Hotels have largely been extending status for Chinese residents and in some cases for residents of Asia. Some Asian frequent flyer programs have been offering status extensions due to coronavirus. No one wants to lose their elite frequent flyers. After all, those are the customers who will drive the most revenue when people start flying again.
However it’s important to be able to use the loyalty program to goose travel, rather than just giving away the store without travel. So how do we understand status extensions, versus taking a wait and see approach and maybe using a double qualifying offer later in the year?
- It depends on the market
- It depends on what competitors do
- And it depends on behavioral data
The former head of Malaysia Airlines Enrich writes about how to know whether to employ status extensions and talks about the Malaysia Airlines experience during a crisis for the airline (he’s seen the data, so he isn’t merely hypothesizing). Still, while he makes good points I do not agree with all of them.
Each Sector And Market Are Different (For Now)
China basically closed for two months. As of last week less than a third of Chinese small and medium-sized businesses had re-opened, especially retail and companies without a way to bring workers back to their city. Many of those are on the brink of financial collapse. Status extensions in China make sense.
And with Cathay Pacific’s reliance on its China route network, and also struggling business in the face of long-term pro-democracy protests, Hong Kong extensions probably do as well.
Iran Air Sky gift should probably extend status. And Alitalia should as well for residents of the North – and actively court the customers of defunct Air Italy. The rest of the world isn’t China (yet?) and extreme measures may wait in favor of waiting to see what strategy is best. If travel picks back up mid-year that’s a different scenario than where all of 2020 is lost.
In addition airlines aren’t hotels. As Mark Ross-Smith observes hotel customers are more likely to split their loyalty than airline customers are.
For Calendar Year Programs It’s Too Early
We’re still early in the calendar year and don’t know what’s to come. Programs would love to use status extensions as a means of goosing travel and filling seats, rather than taking customers off the hook to actually fly. That’s why many would prefer to wait (customers may travel, worrying about their status now) and employ double qualifying miles (and/or dollars, to encourage travel later when things recover).
The game theory here though is,
- If another airline offers to status match your customers for next year, they don’t have to fly you to keep their status for next year and could defect.
- If other programs appear to be more generous and caring, that could erode customer loyalty for your brand – so there’s a collective action problem. One airline might defect and poach customers. That’s not valuable if everyone does it. And everyone else would prefer that no one does it.
- How does likelihood to keep status affect cardmember spend? A customer who thinks their status will end may not be as likely to spend on a co-brand card. That’s a double loss, on top of reduced travel, and may happen anyway in a slowing economy – how does elite spend change relative to the overall cardmember pool?
Of course Alaska Airlines is already dipping its toe in the water of bonus elite qualifying miles (registration required). Their offer is only a 50% bonus (not double) and only through April 11.
The Case For Waiting
It’s a different analysis for programs with qualifying years that vary by member. Nonetheless, assuming that members have more than two thirds of the year left to qualify a wait and see approach may be ideal. Giving out status means not having to fly for it. Not having to fly for it, when members are flying again, means they can fly the competition.
Extending status now for next year is a risky business proposition. It also isn’t likely to put people in seats today. But it’s important to watch whether customer segments stop spending on a co-brand card, and it’s important for loyalty to appear sensitive customer needs.
A program that’s waiting until later in the year might promise to look at ways to recognize the challenging year that members are having. People, faced with their own uncertainty, will likely recognize and respect a message that says the program is waiting to see how things develop and figure out how to best tailor the circumstances that arise to member needs.
If I had to guess, I think what will likely happen is they will just do a challenge in the second half of the year if things quiet down. Essentially fly half of the normal required from Jul 1- Dec 31 and lock in 2021.
Now makes zero sense. If the meetings I travel to are cancelled or if my company enacts a travel moratorium, a status promotion doesn’t make me go out and buy a plane ticket.
Status promotions need to come during the recovery period, not during this current period.
@ Gary — Travelling less is making me realize that I should travel less, permanently. That alone will hurt airlines and hotels, as I can’t be the only one who feels this way. Businesses may also be slow to add back travel expenses that they quickly learn they can replace with technology, while saving big bucks. This same logic will probably bankrupt WeWork, as small companies realize they can just go 100% remote. My small business will likely go 100% remote, saving us on rent, and permanently cut travel expenses n half.
So does this mean American will raise their award redemptions?
After all 500,000 miles one way in business class to Australia from LAX could never be enough for them
As for elite status challenges matches etc
I don’t think we will see that much offered before October or early in 2021 when folks don’t make their tier thresholds and hungry airlines may actually be nicer than shooting at fish in a barrel as they normally do now
If I got a status extension now – why would I fly said airline for rest of 2020?
It would be stupid to offer an extension now for US airlines. Offer some promo now, to entice people to fly. If they are truly loyal, they will fly now.
Interesting fine print on Alaska….
“The bonus elite-qualifying miles awarded as part of this promotion apply only to the number of miles that count toward elite status qualification AND WILL NOT BE AVAILABLE FOR REDEMPTION.” (emphasis added)
On the one hand, I *do* understand their point, but it’s also a bit disappointing.
Also, I am *presuming* the bonus of “status miles only” is in addition to any bonus (redemptive) miles I would earn as an AS elite. That is (round numbers for the sake of this discussion), if I take a flight that is 1,000 miles long, I *normally* would get 1,000 status miles + 1,000 bonus miles (good for redemption, but not counting towards status) and now + 500 miles that are good towards status, but are non-redeemable…is that right?
This is not a matter of being loyal to an airline or not? Nor it’s whether you’re Chinese or Italian that are more affected. It’s a matter of safety and health. As an Executive Platinum flying over 230,000 miles yearly and spending over $30,000 our concern should be our well-being and health. I’m super loyal but will not compromise my life on a great offer nowadays or an extension of my status.
We need to be real. This is happening and it’ll last. As Americans you’ll soon notice that we’ll be at the same level of risk as a Chinese or Italian. Our government lies and you’ll see how in a week or so our numbers will triple or quadruple with this virus.
Worry not about a silly status and these bloggers talking about the same nonsense and almost plagiarizing their postings to compete who gets more readers or who gets to write first about the topic.
Only the airlines will know what to do at the end but with the corruption in the government and the President speaking nonsense and the Vice President contradicting him, we are really close to a Pandemic.
Fly if you want to. Go wherever you want to go but stop hoping for miracles and what an airline would do for your stupid status. Your status comes and goes, but not your life.
Care about you and acknowledge that our corrupted Leader only cares about him.
The truth is in front of your face. Remove your blindfold as this is not your business class seat that you acquired with your miles.. if you were lucky enough to find a mile saver that never exists.
THIS IS YOUR LIFE!!
Be real and smell the coffee!!!!
BIS if you do not go no profit was. made,, it is a two way street,,
Scott and Oscar must be reading your blog.
RE: ED. I am sick and tired of crazy disgusting anti-Trumpers and their rants.
More generally, the coronavirus issue will be with us most likely for the rest of 2020. This is basically a wait and see situation. I am wondering how long we can rehash speculations about the virus.
I flew about 100000 miles last year evenly spread between Europe, Israel, and Latin America – mostly on United and Jet Blue. The corona virus has definitely curtailed my travel schedule. I don’t think that I will be able to maintain my elite status .
Thought maybe it was a good time for status match or challenge since I have travel coming up. I emailed Hyatt and it was a flat no. Guess they don’t need the nights from me.