Hotels and Airlines Race to Devalue Their Loyalty Programs but There is Still Value Left

Hotels and Airlines Race to Devalue Their Loyalty Programs but There is Still Value Left

Travelers and credit card users should not despair over recent devaluations. There is still value in the Hyatt and United progams.

The internet is rife with anger and resentment over recent devaluations of loyalty programs.   Even the Wall Street Journal has weighed in with a headline stating “Frequent-Flier Award Inflation is About to Get Worse”.   As disappointing as these devaluations are, credit card users and travellers alike should not fret.

BestCashCow’s own recent article covered the devaluation of the Hyatt loyalty program, but concluded it is still the best program in the hotel category.  While Hyatt’s program was devalued to some degree in most categories, the hotel chain has only been playing catching up with earlier devaluations by Hilton and Marriott.  Even though it will cost you more Hyatt points to stay in their leading Park Hyatt and Andaz hotels, their points program remains among the best in the industry and users of their credit cards and Chase’s flexible cards are still richly rewarded for choosing Hyatt.   Additionally, Hyatt has added a couple of new features to their program, including the ability to pay through a combination of cash and points (long mainstays of the Starwood and Radisson/Carlsson programs).  To boot, those who sign up for Hyatt credit cards through Chase still get two free nights at any Hyatt in the world--and that remains the best credit card sign up bonus around.

In addition to reductions in the value of points earned toward Hyatt rewards, the Wall Street Journal and many blogs also decried similar devaluations in Delta and United frequent flier mile programs.  Delta, which had already made its frequent flier program far less attractive after its merger with Northwest, has recently announced plans to reduce benefits still further.  For over two years, it has been virtually impossible to find flights eligible for benefits in either coach or business in anything less than the highest tier (the “peak” tier) of its three tier redemption program.  While Delta is now raising the miles required for coach and business class travel in the lower two tiers of its program (where seats are already unavailable), changes to the peak tier redemption costs for highly coveted transcontinental business class seats are little changed.  For example, a one-way business class seat from the US to Europe that used to cost 150,000 points will now cost 162,500 points, and a one way business class seat from the US to North Asia that used to be 170,000 points will now set you back 175,000 points.

Unlike Delta, United’s program offered great value until recently when redeeming frequent flier miles for business class seats across the US and on certain international routes.  Fortunately, United’s devaluation does not affect its domestic redemption schedule where one way awards remain 25,000, 50,000 and 75,000 points for coach, business and first class, respectively (save Hawaii coach fares where redemption is increasing from 40,000 to 45,000 points).  And, while its current changes made redemption on its Star Alliance partners substantially more dear in frequent flier terms, redemption costs for saver-level business class awards from JFK to Los Angeles, to London or to Tokyo are all being raised by less than 15%.       

In spite of the recent reductions in rewards, travelers and credit card holders should not despair over recent devaluations.  Just use recent events as a wake up call and an important lesson.  Do not stockpile your points and air miles for use decades out or for generations to come.  Like Bitcoins, airmiles and hotel points are not real currency and you should make use of them deliberatively but as quickly as possible.

It is worthy of note that BestCashCow has no relationship whatsoever with Hyatt, United or Delta.

See our top ten rules for earning rewards through hotel and air loyalty programs here.

Image: winnond at FreeDigitalPhotos.net

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

Advertising Disclosure: This site may be compensated for hosting offers.


Hyatt Devalues Gold Passport Points; Remains One of the Best Hotel Point Programs

Hyatt Devalues Gold Passport Points; Remains One of the Best Hotel Point Programs

On November 10, 2013, Hyatt announced a dramatic devaluation of its loyalty program. The Hyatt program and the Hyatt Card by Chase remain among the best hotel loyalty and hotel credit card rewards programs.

Hyatt sent an email to all members of its Gold Passport program last night announcing what they called an “award chart update”, but what amounts to a large scale devaluation of its reward program.

Hyatt used to offer an extraordinary value in top-tier redemptions, so much so that a room in its best Park Hyatt and Andaz hotels could be had for 22,000 points.  Unfortunately, the categories and point requirements are now set to change in January 2014.

