Beating up on the loyalty programs

I always enjoy reading Chris Elliott’s columns, sometimes because they are really good and sometimes because they are entertainingly bad. He writes them weekly and is syndicated in a number of papers around the country. And his attitude is always a bit, ummm, aggressive towards folks who express extreme loyalty to travel providers. This week’s column is no different. He attacks the concept that the loyalty programs can provide a return on the investment that the members make and even goes so far as to attack a couple airlines for their behavior with regard to their programs.

One of my favorite bits is where he brings in a “consumer advocate” to educate his readers on the fact that the loyalty cards often have a higher interest rate for folks carrying a balance. This isn’t at all new news, but apparently there are enough people blinded by the allure of those free trips all over the world that they are willing to pay extra – a TON extra, really – simply to earn a few points. Those are the people who need the sort of advice that Chris is offering. I wonder if they read his column.

The end of the article, however, drops off quite badly. Elliott cites a couple examples of instances where the airlines provide shoddy service as examples of why loyalty is bad. Should the airline refund a service fee if they cannot actually provide the service? Absolutely. Is their failure to do so a reason to not collect miles? Not that I can tell. Amazingly, he actually continues that same example to suggest that having sufficient loyalty to actually get status on an airline is a bad idea. The only problem in his logic there is that the fee in question is not waived for folks with status. Would someone with status be treated better in that particular scenario? I’m guessing probably not, actually. Does that mean having status is a waste? Again, not usually.

Knowing what you are getting and being rational about it is important. Simply giving up on any loyalty schemes at all because all the airlines have craptacular service these days isn’t the solution. Knowing how to focus your efforts so as to be in a position to get better service is. If I’m traveling that much anyways, you’d better believe I’m going to see if I can get more out of it than just the actual transportation. Maybe not a ton more, but if I can – and, most importantly, if the opportunity cost of that gain is lower than its cost – then I’m absolutely going to go for it.

Incidentally, I’ve accrued over 50,000 elite qualification miles on my primary carrier so far this year; I’m halfway to the top tier qualification level. But I haven’t really been flying them all that much. I’m not willing to pay the higher fares they’re charging. So I fly with partners and credit the miles there. Elliott might not think that there is a rational way to approach the situation but I’m pretty sure I can prove him wrong. Or, as I mentioned to him in an email conversation leading up to this week’s column (none of which was used in the actual column):

For folks who are travelling shorter hops and less frequencies the loyalty doesn’t pay nearly the same returns. For a lower-tier elite the benefits are very thin and they’re probably spending proportionally more of their travel budget on loyalty than they should be, especially with the limited return on that investment. And for the non-elite the benefits of loyalty are almost zero. Sure, you might eventually accumulate the miles for a reward over multiple years or through credit card transactions, but at what cost versus other schemes, such as cash back or other affinity programs?

Giving too much value to the points is a terrible mistake, one that the airlines and hotels and credit card companies have worked very hard to ingrain in the fabric of our society. At dinner the other night I was sitting at the bar and watched as the bartender rang up every tab. Card after card after card passing by and EVERY SINGLE ONE was an affinity card. I really hope all those folks are actually getting value back in excess of what they’re spending. I’m guessing they are not, at least not all of them. But I can hope.

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.