Pandemic Pain: The New Case Against Frequent Travel Plans
THURSDAY, APRIL 16, 2020 --
My judgment about frequent travel plans--that we are "playing an unregulated lottery"--is almost old enough to be an adult. And it came more than a decade before an airline shyster argued in the Supreme Court that no one could "superimpose a duty of good faith and fair dealing" on frequency plans.
Imagine my skepticism now about playing the game while airlines are effectively grounded and hotels are empty. My feelings run far beyond my normal cynicism. The future is dreary. The long-term future. The medium-term future. The day-after-tomorrow future. And even the I'm-sure-I-can-score-a-one-time-Coronavirus-bargain future.
The airlines especially, but also hotels, will screw us when this pandemic eases and we get back on the road. There will be no award bargains, no new benefits and certainly no short-term deals.
Pain awaits. It is written in the stars. It is written in stone. It is written on the wind. I'm writing it now.
Most importantly, stop charging on airline and hotel cards right now. Find better options. At least switch to bank-sponsored cards that offer currency that can be moved between airline and hotel programs. Even better, find yourself the right cashback cards.
Before we discuss those alternatives, however, let me take you through my thinking and why I'm so worried about what's to come.
GIVING US THE BUSINESS FOR OUR BUSINESS
With Southwest Airlines finally falling in line today, all the major carriers and most hotel chains have extended--and, in some cases, even expanded--elite-status benefits. They've called a do-over on 2020. Meanwhile, a few travel-aligned credit cards have upped the ante on spending and will give you more credit or status for your charge volume. They are, logically, desperate to keep you engaged and playing the game. But where's the payoff on the other side of the equation? To my knowledge, no airline or hotel has offered us the chance to claim an award at a discounted price. As usual, the engagement the travel industry seeks is entirely one-sided. They want you to give them your business, but the payoff is more status of questionable value and severely devalued currency. They offer no future travel at a discounted award level. In other words, in return for our business, they're giving us the business.
DOUBLE DEVALUATIONS ARE A GIVEN
Airlines eventually will flood the market with bonus offers to get us to fly again. Hotels will do the same to get our heads on their beds. And the credit card issuers will incentivize our spend with even more credits. That'll mean much more currency chasing a shriveled network of flights and an uncertain roster of hotels. We've been losing that game for decades now. But it's even more ominous. Airlines, especially, want cash now and their functional equivalent of J.G. Wentworth and 877-CASH-NOW are the credit card issuers. They're negotiating bulk mileage sales with their card banks to get cash now. (An example: Hilton revealed today in an SEC filing that it presold $1 billion worth of Honors points to American Express.) The card companies will turn around and award us with gobs of those newly minted miles and points. The inevitable reality: a secondary round of currency devaluation and award inflation.
WHERE YOU GOING? (PROBABLY NOT) BARCELONA.
As I've said repeatedly in these pandemic weeks, there's no day but today. It's impossible to predict what the future of travel will look like. It could take months--more likely, years--for airlines to look like they did at this time last year. Even if the airlines want to throw you a bargain, what guarantee is there that they'll fly where you want to go? What guarantee is there that they'll still serve your hometown airport? Ditto hotel chains. There's no guarantee that your favorite resort or your beloved hideaway in your desired urban destination still will be aligned with your preferred chain. The chains don't own the hotels in their systems, after all. Hotel owners have their own financial pressures. They'll aggressively shop for better deals than they have now from the chain operator. They'll switch to the brand flag that gives them the lowest cost of affiliation.
CASH WILL BE KING
Travel accounting--especially airline accounting--is bizarre. At least theoretically, the airlines can book revenue when they allow you to cash miles. But how has that worked out for us in recent years? Even if airlines bring back extensive route networks quickly, they'll favor cash over points. Ditto for hotels. The bargains, when they come, will be for cash payments. There might be the very odd award bargain, but airlines and hotels will focus on generating hard dollars rather than award redemptions.
FEES THAT HAVEN'T BEEN INVENTED YET
When it extended elite status for AAdvantage players last week, American Airlines buried new award redeposit fees in the announcement. You're a fool if you think this pandemic and a $50 billion taxpayer-funded bailout would make the airlines kinder or gentler suppliers. Remember, these are the guys who convinced the Supreme Court that they don't have to play fair or deal in good faith. There'll be so many new award fees that we literally can't imagine them now.
So what to do? In short, stop feeding the beast. Stop making believe that there's a pot of frequent travel award gold waiting for you at the end of the pandemic.
EARN CASH AND MANAGE IT
Since you're not generating miles and points from flying and hotel stays, now's also your opportunity to switch to cashback cards. Do what I suggested last year: Swap out your travel affinity cards for cashback plastic and create and manage your own travel bank.
Why, for example, settle for double airline miles for gasoline purchases when you can find a cashback gas card that will give you a non-wooden nickel for every dollar you spend? I know it's difficult to wean yourself off travel cards, but there is a plausible case for cashback cards.
How do you do it? Easy. Analyze your ongoing spend by category. Then google "best cashback card" for that category, whether it is groceries, gasoline, online expenses, electronics, whatever. Then get cards with the best cash paybacks and redirect your spending.
Still not convinced? At the very least, move all your spend to cards that offer points in bank programs. You can then transfer those points to hotel or airline programs that treat you less poorly in the months and years ahead. And if they all suck, as I suspect they will, redirect your bank points to paying off your monthly credit card charges.
