I attend the Freddie Awards each year mostly as an opportunity to meet with people who actually work for the companies I write about. I get to ask them exactly what they think of certain developments, and it certainly helps the conversation when we’re inebriated (probably me more than they are).
Two of the more revealing discussions I had were with Club Carlson and Delta Air Lines. Not because I learned anything new. Instead it was because they confirmed exactly what I’ve thought all along and that the people who run these programs aren’t idiots. They are running businesses, making decisions with real costs in exchange for the hope of future revenue.
Delta, for example, confirmed that they don’t necessarily need to offer a lucrative loyalty program if they can instead win customers with great service and competitive fares. They also recognize that those of us who scrutinize the award charts are a minority; most people just want to be able to book a ticket easily. And speaking to the more specific competitive situation developing in Seattle, they don’t see any reason to acquire Alaska Airlines or drive them out of business. They’re simply moving in on an underserved market (Seattle is a rapidly growing city) and making Alaska sit up and pay attention for the first time in a while. There’s no reason both carriers can’t succeed: customers have more options, Alaska has improved their service, and Delta gets more reliable feeder routes to an international gateway.
But Club Carlson is what’s on everyone’s minds right now after multiple hits in a row. They explained that it was time for their past generosity to come to an end. Lavish promotions and special perks for credit card holders had created lots of buzz, more than they probably could have obtained through conventional ad campaigns. Obviously removing key benefits will cause a few customers to leave but not all. How many of you seriously expected the last award night to remain free — forever? And the recent shuffling of hotels to new award categories was extreme but overdue; Category 7 will expand from 11 hotels (~1%) to 68 (~7%). Did you really think that they’d maintain a special category for just 1% of all properties?
None of this bad news means that loyalty programs are out to get you. Generous rewards programs survive when they deliver results. Hyatt was asked once a few years ago why their hotels offer a full breakfast AND bonus points to Diamond members when the lounge is closed. Individual properties apparently believe they drive customer loyalty, so the policy stands.
But I also predicted in September 2013 that Gold Passport would be (modestly) devalued — either with a new Category 7 or more expensive Category 6 — because its award chart was far too cheap vs. competitors. It turned out I underestimated the issue and we got both a few months later. In that same post, I said “Club Carlson [could] double its award chart at any minute and still have cheaper award nights than Hilton.” That prediction took a lot longer to materialize.
Sometimes partnerships can teach you as much as the competition. Last fall Alaska Airlines radically changed its earning structure for flights on Delta when you credit them to Alaska’s Mileage Plan program, awarding fewer miles to tickets in cheaper booking classes. This was unsurprising because Delta had recently changed its own SkyMiles program to favor more expensive fares and award fewer miles to cheap fares. British Airways recently made similar changes to its Executive Club program, and voilà, news broke over the weekend that Alaska had updated its earning chart for this partner, too.
We can never exactly predict what will change because of a complicated web of partnerships, but we can still spot an imbalance. Ask yourself why. Is it to make up for poor customer service? To drive publicity and fend off competition? To compensate for weak economic demand? When these problems begin to fade, expect a correction.