Redeeming airline miles or hotel points for retail products is almost never going to be a good deal. The loyalty program has to actually buy the item, perhaps they’re getting a modest deal compared to street prices but there’s usually a third party managing the process for them too that takes a cut. There’s not going to be any leverage redeeming miles this way.
In contrast when you redeem airline miles for flights,
- Saver awards are often seats that would otherwise go empty, so the airline ‘sells’ these at a discount (their marginal cost on the travel is almost zero)
- Think of it like Priceline, restricted inventory that would otherwise spoil that’s sold to a limited set of customers in an opaque channel.
- Meanwhile the airline mileage program is the single largest buyer of travel from the airline and is negotiating a bulk discount.
None of these conditions really apply when you’re buying the latest gadget using your miles. It’s one way to engage members who earn plenty of miles from travel and the last thing they’d ever want is another flight. But it’s nothing more than a niche option, or a way to offer low value redemptions to stupid people.
Miles for merchandise should only be used to bail out on a program, fully aware of the haircut you’re taking.
Nonetheless it’s notable that these redemption offers are in some cases being cut off entirely or having their value slashed even farther. Airlines want to conserve cash now however they can, and that applies to loyalty programs too. Loyalty programs aren’t seeing revenue from the airlines (from miles awarded due to travel) or from partners (spend on travel credit cards is down since people aren’t focused on travel, and because of a deep recession).
It shouldn’t be any surprise that the MileagePlus, which used a crisis to sneak in devaluation of partner flight awards (which also entail paying cash to a third party – the partner airline), has in some cases tripled the number of miles needed for merchandise redemptions.
[D]ecided to dip into MilagePlusRewards to get a Chromecast [was 5100 miles now 15400] to give as gift and have found you need to use almost triple the award miles to get anything now [Another e.g.: a 13″ low end android tablet was 34000 now its 91000]
An Amazon Fire Kids 10.1″ 32gb tablet runs $200 at Amazon without any sort of sale or 71,000 MileagePlus miles. That’s less than 3/10ths of a cent per mile, a poor value without any kind of devaluation.
That’s why members asking me about whether to redeem miles for merchandise even from programs whose airlines are deemed ‘at risk’ I’m saying that I wouldn’t. It’s too much of a haircut, so in almost every case I’m going to bet on the airline making it. United isn’t at risk in 2020, and all we’d need is for an airline to reorganize in bankruptcy and not liquidate. Not everyone will, but on a portfolio basis I think enough will that this strategy will pay off very well.