Anything, after all, is better than letting airlines and hotels sucker punch us again after we get back on the road.
Imagine my skepticism now about playing the game while airlines are effectively grounded and hotels are empty. My feelings run far beyond my normal cynicism. The future is dreary. The long-term future. The medium-term future. The day-after-tomorrow future. And even the I'm-sure-I-can-score-a-one-time-Coronavirus-bargain future.
The airlines especially, but also hotels, will screw us when this pandemic eases and we get back on the road. There will be no award bargains, no new benefits and certainly no short-term deals.
Pain awaits. It is written in the stars. It is written in stone. It is written on the wind. I'm writing it now.
Most importantly, stop charging on airline and hotel cards right now. Find better options. At least switch to bank-sponsored cards that offer currency that can be moved between airline and hotel programs. Even better, find yourself the right cashback cards.
Before we discuss those alternatives, however, let me take you through my thinking and why I'm so worried about what's to come.
GIVING US THE BUSINESS FOR OUR BUSINESS
With Southwest Airlines finally falling in line today, all the major carriers and most hotel chains have extended--and, in some cases, even expanded--elite-status benefits. They've called a do-over on 2020. Meanwhile, a few travel-aligned credit cards have upped the ante on spending and will give you more credit or status for your charge volume. They are, logically, desperate to keep you engaged and playing the game. But where's the payoff on the other side of the equation? To my knowledge, no airline or hotel has offered us the chance to claim an award at a discounted price. As usual, the engagement the travel industry seeks is entirely one-sided. They want you to give them your business, but the payoff is more status of questionable value and severely devalued currency. They offer no future travel at a discounted award level. In other words, in return for our business, they're giving us the business.
DOUBLE DEVALUATIONS ARE A GIVEN
Airlines eventually will flood the market with bonus offers to get us to fly again. Hotels will do the same to get our heads on their beds. And the credit card issuers will incentivize our spend with even more credits. That'll mean much more currency chasing a shriveled network of flights and an uncertain roster of hotels. We've been losing that game for decades now. But it's even more ominous. Airlines, especially, want cash now and their functional equivalent of J.G. Wentworth and 877-CASH-NOW are the credit card issuers. They're negotiating bulk mileage sales with their card banks to get cash now. (An example: Hilton revealed today in an SEC filing that it presold $1 billion worth of Honors points to American Express.) The card companies will turn around and award us with gobs of those newly minted miles and points. The inevitable reality: a secondary round of currency devaluation and award inflation.
WHERE YOU GOING? (PROBABLY NOT) BARCELONA.
As I've said repeatedly in these pandemic weeks, there's no day but today. It's impossible to predict what the future of travel will look like. It could take months--more likely, years--for airlines to look like they did at this time last year. Even if the airlines want to throw you a bargain, what guarantee is there that they'll fly where you want to go? What guarantee is there that they'll still serve your hometown airport? Ditto hotel chains. There's no guarantee that your favorite resort or your beloved hideaway in your desired urban destination still will be aligned with your preferred chain. The chains don't own the hotels in their systems, after all. Hotel owners have their own financial pressures. They'll aggressively shop for better deals than they have now from the chain operator. They'll switch to the brand flag that gives them the lowest cost of affiliation.
CASH WILL BE KING
Travel accounting--especially airline accounting--is bizarre. At least theoretically, the airlines can book revenue when they allow you to cash miles. But how has that worked out for us in recent years? Even if airlines bring back extensive route networks quickly, they'll favor cash over points. Ditto for hotels. The bargains, when they come, will be for cash payments. There might be the very odd award bargain, but airlines and hotels will focus on generating hard dollars rather than award redemptions.
FEES THAT HAVEN'T BEEN INVENTED YET
When it extended elite status for AAdvantage players last week, American Airlines buried new award redeposit fees in the announcement. You're a fool if you think this pandemic and a $50 billion taxpayer-funded bailout would make the airlines kinder or gentler suppliers. Remember, these are the guys who convinced the Supreme Court that they don't have to play fair or deal in good faith. There'll be so many new award fees that we literally can't imagine them now.
So what to do? In short, stop feeding the beast. Stop making believe that there's a pot of frequent travel award gold waiting for you at the end of the pandemic.
EARN CASH AND MANAGE IT
Since you're not generating miles and points from flying and hotel stays, now's also your opportunity to switch to cashback cards. Do what I suggested last year: Swap out your travel affinity cards for cashback plastic and create and manage your own travel bank.
Why, for example, settle for double airline miles for gasoline purchases when you can find a cashback gas card that will give you a non-wooden nickel for every dollar you spend? I know it's difficult to wean yourself off travel cards, but there is a plausible case for cashback cards.
How do you do it? Easy. Analyze your ongoing spend by category. Then google "best cashback card" for that category, whether it is groceries, gasoline, online expenses, electronics, whatever. Then get cards with the best cash paybacks and redirect your spending.
Still not convinced? At the very least, move all your spend to cards that offer points in bank programs. You can then transfer those points to hotel or airline programs that treat you less poorly in the months and years ahead. And if they all suck, as I suspect they will, redirect your bank points to paying off your monthly credit card charges.
Anything, after all, is better than letting airlines and hotels sucker punch us again after we get back on the road.