Cash in Those Reward Miles and Points Before It’s Too Late

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The most basic concept of inflation is something you learn in high school. As more and more currency gets printed, its buying power declines.

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That exact concept has been playing out in the frequent flyer and hotel loyalty programs for the past few years, and it’s getting worse. A lot worse. In fact, in a few years, most programs won’t be worth participating in.

Some Saw It Coming Years Ago

A few years ago, when every airline was in distress and going bankrupt, they started doing anything they could to generate revenue. That’s why they introduced things like Economy Plus and started charging for checked bags.

You may have noticed that they also started enticing consumers with all kinds of frequent flyer miles bonus offers. You could buy frequent flyer miles on the website. You could double or triple airline miles at the time you get your boarding pass. You could earn tens of thousands of airline miles if you sign up for a credit card.

The airlines were throwing airline miles at consumers. In effect, they were printing currency as fast as they could. Well, if everyone had access to more airline miles, that also meant they could accumulate them more quickly and cash them in for rewards that did not generate revenue.

Airline Miles Were Devalued

The airlines were facing potentially huge award redemptions with all these new airline miles being issued, so they devalued those frequent flyer miles by raising the price of rewards at virtually every level — multiple times. They also made them more complicated, and made some subject to dynamic pricing and availability.

Not only that, perks for elites like upgrades to business class, early boarding, and no checked bag fees, started being offered to anyone who got the airline’s branded credit card. That made the actual value of those perks decline as well.

Other airlines have moved to revenue-based mile collection. Instead of flying 2,000 miles and earning 2,000 points, you earn based on how much you spend for the flight. So, you can either travel cheap and not earn many frequent flyer points, or spend big bucks to earn more points that aren’t worth much.

This, of course, has been great for both the airlines and stockholders, but not so great for consumers.

The situation has been the same with hotels, although not as bad. Still, devaluations have hit all the major brands.

Spend ‘Em If You’ve Got ‘Em

Just to give you a taste of personal experience, years ago I could get a round-trip upgrade on American Airlines Group Inc (NASDAQ:AAL) from coach to business class from LAX to JFK for 20,000 frequent flyer miles. But, the cost jumped to 25,000, then 30,000. Further still, the airline added a $150 fee along with the frequent flyer miles.

Years ago, I hoarded AAdvantage frequent flyer miles to the point where I had about 400,000. I wanted to fly first-class with my sweetie to Europe, which cost about 250,000 air miles. Except I needed a sweetie first. I found one, but had to wait weeks for American to open up any award availability at all in business class eight months out. I managed to find availability, cashed in those points, and cashed in the rest for a week’s free stay at a resort in Hawaii.

Meanwhile, I’ve been cashing in everything I can, because the programs aren’t going to be worth much in the future. You should, too.

Lawrence Meyers does not own shares of AAL.


Article printed from InvestorPlace Media, https://investorplace.com/2015/04/airline-frequent-flyer-miles-points-late/.

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