Choices: The End of Award History and the Last Mile?

I’ve probably undercovered the introduction of the Mileage Plus Choices program (okay, I’ve undercovered everything since I haven’t had the time or brainspace to post for the last couple of weeks).

The June 2006 issue of Inside Flyer calls the Choices program “The New Golden Egg” so it certainly warrants a mention, though I’m not nearly as high on it as Randy Petersen seems to be.

    United’s new bombshell, Mileage Plus Choices, means looking at the future of frequent flyer programs in a whole new way.

The “Choices” program allows United Visa cardholders to use the portion of their miles earned through their credit card as a form of cash to buy airline tickets, hotel nights, or rental car days (along with a few specialty items) with their miles.

The program is incredibly confusing at first glance because United now has two parallel currencies. Miles are earned from a variety of sources including credit card spend, but only credit card miles are in a special bucket with a different name (‘choices’) which can be redeemed for these awards.

Presumably JPMorgan Chase, which issues the United Visa, kicked in with cash and marketing muscle to launch this program. It’s a shot at Capital One and other proprietary programs which offer unrestricted redemption of miles for flights. Of course, United already offers this (it’s called ‘standard awards’). But here’s another version of a standard award, where only a subset of miles can be used.

Like Capital One, which offers ‘miles’ that can never amount to a better-than-1% rebate from credit card spending, the Choice program offers similar lack-of-value.

Choices can be redeemed for a 1% rebate – subject to certain restrictions – on airline tickets purchased from United. When redeeming for hotel nights or car rental days there’s just a 0.8 cents/mile return.

To a certain extent, more choices are better of course. So it’s difficult to complain about having more redemption options. But I can hardly conceive of a time when it makes sense to actually use this option.

Inside Flyer offers this example of the value of the Choices program:

    For instance, when you decide to redeem a domestic award, always start with “pricing it out,” using miles from the Choices program. Let’s say you price out an award from San Francisco to Phoenix. Given the competitive market and airfare sales, you might be able to snag a seat for $159 roundtrip. Using the Choices program this will cost you 15,900 Choices miles, far fewer than the 25,000 miles you might have had to pay if seats were available using your normal miles.

Sure, fewer ‘choices’ are required than miles for this hypothetical ticket. And if no saver award seats were available, then even more miles would be required for a standard award. But you shouldn’t be redeeming your miles for $159 domestic tickets anyway. So Choices is being compared to a straw man.

Miles are best spent on international business and first class awards and for international upgrades. Occasionally domestic upgrades and first class awards can make sense. But a coach domestic ticket? And one that could be purchased for $159? Hardly.

Choices looks favorable compared to a hypothetical silly use of miles, but remains almost as silly itself.

Leave aside just how complicated this program is (just check out their FAQ), a sure recipe for disaster in loyalty marketing. All the program does is create a benefit floor, United miles can be worth no less than 0.8 to 1 cent per mile. But that’s just damning with faint praise. Even the unattractive Diners Club travel program offers a 1.25 cent/point value, and I have no interest in using my Club Rewards points that way.

The only interesting component of the program is the ability to redeem ‘choices’ for elite qualifying miles, so if I’m a hair short of my status I might use this option. But for most folks Choices is an option worth ignoring.

So why even write about it? The real risk here is that this is an industry directional shift. The Inside Flyer piece cites the underpromoted partnership that Delta has with American Express offering a similar deal, and the Air New Zealand Airpoints program where ‘dollars’ are earned instead of miles. The risk is that this is a trend, where ‘miles as money’ with an anemic rate of return ultimately replaces award charts. The program may become the goose that killed the golden egg of my 8-10 cent per mile return itineraries.


Ultimately I’m a bit more optimistic, though. Completely gutting frequent flyer programs, turning this redemption floor into a ceiling, makes little sense when the programs themselves are profitable entities. There’s no reason to drive away consumers, which is exactly what would happen. Why accumulate points that can only be used for a 1% rebate with United Airlines, when you can nab a credit card that yields 1.5% cash deposited into a brokerage account, or 1% cash with certain spending bonuses up to 5%?

Award availability, and perceptions about the difficulty redeeming miles for flights, is a serious problem for airline programs. And no doubt some program managers will overreact and undermine the value propositions they offer consumers in the process. But ultimately I can’t believe a program like this could foretell the end of the mileage program.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

  1. But you shouldn’t be redeeming your miles for $159 domestic tickets anyway. So Choices is being compared to a straw man.

    Miles are best spent on international business and first class awards and for international upgrades. Occasionally domestic upgrades and first class awards can make sense. But a coach domestic ticket? And one that could be purchased for $159? Hardly.

    For the “true” frequent flyers (those who fly often enough to have status), this is true. But the vast majority of people get their points from their once-a-year vacation and their credit cards.

    For these folks, international business or first class simply isn’t an option. If they didn’t get 25k domestic economy flights, they’d get NO value out of their points — redemption thresholds and capacity controls make it very difficult fo rmost people to redeem.

    Changes like this aren’t about making the programs profitable — they’re already very profitable, as you point out. It’s about stopping the decline, making them useful for consumers.

    Programs like Capital One’s, Delta SkyPoints, Air NZ Airbucks, and United Choices have become popular bcause people are sick of breakage. It’s a recognition that the traditional frequent flyer model is a failure for 80% of members. They want to keep the programs alive and popular, precisely because they’re so profitable.

Leave a Reply

Your email address will not be published.