What Do You Think of Revenue-based vs. Mileage-based Programs?

Discussion in 'General Discussion | Miles/Points' started by Darcie, Feb 16, 2012.  |  Print Topic

  1. Darcie
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    Darcie Silver Member

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    We are comparing revenue-based (Southwest, JetBlue, Virgin America) to mileage-based programs (American, United, Delta, etc.) for the April cover story of InsideFlyer and would like to know what you think about the two different types of programs.

    Do you prefer to earn and redeem miles/points based on the fare cost of the ticket or distance flown?
     
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  2. Sean Colahan
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    Sean Colahan Gold Member

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    I much prefer the legacy carrier way of frequent flyer miles...based on distance flown as opposed to revenue spent. This allows me to redeem for flights I wouldn't otherwise be able to afford and stay loyal to an airline. If they were based on how much I spent I would have to reconsider my loyalty to a single airline/alliance.
     
  3. cvarming
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    cvarming Silver Member

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    I am a fairly infrequent flyer that travel on my own dime. The mileage I get from the "mileage based" programs that I participate in is so much more rewarding than the "revenue based" programs. If I traveled on somebody else's dime then I am sure I would feel differently about this.
     
  4. JetsettingEric
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    JetsettingEric Silver Member

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    I like how american has a combination of both. If you're flying last minute in premium cabin you have one method and if you're flying long distances on cheap fares you have another.

    It's always a delicate balance and I feel american has done it well.
     
  5. PhlyingRPh
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    PhlyingRPh Silver Member

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    I agree and would like it if the other airlines also emulated this type of a loyalty program.
     
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  6. gleff
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    gleff Co-founder

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    None of the revenue-based programs offer truly attainable aspirational awards. They suffer the Greyhound Road Rewards problem (where 10 bus trips gets you.. a free bus trip).

    Mileage-based programs from alliance or network carriers offer the possibility to travel that one couldn't normally afford on their own. There's a pot of gold at the end of the rainbow, it isn't just a rebate punch card.
     
  7. jbcarioca
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    jbcarioca Gold Member

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    While I suspect all programs will retain some aspects of both I regard a revenue-based model as inevitable and desirable. The airlines do this to make money and the most money spent should have the best rewards.

    I do think the redemption models should allow any class, any times, with variable pricing. SQ, for example should permit Suites on awards. The price would be sky-high, but so is the product. In that respect i think the DL SM model is a decent one in that, for a price, any flight is available. If a revenue model rules then it needs to do so on both sides of the equation. No blackouts!
     
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  8. gleff
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    gleff Co-founder

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    They do, and it is! :)

    Ever seen an award price out at about a million points roundtrip? ;)
     
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  9. jbcarioca
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    jbcarioca Gold Member

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    Oops. They did not the last time I tried. I was expecting to spend roughly a million points and had them to spend. That would have been about $20,000 at my point valuation vs the then fare of $29500. I just priced the identical routing and got $14, 659. Thus I now must confess that, as always, you have it absolutely correct.:) So, this discussion is now about price and not availability. The good news is that the suites fare GRU-PEK is roughly the same as an RTW *A fare without requiring all the extra stops. Generally I have been using RTW for these trips.
     
  10. MSPeconomist
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    MSPeconomist Gold Member

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    I think it should be mileage based but with some extra miles for more expensive tickets. I like the DL model with 100% for most coach fares but 150% for M B and Y coach fares plus business and FC. This is simple but does reflect revenue too. Basing it on miles is just more fun than keeping track of money spent and seems more fair given that many expensive tickets are not paid by the traveler. To some extent, miles flown are a measure of pain!
     
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  11. javacodeguy

    javacodeguy Gold Member

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    I definitely prefer the mileage based model. My main reason is that it allows me to be in the same group as big time corporate fliers. I fly a lot, but since it's mainly leisure I can book weeks or months in advance to find the lowest fare. If the frequent flyer program was revenue based there is no way I would be able to compete with corporate fliers that pay mainly last minute or full fare tickets.

    The main reason I could see airlines preferring the revenue model is that it allows less gaming of the system and more fairly rewards those who benefit the airline more. For 100k miles a corporate flier might spend 5 times what I spend in a year. But, in the current system I'm in the same pool as them since status and rewards are just based off mileage.

    I'm sure people like me are not the norm and that most 100k mile fliers are also high spenders. The airline has to weigh people like me into the equation. I fill cheaper flights on the weekends and stay loyal to them because of the mileage based rewards and status.

    I think this is a good move and I'd like to see US Airways follow on this. Full fare Y should definitely be earning the COS bonus. Quite often I'm sure my A restricted first ticket is cheaper than someone's Y unrestricted coach.
     
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  12. DCtrAAveler
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    DCtrAAveler Gold Member

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    As a leisure traveler who could never really 'compete' in a revenue-based system since there's no corporate/business structure 'subsidizing' my travel, I'd have to say I prefer the mileage-based systems of the legacy carriers.
     
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  13. DTWBOB

    DTWBOB Silver Member

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    If you're looking at airlines you should also look at what the hotels do, consider for example the earnings style choices you can get at Hiltons -- and some of us change our earnings style between stays.

    A second topic that needs to be covered is how difficult is it to use miles and do the segments you get when you use them count.

