The future of loyalty programs – to earn, burn, or be undiscerned?

Customer loyalty has been a longstanding, critical component of revenue generation and customer retention strategies for airlines, hotels, and car rental suppliers.

In fact, in January 2020 – just prior to the COVID-19 outbreak – On Point Loyalty released its 2020 ranking of the most valuable airline loyalty programs in the world. The report listed America’s top three airline loyalty programs (Delta’s SkyMiles, American Airlines’ AAdvantage, and United’s MileagePlus) as the most valuable airline loyalty programs globally, with SkyMiles topping the bill at a massive $25.9 billion valuation. As airlines braced themselves to survive the financial impacts of COVID-19, their loyalty programs proved critical to their ongoing financial stability, with a number of airlines using their loyalty programs for liquidity.

But loyalty isn’t just good for travel suppliers. With corporate loyalty programs delivering savings against the cost of air travel, and a strategic preferred airline agreement capable of delivering 5-figure savings to your annual business travel budget, it can certainly pay to be loyal. Not to mention the added traveler perks available to loyal customers – typically enjoyed by those who aren’t footing the travel bill – spanning product upgrades, exclusive lounge access, priority experiences, and VIP service.

In a pre-pandemic world, loyalty was an easy sell to road warriors and their employers. But the travel restrictions of 2020-21 saw a significant reduction in the ability to earn and burn points on travel services. As such, retaining a loyal customer base has become an increasingly challenging and important task for airlines, requiring a high degree of creative problem-solving to ensure a value exchange that remains relevant, achievable, and lucrative on both sides of the relationship.

However, there are several reasons why joining a loyalty program during a pandemic could significantly benefit your business and business travelers alike. Below, we explore why.

Is now the best time to take advantage of loyalty programs?

Here are five reasons why you should consider registering for a travel loyalty program:

1. Double-dipping and discounts

A recent proliferation of corporate loyalty programs pitched to small-to-medium-sized businesses offers the opportunity to double-dip on points earning – creating value for both your business and traveling employees. Such programs include American Airlines’ Business Extras, Delta’s SkyBonus, United’s PerksPlus, British Airways’ On Business, Etihad’s Business Connect, Qatar’s Business Beyond, Singapore Airlines’ HighFlyer, Qantas Business Rewards, and Virgin Australia’s Accelerate to name a few, and offer benefits spanning fare discounts, bonus points, and added extras. And while some of these programs implement a cap on annual travel spend, they could potentially benefit businesses that prefer an “Open Skies” policy and even be attractive to mid-large size businesses looking at a staged return to travel activity.

2. It’s easier to reach elite status with fast-tracked offers

In addition to protecting status tiers for their loyal flyers, many airlines are also making it easier for lower-level members to grow their status.

For example, for the remainder of the year, Delta SkyMiles members can earn up to 75% more toward Medallion Status on nearly every Delta flight, including Award Travel – a first-ever for the industry. For the very first time and exclusive to Delta, Award Travel (inclusive of Miles + Cash) is eligible for Status earn. All SkyMiles Members will earn at least 50% more on Delta tickets* (includes Pay with Miles, Award Travel and Delta Vacation packages).  Members will earn an additional 25% – for a total of 75% – on purchases of all premium fare products (Delta One, Delta Premium Select, First Class and Delta Comfort+) and post-purchase upgrades (cash or miles). 

American Airlines’ AAdvantage program has lowered its elite qualification requirements for 2021 as compared to 2019 and also rolled over all flight activity from October 1 to December 31 2020 to count towards 2021. In addition, and exclusive for 2021, American will waive the EQD requirement for Gold, Platinum, and Platinum Pro if a member spends $30,000 on net purchases with their eligible AAdvantage credit card in the 2021 calendar year.

For the 2021 status year, United is reducing thresholds for qualification for its Premier status program by 50 percent for each status level, to make reaching an even higher status tier easier. At the beginning of 2021, United automatically gave PQP to Premier members based on the 2021 Premier status held at the end of 2020 in order to give members a jump-start on earning status through 2022.

3. More ways to earn frequent flyer points

In 2020, the reality of reduced travel activity caused loyalty programs to expand the channels for points accrual and redemption. This was critical to maintaining a loyal and engaged customer base during a period of potential brand disconnection.

