In response to the news of Southwest Airlines devaluing its currency 6.5% without notice, Pizza in Motion thinks we should stop losing sleep over devaluations or lack of notice.
Southwest Rapid Rewards Has Devalued 38% Compared To 8 Years Ago
When Southwest Airlines launched Rapid Rewards 2.0 in 2011, $1 in airfare cost 60 points.
Then in 2013 they announced a devaluation to 70 points, with six months’ notice.
They devalued again, with two months’ notice, in 2015, creating a sliding scale of value (sometimes it would still take just 70 points to redeem $1 in airfare).
In 2016 they devalued without notice so that $1 in airfare cost 72 points.
In 2018 things changed again so that $1 in airfare cost 78 points, but expensive fare types (Anytime, Business Select) didn’t cost more than that.
Now we’re looking at $1 in airfare costing 83 points, a 38% increase compared to 8 years ago. And this changed happened overnight without notice – a change in how Southwest used to treat its Rapid Rewards members.
Should We Just Assume Poor Treatment From Programs And Shrug It Off?
Ed Pizzarello writes that we should “[s]top complaining about airlines and hotels when they make changes. Start figuring out how to get better value for your miles and points.”
If his point is, don’t gnash teeth because you shouldn’t have expected any better from these programs anyway, just capitalize that they aren’t trustworthy, then ok. But I think that misses that there are relative degrees of deplorableness across programs. It’s a mistake to say they’re ‘all the same.’ Hyatt isn’t as bad as IHG, Air Canada isn’t as untrustworthy as Delta.
How though can people be expected to figure out how to get better value from Southwest’s Rapid Rewards points, when they’re a fixed value program? Your points are worth the amount Southwest says the points are worth, and now Southwest says the points are worth less.
More broadly though I laid out a simple model for why we should expect devaluations back in 2003, and more recently explained why programs devalue.
Loyalty programs are not a store of value and the best thing you can do is earn and redeem, and then earn again, so to the greatest extent possible you’re doing both in the same period, at the same award cost. Ed’s argument is right that saving for the future is a fool’s game with these private currencies that lack any sort of central bank or other constraint. There’s a reason new electronic currencies limit the amount of coins that can be minted.
Is It Worth Shaming Programs That Treat Members Badly?
Ed writes, “[w]e’re past the point where public shaming will have an effect. The only time I can recall a program looking in the rear view mirror on negative changes was when Suzanne Rubin ran the American Airlines AAdvantage program…”
My memory is a little longer than Ed’s!
- In 2008 American Airlines announced a $5 online award redemption fee. In the face of outrage, they backed away.
- United required a Saturday stay on a roundtrip ticket in order to redeem a saver award. They rolled back the change amidst consumer backlash (while Northwest slipped in their own version of the change – which stuck for many years).
- United made systemwide upgrades redeemable only on nearly full fare (H and above) tickets in 2003. There was enough of an uproar that they even issued additional sweet spot certificates valid on nearly any fare for the same year, and had less restrictive international upgrades the following year (that still excluded the cheapest fares). That policy remained in force until the introduction of PlusPoints right before the pandemic.
- US Airways planned to count only full fare tickets towards elite status. Then-marketing VP Ben Baldanza described customers buying the inexpensive tickets they offered as not having the kind of loyalty they were interested in. They backed away from that plan.
- US Airways announced the end to flight bonuses for elite members in 2008 and reversed course. And they even did so retroactively. At the end of 2008 elites all received the flight bonuses they would have earned while the change was in place (May 1 – November 19).
- In December 2002 Delta announced they would stop giving full elite credit to discount fares. Two years later they rolled back the change and also rolled back award fee increases.
Now, these cases where airlines made changes to their loyalty programs and then reversed course due to outrage are for the most part quite some time ago. We’ve seen it more recently in foreign programs (Thai Airways walked back an award chart devaluation, Qatar Airways reversed a 50% devaluation back in November). For U.S. programs though,
- There were more competitors then
- Banks didn’t pay as much for points then, which is partly a function of consolidation (power shifting more to the airlines) and part move to a new equilibrium set off by American Express losing its Costco co-brand and bidding up the price of other partners.
Why Shaming Programs Matters
If it didn’t make sense to shame bad behavior from a travel provider, then it wouldn’t be worth telling people how the Westin Fort Lauderdale Beach Resort is cheating them. We should just take it.
Even if programs aren’t going to reverse course, some might be more reluctant to move forward knowing there will be blowback. Other programs will see whether customers change behavior. They might even be encouraged to keep award charts around.
But if Ed is right that we shouldn’t trust loyalty programs, and that ought to become our base case, then the way that information gets out to the public is precisely by shaming loyalty programs when they behave badly. Rather than shrugging our shoulders at no-notice devaluations, it is important to shout it from the rooftops so that members know to build lack of trust into their base case.
Your voice is like a Lighthouse guiding us in the Points & Mike’s Ocean…
If outrage is the right reaction here, why not for what IHG did earlier this month? The no-notice nature of that devaluation got only a passing mention on the blogs.
