The Future of Loyalty Programmes - to earn, burn or be undiscerned?

 

Customer loyalty has been a longstanding, critical component of revenue generation and customer retention strategies for airlines, hotels and car rental suppliers. In fact, in January 2020 – just prior to the COVID-19 outbreak – On Point Loyalty released its 2020 ranking of the most valuable airline loyalty programmes in the world. The report listed America’s top three airline loyalty programmes (Delta’s SkyMiles, American Airlines’ AAdvantage, and United’s MileagePlus) as the most valuable airline loyalty programmes globally, with SkyMiles topping the bill at a massive USD25.9bn valuation. As airlines braced themselves to survive the financial impacts of COVID-19, their loyalty programmes proved critical to their ongoing financial stability, with a number of airlines using their loyalty programmes for liquidity.

But loyalty isn’t just good for travel suppliers. With corporate loyalty programmes delivering savings against the cost of air travel, and a strategic preferred airline agreement capable of delivering 5-figure savings to your annual business travel budget, it can certainly pay to be loyal. Not to mention the added traveller perks available to loyal customers – typically enjoyed by those who aren’t footing the travel bill – spanning product upgrades, exclusive lounge access, priority experiences and VIP service.

In a pre-pandemic world, loyalty was an easy sell to road warriors and their employers. But the travel restrictions of 2020-21 saw a significant reduction in the ability to earn and burn points on travel services. As such, retaining a loyal customer base has become an increasingly challenging and important task for airlines, requiring a high degree of creative problem-solving to ensure a value exchange that remains relevant, achievable and lucrative on both sides of the relationship.

However, there are several reasons why joining a loyalty programme during a pandemic could significantly benefit your business and business travellers alike. Below, we explore why.

Is now the best time to take advantage of loyalty programmes?

Here are five reasons why you should consider registering for a travel loyalty programme:

1. 1. Double-dipping and discounts

A recent proliferation of corporate loyalty programmes pitched for small-to-medium-sized businesses offer the opportunity to double-dip on points earning – creating value for both your business and travelling employees. Such programmes include American Airlines’ Business Extras, Delta’s SkyBonus, United’s PerksPlus, British Airways’ On Business, Etihad’s Business Connect, Qatar’s Business Beyond, as well as Virgin relaunching their wider brand loyalty programme, Virgin Red to work alongside Virgin Atlantic Flying Club, spanning fare discounts, bonus points and added extras. And while some of these programmes implement a cap on annual travel spend, they could potentially benefit businesses that prefer an ‘Open Skies’ policy and even be attractive to mid-large size businesses looking at a staged return to travel activity.

1. 2. It’s easier to reach elite status with fast-tracked offers

In addition to protecting status tiers for their loyal flyers, many airlines are also making it easier for lower-level members to grow their status.

For example, British Airways are protecting all statuses for 12 months for those whose Tier Point collection end date falls between 1 July and 31 December 2021. And from 1 July 2022, members will need 25% fewer points to climb Tiers. British Airways is also reducing the number of Tier Points needed to reach each Tier (Bronze, Silver, Gold, Gold Guest List) by 25% for the year after the 12-month extension, making it easier for members to renew or upgrade a Tier.

• Bronze: 225 Tier Points or 18 eligible flights
• Silver: 450 Tier Points or 37 eligible flights
• Gold: 1125 Tier Points

In North America, for the remainder of the year, Delta’s SkyMiles members can earn up to 75% more toward Medallion Status on nearly every Delta flight, including Award Travel – a first-ever for the industry. For the very first time and exclusive to Delta, Award Travel (inclusive of Miles + Cash) is eligible for Status earn. All SkyMiles Members will earn at least 50% more on Delta tickets* (includes Pay with Miles, Award Travel and Delta Vacation packages).  Members will earn an additional 25% – for a total of 75% – on purchases of all premium fare products (Delta One, Delta Premium Select, First Class and Delta Comfort+) and post-purchase upgrades (cash or miles).  Relative to 2019, AAdvantage lowered its elite qualification requirements for 2021 and also rolled overall flight activity from Oct 1^st to Dec 31^st 2020 to count towards 2021.  In addition, and exclusive for 2021, American will waive the EQD requirement for Gold, Platinum and Platinum Pro if a member spends $30,000 on net purchases with their eligible AAdvantage credit card in the 2021 calendar year.