According to the new program rules, the exclusive Park Hyatt hotels in Beaver Creek, Milan, Paris, Sydney, Tokyo and Zurich will now be Category 7 hotels (a new category) and will require 30,000 points for a room per night.  The point requirements for Category 5 and 6 hotels are increasing as well, as are the requirements for upgrading to Regency Club rooms or Suites.  Additionally, some hotels are shifting between categories (with more moving up a category than down). 

This entire change has many of the blogs that tell readers how to scam the point earning process abuzz.  Many of them are telling their readers to contact Hyatt and Chase to voice their displeasure.  I personally find it disingenuous and troubling that people who have been taking advantage of the point earning process are complaining about the decline in value of something that they have not earned.  They are essentially asking for more and more for free, instead of understanding that their manipulation of the system is forcing Hyatt to follow the path of other hotel and airline chains and to devalue their programs. 

In reality, the people who are truly losing value as a result of the devaluation are those loyal Hyatt customers who have earned their points through their patronage.  Hyatt, like its peers, is increasingly moving towards rewarding status to its most active patrons, and towards devaluing what it provided for past patronage.

There is, however, one bright spot here - even though the current devaluation is disappointing, the Hyatt rewards program still provides the best value, together with Starwood, in the hotel sector.  Their hotel product, especially at the top-tier hotels, remains in a class above its peers.

Most will therefore find that not only staying in Hyatt hotels, but continuing to use the Hyatt card, and Chase Sapphire and Chase Ink cards (transferring the points to Hyatt), remains one of the most valuable opportunities in the credit card travel and reward space. 

Image: www.hyatt.com

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

Advertising Disclosure: This site may be compensated for hosting offers.


Top Ten Rules for Using Credit Cards for Hotel Points and Airline Miles

Top Ten Rules for Using Credit Cards for Hotel Points and Airline Miles

Getting travel points is the best way to be rewarded for your credit card spend. Here are BestCashCow's top ten rules to follow.

Rule 1: You can do this to earn lots of points

There is nothing wrong with earning loyalty points from your favorite hotel or airline, or flexible points (such as Chase’s Ultimate Rewards points) that can later be transferred to a program or used for your travel expenditures.  There is also nothing wrong with opening several credit cards to take advantage of sign up bonuses.  Yes, the web is full of blogs run by kids who are traveling the world on points that they “earned” through churning cards that will tell you how to completely game the credit card system and extract points from everywhere.  Yes, that is unethical and, yes, people who follow these blogs every day need to get new hobbies.  However, having a few or even several cards that you use to accumulate points is completely reasonable.  Credit card companies are exacting large transaction and processing fees from vendors.  That is being passed on to you.  It is fair to ask for some of the value back for your loyalty and usage.

Rule 2: You get more value back from earning the right travel and rewards points than you do from any other program

The industry standard is basically that a dollar spent on a credit card is worth as much a penny in remuneration to the consumer.  Most cash back programs are geared to this number.  Gift card programs through Chase’s Ultimate Rewards or Amex’s Membership Rewards will also give you back 1%.  You may from time to time find a 20% or even a 30% bonus, but you are simply never going to get more than about a penny.  Leading hotel rewards points and airline frequent flier points can easily be redeemed for 3 or 4 cents per dollar spent.  Using points to stay at luxury hotels or to fly, or upgrade to, business or first class on long haul flights often results in value of as much as 8 or 9 cents per dollar spent!   Hotel and airline points are therefore always your best bet.

Rule 3: Having the right cards with large lump sum sign-on bonuses is the easiest way to jumpstart a point earning strategy

Most people get more travel and reward points from credit card usage than they do from actually traveling, and many get many points through sign-on bonuses. 

The best travel and rewards sign up bonuses for travel rewards credit cards are constantly updated and compiled in this table.

