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It's pretty smart how these loyalty programs are designed. Much of the behavior hinges on flights being expensed, while it's the individual employee who reaps

It's pretty smart how these loyalty programs are designed. Much of the behavior hinges on flights being expensed, while it's the individual employee who reaps the benefits. It causes people to constantly overspend on flights because they aren't the ones paying.

mintplant 11y ago
Same business model behind high hotel wifi prices.
- ghaff 11y ago
  Not really even if both are largely based on the fact that the person doing the purchasing is often not the one paying for the purchase. The business model behind high WiFi prices and $9 bottles of water is more that they're opportunities to sell high-margin add-ons to price insensitive customers. Thus business-oriented hotels charge for these things while they're free at the Holiday Inn down the road. (With respect to WiFi, this does seem to be changing as WiFi is increasingly viewed as more or less essential by those traveling for pleasure as well as business. The trend I see increasingly is free WiFi being used as a perk to encourage behaviors that the hotel chain wants to encourage--such as booking directly online.)
tamana 11y ago
Life, uh, find a way (to respond to incentives)
robin_reala 11y ago
As part of the UK civil service I’m not allowed to keep airmiles accrued during business flights: they have to be declared and donated back to the government.
- jessriedel 11y ago
  Honestly, it's crazy this isn't true for all governments and businesses. Frequent flier programs are just transparent kickbacks. I'm not too worried about the redistribution (since ultimately people will count it as a perk when they are comparing jobs, so it's priced in), but there has got to be significant deadweight losses from inefficient compensation, and from the person booking the travel being insulated from various incentives.
  - apendleton 11y ago
    Yeah, I generally look at it as legitimate compensation rather than a kickback. Like: "As the sales manager for across the country you have to spend half the year away from your family, and we're not going to pay you any more than the guy that sits next to you, manages sales on this side of the country, and travels a lot less. But at least when it comes time for you to go on vacation, you'll get to fly for free." Also, anecdote: I have a friend who works for an organization that employs many frequent flyers, and they have an organization policy of all flying the same airline for all flights because the benefits in terms of better rebooking in the event of flight problems for their frequent fliers are worth the added cost of not shopping around. They actually all switched, collectively, from United to American last year or the year before in response to changes to United's program.
    - _delirium 11y ago
      Yes, I think big companies especially tend to view it that way. Governments have passed some of these rules about employee travel having to use the miles/points for official purposes mostly because it's politically popular to hammer "government waste", even using tools that aren't very efficient hammers. Companies tend to take a bigger-picture view when they're worried about travel budgets, instead of the relative penny-pinching of going after airline miles. For example when there's internal pressure to cut corporate travel budgets, two common policies are: 1) direct managers to reduce unnecessary travel, e.g. cut out 10% of trips entirely, and 2) institute a rule that employees have to book through the corporate travel agent and normally must pick one of the routes that's within x% of the cheapest business class fare. The miles themselves, yeah, I think they just see as a minor compensation to employees for travel, since they don't pay them overtime or anything. Plus in some cases it's not precisely a kickback. Sometimes it is, but other times it's intended to incentivize the traveler to stick with their main airline even when the airline has worse routes to some cities. For example, you usually fly United, but today you want to fly to a city where American has a nonstop and United has only a 1-stop, for similar prices. Absent any kind of loyalty program, you'd pick American's nonstop for convenience. United's perks are supposed to encourage you to take the United 1-stop, even though it's a bit less convenient. This isn't precisely a kickback in the normal sense, because they aren't incentivizing you to buy a higher fare, and it's basically a wash from the employer's perspective. Instead they're incentivizing you to accept being personally inconvenienced with a worse flight, in return for receiving some personal perks.

mintplant 11y ago

Same business model behind high hotel wifi prices.

ghaff 11y ago
Not really even if both are largely based on the fact that the person doing the purchasing is often not the one paying for the purchase. The business model behind high WiFi prices and $9 bottles of water is more that they're opportunities to sell high-margin add-ons to price insensitive customers. Thus business-oriented hotels charge for these things while they're free at the Holiday Inn down the road. (With respect to WiFi, this does seem to be changing as WiFi is increasingly viewed as more or less essential by those traveling for pleasure as well as business. The trend I see increasingly is free WiFi being used as a perk to encourage behaviors that the hotel chain wants to encourage--such as booking directly online.)

tamana 11y ago

Life, uh, find a way (to respond to incentives)

robin_reala 11y ago

As part of the UK civil service I’m not allowed to keep airmiles accrued during business flights: they have to be declared and donated back to the government.

jessriedel 11y ago
Honestly, it's crazy this isn't true for all governments and businesses. Frequent flier programs are just transparent kickbacks. I'm not too worried about the redistribution (since ultimately people will count it as a perk when they are comparing jobs, so it's priced in), but there has got to be significant deadweight losses from inefficient compensation, and from the person booking the travel being insulated from various incentives.
- apendleton 11y ago
  Yeah, I generally look at it as legitimate compensation rather than a kickback. Like: "As the sales manager for across the country you have to spend half the year away from your family, and we're not going to pay you any more than the guy that sits next to you, manages sales on this side of the country, and travels a lot less. But at least when it comes time for you to go on vacation, you'll get to fly for free." Also, anecdote: I have a friend who works for an organization that employs many frequent flyers, and they have an organization policy of all flying the same airline for all flights because the benefits in terms of better rebooking in the event of flight problems for their frequent fliers are worth the added cost of not shopping around. They actually all switched, collectively, from United to American last year or the year before in response to changes to United's program.
  - _delirium 11y ago
    Yes, I think big companies especially tend to view it that way. Governments have passed some of these rules about employee travel having to use the miles/points for official purposes mostly because it's politically popular to hammer "government waste", even using tools that aren't very efficient hammers. Companies tend to take a bigger-picture view when they're worried about travel budgets, instead of the relative penny-pinching of going after airline miles. For example when there's internal pressure to cut corporate travel budgets, two common policies are: 1) direct managers to reduce unnecessary travel, e.g. cut out 10% of trips entirely, and 2) institute a rule that employees have to book through the corporate travel agent and normally must pick one of the routes that's within x% of the cheapest business class fare. The miles themselves, yeah, I think they just see as a minor compensation to employees for travel, since they don't pay them overtime or anything. Plus in some cases it's not precisely a kickback. Sometimes it is, but other times it's intended to incentivize the traveler to stick with their main airline even when the airline has worse routes to some cities. For example, you usually fly United, but today you want to fly to a city where American has a nonstop and United has only a 1-stop, for similar prices. Absent any kind of loyalty program, you'd pick American's nonstop for convenience. United's perks are supposed to encourage you to take the United 1-stop, even though it's a bit less convenient. This isn't precisely a kickback in the normal sense, because they aren't incentivizing you to buy a higher fare, and it's basically a wash from the employer's perspective. Instead they're incentivizing you to accept being personally inconvenienced with a worse flight, in return for receiving some personal perks.