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Travel and Expense Management

The Price of Loyalty

“Can I still earn frequent flyer miles and hotel points when I use Rocketrip?”

That's one of the questions we get asked most from travelers, along with, “You’re telling me I can get paid for saving on my business trips?” and, “No really, what’s the catch?” (For the record, that’s exactly what we’re saying, and there really isn’t a catch.)

It’s very common for Rocketrip users to earn frequent flyer miles and hotel points on the same trip that they get rewarded for beating their budget. Rocketrip Points are a complement to loyalty programs, not a substitute.

Many Rocketrip users collect rewards just for picking low-cost options offered by their preferred travel providers. For example, a member of the United MileagePlus and Starwood Preferred Guest programs might choose to take a cheap early-bird flight, or stay at the Sheraton instead of the Westin. Other travelers are indifferent to brands, and simply book the lowest-priced option to maximize their Rocketrip earnings.

Frequent flyer miles, hotel points, and elite traveler status have traditionally been key considerations for business travelers. However, these perks have to be evaluated in the context of a trip's cost, convenience, and whether it fits within company policy.

The calculus is changing, and there's evidence that the importance of loyalty programs is diminishing due to a range of factors, from consolidation within the airline industry, to the ease of online comparison shopping.

Not all Points are Equal

There are a few differences between the rewards you earn from Rocketrip and those you earn from an airline or hotel.

For one, Rocketrip Points are effectively cash. They can be redeemed at par value for a wide range of gift cards and cash cards, not just for flights or hotel stays.

The second difference has to with how each type of point is awarded. Rocketrip passes back a percentage of whatever you beat your budget by. (That percentage is determined by each company, and generally falls in the 40%-50% range.) For example, a user who books their trip for $100 less than their budget, will usually earn $40, or 400 Rocketrip Points. In practice, Rocketrip users who beat their budgets do so by more than twice the amount in this example, and take home average rewards of $119 per trip. On the most fundamental level, Rocketrip incentivizes business travelers to be cost sensitive, since the less they spend, the more they’ll earn.

Travel loyalty programs are meant to decrease cost sensitivity. Airlines give out frequent flyer miles and elite status to keep travelers coming back, even when another airline might offer a cheaper fare. As Fortune Magazine notes, and as any frequent traveler can attest, “airline mileage programs are designed to be psychologically attractive, even addictive, to customers.” Once you join a program you’ll need to hit minimum spending amounts to attain elite status, so there’s a strong disincentive to ever fly with another airline, or even check their prices. This is especially true for business travelers. If the company’s paying, why bother?

There’s something to that logic. Companies care about the cost of travel, but also about the comfort of their employees. The perks of loyalty programs have understandably come to be seen as a type of fringe benefit that an employee earns for spending time on the road.

Unfortunately for business travelers, new rules being put in place by airlines and hotels mean loyalty counts for less than it used to.

When Miles Don't Measure Up

Recent changes to airline loyalty programs have rendered the term “frequent flyer miles” something of a misnomer, while also reducing the benefit of these programs to travelers.

This year Delta and United announced they were switching to a revenue-based award system. Under this model, which is now used by almost every major carrier, travelers earn points based on how much they spend: the frequency of travel and the number of miles flown have no direct impact.

The way points are redeemed has also changed. Loyalty awards are now being priced dynamically like all other tickets. The number of miles required for a ticket will constantly change based on destination, projected demand, and the cost of the ticket in dollars.

On its own the move from a mile-based, fixed reward system to a revenue-based, dynamically-priced one is value neutral: some tickets will cost more reward points than they used to, and some will cost less. But the move comes at a time when airlines are making it more difficult for travelers to check on the value of their rewards, and there’s some worry that this decrease in transparency is an attempt to cover-up point devaluation. Delta, for instance, caught travelers' ire by removing its reward chart from its website.

Speaking to Bloomberg News about the change, Jason Steele, a freelance writer in Denver who blogs about the travel loyalty industry, compared it to shopping at a retail store where prices are shown only at the cash register. “It’s really a punch in the stomach to a big [mileage] fan when they replace the reward chart with a question mark,” Steele said. “Now, overnight and with no notice, all the price tags are gone and the currency is worth whatever Delta says it is.”

In that same article, Tim Winship, editor of FrequentFlier.com, voiced skepticism about the value of frequent-flyer programs:

“I don’t want to say they’re worthless, but they are certainly worth less. I can certainly foresee a day when average travelers knock consideration of frequent-flyer miles down to the very bottom of their list, and they buy on price and let the frequent-flyer chips fall where they may.”

The Sad State of Elite Status

For some travelers, the real appeal of loyalty programs isn’t the chance to earn an occasional free flight or hotel stay. It’s elite status that matters most. When you’re on the road all the time, the benefits of early boarding, access to TSA fast lanes, premium upgrades, and dedicated customer service are worth their weight in gold - or platinum, or diamond, or any of the other precious materials by which airlines categorize their most valuable customers.

However, this special treatment is becoming decidedly less special due to a phenomenon known as “elite bloat.” Airlines are adding more levels of elite status, while raising minimum eligibility requirements. This is, in part, a result of industry consolidation. For instance, following their merger, American Airlines and US Airways combined their loyalty programs, making each status tier a bit more crowded. AAdvantage members found themselves lumped together with refugees from the Dividend Miles program, and like new step brothers who are forced to share a bedroom, no one seemed to be happy about it.

There are more elite travelers than ever competing for those cherished free upgrades. What’s more, there are fewer free upgrades being given out, because airlines are increasingly able to sell out their first class cabin inventory as they limit capacity and introduce new merchandising strategies.

How to Be a Travel Free Agent

All this means that staying loyal to one airline won’t get you as far as it used to. The same, sadly, is also true of hotels. Still, there are a few things that you can do to make sure you’re earning maximum rewards from your travel.

1. Get Carded

If you spend any time perusing the amazingly extensive body of online literature devoted to loyalty points, you’ll quickly come to realize that the best way to rack up travel rewards actually isn’t to travel. By far the most efficient way to earn free trips and elite status is to leverage your credit card spending.

Some of the best regarded cards, such as the Chase Sapphire or Capital One Venture cards, offer rewards that can be used at a wide range of airlines and hotels, so you won’t be stuck with only one redemption option. Research what card best fits your needs, and be sure to take advantage of all it has to offer. Many cards offer generous sign-up promotions that are worth the price of a round trip plane ticket.

2. Earn DIY Elite Status

Some of the perks showered on travelers with elite status are available to mere commoners, provided they use workarounds like these.

  • To cut down on your wait at airport security, sign up for the TSA Precheck program.
  • To relax in comfort during long layovers, use LoungeBuddy to buy day passes to the private airline clubs.
  • To get VIP treatment at any hotel, consider using a personal concierge app like Fetch or Ryze. You might also be eligible for complimentary guest perks offered through your credit card.

3. Prioritize Savings

At Rocketrip our position is that there’s no such thing as the right trip to book - just the one that works best for you. Generally we find that people who want to maximize the perks they earn when traveling for business should prioritize beating their budgets over chasing miles and points offered by specific airlines and hotels. Most Rocketrip users keep 40 cents of every dollar they save on their trips. By comparison, most frequent flyer miles have an equivalent value of under 2 cents.

In practice, this means the money you get from Rocketrip by saving on your flight and hotel will almost always exceed - by a significant margin - the potential difference in loyalty points you’d get by picking a more expensive option.

All Tags: Airlines, Travel and Expense Management

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