For example, AAdvantage members can earn miles “on the ground” across a range of travel, retail, and financial partners. Members have the ability to earn miles on everyday purchases by shopping online via the AAdvantage shopping portal (https://www.aadvantageeshopping.com/) or dining out (https://www.aadvantagedining.com/). For additional detail on ways to earn miles on the ground, click here: https://www.aa.com/i18n/aadvantage-program/miles/earn/earn-miles.jsp.

With United, members can also shop (https://shopping.mileageplus.com), dine (https://dining.mileageplus.com), or cruise (https://cruises.united.com) their way to earning miles. Members can also stay with hotel and vacation rental partners like Marriott®, IHG® and Villas of Distinction to earn miles, and earn miles for Hertz® car rentals. Members can also earn miles with home and financial partners, and via gift cards and vacation packages. For additional details on ways to earn miles on all of life’s daily moments, click here: https://www.united.com/ual/en/us/fly/mileageplus/earn-miles.html.

4. More flexibility and exclusive perks

The speed at which loyalty programs adapted to the pandemic and their willingness to provide flexibility is likely to be instrumental to their members’ longer-term trust and loyalty. Many airlines have now implemented more flexible flying policies to provide greater financial certainty for businesses and leisure travelers alike as they return to travel.

While expanding redemption opportunities for points has helped to maintain program engagement during the travel downtime, airlines are now looking at ways to encourage the redemption of points for travel again.

Karen Buls from American Airlines’ AAdvantage program told CTM that, “One of the exciting new enhancements to the program is the introduction of elite choice rewards for the Platinum Pro and Executive Platinum tiers. Upon qualifying each tier, members will have the ability to select from a suite of rewards, providing them with more flexibility to use their benefits where, when, and how best fit their needs.” Benefits include upgrades, bonus miles, award discounts, carbon offsets, charity donations, travel vouchers, Admirals Club access, and more.

“For the last 40 years United’s MileagePlus loyalty program has continued to lead the industry by offering our members innovative benefits to enhance their travel experience,” said Luc Bondar, Vice President of Marketing and Loyalty at United and President of MileagePlus. “From introducing the most rewarding upgrade currency with PlusPoints to offering all our members miles that never expire, and most recently introducing no award blackouts on every United flight for every MileagePlus member, we’re constantly showing our customers that loyalty is a two-way street and that we appreciate their loyalty to United.”

5. Competitive market offers

As travel activity resumes, airlines are ramping up their promotions to entice new customers to their programs. For example, Air New Zealand recently ran a “Touch of Gold” promotion aimed at poaching members of competing loyalty programs. Members with a Gold or higher status (or equivalent) with another airline (excluding Star Alliance airlines™ or Cathay Pacific) were offered a four-month trial of Air NZ’s Gold membership status. Time will tell how competitive loyalty programs become, and how fickle their members may prove to be, as operators vie for each and every booking.

How will airlines continue to add value for their loyalty members?

While travel activity continues to increase and drive competition amongst airlines, the promise of fast-tracked status climbing and extraordinary membership perks is an unrealistic long-term expectation due to its impact on profitability.

Once these special perks come to an end, what will airlines do to engage and retain their loyal members and encourage new members to choose their loyalty program over their competitors’?

Travel suppliers will need to continue to look for new, creative ways to maintain customer loyalty beyond traditional earn and burn models. For example, last year Delta trialed a premium program called SkyMiles Select where passengers paid $59 a year to enjoy the privileges of early boarding and a guaranteed overhead storage space every time they flew. For businesses with a Best Fare of the Day policy, these low-cost, low-loyalty solutions may be sufficient to drive enhanced traveler satisfaction without the compliance and consolidation challenges of a preferred airline agreement.

The road ahead – what’s best for your business?

We asked business travelers what loyalty perks they’ll value most as they get back to travel. Here’s what they said:

If you’d like to discuss additional ways to help elevate the value of your travel program and the experience for your travelers, CTM’s customer solutions teams can work with you to review your post-pandemic travel plans and establish the best approach to loyalty for your business and traveling workforce.

From a consolidated preferred airline agreement and associated loyalty program to an Open Skies policy for maximum flexibility and choice, our team will design a custom solution based on your specific travel needs and trends.