How much do travelers care about their rewards points?
Ed Bastian, the chief executive of Delta Air Lines, found out quickly last month when the company announced major changes to its SkyMiles program that emphasized dollars spent over actual travel and made it far more expensive to attain the highest status categories.
In a speech to the Rotary Club of Atlanta not long after the announcement, Mr. Bastian acknowledged SkyMiles members’ discontent and added that the changes, which weren’t scheduled to take place until 2025, “probably went too far.”
On Wednesday, Delta walked back some of those changes. In an email to SkyMiles members, Mr. Bastian recognized their displeasure and said that the airline would cut the amount travelers need to spend to reach various status levels, loosen restrictions about using Delta’s Sky Club lounges and give some members a boost in status, by granting them what it calls Medallion Qualification Dollars.
Mr. Bastian noted that the airline made “some difficult program decisions” in an effort to address the program’s surge in elite members during the pandemic and overcrowding in its airport lounges as travel rebounded.
“But your response made clear that the changes did not fully reflect the loyalty you have demonstrated to Delta,” he wrote.
Virtually every travel company has some form of a loyalty program where customers are rewarded for how much they stay, fly and spend. When the programs first began in the late 1970s, earning elite status usually involved a straightforward combination of money spent with the program and actual time spent in the air or in a hotel room. And it wasn’t unheard-of for a traveler loyal to a specific airline or hotel company to spend extra money — or take an inconvenient flight or make a so-called mileage run, in which they took flights just to rack up miles — to earn or retain status.
More recently, dollars spent on loyalty credit cards are becoming the primary way for travelers to earn points and, more important, elite status, which can bring numerous perks.
Delta is not the only loyalty program undergoing change. Throughout the travel industry, rewards programs — and some travelers’ allegiance to them — are going through an upheaval.
Mark Ross-Smith, the chief executive of Loyalty Status Co., which helps travel brands acquire and retain customers, said that at their core, loyalty programs are about emotions.
“All these reasons mostly are emotional things,” said Mr. Ross-Smith, referring to why a flier might be loyal to an airline. “You don’t fly Delta because it’s the cheapest airline to go from A to B, so people are paying a premium to fly Delta. That is an emotional-based decision because if it were a transactional, money-based decision, they’d be flying whoever’s the cheapest, and they’re not.”
The Big Three
The so-called Big Three airline loyalty programs include American Airlines’ AAdvantage, Delta’s SkyMiles, and United Airlines’ MileagePlus.
Of those, Delta’s is by far the most popular among fliers, and as the proposed changes made clear, credit card spending and dollars spent on flights have become the most important segment of the program, rather than miles flown or flights taken.
Through its co-branded credit cards with American Express, Delta earned $1.7 billion during the third quarter of this year; last year, the airline made about $5.5 billion from its credit card offerings. The airline estimates that spending on its credit cards is approaching 1 percent of the U.S. gross domestic product.
In the wake of Delta’s original announcement, other airlines swooped in, trying to woo away SkyMiles members.
JetBlue Airways began offering a status match from Delta to its TrueBlue program in which up to 30,000 Delta defectors could trade in their Delta status for a similar elite status with JetBlue. For instance, top-tier Delta Diamond Medallion members could receive a status match to JetBlue’s Mosaic 4 tier, which grants perks such as credits for Blade helicopter transfers between Manhattan and Kennedy International Airport or Newark Liberty International Airport. That status would be valid through the end of 2023 but could be extended through 2024 by meeting certain criteria.
Nearly 20,000 people accepted the offer and enrolled in its program, JetBlue said, and the airline said it expected to reach the threshold by the end of October, though Delta’s about-face may change that. (JetBlue declined to comment on whether it expected a slowdown in sign-ups as a result of Delta’s reversals.)
Alaska Airlines offered a similar status match.
The modified changes that Mr. Bastian laid out on Wednesday would reduce the number of Medallion Qualification Dollars (M.Q.D.s) — a threshold calculated based on the money a traveler spends with the airline — needed for all tiers. For entry-level Silver Medallion status, a traveler would need to earn only 5,000 M.Q.D.s instead of the 6,000 initially announced by the airline in September — though that’s still higher than the current requirement of 3,000. Top-tier Diamond Medallion members would need to earn 28,000 M.Q.D.s. And some credit card members will receive a “head start” of 2,500 M.Q.D.s per card, Delta said.
