Some news from the Freddie Awards

Freddie Awards emcee and all-around frequent traveler guru Randy Petersen prepares to take the stage at the 21st annual awards ceremony

The purpose of last weekend’s trip (as much as I can claim it had a purpose) was to attend the 21st annual Freddie Awards in Ft. Lauderdale.  The awards ceremony is run by the folks at Inside Flyer and is designed to recognize and celebrate the loyalty programs of the airline and hotel industries.  It operates in association with the Frequent Traveler Marketing Association annual meeting so that brings a lot of folks in to town for the event.  Most are associated with one of the loyalty programs, one of the retail reward providers (the folks from SkyMall were a major sponsor, for example) or the folks who actually design and build programs and operate them for the carriers (more on that in another post).  And then there was me and about 75 other frequent travelers.  Inside Flyer is kind enough to open up the award ceremony to the travel community at large, and that means I got to attend and rub elbows with all of the above industry professionals.  I was able to ask a lot of questions and even get answers to some of them.  It was very interesting.

Oh, and they gave out some awards, too.  Some of the results were very logical and some were quite surprising.  Here are some thoughts on a few from each of those categories.

In the Americas Alaska Airlines won the award for program of the year.  This was not a huge surprise to me.  Their program is great for folks who fly on a variety of carriers (as long as they are an Alaska partner) and that partner network is pretty broad.  There is definitely value to be had there. 

The surprises (to me) came from the wins in the programs outside of the Americas.  Etihad (United Arab Emirates), Virgin Blue/V Australia (Australia) and Jet Airways (India) all won awards; some of them won more than one.  These programs all seem to have moved away from what would be considered a traditional reward structure in the United States or Western Europe.  Travel rewards are still a significant part of the programs, but the programs are increasingly augmenting their programs by offering retail merchandise and other benefits to their members.  The retail rewards may not have the flash and glamour of long-haul premium cabin rewards (generally the best cash value rewards out there) but they are something that they customers can get with smaller numbers of points, without inventory limitations and generally they seem much more readily accessible. 

Ten years ago frequent flier programs were much more focused on providing incentives to continue or increase travel on a particular carrier, but they were targeted at the folks who were already traveling a lot.  Today the programs have a much broader target audience and that has significantly changed the focus and the types of rewards out there.  And if the results from the Freddie Awards are any indication, the masses are not looking at travel rewards as their main redemption target.  That is good news for the carriers – the retail rewards are generally actually profitable for the carriers to redeem – but bad news for travelers looking for the high value travel rewards.  As more programs shift towards cash-value type reward schemes the premium tickets become ridiculously expensive, even if the inventory is greater.

US-based programs are acknowledging this development in the market in a big way.  Virgin America built their eleVAte program around this concept and every indication I’ve see so far suggests that jetBlue’s new incarnation of their TrueBlue program due out later this year will follow this path as well.  The legacy carriers are rolling out shopping malls, auction sites and and other retail redemption options.  Marriott has long had retail redemption as a prime option for their points and American Express’s Membership Rewards program is geared toward merchandise redemption almost more than they are towards travel rewards.  Things are not moving quite as quickly in this direction for the legacy programs, but they definitely recognize the value of this approach and they are certainly happy to get the points off their books while not losing money doing so. 

Such a shift does pose a significant risk to the programs, particularly the airlines.  For several carriers the best income stream they have these days is their credit card partners and the revenue they realize from selling those points to partners.  Billions of dollars are moving around on those transactions.  Should the public decide that the value of the points no longer justifies collecting them the airlines will suffer as the credit card companies buy fewer and fewer miles.  Of course, with more and more people choosing to redeem their miles for merchandise and the like the risk may not really be so significant.  But it is definitely something the carriers have to account for.

The industry is definitely showing trends of shifting and the proverbial writing may be on the walls, or at least starting to appear.  Of course, in the mean time I’ll still be redeeming my miles for more travel.  After all, I don’t really want more “stuff;” I want the adventures and memories that travel offers me.