Loyalty Programs Still Show Some Life for Decimated Hotels and Airlines

With so many people housebound, you might assume travelers have ignored their loyalty programs. But that's less true than you might think:  loyalty programs are still showing some activity, which is good news for cash-starved airlines and hotels.

Many travelers have been continuing to buy frequent flier miles and hotel points. Between the start of February and the end of March, travelers bought more than 100 million points and miles a day, on average, according to Points, which runs loyalty currency sales for more than 55 airline and hotel loyalty programs.

What Points won't offer up is how that 100 million compares with an average two-month period. A spokesperson declined to disclose a number that would serve as a way to gauge the activity during the coronavirus crisis.

Just the same, airlines and hotels have been coming up with creative loyalty efforts to both keep customers engaged and also to smooth out their finances during the crisis.

Take the case of Frontier Airlines, a U.S. budget carrier. Frontier this week ran a promotion, with the help of tech vendor Wyng, that let some customers exchange their flight credit for Frontier Miles. Offers varied, but in one case, converted $2,880 in flight credits into 80,000 miles.

Why do this? Frontier is like many airlines in that it has a burden of vouchers for future travel that it has offered customers due to canceled flights. The credits are better for Frontier than cash refunds by helping the airline preserve short-term cash. But the vouchers still weigh on the carrier's financial books.

A credit voucher increases expenses. But companies typically treat loyalty rewards as a promotional expense that reduces revenues instead. The latter choice may make an airline or hotel's financial position look better to investors.

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Loyalty Programs Help Suppliers

Loyalty points often cost less for travel suppliers than cash rewards. An airline could, in effect, reduce the value of miles or their redemptability, if needed later.

Skift has noted that frequent flier programs can bring some relief to struggling airlines in other ways, too.

Some airlines are likely to ask banks to pre-pay for miles that the banks could use to tempt consumers with credit-card offers after travel resumes. In return, an airline would pledge its frequent flyer program as collateral. A case in point: Chase in 2008 made $600 million in advanced mileage credit purchases of United's miles to help the cash-strapped carrier.

A travel company could also sell a loyalty program to earn cash, as some airlines, such as Air Canada, have done in the past.

United, Marriott, and other travel suppliers have also been letting program members donate miles and points to coronavirus-related charitable efforts. That saves travel companies money, too.

If you think travelers have stopped caring about their loyalty miles and points balances during the crisis, think again. In its study published Friday, Points found that promotions drove the average transaction size purchase or sale of miles or points by members made during February and March. American Airlines was one of a few major airlines that offered generous mileage bonuses for people who bought miles in recent promotions.

Yet in an alarming trend, some members of loyalty programs with elite tier status have taken to social media to complain. They feel brands have failed to provide special treatment during the crisis. Some elite travelers expected faster customer service response times. others wanted greater flexibility for rescheduling travel.

Customers expect brands to recognize their high-spending value in exchange for being brand advocates, warned Collinson, a customer benefits and loyalty company. Bad experiences can signal a limit on loyalty value, it argued.

Tech vendor Points argued there's an opportunity for airlines, hotels, and other travel suppliers now. Loyalty members are looking to buy miles and points to reach redemption goals in anticipation of travel once the crisis ends.

For example, to keep elite travelers satisfied, Hilton has been one of several hotels, airlines, and other travel suppliers to extend the value of benefits that program members haven't been able to use due to travel restrictions. Hilton granted an extension of elite status through the end of March 2020 to people who had earned Hilton Honors elite status in 2019 and who faced losing their status on March 31. Many other travel brands have copied the move.