The airline is also increasing the number of visits to Sky Club lounges for some credit card members. American Express Platinum and Business Platinum members (who can use the lounge when flying Delta) will receive 10 visits instead of the proposed six beginning in February 2025. Travelers can pay $50 to drop in once all their visits have been used. The airline’s top-tier credit cards, the SkyMiles Reserve and Reserve Business, will receive 15 visits per year, up from the proposed 10.
However, Delta isn’t bringing back Medallion Qualification Miles or Medallion Qualification Segments, which were the traditional ways to earn status. Additionally, basic economy fliers — whether they have elite status or an eligible credit card — will also not see lounge access restored in 2024.
Delta is not the only airline that has been rethinking loyalty. American’s AAdvantage last year introduced “Loyalty Point Rewards,” which also put a greater emphasis on credit card spending. While loyalty watchdogs and websites bemoaned the new scheme, the carrier’s changes didn’t result in the outrage that met Delta’s changes.
Unbundling loyalty
Mr. Ross-Smith predicts many road warriors won’t defect entirely from their favorite programs, even with the changes. But the future of loyalty, some experts predict, might not be allegiance to a single brand at all — but a “pick your benefit” or an à la carte service that offers flexibility as a perk. That could mean an unbundling of the programs, not unlike what has happened with streaming, where rewards members would pay for the benefits they want and forgo ones they don’t.
The airlines are already unbundling their services, particularly ultra-low-cost carriers such as Spirit Airlines, Frontier Airlines and Breeze Airways. On these airlines, the cost of your ticket gets you little more than a seat on a plane — and then travelers pay extra for each service they want to add, including checked bags, better seats and meals.
Passengers may start to follow the carriers’ model. Loyalty members who once stuck with one carrier to gain status and earn upgrades and other perks may no longer see a point in spending thousands of dollars to reach the next tier if the programs are just going to be devalued anyway.
New twists on rewards
In a twist on traditional loyalty programs, some companies are asking members to pay a relatively nominal fee in order to gain access to rewards. While Frontier Airlines has a traditional rewards program, travelers with flexible travel dates can also pay as little as $299 to enroll in its GoWild program, which allows members to hop on a flight as soon as the day before departure (for domestic travel) at no charge. While they won’t earn miles or elite status, if they’re an elite member of the standard rewards program, they won’t pay extra for carry-on or checked bags, depending on the tier.
Ennismore, the hotelier whose portfolio includes boutique brands such as Delano and Mondrian, offers a membership program more akin to a WeWork than a hotel brand. The chain’s Dis-Loyalty program offers no elite status tiers and no points to earn. Instead, for $18 per month (or $216 annually), guests receive 50 percent off stays at newly opened hotels and discounts on food and beverage.
In announcing the program last July, the founder and chief executive, Sharan Pasricha, said the program aimed to “break the traditional loyalty model” by inviting members to explore the company’s various brands rather than rewarding them for stays.
Other travel brands, like Expedia, the online travel agency, are also throwing their hat in the loyalty ring. Expedia recently began a rewards program, One Key, where members can save up to 30 percent on bundled flight and hotel bookings. Additionally, members earn 2 percent in OneKeyCash for every dollar spent on hotels, vacation rentals and more, and 0.2 percent in OneKeyCash on flights. You earn one point for each dollar spent, but you can earn across programs, particularly if you’re booking flights, a process known among frequent fliers and road warriors as double or triple dipping. If you book through One Key, you get that program’s points, plus points on your credit card loyalty program and, if you’re a member of the airline’s frequent flier program, those points as well.
However, there are some limitations. OneKeyCash can be used only on “pay now” hotel reservations and vacation rentals participating in the program. You’ll also need to have enough OneKeyCash in your account to cover the full cost of a flight — including taxes and fees — to book using One Key points. And as is generally the case when booking through O.T.A.s, you won’t receive the usual perks at a hotel, like upgrades or a welcome amenity, when not booking directly.
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