For now, the industry's biggest task it to make sure that Millennials don't completely disengage and abandon loyalty altogether.
Editor’s Note: Skift’s Business Traveler newsletter is now the Business of Loyalty newsletter.
In this weekly missive, we’ll bring you the same insight into what matters most to the people who travel for a living, but now with an added focus on how airlines, hotels, and credit card programs battle for their attention and their business — a points geek with a Ph.D. of sorts.
While we are still looking at how these moves impact the consumer, the focus is on what the industry is doing to win their loyalty. The newsletter is being written by Grant Martin, who you’ve come to know as the author of our Business Traveler newsletter over the last three years. He’ll be able to take advantage of contributions from Skift editors including Brian Sumers (airlines) and Deanna Ting (hotels) in order to better explain what’s happening with loyalty right now. We hope you’ll stick with it, and we promise to never devalue your reading experience.
“Loyalty is dead. Long live loyalty,” was the first response to news that Skift was launching a loyalty newsletter last week.
It’s a fair statement for a large part of the traveling population — particularly those who focus on budget travel. The last three years have brought great dilution to loyalty programs in the travel industry, which has evolved to focus more on revenue than actual time spent on an airplane or in a hotel.
For higher spend travelers that may be okay, but for others, including those who are forced to buy the least expensive fare by the travel desk or those simply traveling for pleasure, the perks of loyalty are now harder to find. And millennials, who are now just maturing into management and traveling in a larger segment, are getting the shortest end of the stick.
Indeed, for most younger travelers it often does make little sense to aim for elite status — much less top tier elite status — in an airline or hotel loyalty program. Nearly halfway through the year, business travel on my favorite carrier, American Airlines, has me at 67,000 out of 100,000 miles for top tier Executive Platinum status but only at $5,300 out of $12,000 spend — and that’s with several business trips to Asia already in the books and a very unhappy fianceé.
While I’m sure that I’ll reach top tier status this year, others have completely given up. This past week, Matt Kepnes, who runs the Nomadic Matt blog, wrote 1,600 scathing words on why he’s no longer loyal to American. The comment section of that post is full of similar reports. Aviation reporter Brian Sumers doesn’t even bother and insanely flies Frontier everywhere.
Skift’s Portrait of the Millennial Traveler 2016 backs this up. While a small segment of Millennial travelers like myself are finding success in travel loyalty programs, most are adrift, focused on just getting from point A to point B.
This tectonic change is what’s causing many loyalty programs to change the way they approach younger travelers. Knowing that most Millennials aren’t interested in saving up for grand scale rewards or top-tier status, programs are now looking more towards smaller-scale rewards and experiential redemptions in which younger, points-poor travelers can participate.
Other programs, especially in the airline space, seem to be going in the other direction. Back at American Airlines, the AAdvantage program has taken serious heat in the last months for tightening up award space and jacking up prices for mileage tickets. Flush with cash from a strong few years for the industry, it seems that airlines have little need for loyalty programs these days.
Even so, if airlines and hotels can keep the attention of the Millennial segment, there are still deals to uncover. Alaska Airlines, through either the marketing or the customer retention department (see: its merger with Virgin America) is currently racking up awards for having the best airline loyalty program in the country. And despite the Starwood – Marriott merger, travelers still seem to love both loyalty programs.
Given a relatively strong travel economy, it may be a few years until the industry comes crawling back to younger travelers in full force.
The Big News
For our latest report we go really deep on hotel loyalty to better understand where hospitality brands are at right now.
For today’s hospitality brands, loyalty programs are as much about repeat customers as they are about controlling distribution costs. Often times that means strategy at the property level, rather than at the brand level.
Skift Stories and More Expert Insight
Alaska took one step closer to the Oneworld alliance by kicking off a partnership with Finnair this week. It already has a strong relationship with American, another Oneworld partner, as relations with Delta continue to cool.
Some of the perks are impressive, but UBS may have some trouble challenging Chase and American Express. Both competitors offer serious value to cardholders seeking free travel. And each has been in the high-end business longer than UBS. Plus, Chase and Amex have lots of airline partners.
Sometimes it’s easy to forget that the U.S. isn’t shorthand for the whole world. The fragmented market in Europe and elsewhere makes it much harder for hotels to try and increase direct bookings.
A BMW X3 SUV or a Toyota Corolla? OK, airline travel and related perks, such as those for car rentals, just aren’t fair. But leisure travelers aren’t storming the barricades anytime soon.
AmEx is giving free Blade (helicopter service) gift cards to some lucky Platinum cardholders. No dice so far for Skift’s Loyalty team.
Air Canada and its loyalty program are not on the best of terms right now.
Incentives for transcontinental travel keep heating up.
American Airlines has a new lounge for ultra-premium passengers at JFK. Good luck getting in though.
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Photo credit: Hilton's app allows loyalty members to use keyless entry at some properties. Hilton Worldwide