The President of the American AAdvantage program says they’re intending to get rid of award charts. He offered comments to The Points Guy website that they’re working on a replacement like “a real estate website that shows you how many people have bought a property in a given area and for what price range, as well as a ticker for how many people are looking at a specific property right now.”
The more I think about this model, and this analogy that he offers, the worse it sounds for customers.
- The price is whatever American says in the moment. Prices will fluctuate instead of offering any anchor to consumers in the form of a published, stable price list.
- The expectation is that prices will rise Outside of the Great Recession, what happens to real estate prices over time?
- Creating a buying frenzy. What difference should it even make “how many people are looking at” a specific route over particular days right now? We know that a lot of people are interested in warm weather leisure destinations over the Christmas holidays, that Europe peaks in the summer. What is a heat map going to tell us other than that we’d better ‘act fast’ or ‘lose out’?
- Be prepared to offer American more than asking price? Real estate prices where I live in Austin are regularly going for more than $100,000 over asking price.
Median sales price $465,000 Median sales price, year-over-year 42.3% increase Homes sold, year-over-year 33.1% increase All homes for sales, year-over-year 19.1% decrease New listings, year-over-year 35% increase Median days on the market 24 Median days on the market, year-over-year +8 Share of homes sold above asking price 73.7% Share of homes sold above asking price, year-over-year 42.9% increase
Replacing award charts with ‘a real estate website’ turns a valuable currency into more or less a synthetic CDO.
Somewhere along the way there was this idea that the price of an award ticket in miles should track the price in dollars, when nothing could be farther from the truth.
Mileage programs were build to reward customers for travel, giving them outsized value on their leisure trips, because:
- The mileage program could access all of the spoiling inventory the airline had. They could make unsold seats available to mileage members, without undercutting ticket sales.
- And the mileage program is the largest buyer of seats at the airline.
They’re getting bulk discounts and seats the airline wouldn’t be getting ticket revenue for, and making those available to mileage members. The whole point of the program is to offer deeply discounted tickets as a reward for loyalty. That gives the program incredible leverage.
There’s not always enough spoiling inventory for this, once planes fill up and the program prints too many miles. So there’s also ‘rulebuster’ style awards where additional inventory gets made available for more miles.
Not everyone goes business class to Europe or Asia, and certainly not every year. It’s not the only way people spend their miles. But having great value awards that are accessible to members gives them something to stretch towards. It’s what motivates – people put Bali or Thailand or even just Hawaii on their screens back in the day when we used to use screen savers.
And it’s that opportunity to make travel far more accessible than just saving money with a cash back card and using it for travel is what motivates people to engage in the program, to choose the mileage card over the cash back card, and to utilize a program’s partners that reward transactions with miles (and for which the airline gets paid).
The price isn’t supposed to just change at will. There should be a goal to reach towards. And that anchors our sense of value, too, whether or not we’re getting a good deal from the program.
When you take away the award chart you get a postmodern big mess. There’s nothing to anchor to. The program can raise award prices at will and not tell the member they’re doing it (let alone give them any advance notice, so they can accelerate their earning to reach their goal or redeem their miles for the trip they’ve been saving for). What we have seen from every single program that’s eliminated award charts is that’s exactly what happens.