Has the horde of hoarders disappeared? When it comes to miles, the conventional wisdom these days among many frequent flyer experts is to “earn ’em and burn ’em.” In the past, frequent travelers could safely save miles and points because they believed they would always be there. These days, members are being advised to redeem as soon as they can. We will look at recent changes in the industry, why experts say to redeem miles as soon as possible, the actual hoarding habits of frequent flyer program members by type, and how the hotels and airlines view hoarding.

What Happened?
As we all know, the airline industry took a nosedive after Sept. 11 when the demand for air travel plummeted. Some of the biggest airlines went into bankruptcy and are only now recovering from the extensive financial losses. One way the airlines employ to make money is to sell frequent flyer miles to partner companies. The airlines sell frequent flyer miles to partners such as banks (for credit cards), car rental agencies and hotels as an ancillary form of revenue. As a result, frequent flyer programs have become quite profitable. Good for airlines in financial difficulty, but not so good for the frequent flyer.

Why Not Hoard?
With mileage-earning credit cards and extensive partnerships, it is much easier these days for members to rack up large mileage balances. To deal with the large number of miles in circulation and the liability of all those miles if the owners decided to cash in for free tickets, the airlines have responded by shortening mileage expiration policies, tightening award seat capacity controls and raising award redemption levels. Because of these changes, many industry experts encourage members to use the hoard sooner rather than later.

Shortening Expiration Policies and Limited Award Availability
Delta Air Lines was the first to shorten its expiration policy to 24 months, effective Dec. 31, 2006 and US Airways went to 18 months in January 2007. Other airlines followed suit and the industry standard three-year expiration policy is now somewhere between two and three years. Alaska Airlines is the latest to shorten its policy from three to two years, beginning Apr. 1, 2008.

The airlines chose stricter policies to eliminate miles in inactive accounts and to help alleviate the problem of too few award seats. United Airlines announced in its press release: “New 18-month expiration policy preserves award seats for United’s most loyal customers and reduces the company’s frequent flyer mileage liability.” Some members responded to shortening expiration policies by spending their miles before they expired. But this isn’t necessary — you just have to be aware of the policy change and the new rules to protect your savings. Something as simple as spending $30 on dinner once every 18 months protects your hoard from expiring.

Even the executives of frequent flyer programs agree that seat availability is scarce. In a recent survey by Jay Sorensen of IdeaWorks, 66 percent of executives in frequent flyer program management agree that seat availability at the lowest award level is “too limited.” While availability may be tight at the lowest level, members have the option of spending twice as many miles for the anytime awards; however, Delta recently introduced capacity controls on its higher level award, following Northwest’s lead. The higher award levels at Delta and Northwest offer more availability, but seat inventory is still limited.

Devaluation
Tim Jarrell, publisher of Fodor’s Travel Publications, says “My first word of advice is to use up your miles. Don’t hoard them — they’re not bank accounts that earn interest.” Airlines and hotels periodically change their award charts and increase the number of miles and points required for an award. For example, United changed its award chart last fall, increasing many award levels. An unrestricted first-class award to Australia jumped to 270,000 miles from 200,000 miles, a 35 percent increase. In response to the changes, Joe Brancatelli, editor and publisher of Joesentme.com, asks, “So now do you understand why I’ve been telling you for years not to treat your frequent flyer accounts like bank accounts?…Use them now or watch them continue to devalue like a third-world currency.”

Hoarding Habits
Despite the changes to the programs and devaluations, are hoarders still out there, squirreling away their miles for retirement or stockpiling for a dream vacation? Yes and no. We found that some frequent flyers burn miles as soon as they earn enough for an award. Others still hoard, but have changed their habits. FlyerTalk member gsw says he is “more apt to redeem miles, and I am more inclined to try to limit miles to my principle frequent flyer program.” And others, the die-hard hoarders, hoard miles because they just want as many as possible. When we asked FlyerTalkers about whether they still hoard and why, we found a few patterns.

Types of Hoarders
The True Hoarder
The die-hard hoarders out there continue to pile up the miles despite the changes and devaluations. They value the flexibility and options that accompany a large mileage account. Randy Petersen, our in-house hoarder, falls into this category. He didn’t reveal the exact size of his mileage balances, but tells us “I don’t fear ‘devaluation’ and am glad to say that if I lost my house tomorrow, I’ve got enough saved up for almost two years of free hotel nights.” He says he isn’t concerned about the perceived lack of available awards because, “If you’re a smart traveler, you can get the award you want.”

The true hoarder enjoys collecting miles and points as much as redeeming them. For a few, the accrual of a large balance is more important than the awards. “I enjoy the chase. I would collect frequent flyer miles, even if I gave them all away,” says gsw.

Dudemon has turned collecting miles and points into a hobby and he checks his balances daily. He has amassed over a million airline miles in seven airline programs and just under 900,000 hotel points in five programs. He tends to redeem miles for big trips, such as a month in Australia that cost over a million miles and points.

