What are some of the “myths” regarding frequent flyer and hotel loyalty programs that you would like to debunk?
That everyone should participate in a program. As a consumer advocate, I help many travelers who obediently give all their business to a single airline or hotel, hoping to achieve elite status. They often spend more money for an inferior product. In the end, only the company benefits. Truth is, loyalty programs only work for a small percentage of very frequent travelers. I can’t blame anyone for wanting to be treated with a little dignity, so I definitely understand mileage addiction. But often, their loyalties are misplaced. The other big myth is that loyalty programs are always a win-win, allowing travel companies to reward their best customers. That’s a marketing department lie. Rewards programs are created to enrich companies and their shareholders. And there are losers. When the programs aren’t profitable enough, companies simply move the goalposts, frustrating hundreds of thousands of program members.
As a consumer advocate, what do you think members of airline and hotel loyalty programs should know about these programs?
I think most program participants aren’t aware that, in a sense, airlines and hotels of the past don’t exist anymore. They are loyalty companies who happen to also run airlines and hotels. For example, North American airlines earned $10 billion from their frequent flier programs in 2014, on estimated profits of $11.9 billion. Take away their loyalty programs — subtract all the money they’re earning by selling miles to banks, credit card companies and you — and they’re much less profitable. The tail is wagging the dog.
On your blog, Elliott.org, you’ve discussed the idea of regulating loyalty programs. What types of regulations could be beneficial?
I believe in a free market, but I also believe sensible government regulation is essential. At a minimum, airlines and hotels ought to have strict disclosure requirements for program changes. They need to give us fair warning when a change is coming. And we need to clear up the issue of points ownership once and for all. Who do the rewards belong to? Look at the terms of your program — they’re not yours. They should be. Points and miles are a form of legal tender, and it’s definitely the government’s responsibility to regulate a currency. Loyalty programs today remind me of the hyperinflationary German Mark during the Weimar Republic. Trillions of worthless, unredeemed miles sit there, waiting to expire.
What are the most common complaints you hear from airline travelers and hotel guests about their miles and points programs?
I get a lot of complaints about the goalposts being moved on programs and expiring miles. My readers often believe that if they are loyal to an airline or hotel, that will be reciprocated. They’re shocked when they discover it’s a one-way street.
What steps can airline and hotel customers take to get the most from their airline and hotel program memberships?
I think understanding the basic economics of loyalty programs, and seeing the big picture, is critical. You’re not getting a “free” ticket to Hawaii — either you or your employer are paying for it. Probably overpaying for it, actually. Every time you plunk down your card, you’re propping up a system that, in the end, probably will not reward most participants. Think about it. When you stop spending like a pirate, you’ll be banished to the back of the plane, if you can afford to travel at all. Do you really want to live in a world of overpriced travel and substandard service? I’m fighting for a fairer travel industry where all consumers are handled with dignity and respect. Participating in a loyalty program shouldn’t be a prerequisite for being treated well.
Do you have any other recommendations for frequent travelers?
Look, I’m a passive participant in several loyalty programs and I love my Starbucks gold card. I’m on my third espresso right now! So I understand a thing or two about loyalty. But I would warn against loyalty for loyalty’s sake. Be reasonable. Consume in moderation. Understand your place in the travel ecosystem, and that for every lie-flat seat that’s installed on a plane, there are probably two rows of no-legroom economy class being bolted into the back. When airlines and hotels separate their best customers from the rest, it gives them a license to treat the vast majority like cargo. By adding a little reason to your participation in loyalty programs, you can stop the madness.