It started with a simple mistake on my part. I was planning an overseas trip – the first for some time, obviously. The airlines and the hotels had kept in email touch during the lockdown months: “We are preserving your status as one of our preferred customers. You will maintain your gold/platinum/preferred level for 2021. Thank you for your continued loyalty”.
So, there I was, busily planning my trip to Europe, burning points and taking advantage of my supposedly elevated status at the travel companies with whom I have spent the last 25 years freely spending personal and corporate money. I completed my London booking on the Hilton app, getting a great deal for points and cash at their wonderful Conrad St James property and moved swiftly on to the Marriott app for three nights at their flagship hotel in Edinburgh.
It was the AmEx alert on my mobile for the large transaction that sent me scurrying back to the Marriott booking. Apparently, I hadn’t booked the room with a combination of points and cash – I hadn’t had enough points for all three nights and, because they held my credit card details, I’d been docked for the purchase of an extra 100,000 Bonvoy points to the tune of $1,237.50 – more than the cost of the three nights if I’d simply paid cash and kept my existing points intact for another day. No problem, I thought, I’ll clear it up in the morning.
Well, not so fast, smug, formerly frequent business traveler! It was the tone of the phone conversations more than the intransigence of the Marriott position that shocked me. It soon became clear that they were not giving way on this. I was contractually obliged, I needed to go back and read their terms and conditions, there was nothing they could or would do – mistake or no mistake. I spent hours on the phone and exchanging emails, getting madder and madder and slowly beginning to understand that the decimation of the travel industry during the pandemic had changed the balance of the game. These guys needed cash. They’ve done their math. They know that there will be no return to the former state anytime soon. The confidential internal memo had gone out – no mercy, maximize rates, maintain politeness if you can but we are backing you, our frontline sales team, to help get us out of this hole and if you piss off a formerly important customer segment, so be it.
My complicated flight arrangements with American Airlines (two bookings to be reinstated with a mess of flight credits and vouchers to be redeemed) underlined the sea change in the industry. It seems that the value of the business class seats that had been booked and paid for pre-lockdown were now worth about half of their purchase value. I clearly hadn’t read the fine print here either - that the value of my investment could crater as well as go way down. Well, you know in advance with American that you have no chance of success in a conversation about fares, but you used to be able to have a pleasant chat with a customer service operator in Winston Salem about the unfairness of it all and who would offer up tactical advice for better routes, prices and upgrade opportunities. But that too had passed into recent history. I didn’t have the chance to chat about the grandchildren in Wilmington, nor talk about the load factor on the CLT-LHR route as compared to my PHL booking. Instead, I had a perfunctory conversation to confirm that my formerly business class assets were now measured in premium economy currency and that my chances of purchasing an upgrade with some of my many miles on this journey were somewhere between none and zero.
The final confirmation of this new state of play took place in the Hertz parking lot at Edinburgh airport about two weeks later. The harassed manager of the office glanced at my proffered card: it’s a collectible item, the Hertz Platinum Card. It is the non-fungible token of the loyalty world. This card has inspired a look of awe and immediate attention from every Hertz branch manager in many countries over the years; causing them to drop everything, usher you out of the plebian Gold Plus line and escort you personally to a hugely upgraded vehicle and to earnestly wish you bon voyage as you disappear in a cloud of turbocharged exhaust fumes onto the highway to heaven. My Edinburgh branch manager grimaced at the sight of my formerly magical card. “I only have one car, I’m afraid” he said, “I have no staff, so here’s your paperwork. It’s just the way it is right now.” And he left to deal with the growing queue of impatient and possibly formerly important customers simmering behind him.
What a major hospitality company, one of the biggest airlines in the world and arguably the best-known name in car rental do have in common is that they are all struggling to get their businesses back to profitability. The customers that previously drove both their volume and their profits – the frequent business travelers – have largely disappeared from view as employers reevaluate both the purpose and efficiency of all those sales calls, conventions, face-to-face meetings, off-site morale boosters and the like.
So, is the currency of this segment – the points-driven loyalty program – dead? Well, looking at the numbers, you could think so. Between them Delta, United, American, Southwest and JetBlue are sitting on $27.5 billion of rewards program liabilities according to a recent report. That number represents the value of the earned and unclaimed rewards of their customers sitting on these airlines’ balance sheets. But on the other hand, you may have noticed the increasing number of ways these airlines are now encouraging you to earn points and miles on items other than their core travel services - from credit cards to wine clubs. During the pandemic a few of the airlines used the future cashflow of their loyalty programs to borrow money. American, Delta and United between them raised $26 billion in this way to shore up their cash positions. According to The Harvard Business Review the valuations of the mileage programs of American Airlines and United Airlines exceeds that of the parent airlines themselves.
So, maybe the current strategy of the travel business is a continuation of what many of us cynically thought was the original premise of the points-based loyalty programs in any case: encourage the earning of points by offering status and priority treatment but discourage and make as difficult as possible the future redemption of said points. But why this dissing of the customer segment that could help them climb out of the hole? Is it just chronic staff shortages or a cold-eyed look at the immediate future? It appears that the hotels, the airlines and the car rental companies would rather have any full fare paying customer than a former frequent business traveler trying to redeem points and score deals. And the thinking may be that if the road warriors start to come back in droves, there’s plenty of time to readjust.
So, the absence of that business guy at the front of the hotel or gate check-in, impatiently waiting to board first while finishing the conference call at the top of his voice may be a relic of a former time - and that looks like it’s good news for the travel companies as well as other travelers!