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Study rates airline loyalty programs on hotel, car rewards

Many major airline loyalty programs have added the possibility of redeeming miles for rental cars and hotel rooms, but according to a new report, some of those programs are much more effective than others in making those awards a desirable option for participants.

The report from IdeaWorks Company, a consultant to airlines, notes that hotel and car rewards are now standard in “every major frequent flyer program in North America and Europe” except for US Airways and Turkish Airlines. But when it comes to exchanging miles or points for hotels and cars, redemption procedures fall into three categories of increasing difficulty for consumers, the report noted.

It singled out six airline frequent flyer programs for having the easiest, most seamless procedures: American, British Airways, Delta, Lufthansa, Southwest and United. Those programs “use online methods (of redemption) that mimic the ease of booking a car or hotel at an online travel agency,” IdeaWorks noted. “Online booking, with automatic deduction of miles or points, ensures instant gratification,” and usually provides “a wide variety of car rental brands and vehicle types and hotel properties.”

What’s more, “Capacity controls and date restrictions are missing from the process; this removes the hassles associated with many flight rewards,” IdeaWorks said. “The secret is the procurement method. Airlines are the clients for these transactions and buy rewards with cash, and everyone knows cash is king in the travel business.”

The report said that in this category, American’s AAdvantage program “set a standard other airlines can follow,” since it offers such a wide variety of redemption choices. “A booking query (through AAdvantage) performed for travel to Orlando delivered 78 individual vehicle results and 204 hotel properties,” the company said. “That’s an amazing abundance of choices for program members.”

In the second type of hotel and car award redemptions, some airline frequent flyer programs limit the selection to their “preferred supplier” partners, so that participants can only choose among a few brands. The third type of redemption involves paper or electronic vouchers or gift cards that must be exchanged for services from a hotel or rental firm. “The latter delays gratification and relies upon rather antiquated methods,” IdeaWorks said.

As an example of the problems with the third approach, IdeaWorks singled out Japan’s All Nippon Airways. “The ’Using Miles’ section of the ANA Mileage Club web page for the Japan website displays an ’Other Awards’ section that is complex beyond comprehension,” the company noted. It includes “a bewildering array of ANA Value Vouchers, ANA Skycoins, ANA Miles, ANA Shopping Point Awards, Selection Awards, Coupon Awards, and Partner Awards” that is “virtually impossible to sort through.”

The IdeaWorks report calculated that car rental awards are worth an average of 1.2 cents per airline mile redeemed, while hotel awards are worth a scant seven-tenths of a cent per mile redeemed. Car and hotel awards typically account for 5 to 10 percent of an airline’s overall mileage redemption activity, the report notes, with about three-fourths of that going to hotel bookings and the rest to cars.

The full report is available for program participants to read online at:
ideaworkscompany.com/wp-content/uploads/2012/12/Points-Pillows-and-Porsches-Report-2012.pdf

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