For a more recent example of program changes resulting from shaming, I’d include the lifetime status rules when they created the Bonvoy program. It was clamor from lifetime SPG members that led to them being included as grandfathered LT titanium, and then from Marriott members that got them the similar criteria as for SPG.
I’ve had some success letting the card issuing bank know that I don’t appreciate their association with the offending doggy, unethical company and ask that my feedback be recorded and routed to the CC marketing department. Chase was good enough to give me a mileage boost in 2018 after the last “theft”.
It seems even my preferred airline (SWA) has become just another morally corrupt and unethical company.
They should just abandon the heart and replace it with a wood screw!
No-notice devaluations are the flip side of penalty-free cancellation and redeposit of award tickets. Southwest lets you cancel a trip with no penalty up to 10 minutes before departure.
If any airline offering free redeposit announces a devaluation, customers will make speculative bookings to beat the deadline. Some of those will cost the airline money in lost sales.
I see one avenue for a program to provide notice without promoting as many speculative bookings. Announce a devaluation which will apply only to travel dates X and later. In other words, the award cost is tied to the travel date rather than the booking date. This would require new software.
I complained on Twitter and got this nonsense response – “When we elect to change our burn rates it’s in an effort to maintain the generous value proposition of Southwest Rapid Rewards: no blackout dates, every seat is an award seat, and points that don’t expire. Unlike our competitors, we don’t charge a points restocking fee if you have to change or cancel your reward flight, and we don’t implement a minimum point balance to redeem for reward travel. With this in mind, the decision was made to maintain the best overall value for our customers.”
Giving you less than we promised is how we provide you with value! That is some Delta logic right there.
I wonder if WN will stop at 1 cpp like Delta (although it’s still possible to get better value). It does seem like most airlines are aiming for 1 cpp tho. It would be nice to map these devaluations to inflation.
Delta deval, United deval, Southwest, all Jim Crowe moves
I think airlines and hotels may be killing the goose that lays the golden eggs. At this point, I’ve been shifting to airline/hotel cards with no annual fee and only putting spend on these cards for the corresponding brand (other spending goes on cash back cards). I burn accumulated points quickly on one-night hotel stays in inexpensive markets and on cheap domestic flights.
If most other people start (rationally) behaving like this, co-brand spend drops and the rights to co-brand credit card portfolios become less valuable, and credit card issuers will buy fewer points/miles for their cardholders each year.
Agree 1000%. The 38% devaluation is on top of fare increases. Essentially the total award prices have likely doubled or more compared to 8 years ago.
Southwest is pure Evil, just like Delta.
Now is actually the best time to get a WN credit card because further devaluations are unlikely until 2023, and I don’t feel bad about churning their junk cards just for the SUB
Outrage without action is whining. If you feel so strongly about it, take your business elsewhere.
I’m looking forward to your post the next time Chase increases the bonus on its Southwest cards. How much of the outrage will remain?
@Brutus – Nailed it. Bloggers proudly and sanctimoniously love to ascend their moral soapbox and shout their outrage and disgust over airlines and hotels having the audacity to devalue their currency (like EVERY OTHER part of our economy does ALL THE TIME) and then proceed to entice their readers to click on their exhaustive list of credit card referral links on the right side of the very same “outrage post” with which they are demonizing them. Oh, the hypocrisy. It burns. lol
I think these devaluations are going to be the trend of 2021. Folks are sitting on mountains of points, and airlines (and hotels) are bracing for a tidal wave of redemptions. The easy way to cut that wave down to size will be through devaluation. They don’t want their airline seats (or hotel rooms) full of non-revenue customers. They need cash to recover from COVID losses. I think we may see some of the value return after the huge wave subsides, but in the short term “free” travel is going to cost more.
@Doug Southwest’s excuse is not valid right now. Many competitors now waive re-deposit fees and make it easy to cancel or change flights for free. This change by the other airlines takes away a lot of the benefit of booking with Southwest.
Thank the maker for transferable points like AMEX, Chase, etc. Honestly though, I’m finding so much less value in loyalty programs and status both.
This is why any time a signup bonus increases to a new level, you can bet a deval is coming soon. How it should work is that any deval should be accompanied by an X% increase in all members existing points/mileage account balances. You want to devalue the currency, fine, do it from here on out. But you’re screwing the members who were saving up for something.
Tempest in a teapot. Other programs have devalued their points at a higher rate while WN has had free baggage, no fee cancellations up to 10 minutes to start of boarding with redeemed points returning to your RR account immediately, the incredible Companion Pass…good for up to two years as many times as you wish to use it, rare cancelled flights due to poor management of crew resources and damned good customer service.
Are they perfect? No
Am I unhappy about the devaluation? You bet
Southwest still offers the best reward program in the industry and I fully intend to fly them whenever they fly the route I need. BTW, I have over 350,000 RR points in my account and we have had a Companion Pass for more than five years, primarily though credit card usage.