Rule 4: Not all travel and reward programs are equal

Before you earn points with a program, you need to examine whether the program is generous and whether it works for you.  These programs are very different, even within a certain segment.  For example, among hotels, Hyatt’s program is strong.  Even after a 2014 devaluation, 30,000 points will give you a free night in Park Hyatts in Milan, Paris, Tokyo, Sydney or Zurich where a room could easily run you over $1,000 a night.  Its global footprint, however, is not nearly as broad as Starwood’s program which is also generous if used properly.  Other programs such as the Hilton, the Marriott or the IHG programs offer significantly less value.  Within the airline category, British Airways has turned their Avios program into a great vehicle for short haul redemptions on American or on other OneWorld partner airlines.  Delta, on the other hand, has turned both their airline and their SkyMiles program into one where even the most loyal traveller only sees value in Business Class inter-continental redemptions.  

Rule 5: Hotel and Airline points should be used, not accumulated

People frequently make the mistake of hoarding points instead of using them.  Hotel and airline programs can be devalued in multiple ways – by changing the number of points required for a reward, changing categories, changing partners, and of course by causing your points to expire.  The terms of the program are very clear: the fine print always explains that the issuer can change or even withdraw the program at any time.  And, as it becomes easier to earn points, virtually every major airline or hotel chain is tweaking, or even dramatically changing, their program each year. Therefore, while points may be a currency, they are not a store of value.  This comes from firsthand experience.  I lived in the Hotel Pulitzer in Amsterdam for four months about 16 years ago and accumulated tens of thousands of Starwood points that I never used; today those points are worth substantially less.  Don’t make my mistake.  Use your points!    

Rule 6: Travel and Reward Programs Run by the Credit Card Companies Offer Much More Flexibility

Earning points in a credit card program and keeping them there until you are ready to use them enables you to avoid point or mileage devaluation (expiration) and to have flexibility of program or experiences.   These programs can also allow you to earn points more quickly through 2x, 3x and even 5x spend categories and enable couples to pool points more easily.  Within this category, the two best programs by far are the Chase Ultimate Rewards program and the Amex Membership Rewards program.

This chart shows the cards that produce the most valuable travel and rewards points.

Rule 7: Use Your Card, But Use it Judiciously

Put all of your finances on your credit cards and make sure to pay them off each month or the interest and penalties will cost your more than the value of points accrued.  However, never spend more to use a credit card and never spend money just to accumulate points.  Mileage runs to get status on an airline or loyalty-induced hotel stays to achieve status at a hotel at the end of the year make sense for hard core travelers, but spending runs never make sense even for hard core spenders. 

Rule 8: Leverage your Point Earning Strategy Through Spend Bonuses, Dining Rewards and Online Spend Reward Programs

Having a card that accumulates travel and reward points is part of a strategy of earning points on your spend, but with a little extra work you can often earn more than 1 point per dollar spent.  You can do this by taking advantage of spend categories (Chase Ink cards, for example, enable you to easily rack up 5x points at office supply stores like Staples and Office Depot).  You should also enroll your cards in a dining rewards program (United, American and Delta all have these and you can enroll any card).  Finally, before you spend money online, you should see if you can get bonus points for going through your credit card company’s portal (using www.evrewards.com is the best way to do this).

This article details a strategy for ramping up tons of Chase Ultimate Rewards points with a handful of related cards.

Rule 9: Cancelling Cards Is OK

As noted in Point 1, churning is unethical, even if the credit card companies have done little to preclude it.  It is OK to cancel your cards if they don’t provide value to you.   You should never cancel a card within six months of opening, however, as card companies will take back their card initiation bonuses.  Instead of cancelling a card, consider asking for the annual fee to be waived as companies often agree to this.  Since issuers make more from a well-used card on vendor fees, they have an incentive to keep the card in your hands.

Rule 10: …. But Cancelling Cards is Also Where You Risk Damaging Your Credit

Opening a couple of credit cards has very little impact on your credit score, unless you open several cards with several different issues at once (a red flag).  Using cards judiciously and paying your bill in full each month actually helps your credit score.  But, cancelling credit cards does impact your credit score as the decline in amount of credit that is being extended to you can impact your score.  Before you cancel a card, ask the issuer to increase the credit available on another card with them that you are keeping (Chase, for example, will always do this for you) or consider asking to downgrade to a different, annual fee-free card issued by the same issuer.

See this article for more information on the risks of a card churning strategy to damaging your credit history.

Image: adamr at FreeDigitalPhotos.net

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

Advertising Disclosure: This site may be compensated for hosting offers.