner transactions.
The new system revolves around the concept of "Loyalty Points." To attain Gold status, the lowest tier in the American AAdvantage program, members must earn 30,000 Loyalty Points. Executive Platinum, the highest tier, requires 200,000 Loyalty Points. It is crucial to differentiate Loyalty Points from AAdvantage miles.
The earning rate for Loyalty Points is directly tied to the accumulation of AAdvantage miles, with one Loyalty Point awarded for every AAdvantage mile earned. However, the rate at which miles are earned varies based on a member’s existing elite status. For instance, AAdvantage members without any status earn five miles for every dollar spent on an American Airlines flight, while Executive Platinum or Concierge Key members earn 11 miles per dollar spent. Consequently, Gold members earn five Loyalty Points for every dollar spent on flights, while Executive Platinum members earn 11 Loyalty Points for every dollar spent. This tiered system effectively rewards existing elite members, making it easier for them to retain their status in the future.
For example, an Executive Platinum member would need to spend just over $18,000 to maintain their existing status under the new program, compared to the previous requirement of $15,000 in spending and 120,000 elite-qualifying miles. For individuals without any existing status, the new program presents a more significant challenge. Reaching top-tier status would necessitate spending $40,000 on flights or generating 200,000 Loyalty Points through engagement with the airline’s partners. While achieving lower-tier status is relatively easier, the overall system is perceived by some as complex and cumbersome compared to other airlines’ programs.
Achieving top Executive Platinum status without flying would require a substantial investment, such as spending $200,000 on an American Airlines co-branded credit card or generating 200,000 Loyalty Points through business with American’s program partners.
American Airlines has also adjusted the calendar year for earning status, extending existing status for current holders through March 31, 2022. Moving forward, the qualification period will run from March 1 to the end of February of the following year, aligning with spending patterns.
While American Airlines claims that the new program is more straightforward, many frequent fliers may disagree. The changes introduce a more accessible pathway to status for members who may not fly as frequently but still engage with American AAdvantage partners. In summary, Airlines and Hotels Have Used 2021 to Shake Up the Miles and Points Game.
It is imperative to closely monitor your American Airlines app or account in the coming year to ensure compliance with the revised requirements for earning or maintaining status.
Marriott Bonvoy: Farewell to Award Charts
Following similar moves by other loyalty programs like Hilton Honors and IHG Rewards, Marriott Bonvoy is eliminating its award charts, which provided a clear understanding of the number of points required for a redemption night. The new system will implement dynamic award pricing, replacing fixed award prices with rates that fluctuate based on demand and the cash price for a specific night’s stay.
Critics argue that this change reduces transparency, as the points required for a redemption night will be determined by a combination of demand and the cash price. While this may benefit hotel owners, it creates uncertainty for loyalty program members, making it difficult to plan and budget for future trips.
Under the dynamic pricing model, the points rate, like the cash rate, can fluctuate daily based on demand. This means that even if a member has accumulated enough points for a free night, the price could increase unexpectedly. This was not the case with award charts, which provided a minimum and maximum point range for redemption.
While the points rate can also decrease based on demand, it is generally expected that redemption costs will increase for popular resorts or hotels during peak periods and decrease for less-frequented hotels with lower demand. Fortunately, members have until March 2022 to redeem points for future stays using the existing, more consumer-friendly award charts before the dynamic pricing system takes effect.
The proliferation of miles and points issued through credit cards and travel has prompted loyalty programs to implement inflation-style changes, reducing the value of previously issued loyalty currency.
Other Notable Changes and Strategies
Delta Air Lines has reduced the value of global upgrades for its top-tier Medallion members, limiting them to one cabin of service (previously, economy tickets could be upgraded to business class, but now upgrades are limited to premium economy). World of Hyatt recently updated its award chart to include off-peak and peak pricing, which can result in higher or lower redemption costs based on local demand. However, Hyatt maintains transparency by providing a helpful range of redemption prices based on an award chart.
The adage "earn and burn" has never been more relevant. It is advisable to redeem miles and points as soon as possible, as their value can change with little or no advance notice due to program modifications. Airlines and Hotels Have Used 2021 to Shake Up the Miles and Points Game.
An effective strategy is to shift credit card spending to programs like American Express Membership Rewards or Chase Ultimate Rewards, where points are more flexible and can be redeemed for travel spending or merchandise. This approach offers greater control and flexibility compared to relying on a single program that may unexpectedly change its policies.