The Elite Hoarder
Primarily interested in the benefits of elite status, we encountered more than one frequent traveler who preferred to fly on paid tickets or pay for a hotel room to reach or maintain elite status. The miles and points earned from flying and hotel stays were less important than reaching the perks of status — room and flight upgrades, more reservation ability, recognition and all the other benefits available for elite-level members.

“I value the perks that come with elite status…more than using points for trips/hotel,” says mauld. Some of the elite hoarders are racking up the miles and points to reach lifetime elite status and its continuing benefits. Dcameron says, “I am not worried about how many miles I have in my account at any one time, I am more worried about lifetime miles counting toward lifetime platinum.”

The Dream Vacation Hoarder
Many members fall into this category. They save their miles and points for “The Vacation,” which in many instances includes first class travel. “While many programs have devalued points/miles, I still feel it is worth holding onto the points/miles until I get the award I want,” Johnep1 says. Jlr4travel says he’s proud of his accrued miles and saves them so he can take “some interesting trips. I think my ultimate goal/dream in life is to do an ‘around the world’ trip using frequent flyer miles.”

The “Saving for an Emergency” Hoarder
Most financial planners recommend having an emergency fund to cover sudden unexpected expenses. Some frequent flyers like to have a cache of miles in case they have to travel on short notice when fares are the highest. While you may have to redeem twice as many miles to get an award ticket, it may still be a better value than paying last minute prices. “I’m keeping them for ’emergency’ travel,” says ddc, “I live in the U.K. and my family lives in Australia. If I had to go home in a hurry, I’d have to stump up a lot of cash to buy a last minute ticket. Having the miles gives me at least the possibility of getting a flight at short notice for less than what I would have to pay otherwise.”

The Hoarder by Default
While technically not a hoarder, there are members out there sitting on a lot of miles and points simply because they haven’t been able to redeem them or don’t want to travel. Generally, the default hoarder has an inflexible schedule, like travelergcp who says, “I definitely don’t intend to hoard miles. I tend to want to save them for expensive trips in premium cabins, but inevitably the tight capacity controls on awards, combined with my not-that-flexible schedule force me to hoard rather than spend.” Others, like den1k, end up with a lot of miles and points because they don’t want to travel during their free time, “I just don’t want to travel when I’m not working since I’m always traveling while working.”

While it can be difficult, if not impossible, to redeem for awards to popular destinations during high travel seasons, the airlines have started to promote destinations and list routes that have available award seats. Granted, if you want to fly to Paris and the only time you can go is at the height of the summer travel season, you probably won’t land an award seat. But maybe you will find Lisbon or Zurich intriguing, fascinating cities in their own right and not as popular as Paris, Rome or London. Also, there’s always the possibility of rail travel to get to the city you desire.

And if you don’t succeed on first try, in addition to looking for seats on alternate routings, you can try again later. Airlines frequently release award seats closer to departure, so you might find that an award seat you couldn’t book three months in advance is available three days before the flight (although in some instances, you will have to shell out an additional fee for last minute award bookings).

The Opportunistic Hoarder
The Roman philosopher Seneca is quoted as saying “Luck is what happens when preparation meets opportunity.” The opportunistic hoarder always keeps some miles and points on hand to take advantage of the occasional award sales offered by the airlines and hotels and has been known to get some incredible deals. Like a bargain shopper with cash to spend, this hoarder snaps up the deeply discounted but perfectly good offers that crop up from time to time. Steve Belkin, an avid FlyerTalker, couldn’t resist a 50 percent off award sale to Bangkok offered by KLM and was able to take his two children for only 45,000 miles in business class — a savings of 135,000 miles.

When InterContinental offered its new PointBreaks discounted awards at more than 500 properties, one member booked five nights in Rio for a total of 25,000 points (normally 30,000 per night).

The Retirement Hoarder
Unlike bank accounts, mileage accounts don’t earn interest and when changes are made to award charts that devalue your miles, your mileage account becomes less valuable. Many people look forward to retirement with its promise of endless time to travel. Efrem says, “I’m sitting on a lot of miles, but I’m also looking forward to retirement not too far down the road with vastly reduced opportunities to go somewhere on someone else’s nickel.” Regardless of the devaluation of miles, it might make sense to save them for retirement when you are living on a fixed income and don’t have as much available cash to spend on travel. And who’s to say that award availability will continue to get worse? It might get better.

Greggwiggins is “saving miles just as I put money into my retirement savings accounts, so that when I retire in a few years, I’ll be able to travel freely despite having a lower annual income than I do now.” Saving miles and points for retirement isn’t a bad idea, although it’s not without risk. For those who are building a nest egg of retirement miles and points, we strongly recommend paying close attention to expiration policies and monitoring your accounts to prevent you from moving into our final category of hoarders.

