Coming home from a trip to Paris this week that we put together with frequent flyer miles and hotel points, I picked up the issue of National Geographic Traveler that arrived in the mail during our absence. In it, there is an article by contributing editor Christopher Elliott in which he decries loyalty programs like frequent flyer miles and hotel points, concluding with a call to action. Based on the complicated nature of the programs and the way they distort decision making, most of us should cut up our affinity cards and kick the habit, he asserts. You can read the article here:
And if you bother to do that, I’m here to tell you that he’s absolutely wrong. Instead of coming off like his column title, “The Insider,” Elliott sounds like a rookie who is too pre-occupied with other things or has a big enough travel expense account so that he doesn’t have to worry about the cost of travel, which most people find pretty high these days. A lot of us have to be content with simply reading about it most of the time, so it’s a shame to pay for bad advice, too. We need to deal with things as they are — not what we wish they could be in a perfect, rational, fair and efficient world. Of course, points and miles distort the market and impact consumer decision-making. That’s the whole idea.
But for every disgusted consumer that says “it’s not worth it” with the loyalty programs, another first class seat or room with a view is left open for people like yours truly. As much as I appreciate it, honesty compels me to tell you that if you’re one of them, I think you and Christopher Elliott are making a mistake. Like it or not, you’re paying for those programs and so you might as well benefit from them. With banks now giving you a microscopic return on whatever money you manage to put away in savings, doesn’t it make sense to collect a comparable or sometimes even better return on the money you already have to spend?
Even for those who never travel on business or only travel a couple of times each year, the mantra applies: You can pay a little bit of attention or a lot of money. There are some key pillars upon which we have built our ability to do more with less.
First, understand that the big dollars and best experiences are often in knowing how everything fits together in your overall plan and how to compare for overall value, rather than trying to save the last dollar on every individual transaction. I recall a discussion in a Paris hotel lobby with a disenchanted guest who was staying another couple of unplanned days at full rack rate. He’d saved $100 on his round-trip ticket from New York by flying on a Middle Eastern carrier. When something happened and his flight was cancelled, he learned that the carrier only had three flights per week out of Paris, not much in the way of affiliations with other carriers and seemingly very little customer service capability outside of the cabin. Even without the big extra costs he was encountering to recover from his airline’s lack of performance, his cash savings on the ticket added up to less than the value of the miles I was getting.
Second, be flexible. The more conditions that are thrown into the mix in terms of dates, duration, destination, payment mode and other factors, the more likely it is that you will have trouble finding a great deal. Paris over Christmas was a great deal with miles and points. If we had insisted only on going to the Caribbean during Spring Break, it would have been a different story. Flexibility en route can sometimes also help pay for your travels, too. By leaving things a little loose around the edges, we’ve been able to accumulate thousands of dollars in compensation for accepting bumps on overbooked flights.
Third, plan ahead. If you want to go someplace popular in high season, then make your decisions while you still have a shot at affordable arrangements. If you’re going to beach for Spring Break, you should be shopping those fares by September and locking in before the end of November. If you’re booking accommodations that you can cancel without penalty, you can do that even earlier. Using points or miles? Be looking almost a year out and understand that you can’t book every trip for minimum miles. For some trips, it may not be worth the trade. The fact that you can’t do everything you want to at any time you feel like it for the number of points or miles that you want to trade doesn’t mean the programs aren’t worth it. There are a lot of trips that aren’t worth the money they want for them, either. Others may simply be out of reach, regardless of their high value, (like, say, a National Geographic tour.)
Fourth, learn the programs and follow them relentlessly to leverage your earnings opportunities. We use an airline-affiliated credit card to pay many everyday expenses for which we would ordinarily pay cash. It not only builds miles, but it offers free checked bags, discounted club access and some other spiffs. We also have a hotel card and another that accumulates generic credit that can be used on Travelocity.com or even returned as a cash statement credit, (something that I never intend to do.) So, could we just go to a cash-back card and come out in the same place, in terms of pure economics? Sure – and you can also buy term life insurance and invest the difference. (How’s that been going for you?) From gas to groceries and dental work, I want something besides my receipt whenever I can get it. Loyalty programs are essentially a rebate program and not participating generally doesn’t get you a discount.
In addition to the credit toward travel that can be accumulated, the connections with travel vendors result in regular marketing communications about specials and bonus offers. Pick only a few programs and concentrate on them so you can put yourself in a position to redeem as frequently as possible, instead of accumulating a dozen orphan balances that you’ll seldom or never be able to cash in on. One of the best ways to stay up-to-the-minute is with the help of http://www.flyertalk.com, an online community of obsessive deal hunters who don’t miss a trick.
Lastly, maximize value as you acquire and redeem points. It doesn’t make sense to burn 25,000 miles on a ticket to Orlando or Las Vegas that you could have picked up for $300. It is equally shortsighted to torch 25,000 hotel points for a $75 room. Save those points and miles for times when your avoided cost will be much higher. To evaluate, I place a value of 1.5 cents on a frequent flyer mile and a half-cent on a Hilton Honors or Priority Club point. You need to think about these numbers to make rational decisions, rather than simply throwing up your hands and deciding “it’s not worth it.” When the cost is low or moderate, pay with money and accumulate credit for bigger things later.
There is no question that we took travel loyalty programs to a level well beyond what most normal people would call reasonable or balanced, but it’s been a very worthwhile avocation since getting into the game in 1997. The result has been more than $40,000 in travel trade – including a trip to Paris this week that ran under $400 for two people which would have otherwise cost more than $3,000. (And before you buy into the “it’s not worth it” camp, just think about what it takes in gross income to come up with after-tax, discretionary money for travel.) With our current stash, we can do a couple of more like that and beyond the money, the experiences have been – as Mastercard is fond of saying — priceless.