Point of No Return

From the January/February 2012 issue of National Geographic Traveler

It used to be so simple.

If you belonged to a loyalty program, you’d get a point for every mile flown. Collect enough of ’em and you’d qualify for a round-trip ticket. The same formula worked for hotels and rental cars.

But today you can score miles without darkening the door of an aircraft, hotel, or rental car. Buy a box of cereal? Ka-ching! Talk on a cell phone? More miles. Get a mortgage? Even more! Unfortunately, the “free” ticket comes with a bundle of restrictions, including blackout and expiration dates, and extra charges or higher minimums to fly on more desirable dates.

For all but the most skilled mileage collector (think of George Clooney’s character in the movie Up in the Air), loyalty programs have become an unwinnable game. Every day a reader complains to me about the unavailability of reward seats or the ever shifting landscape of elite-level requirements and expiration dates. Still, last year, Americans maintained 2.1 billion loyalty program memberships and accumulated approximately $48 billion in points and miles. Why do we play the game?

It didn’t start out this way: When American Airlines offered the first mileage-based rewards program in 1981, it wanted to reward its frequent customers and generate loyalty to the company—a mutually beneficial compact. Back then, airlines attracted customers the old-fashioned way: with good service and competitive prices.

Within a few weeks of AAdvantage’s launch, United unveiled its own frequent flier program, followed by TWA and Delta. Plans in those early years were simple and straightforward: On many airlines you could get a coach ticket for 20,000 miles with no expiration dates.

But the debut of rewards programs coincided with the deregulation of the airline industry, which led to a shift away from service as a selling point. Cheap fares moved most of the tickets. Along the way, loyalty programs changed too. Mileage expirations were introduced by United in 1988 and quickly spread. American also pioneered “elite” levels, which further segmented air travelers, according to Tim Winship, who publishes FrequentFlier.com. “It gradually dawned on the airlines that the programs were potential generators of revenue,” he says.

Loyalty programs have been adopted by hotel companies (Hilton, Starwood) and other industries from cellular companies to video rental businesses. The programs appeal to our natural urges to collect (stamps, baseball cards, pet rocks) while offering small but addictive rewards not unlike a cigarette’s nicotine hit. The airlines have perfected the art of manipulation, crafting ever more complicated incentives to stimulate our worst hoarding instincts. And as the points-earning opportunities mushroom, the real rewards are being contained behind growing walls of elite and super-elite status, available to only a chosen few.

We rarely have a chance to see how much money the programs generate, but occasionally we’re afforded a glimpse into the workings of the engines driving the loyalty economy. In 2005, for example, Air Canada spun off its Aeroplan frequent flier program in a $250 million stock offering. And a survey by IdeaWorks estimated the annual value of United’s program at an eye-popping $3 billion. That’s about $33 per member.

While companies have benefited from our loyalty, we’ve become mile-addicted junkies hooked on the largely empty promise of a free flight, more legroom, or extra-special upgrades. I’ve watched otherwise rational travelers do insane things, such as book flights on an airline when there were cheaper alternatives (particularly when their company was footing the bill), fly somewhere they didn’t really have to go, or make a purchase “for the miles.”

I myself have fallen into the trap. In a misguided attempt to reach my preferred airline’s coveted “elite” status, I found myself obsessively collecting miles without regard for the value of my collection. My efforts included flying from New York to Anchorage primarily to qualify for elite status.

I could also point to the rise of online forums and blogs dedicated to helping travelers maximize miles as evidence of our collective delusion (read the conversation threads on Flyertalk.com or the blogs on BoardingArea.com if you doubt me). These hangouts for hard-core frequent fliers are often a breeding ground for entitled elites and wannabes, who trade tips on how to work a corrupt and corrupting system. It should bother all of us that loyalty programs have created what travel agent Blake Fleetwood calls “a new class system” in which a select few enjoy free flights, luxury rooms, upgrades to first and business class, red-carpet check-in lines, and early boarding. At the same time, airlines take increasingly more from the non-elites (adding fees for checking luggage and for snacks, for example) in a process that is euphemistically called “unbundling.”

A product like this ought to come with a warning label. Some experts have estimated the value of a mile to be somewhere between one and two cents, but I’d posit that miles have negative value—that is, participating in the program can cost you real money. Your points don’t even belong to you: According to the conditions of most programs, they’re the airline’s property. And the terms can be changed at any time, for any reason. Loyalty goes only in one direction, apparently.

Is there a way out? Sure. It starts and ends with you—the consumer—making purchases based on common sense, not miles. If you’re booking travel for the loyalty points, you’re missing the point. The winner isn’t the traveler with the most points; it’s the airline or hotel. Odds are you won’t be able to redeem the points the way you want to. There’s a very good chance they’ll expire before you can do anything with them. But your money, ah, your money—the company gets to keep that.

For many of us, the solution would be to cut up the frequent flier affinity credit card. Book the plane ticket with the best connection and the lowest fare. Reserve a room at the hotel that’s in the best location. Government regulation of mileage programs? It’s been tried. It’s—sorry about the pun—pointless. No, you have to regulate your own behavior. So, kick the habit, now.