“I Will Never Hoard Again” Reformed Hoarder
Bankruptcies and expirations have left quite a few frequent travelers upset and bereft of their dreams of future free flights and hotel stays. Unlike banks that are backed by the FDIC, airlines and hotels don’t offer any guarantee that your collected miles and points will still be there when you retire — or even next week. In this month’s magazine, a reader asks for help for his predicament — a loss of almost half a million miles on US Airways. While we sympathize with those who lose miles and points to expiration policies, we also know that members can easily prevent miles from expiring. Make sure you know the expiration policies of the hotels and airlines you are members of. If you do end up with expired miles, some programs allow members to reinstate miles and points (sometimes for a fee), but others aren’t so lenient.

Every program has a clause in its terms and conditions that “reserves the right to amend, suspend or terminate the program at any time.” So even if the airline goes into bankruptcy, it has no legal obligation to honor the accumulated miles of its members. Supersonic Swinger tells us, “I use whenever humanly possible, since losing half a million hoarded points when Ansett Australia collapsed.” It’s unlikely that you will lose your miles because of an airline’s bankruptcy, but it does happen.

The Programs’ Response
How do loyalty program managers at the airlines and hotels view hoarding? You won’t find any hoarders at Southwest because after you earn enough Rapid Rewards points, you automatically receive an award ticket in your account whether you want to redeem your points or not — and the award has a set expiration date. The rules are specifically designed to prevent hoarding. Low-cost carrier Frontier Airlines reports they don’t have many members with huge mileage accounts. Like many airlines, Frontier offers award sales and reports that more members are redeeming miles at the reduced rates. When it comes to liability, Mark Dority, EarlyReturns Program Manager, says, “Liability is something that all airlines want to keep a handle on — so in that respect there is a slight impact” when members hoard miles.

The larger airlines, however, offer awards such as around-the-world tickets, superior first class service and destinations to exotic locations that require a lot of miles and inspire members to save. Rick Rasmussen, Alaska Airlines Director of Customer Loyalty, says many of the most active Mileage Plan members save their miles for “once in a lifetime” trips and redeem for first class tickets to Europe, Asia, Africa, Latin America and Australia on partner airlines. He says that hoarding miles “does contribute to growing liability on program balance sheets.”

Liability
Each year, the airlines report to the SEC the outstanding number of miles in frequent flyer accounts or the deferred revenue these miles represent. This information is recorded on the balance sheets as a liability. American Airlines reports the “total liability for future AAdvantage award redemptions for free, discounted or upgraded travel on American, AMR Eagle or participating airlines as well as unrecognized revenue from selling AAdvantage miles was approximately $1.6 billion and $1.5 billion…at December 31, 2006 and 2005, respectively.” The amount of liability the airlines record is substantial and the fewer outstanding miles an airline has on its books, the better.

Tempting Awards
In an effort to get members to spend miles and points and reduce liability, the airlines and hotels are expanding the offerings to entice members to redeem. Many loyalty programs offer online auctions and members can bid on concert and event tickets, travel packages and merchandise. Mileage Plan features a monthly auction on its Web site and a recent package that included business class tickets from Seattle to Paris and a week in a suite at the InterContinental Paris set a record at 901,000 miles redeemed. Etihad Airways recently gave away a two-night vacation package to Brisbane to the winning bidder who bid just over 400,000 miles.

For members who are reluctant to redeem miles for award tickets that don’t earn elite qualifying miles, Mileage Plan offers Money and Miles awards that offer a 50 percent discount for 15,000 miles — and the discounted tickets still earn miles.

Amy Ceriani-Nelson, Manager, Loyalty Programs, says that InterContinental Hotel Group tracks the points balances of all members. She says that knowing the point balance ranges of members helps guide redemption offerings. The hotel program offers items at a full range of point values, from CDs and DVDs to a Personal Shopper, as well as periodic redemption sales. And while many programs are tightening expiration policies, Ceriani-Nelson reassures members: “We know that our members very highly value our ‘no point expiration policy’ and, recognizing this, do not intend to alter it.”

Air Canada Aeroplan members can now redeem miles for music for 6,000 miles for 50 songs and United Mileage Plus just opened up its Merchandise Rewards program to all members through Dec. 31, 2007. Members can redeem for merchandise such as 141,500 miles for a Canon Camcorder and 72,000 miles for a KitchenAid Espresso Machine.

Hoard or Spend
Devaluation and tighter award capacity exist, but does that mean you need to run out and spend all your miles? As long as you are aware of the changes and know the risks, it still makes sense to save your miles for an award that matches how you value your miles. Free travel during retirement may be more valuable than the devaluation caused by higher award levels. And the peace of mind that comes from having some miles in your account to use for an emergency may be worth it. We agree with sbrower who hoards less than he used to, but still saves them “for occasions when I think that the miles are a better use than the cash.”