Game Changers
Global Traveler|Class Act 2021
Travel brands revamp loyalty programs to keep customers engaged.
MARLENE GOLDMAN

One of the many fallouts from the turbulent past 1.5 years of pandemic-related travel restrictions and lockdowns has been the rethinking and imminent restructuring of loyalty programs throughout the travel industry, from airline and hotel brands to cruise and rental car companies. Loyalty programs are more than a perk for customers; they can be worth more than the brand itself for the program owners and operators. For example, the world’s largest airline, American Airlines, is valued at roughly $6 billion, whereas its passenger loyalty program, AAdvantage, boasts an estimated worth of $24 billion according to a recent analysis by Financial Times.

The value loyalty programs bring is one reason brands all across the industry restructured their programs to keep loyal customers enrolled and engaged amid all the COVID-sparked uncertainty. But the nature of loyalty programs has traditionally targeted business travelers, a sector still far from recovery.

“Most frequent-flyer programs or loyalty programs are geared toward high-repeat travelers, which are usually business travelers,” said Ben Baldanza, an economist and former CEO of Spirit Airlines (2005–2016). “If business travel reduces, changes, and people work at home or meet using video, not earning miles on room nights, it’s harder to earn a free flight or hotel room. If consumers have to wait years to get their rewards, loyalty reduces.”

Jay Sorensen, president, IdeaWorksCompany, concurred: “At the present, business travel is largely missing. I would guess business travel is off80 percent. That’s a huge number, so that is an uncertainty. Frequent flyer programs are for business travelers, primarily.” IdeaWorksCompany specializes in brand development and developed frequent-flyer programs for international airlines.

“When the airline is uncertain what’s going on, it’s really hard to re-engineer the program to perform for whatever the new environment is you end up with,” Sorensen continued. “What’s been happening with frequent-flyer programs is they want to keep you engaged, so they’re not allowing your miles to expire or your status to expire.”

Steve Saxon, partner and lead of McKinsey’s Travel practice in Asia, and Thorsten Spickenreuther, loyalty expert with McKinsey, explained airlines, hotels and other travel companies are extending status tiers or in some cases temporarily removing expiry of miles and lowering requirements for requalification.

American Airlines’ AAdvantage extended all elite status expiring Jan. 31, 2021, until Jan. 31, 2022. The company also made it easier to earn elite status using special promotions. And according to its website, “AAdvantage members who currently hold lifetime elite status will continue to hold their lifetime elite status.”

Delta Air Lines also extended elite status on its SkyMiles frequent flyer program. Delta SkyMiles Medallion members can maintain status through Jan. 31, 2023. Delta and American Express also extended SkyMiles partnership benefits through the same 2023 date. In addition, all Delta 360 members will keep their exclusive membership in Delta’s annual, invite-only program for an additional year.

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