How Much Does The Value Of a Frequent Flyer Mile Change During The Current Crisis?

I’ve published not only how much I think miles are worth in each airline, hotel, and credit card program, but also how I arrive at my valuation – what factors determine the value of a mile.

I haven’t updated these valuations formally in recent times. I saw that The Points Guy updated valuations for April. When I do my own valuations I show how mine compare to others who take on a similar task, both TPG and One Mile at a Time. I find my valuations tend to be lower than TPG’s overall.

I was curious how they’d be shifting the value of miles in the current COVID-19 environment. Largely they haven’t. Their valuations appear largely stable with where they were a year ago, except for some variance based on news in specific programs since then. Could that really be right?

And I started thinking about the factors that should be influencing how you value miles in today’s environment, compared to a couple of months ago.

  • Discount for time. You’re not likely to spend miles today for near-term travel. And if you’re not redeeming miles now, then you should be taking a discount for time alone if nothing else. (That’s true even in a near-zero interest rate environment.) However there are certainly opportunities to redeem miles and points now for travel off into the future (say, in the December – February timeframe) and even get superior value doing so.

  • Discount for risk. Will your frequent flyer program ‘make it’ or will you take a partial or total haircut in bankruptcy? I’ve argued (I think persuasively) that while smaller loyalty programs could go out of business with their attached airlines or hotels, the largest programs especially in the U.S. but even in Europe and Asia should safe. Still, there should be some modest discount taken due to increased uncertainty.

  • Redemptions will become easier and less costly. With empty airline seats and empty hotel rooms, redemptions should be easier to get for awhile and that means spending fewer points (on average) for the awards you want, and having an easier time finding availability. That mitigates in favor of miles being worth more.

  • There will be inflation down the line. Expect airline and hotel loyalty programs to start making the mileage printing machines go brrrr as people begin to travel again. They can incentivize butts in seats and heads in beds using their loyalty programs, both to get more people traveling but also to influence share shift, bookings away from competitors. That’s great in the short run, but once planes fill back up and hotels do too there will be too many points chasing too few redemptions and that’s why we get devaluations. In the longer term we’ll see a decline in value of points earned today.

These broad factors need to be taken into account when estimating the change in value of a mileage currency, and they’re likely to apply differently to each program based on, among other things, the tendency to print miles and the financial stability of the program in uncertain times.

That means I need to be thinking on my valuations and how much they need to change, recognizing that there are forces pushing the value both up and down at the same time.

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, 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 »

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  1. I expect premium cabin airfares to be significantly lower for the next year or two. If that’s the case, and given that most of the value I get from my miles is toward premium cabin international fares, it’s hard not to discount the value of miles.

  2. @Ethan: On the other hand, if award seats are more plentiful for a while, then your miles are arguably worth more since you’ll have more opportunities to redeem them.

  3. Cash prices will also likely be down for a while, so although there will be better award availability, your redemption cpp will be lower, thus lowering the value of miles (especially those used for domestic economy travel). Therefore, programs like Delta go down in value, while programs good for premium international travel (Alaska, *cough* AA, etc) go up in value.

  4. @Gary, I think this discussion should be broken into 2 groups: 1) airlines & hotels and 2) banks (ie. Chase, Amex, Citi, Cap One, etc.). Assuming that banks maintain their points redemption partnerships with airlines & hotels, could you argue that bank points will be worth more than before? Banks will likely be approving less CC’s during this recession (meaning less bonuses & spending, thus lower points or mileage inflation – dare I say deflation?) and existing Chase, Amex, etc. CC holders will be able to take advantage of better inventory as you pointed out. Plus Chase and Amex very unlikely to go under, while it’s a possibility that more airlines will go BK in the near to medium term.

  5. @Marc – unclear to me whether airlines (committed bailout program, just negotiating over terms) are currently at a greater risk than banks (broad economic exposure, still undetermined impact of loan defaults, etc). But in prior bankruptcies, airlines have typically honored all points issued- can’t kill the golden goose!

    So I’d separate the analysis into short term and long term, after demand and supply equalize. Short term you can get oversized value for your points, assuming there are flights and things are open when you actually want to go.

    Long term, travel demand will be down, particularly international, where there are going to be entry restrictions until there is a broadly available vaccine. I’d expect supply to eventually adjust to demand, and prices for domestic and international flights to go up as a result (fewer seats sold, less price sensitive travellers as people will only fly when they need to fly). There will certainly be devaluation of points, but in the interim, opportunities to again get outsized value until the adjustments go through.

    So I kinda come around to the same conclusion as always- spend ’em when you got ’em! Now is the best time to plan future travel, either on points or purchased tickets. Yes, there is considerable uncertainty as to if you will be able to fly, but the option cost (assuming you have the available points/cash) is fairly low as is the risk of losing your money/points (in my assessment, at least).

  6. Fewer flights with lower demand tells me award availability will be about the same. Lower cash prices means the value will be lower.

  7. So do you agree with TPG that pretty much nothing has changed in the past year? HawaiianMiles was the only program with a significant drop – from 1.2 to .9. United and Best Western each down ,1 cent.each. All others the same.

  8. In the short term, cash prices will be very low as airlines and hotels need to refill their customer pipelines to cover huge fixed costs. Why use mikes if cash prices are low?

    The Point Guy valuations have always been through colored glasses one needs to drive their credit card sales. I have a lot of miles and I’d sell a bunch of them for TPG valuation prices.

  9. When I can fly from San Francisco to Athens one way in business class for 42k miles and $5.60, it sure feels like my miles are more valuable.

    Plentiful saver awards and even web specials in J/F with AA? It’s like the good old days.

  10. Gary, of course TPGs valuation of points is going to be higher then yours, TPG is in bed with the airlines, he has to pump up the value to his readers.

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