    DTWBOB
     
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  14. Wandering Aramean
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    Wandering Aramean Gold Member

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    But is this a function of the accrual method or the partners? I believe it is the latter and that is an issue that the programs are, albeit slowly, resolving. VX points can be used on VS. Sure, I don't think that it is a great product, but flights to Australia, SE Asia, India, Africa and Europe in the pointy end of the plane certainly should qualify as aspriational awards, right? B6 is in the process of linking up with HA for FF reciprocity. For many people Hawaii is an aspriational award, and HA also has service to Asia and the South Pacific.

    The partnerships that these newer programs have are less robust right now but that doesn't necessarily mean that revenue-based programs are unable to provide aspirational awards. After all, even when B6's TrueBlue program accrued points based on distance traveled they still didn't have partners.

    And let us also not forget that for many people the aspiration is simply an extra trip to visit family, not necessarily to travel around the globe. It is somewhat presumptuous to project our travel desires on to others.

    Ultimately I think that the answer to this question will necessarily vary based on how your paid travel normally runs. If you're flying on full-fare tickets then the value proposition of a revenue-based program is much higher. If you're traveling on a tighter budget then it is clearly better to have a distance-based program where the cheap seats can have their value increased through the redemption process. And I'll toss the CC-earning folks in with the discount fare folks; they, too, are benefiting from the arbitrage spread on their CC spend in most cases.

    I'm willing to bet that no one in this thread is going to vote for the revenue-based program personally. There is a natural bias of the sample set here. ;)
     
  15. MSPeconomist
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    MSPeconomist Gold Member

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    A reason for not going to a revenue based system to generally reward the corporate travelers more is that frequently they do not control the choice of airline so there is no reason to give them an incentive to pick a particuar carrier.
     
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  16. Sweet Willie
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    Sweet Willie Gold Member

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    +1 NO DOUBT !
     
  17. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    I thought the question posed in this thread was similar to going into a bar and asking the patrons: what do you prefer on the menu here, beer or lemonade?
     
  18. RestlessLocationSyndrome
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    RestlessLocationSyndrome Silver Member

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    I like both since I utilize the strengths of each individual program and earn points based on the trips that I expect to take in the future:
    • With mileage based, I accumulate miles to use for more aspirational travel that is quite expensive to purchase (e.g. first and business class from US to Asia).
    • With revenue based, I accumulate the points to use for inexpensive travel that makes little sense to use miles for (e.g. LAX to SFO, LAS, PHX on WN).
     
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  19. firstglobal

    firstglobal Silver Member

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    When it comes to earning qualifying miles, this is exactly how I feel. AA's system feels very punitive for the times when you do end up purchasing cheap fares. The way DL handles class of service MQMs is one of the few things I really like about their program.

    That said, my problem with revenue-based programs isn't the earning side, it's the redemption side. I love redeeming miles at ~7cpm knowing that the only reason this is sustainable is that most people are redeeming at ~1cpm. If all redemptions were a fixed value, this game would no longer be any fun.
     
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  20. MSPeconomist
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    MSPeconomist Gold Member

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    True, but I think it's even worse. Since expensive airline tickets tend to be purchased by business travelers, many of whom do not choose their airline, giving this group more rewards tends to waste resources that could be better used to create incentives for people to purchase (profitable) tickets from the carrier. From this perspective, it might be OK to give less than 100% miles for very cheap fares, but putting too many of the program's resources into those buying the most expensive tickets is wasteful because this group includes those whose corporate travel policy dictates their choice of carrier or insists on the cheapest or best scheduled flights.
     
  21. jbcarioca
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    jbcarioca Gold Member

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    You lost your bet. I am one who favors the revenue based system. I suspect most of us who favor such a system are not posting in this thread, though.
     
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  22. gleff
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    gleff Co-founder

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    I believe it's harder to conceal the amount of consolidator discount inherent in providing unsold inventory 'on the cheap' as part of a loyalty program, so a miles-based program is inherently better for pairing rewards with deep discounted premium cabin travel.

    Which isn't to say I'm against rewarding revenue, I'm hugely in favor of big miles bonuses for paid premium cabin travel.

    Just not a fan of straight points-per-dollar-spent. I like that the programs are a bit obscure and convoluted and believe that both carriers and consumers benefit frmo that, it's the Straussian in me.
     
  23. jbcarioca
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    jbcarioca Gold Member

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    :D:D:D What a surprise, coming from you. Who would have imagined??
    Truthfully I doubt there will be a program that you and our other guru's will not find ways to manage to our favor.
     
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  24. tondoleo
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    tondoleo Gold Member

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    The issue is simple. These are loyalty programs. That is why they are not revenue based. It is the consistently repeating business traveler and mile runners that provides the most dollars to the companies.

    The reward for the travelers who are infrequent and provide large revenues is they get to be in J or F and receive those benefits that are paid.

    For travelers like Mr. jbarioca no airline or hotel could possibliy compete with his reward that is the immeasurable pleasure of loaning to Kiva.
     
  25. desamo

    desamo Gold Member

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    Even (at least most of) the mile-based systems have revenue-based adjustments, though. I prefer the mile-based ones. I'd have to look how much I spent on airfare last year, but it wasn't gobs. On the other hand, because I now have the lowest-rung of elite status because of that flying, I'm more loyal to my airline than I would be otherwise.
     

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