12 March 2007

Why Hoarding Airline Miles is a Fools Game

Confession: I am an airline miles and hotel points whore. Yes, whore. I am the nut who will fly an extra connection - completely out of the way - just to rack up another 1,000 miles. A few years ago, when a hurricane was bearing down on Hooterville, I had scheduled work travel. I knew that if I waited for my outbound flight, there was a good chance that it would be canceled. I went to the airport early and hoped to get on an earlier flight to New York. The only option that would have gotten my out earlier was to fly from Florida to SAN JUAN, Puerto Rico to JFK - instead of a direct Florida to NYC flight. For an extra 1,900 miles, I would gladly make a detour to San Juan - and I avoided a hurricane - BONUS!

Based on the title, you wouldn't think that I would be the kind of fellow that would be accumulating airline miles, would you? Oh contraire...I love accumulating. I also love using them. I am an "earn and burn" kind of a guy. Many people often make the serious mistake of "saving up" for a destination award - a trip to Hawaii, a summer vacation to Europe, etc. The reality is that airline miles and hotel points are not appreciating assets - that is, you do not earn interest on your miles balance, and there is just no way that the miles you have today are going to be "worth" more tomorrow.

Instead of saving for a Hawaiian vacation, figure that you are saving cash for a kitchen remodel. You know that the new kitchen will cost you $25,000, so you begin stashing away a few extra dollars each month. After one year, you have saved $18,000, but now the cost of the new kitchen has risen to $40,000. You continue to save, and after another year, you have saved about $30,000 - except, the cost of your kitchen has now risen to $50,000. Face it - at this rate, you're starting to think about dining out more often than cooking at home.

How far fetched is this example? Not very, when you consider that within the last couple of weeks, one major airline and one major hotelier have introduced major changes to their award structure that has caused nothing but a serious devaluation in the currency that is your hotel points and airline miles....and they did it completely under the radar...essentially in the middle of the night when no one was looking. That is easily the biggest gripe. Without a doubt, had USAirways or Marriott announced that they were moving the goalposts with a few months notice, allowing people who had been planning on booking these affected awards the opportunity to do so, they would have created some goodwill - even while delivering bad news. By waiting until after the voting for the Freddies (the mileage geeks' equivalent to the Oscars), Marriott really steamed some folks.

Devaluation is the term often heard when disappointed folks talk about their inability to score their intended award, but INFLATION is just as critical. There are just too many airline miles and hotel points on the market right now, all chasing a limited number of available award seats and hotel rooms. It used to be that you actually had to fly or stay at a hotel to earn their respective currencies. Now, you can buy flowers, eat at your favorite restaurants, charge your groceries on a co-branded credit card, or refinance your mortgage to get points and miles. This ease in earning miles has led to a glut on the market. The more miles people "own" as assets, the more miles airlines keep on the books as liabilities. When airlines and hotels realize that there are too many awards sitting unused in loyalty accounts, they need to tighten the strings.

The bottom line is this - if you are saving for a "dream" reward, aim to have the required mileage earned in less than one year. If you cannot do that, there is a good chance you will not get the desired award at the level you are chasing. Reduce your expectations accordingly for each year it will take you to earn the mileage required, and you will be less disappointed. Also, many airlines and hotels readjust their award offerings early in the year. If you think that you MIGHT use an award - and you suspect that the award may cost more when the next devaluation occurs, book it in advance. Most hotels will gladly return the points you have allotted for a canceled award - and some don't even require you to have the points until you are ready to travel. Airlines will usually charge you a fee to do the same, but you might be willing to pay that as insurance to secure the award you really want.

Earn 'em and burn 'em - you will reduce the likelihood that you will be disappointed.


Shadox said...

I got 279,000 miles (and counting) on United. The problem is that I can never get the flights I want when I want them. Inflation is right.

But seriously, intentionally taking extra connections to earn miles? You, my friend, are an addict. My time is worth waaaay more than miles - I just want to get home. Also, spare the environment. Fly direct.

Anonymous said...

i never gat tha ticket to Hawaii for 35000 miles . I guess better use it for vegas for 25K miles .

The Travelin' Man said...

The 35K US-Hawaii ticket is one of the most sought-after mileage awards around. You really only have a couple of options here - (1) book as far out as humanly possible (almost a year in advance). There are only a limited number of these seats on each flight, and they go fast. Be ready to pounce, but you will need to do so in advance; (2) if you HAVE to go to Hawaii on miles and feel like your only option is the 70k "any time" award, check to see if there is availability in the first/business class awards at the lower level first. You may not save any miles, but for the same number of miles, you may get a much better class of service; and (3) if there is any chance that you will earn even the lowest level of elite status with an airline, wait to book your awards until you have that status. Sometimes airlines will magically open up some "extra" seats in the correct fare bucket to accommodate an elite traveler. If you are not an elite (essentially, a nobody, to the airlines), you need to play by their rules.

Good luck getting to Hawaii!

Plus6 said...

Great post. I was traveling quite a bit with my last job but have since slowed down at my new job. I have about 125,000 miles with Delta. If I book a year in advance (as early as possible) what do you think my chances of getting to Europe are with those miles? Also, do Marriott hotel points expire in any length of time? I have a ton of those and have been using them for long weekends here and there, but would not want them to expire. I have never seen anything saying there is a time limit with those.

Thanks! Nice site.

Kelly said...
This comment has been removed by a blog administrator.