As any mileage-collector will readily confirm, the more options for redeeming points, the better. But the savvy mileage-collector will be quick to ask the follow-up question: When redeemed for _____ (fill in the blank), how much are my miles worth?
Years ago, when the average price of a domestic roundtrip ticket was close to $500, the industry-standard price for a frequent-flyer award ticket was 25,000 miles. While a more detailed analysis would deduct somewhat for the hassle factor of booking a capacity-controlled award ticket versus a revenue ticket, the benchmark value of a frequent-flyer mile was generally assumed to be around 2 cents.
Of course, you could get more or less per-mile value, by booking more or less expensive award flights. But the average traveler was more interested in convenience than in squeezing extra value from his points.
When redeemed for non-travel awards, the return-on-investment has always been much less. Want to cash in miles for an iPad? Fine, but expect to get less than 1 cent per mile in redemption value.
In the years since 2-cents-a-mile was the standard, the value of a mile has steadily eroded, in the process significantly devaluing airline loyalty programs themselves, at least for average travelers who earn more of their miles from credit-card charges than from flying.
New Delta Redemption Options
Delta, for one, has signaled, both in public pronouncements and in its award pricing, that it wants the value of a SkyMiles mile pegged at 1 cent apiece.
This week, Delta added the following to the list of services for which SkyMiles members can redeem their miles:
- Upgrades to Delta Comfort+, first class, or Delta One
- Selecting Preferred Seats
- Ticket change fees
- Award-ticket redeposit fees
- Same-day confirmed fees
- External ticket charges
Looking at using miles to upgrade to Comfort+ or first class, 5,000 miles can be redeemed in exchange for a $50 discount on the upgrade price. So exactly 1 cent per mile. And that’s best case. Because the pricing is based on 5,000-mile increments, you’ll be getting less than 1 cent when redeeming for intermediate amounts.
To the extent that it’s possible to quantify, the other new redemption options also yield a per-mile value of 1 cent, or less.
Bottom line: Assuming you’re earning most of your miles for credit-card use, at a rate of one mile for every $1 spent, getting 1 cent per redeemed mile amounts to a 1 percent rebate.
Reader Reality Check
At what point do airline loyalty programs become irrelevant to you?
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After 20 years working in the travel industry, and 15 years writing about it, Tim Winship knows a thing or two about travel. Follow him on Twitter @twinship.