Randy Petersen's Opening Remarks – May, 28 2008

Randy Petersen's Opening Remarks – May, 28 2008

By the time you read this, voting for this year’s Freddie Awards will be completed. And here at the House of Miles, we have been totally blown away by the turnout. While I don’t yet know the final tally, it looks like it will easily exceed 500,000 voters. Never in my wildest dreams would I have guessed that many frequent flyers would want to tell the world how they rank frequent flyer programs. We’ve had several record setting days of voting, including one that saw nearly 80,000 frequent flyers place their votes for the best programs. The Freddie Awards turn 20 years this year and I hope you’ll join us in person in Phoenix on April 24th for the announcement of the winners. Or you can wait until you receive the May issue of this magazine to find out which programs reign supreme.

Now, turning our attention to the always controversial topic of award availability. Another year has gone by, and while the critics of these programs continue to moan that frequent flyer programs are cutting back the number of award seats available, the facts continue to point in another direction. There will be those who say I’m soft on the topic, but I’m constantly guided by facts. For instance, based on a preliminary review of award redemption stats from 2007, it looks like awards redeemed actually increased just over seven percent throughout the industry. Not bad for “cutting back.” And there are other signs that the industry is really working on improving transparency and increasing the number of ways in which members can use their miles and points, while eliminating some of the roadblocks.

Let’s take a look at hotel programs to begin with. Since last month’s issue, a major announcement was made by Hilton HHonors to eliminate all blackout and capacity control restrictions for all members on standard room award redemptions. This change is not to be taken lightly, after all, Hilton has nearly 2,900 properties. Previously only Starwood and Choice had similar program benefits, with Starwood being the key beneficiary of the marketing wars among hotel programs. Starwood has nearly 900 properties and that is a sizeable difference. What amazes me is that Hilton HHonors made the change without diluting its popular Double Dip. I know that when I do my own math, it’s pretty tough to deny that points and points for the elite member paying with a Hilton credit card is mighty rich. While it appears that Hilton will still keep in place its Extraordinary Demand Dates policy at hotels and there is still some confusion over the room definition of “standard” vs. “deluxe,” this is truly another move in the right direction.

Shortly after the Hilton HHonors announcement was made we noticed some very interesting surveys being offered by IHG Priority Club, which usually is right on with innovation and many bonus offers. The survey we saw was asking for members’ thoughts on: cash+points redemptions, status/benefits honored at other hotel chains (with 300-400 hotels), ability to pay for status (current offer), points for staying at Hilton/Sheraton, customizing your benefits, immediate benefits for guaranteed increases in stays, and discounted close-in award bookings. Truly there is plenty of movement among hotel programs in the direction of increasing award redemption transparency and options — not, as some say, in reducing them.

Which brings us back to frequent flyer programs. Last month we peeked at Delta’s upcoming award redemption strategy that includes paying with miles (again, similar to that of United’s Choices program, which has no capacity controls on award redemption). This month, Northwest WorldPerks is rolling out something called PerkChoice that not only eliminates some of the problems members face when redeeming awards, but also lowers award redemption thresholds.

For example, now WorldPerks members can redeem for a domestic award even if they only have a mileage balance of 12,500 miles, instead of 25,000 miles. As well, it gives members more flexibility. For example, if PerkSaver (discounted award) is sold out on your desired return flight, you can combine it with a revenue ticket rather than using PerkPass (“rulebuster” award). The major problem with awards is not that they are unavailable, but rather that a segment of the award is not available. PerkChoice identifies the bottleneck and allows you to get around it without having to pay double miles.

Here’s an example of how PerkChoice might work. Let’s say that the cheapest roundtrip price DTW-PHX is about $200 but that awards aren’t available. With PerkChoice, the WorldPerks member would either pay: 12,500 miles + $100 (on flights where PerkSaver inventory is available) or 25,000 miles + $100 (on flights where only PerkPass inventory is available — so the cash is being combined with one half the miles required for a PerkPass ticket). Hey, it’s better than having to spend 50,000 miles isn’t it? Think of all those members who have between 12,500 miles and 24,999 miles who never had anything of value with the program. This is a departure from WorldPerks popular “cash&mile” fares as it is completely flexible and dynamic, and available in all Northwest markets. This is the new face of miles. Maybe, just maybe, the airlines are starting to come around on this topic.

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