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I found it very confusing, too. In particular, the headline makes no sense at all -- ultimately the "miles" they sell are for the very same "seats". Framing it
by goflyapig 9y ago
I found it very confusing, too. In particular, the headline makes no sense at all -- ultimately the "miles" they sell are for the very same "seats". Framing it as though the "miles business" is distinct from the "flying business" is nonsensical.
What I think it's getting at is: airlines are increasingly selling their services (i.e. seats on planes) indirectly, via loyalty programs instead of directly, via ticket sales.
Selling via the loyalty programs has benefits probably because consumers over-value the miles they receive, because (a) some portion of the miles will expire or never be redeemed, and consumers don't internalize that fact, (b) the airline collects from from the bank as soon as the issue the miles, but they don't have to pay for the seats until some point in the future, and (c) they can take advantage of some psychological factors/gamification by encouraging people to earn "gold" or "platinum" status, etc.
- peteretep 9y ago> ultimately the "miles" > they sell are for the very > same "seats" No figure to support the following claim, but I'd expect 50% of miles to expire without being redeemed. But also: I recently stayed at the Conrad Rangali "for free" having accumulated enough points. Food, a small upgrade, transfer to the island, etc conspired to add an extra $5,000 of spend on a five night stay. Don't underestimate the upsell!
- saryant 9y agoWell, yeah. It's the Maldives. I've used points for five-night stays at the Conrads in Seoul and Tokyo without having a single dime on my invoice at checkout.
- peteretep 9y agoI have not escaped any points stay without additional spend, and I suspect that makes me the much more typical case than you.
- saryant 9y agoAt a resort, I expect you're right. But in an urban setting? What is there to spend money on at the hotel that isn't better off-property? Especially at Hilton properties where anyone with enough points for a redemption at least has gold status and gets free breakfast and likely lounge access.
- peteretep 9y ago112 nights in Hilton properties last year, about 20% redeemed. I eat at the hotel restaurants a lot because it's convenient (and occasionally good — Trianon Palace probably having the best Hilton restaurant), I generally get them to book my airport transport because it's convenient, I often raid the minbar for water because it's convenient, and I usually have room service at least once.
- prostoalex 9y agoThe headline reflects airline's point of view, not consumers'. The money quote on credit card subdivision: "it accounts for more than half of all profits for some airlines, including American Airlines Group Inc., the world’s largest"
- Fomite 9y agoImportantly however, and what is being noted, is if I use my Delta credit card, Delta has an income stream whether or not I'm flying. Eventually, someday, perhaps those miles will be used for seat, but it's a different revenue stream that's likely not perfectly correlated.
- goflyapig 9y agoRight, and that's what I was trying to get at when I mentioned that "some portion of the miles will expire or never be redeemed", but I guess it should be emphasized since it's the main benefit to the carriers. If you have a Delta credit card and you never redeem the miles, the rational thing for you to do would be to switch to a credit card with a different rewards program. The reason you'd keep using your Delta credit card is because you anticipate that you will redeem the miles for air travel later. The value of the miles still ultimately derives from their "flying business".