More Than Just Rewards

Points programs continue to evolve. So what does that mean for the future of loyalty?

- Ramsey Qubein

According to many travel industry experts, loyalty rewards programs have been one of the most profitable innovations in the history of the travel industry, especially for airlines. When American Airlines created AAdvantage on May 1, 1981, it was the birth of what we know to be a valuable and important industry incentive that can also be a big player for a company’s bottom line.

These programs were originally a way to capture traveler information and attract future business through points and miles. But loyalty programs have evolved into major profit centers for companies. Some have even spun them off as separate entities. Decades ago, Air Canada even sold its affiliated Aeroplan program while still using it for mileage earning and redemption resulting in a nice chunk of change for the carrier at a time when it was facing bankruptcy.

Delta Air Lines was able to climb back from bankruptcy in part thanks to a forward sale of SkyMiles to credit card partner American Express. In fact, most major brands now have affiliated credit card partners that contribute direct revenue to the parent company through the sale of miles and points or bonuses for acquisition of the card.

These programs have also given travel brands the tools to offer more personalization and targeting of services. Studies show that they remain relevant and of interest to consumers although ever-changing rules and benefits sometimes add confusion. Perhaps one of the biggest changes in the industry was the shiftto revenue-based programs by airlines awarding miles based upon how much someone spends instead of distance flown. This resulted in the majority of travelers earning fewer miles from their trips; it only incentivizes the top spenders.