Wednesday, April 8, 2015

Airlines woo members with wild, weird, wonderful rewards

If you think frequent flier miles are only useful for flying, think again! A recently released report shows otherwise.

IdeaWorksCompany, a consulting firm that serves the travel and hospitality industries, recently reviewed the frequent flier programs of 160 airlines around the world to gather examples of alternative rewards the programs offer. They found that some airlines offer their members the ability to use their accrued miles for more than the “must-have” rewards of air, hotel and car; they can use them to purchase unique experiences, event tickets, and retail goods.

Why, you may ask?

“Beyond the benefit of reducing reward liability, alternative rewards can encourage members to interact more frequently and deeply with the program,” Jay Sorenson, president of IdeaWorksCompany, said in an email introducing his company’s report titled, “Airlines Woo Members with Wild, Weird and Wonderful Rewards.”

“In addition, a thoughtful selection of rewards can create a personality for the frequent flier program and ultimately the airline,” the report said, noting that it is the selection process that counts. “Does the program wish to be playful, luxurious, or socially aware?” The 17-page report compiled 25 alternative rewards in six categories that can be used to define a program’s brand ranging from the extravagant to everyday comforts. The categories include rewards from the airline, fun treats and little luxuries, member auctions and raffles, unique travel experiences, social responsibility, and things linked to the carrier’s brand.

The full report is available here.

In the “rewards from the airline" category, the reward I found most interesting and appealing is also among the most expensive in that category. For a mere 100,000 frequent flier miles, diamond or gold-level members of Taiwan-based EVA Air’s frequent flier program can buy a 90-minute session, complete with trainer, in the airline’s flight simulator. The value of this reward is literally priceless, as the session is not offered for sale.

“Fun treats and little luxuries” include a “marriage proposal kit” from Israel’s El Al. For $60 plus 120 miles, a flight attendant will deliver a bottle of wine, elegant glasses, and premium chocolates to the couple (presuming the would-be groom got the answer he was hoping for), along with an official certificate from the El Al family of employees to recognize the event.

“Member auctions and raffles” allowed Portuguese carrier TAP to remove some 1.2 million miles from its books in 2014 through a number of raffles on its Facebook page. The top bid was 220,000 miles for a four-night cruise on Royal Caribbean, with roundtrip tickets on TAP. Meanwhile, auction activity by American Airlines (NYSE:AAL) consisted of a single event during 2014. An all-inclusive package for two to see Justin Timberlake live in New York produced a high bid of 421,000 miles. The package included tickets from a U.S. airport, hotel accommodations, transfers, meals, and a $600 prepaid MasterCard. In that auction, bidding was limited to AAdvantage MasterCard cardholders.

In the category of “unique travel experiences,” Australian carrier QANTAS offers its frequent flier members a private motorcycle sidecar tour of Beijing, China followed by a gourmet lunch with sparkling wine served along the wall of the Forbidden City. The package, valued at $199, can be obtained for 35,500 points.

Life vest purse
Photo courtesy Air France
Offerings in the “social responsibility” category include an offer from QANTAS for a 10-day volunteer trip that helps protect habitat, gathers habitat data, and raise awareness for the country’s indigenous koala bear, a species under threat. Frequent fliers can redeem 536,500 points per person for the trip, valued at $2,300.

Air France has a much more modest offering: purses made from unused aircraft life vests. Life vests have a limited life span before they must be removed from service, so Air France teamed with a company that employs people with disabilities to manufacture the purses from the retired vests. The cost is 9,000 miles or €25 per purse.

“Things linked to the carrier’s brand” include a pair of Business Class seats from a 747 operated by Japan’s All Nippon Airways (ANA) for 747,000 miles. The seats have a value of $6,288. Other more modest rewards include UAE-based Emirates’ offer of luxury seating at a Saint-Germain soccer game and access to the Emirates Club at the football stadium. That package costs 12,000 miles and is valued at €170 for the tickets, plus club access.

ANA Airliner Seats at maintenance base, HND
Photo by Carl Dombek
While the offer of rewards such as these may indeed result in a deeper relationship between an airline and its passenger, buyers in any such transaction must perform a cost-benefit analysis. I’m not referring to a complicated, down-in-the-weeds vetting; I’m talking about a simple calculation that will show the value of each mile to be redeemed. Some rewards like the airline simulator time cannot be purchased at all, but others can be, and the cost should be counted. Frequent flier members considering redeeming miles for a reward should divide the cost in miles by the dollar or euro value of the item. That will return a value per mile, which could help determine whether it is a smart purchase.

For the koala trip, each redeemed mileage point has a value of about 0.43 cents. For the 747 seats, each redeemed mileage point has a value of approximately 0.84 cents. If the average value of a frequent flier point is between 2 and 4 cents when redeemed for travel, frequent flier members may want to think long and hard about redeeming miles for less than half that value.

Or perhaps not. I mean, seriously, where else are you going to find 747 seats to put in your man cave or get a chance to fly an airliner simulator? As the advertising slogan goes, “There are some things money can’t buy.”

Visit my main page at TheTravelPro.us for more news, reviews, and personal observations on the world of upmarket travel.

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