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Does the IHG playbook show where Delta SkyMiles is headed?

by on Wed February 11, 2015 • No Comment


There is a lot of consternation in the frequent flier enthusiast community about Delta SkyMiles’ moves over the last few weeks, especially eliminating a published award chart altogether.

The moves appear almost inexplicable, and stoke a value seeking member’s worst fear – moving to a system where the number of miles required for a trip is directly related to the cash price of the trip – eliminating ‘jackpot’ awards with high value, and forcing us all to settle for 1 – 2 cent per point redemptions.

But this is not the first time a loyalty program has made moves similar to Delta’s.

And in fact it is Delta’s cross-town neighbor in Atlanta, IHG Rewards, that has set the precedent.

Here are some examples…

  • IHG went to 9 award tiers from 2 to 5 tiers in early 2013, and published the chart with advance notice
  • Delta moved to 5 award tiers from 3 in early 2015, with about a years’ advance notice, though after some public outcry to reveal it
  • IHG stopped publishing its recently revised award chart, directing users to see live pricing by using the hotel night search
  • Delta stopped publishing its brand new award chart, saying prices can be found by using its calendar search
  • IHG publishes regular ‘PointBreaks’ that offer flash sales for less points
  • Delta has started offering limited time award discount sales
  • IHG made quiet changes to its terms and conditions without notice
  • Delta just did the same

It’s hard to directly compare hotel and airline mile programs. The competitive dynamics are entirely different. But the history is so similar you have to think there has been some cross pollination of ideas in bars, in bedrooms, or in hiring between IHG Rewards and Delta SkyMiles.

Using IHG as a template, here’s how you might think about SkyMiles:

  • The overall value of the program may not change dramatically. Yes some aspirational awards got watered down by IHG, but the overall proposition of the program didn’t suffer dramatically. IHG wasn’t a leader in value before these changes, and Delta wasn’t either.
  • High value awards still regularly exist – but the most extreme values get tempered. You can get some decent point values with IHG Rewards, but jackpot values are much harder to find. So in airline terms, a 125,000 mile business class seat on a flight where seats are selling for $8,000 will be even more rare, and that hurts. But getting that 125,000 mile reward on flights when Delta is offering discounted business class fares could still be possible, giving you closer to 3-4 cents a mile in value.
  • You will see more limited time price discounts. But they’ll probably stick to mundane Economy Class discounts like they have with the test sales they’ve offered the last few months, and the magnitude of discounts IHG offers with PointsBreaks is unlikely.
  • Elite status will continue to water down. IHG’s top tier status is almost useless for benefits. One silver lining is the $200 per year Ambassador status you can purchase, which confers high quality room upgrades at Intercontinental hotels. But airlines just don’t have the extra inventory to upgrade, so don’t have high hopes for Medallion status.
  • Award price increases may be more incremental.  With more tiers and no award chart to adhere to, the program can  fine tune adjustments more frequently. That may feel more palatable than the step function changes airline programs have historically relied upon. And partner awards can be more effectively subsidized by better revenue management of Delta’s own  inventory, which could be a good thing for value seeking fliers who prefer partner awards.

Yes, the Delta changes are hard to call anything but disappointing.

But IHG’s experience shows they are not without precedent, and you should be able to find decent value from your miles, even if SkyMiles never will be (or never was) a leader in value.

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