3. More ways to earn frequent flyer points

In 2020, the reality of reduced travel activity caused loyalty programmes to expand the channels for points accrual and redemption. This was critical to maintaining a loyal and engaged customer base during a period of potential brand disconnection.

The Etihad Guest programme provides members with the ability to earn Etihad Guest Miles at over 300,000 hotels around the world, earn miles with ‘Walletplus’, and a range of partners allows guests to earn miles when they spend with them. A full list can be accessed here: https://www.etihadguest.com/en/earn-miles.html

Additionally, AAdvantage members can earn miles “on the ground” across a range of travel, retail, and financial partners. Members have the ability to earn miles on everyday purchases by shopping online via the AAdvantage shopping portal (https://www.aadvantageeshopping.com/) or dining out (https://www.aadvantagedining.com/). For additional detail on ways to earn miles on the ground, click here: https://www.aa.com/i18n/aadvantage-program/miles/earn/earn-miles.jsp

4. More flexibility and exclusive perks

The speed at which loyalty programmes adapted to the pandemic and their willingness to provide flexibility is likely to be instrumental to their members’ longer-term trust and loyalty. Many airlines have now implemented more flexible flying policies to provide greater financial certainty for businesses and leisure travellers alike as they return to travel.

While expanding redemption opportunities for points has helped to maintain programme engagement during the travel downtime, airlines are now looking at ways to encourage the redemption of points for travel again.

To support British Airways’ On Business members during the pandemic, BA is making a few policy updates to the Tier Status and On Business Points:

On Business Tier Status Extended

• Members’ current Tier status will be protected and extended until the end of December 2022
• Members will continue to move up to the next tier if they reach the required spending thresholds on company travel by the end of 2021.  A reminder of the spend thresholds for each tier can be found here.

On Business Points

• Members’ Points Expiry Date will be extended until the end of December 2022

All the changes outlined above will happen automatically, so members need to take no action.

Etihad has announced that it will shortly update the conditions on Etihad Guest miles to have no expiry date.

Virgin Red brings rewards from across the Virgin Group all under one roof, meaning travellers can link their Virgin Atlantic Flying Club account, getting the best out of both programmes, earning points by spending with other Virgin brands like Virgin Wines and Virgin Media as well as select partner brands like Nike, Lego and Octopus Energy.

Air France-KLM’s Flying Blue scheme is promoting savings on baggage fees as well as between 10- 50% off seat options depending on which tier members are in. Platinum members even have access to their own dedicated Platinum Service Line for exclusive support 24/7. These steps are in addition to maintaining tier levels for any existing members from 2020 through to December 2021.

5. Competitive market offers

As travel activity resumes, airlines are ramping up their promotions to entice new customers to their programs. For example, Lufthansa’s Miles and More programme have doubled points rewards for any flights taken during 2021. This applies to both their existing Frequent Traveller, Senator and HON Circle members as well as new customers who decide to switch to Lufthansa, Swiss, Austrian Airlines, and almost 40 other partners through the Star Alliance membership.

How will airlines continue to add value for their loyalty members?

While travel activity continues to increase and drive competition amongst airlines, the promise of fast-tracked status climbing and extraordinary membership perks is an unrealistic long-term expectation due to its impact on profitability.

Once these special perks come to an end, what will airlines do to engage and retain their loyal members and encourage new members to choose their loyalty programme over their competitors’?

Travel suppliers will need to continue to look for new, creative ways to maintain customer loyalty beyond traditional earn and burn models. For example, last year Delta trialled a premium programme called SkyMiles Select where passengers paid US$59 a year to enjoy the privileges of early boarding and a guaranteed overhead storage space every time they flew. For businesses with the Best Fare of the Day policy, these low-cost, low-loyalty solutions may be sufficient to drive enhanced traveller satisfaction without the compliance and consolidation challenges of a preferred airline agreement.

The road ahead – what’s best for your business?

We asked business travellers what loyalty perks they’ll value most as they get back to travel. Here’s what they said:

 

 

 

 

If you’d like to discuss additional ways to help elevate the value of your travel programme and the experience for your travellers, Corporate Travel Management’s (CTM’s) customer solutions teams can work with you to review your post-pandemic travel plans and establish the best approach to loyalty for your business and travelling workforce. From a consolidated preferred airline agreement and associated loyalty programme to an Open Skies policy for maximum flexibility and choice, our team will design a bespoke solution based on your specific travel needs and trends.