Frequent-Flier Miles Devalued
I’m thinking of getting out of the frequent-flier-mile game. It’s just not worth it anymore.
No, I won’t completely abandon it. There’s still plenty of value in earning miles for flights, gaining points for hotel stays, and remaining loyal to one brand.
But the mileage credit card frenzy? It isn’t worth it anymore.
You see, I’ve built up some very cushy balances with just about every major airline and hotel program—enough points to fly two people business class anywhere in the world and stay a week at some of the most luxurious hotels.
But those hefty balances are becoming less valuable by the day. In the last few months, I’ve watched in horror as Delta Air Lines, United Airlines, Southwest Airlines, Alaska Airlines, Hilton, Marriott, and Hyatt have increased the number of points or miles needed for a redemption.
The price of that dream vacation got much more expensive.
Take United. Using its miles to fly Star Alliance partner Lufthansa in business class to Europe jumped from 100,000 miles to 140,000—a 40 percent increase. (Coach prices stayed the same: 60,000 miles for a round-trip.)
And Delta Air Lines’ cheapest business-class ticket to Europe is going from 100,000 miles to 125,000 miles. It might not be too long until United and American Airlines choose to match that level.
It’s not just the airlines. The cost of five nights at the Park Hyatt Beaver Creek (one of my favorite ski-in, ski-out hotels) went from 110,000 points to 150,000 points—a 36 percent price hike. To be fair, this was one of the most extreme increases across the company, and Hyatt added several other benefits to its program, such as a 20 percent discount on room rates for elite members and the ability to mix points and cash for a free night.
But it’s those free nights at fancy hotels like the Park Hyatt Beaver Creek that I aspire to while slogging through another week on the road for work, staying in big, bland conference hotels. I doubt anyone squirrels away his or her points for a weeklong stay at the Hyatt Place Oklahoma City Airport.
So why the devaluations now?
There are some 15 trillion unused frequent-flier miles out there. Most of those miles weren’t earned by flying, but rather through credit card purchases and other partnerships. And credit card companies, flush with miles, have been offering new customers ridiculously large sign-up bonuses, some as high as 100,000 miles.
“Airlines have been in overdrive, printing miles to sell to credit card companies and other marketing firms over the past several years,” says Brian Kelly, founder of ThePointsGuy.com, a site focused on maximizing frequent-flier miles and credit card points. “Now there are trillions of unused miles and points, but not enough available seats to accommodate those who want to use them.”
Airlines, hotels, and car rental companies always look at the value in their programs. With the recession behind us and business travel picking up, these companies are less willing to give away their products for free.
“Every year, we need to tweak it a little bit based on the current environment,” Jeff Zidell, the head of Hyatt’s Gold Passport loyalty program, told me. “It’s not any one thing that tips the scales at the end of the day.”
Now, to be clear, I will still be a member of all these programs and try to stay loyal to a chain or two.
What I’m contemplating is ditching the miles-earning credit cards.
I currently have 12 credit cards (all of which I pay off in full each month; if you don’t, the higher interest rates make the whole miles-earning effort pointless). Some cards are best to use at restaurants. Others at drugstores or gas stations. A few give me one free hotel night when I pay the annual fee on my card-holding anniversary.
It can get a bit confusing, but I’ve been playing this game for years. I’m good at it and have benefited greatly.
I snagged a free flight to Asia in a lie-flat business-class seat that would have cost more than my monthly salary. I’ve stayed in $1,000-a-night hotel rooms for free. And I paid with points for eight nights and business-class seats for my upcoming honeymoon.
But I’m finding it harder and harder to use my miles these days. And even when there’s award space open, it costs me more and more.
That’s where cash-back credit cards come in.
Consider this: to get the cheapest domestic round-trip award ticket, you usually need 25,000 miles. Typically, airline credit cards earn one mile for every dollar spent. So, $25,000 in spending for that free ticket.
But spending the same amount of money with a 2 percent cash-back credit card would net me $500—and that’s enough for most advance-purchase domestic tickets. Plus, if you go this way, you don’t have to worry about award tickets being available (and you earn miles on the flight). Sure, airfare costs more on holidays, but let’s face it, there are so few award tickets available on those days that I wouldn’t be able to redeem the miles then, anyway.
The true advantage to miles is the big splurges. The $1,000-a-night hotels. Sitting up front on the long-haul international flights. But how many of those lavish vacations will you realistically take? Besides, why try to save up for that perfect vacation if the airlines and hotels are only going to move the goalposts just as we get close to redeeming?
I haven’t made the switch yet. But the more I look at large mileage balances, I realize that for road warriors, this is the worst type of inflation possible.