Jan. 10, 2014 at 1:23 PM ET
Consumers saving up their airline miles for a free trip may find that ticket is getting further out of reach. It's time to switch loyalties.
Airlines have been increasing the price of reward fares, and several big jumps are imminent. United's program changes, effective Feb. 1, almost double the cost of some first-class tickets on international partners. A one-way ticket from the United States to Europe, for example, will be 110,000 miles rather than 67,500. Even an economy United ticket from the mainland U.S. to Hawaii will cost 5,000 miles more, at 45,000.
On June 1, Delta will increase many of its award tickets, too, boosting the cost of a one-way, first-class domestic ticket by as much as 5,000 miles. Economy "saver" tickets to Hawaii will cost 22,500 miles, up 2,500, while many business tickets to Asia will cost an extra 10,000 miles each way.
"There was a time in which members, over the course of a few years, could accumulate enough miles to round-trip to Europe in business class if they made wise use of a credit card combined with other mileage accrual activities," said Jay Sorensen, president of IdeaWorksCompany, a research firm. "Under this new regime, that's no longer possible."
Sorensen said airlines typically raise reward rates to offset demand, either because they see the opportunity to sell more of those seats or to limit a growing number of travelers snagging them for free. "They're anticipating that outcome, or creating that outcome to some extent," he said.
It might be tempting to bail, but travelers close to a reward will find it's more valuable to stay loyal in the short term than cash out miles for a magazine subscription or car rental. "Build up your account to the point where you get something of value, cash out and then refocus your strategy elsewhere," said Brian Kelly, founder of ThePointsGuy.com.
After that? It's time for occasional travelers — those who take only a trip or two per year — to ditch airline-specific loyalty programs.
"Would you invest your entire retirement in one stock?" said Kelly. "No, because that would be stupid. It's the same thing with these airlines and your vacation. You can't be naïve and think your miles are always going to maintain their value."
General travel reward credit cards — Capital One Venture, Barclaycard Arrival, Chase Sapphire and the like — often offer better value for domestic reward travel. Cardholders often earn more than one mile for every dollar spent, with discounts for booking reward travel directly through the issuer. Plus, because travelers are buying a seat with points at the market rate, any open seat is fair game. "Alec Baldwin and his Vikings even have more reason to boast right now," Sorensen said.
But even after recent changes, airline programs still have an edge for travelers hoping for a business- or first-class ticket. "Rewards prices are low in relation to premium class airfares," Sorensen said. Travelers will just have to be prepared to wait a while longer to earn enough for that trip.
A happy medium: Programs like Chase Ultimate Rewards, American Express Membership Rewards and Starwood Preferred Guest let users transfer points to partner airlines, said Kelly. That allows travelers to follow the deals, either by redeeming directly for economy tickets or moving rewards into an airline program for a pricier trip.
Travelers really desperate to cash out of airline programs may find online point brokers are willing to buy their miles at a favorable rate, but it's an avenue to explore with caution. You might end up without either miles or cash. "Brokers are against the program rules of all these programs," said Kelly. "Airlines will absolutely shut down your account and blacklist you if they catch you. And if one of these companies steals all your miles, who are you going to complain to?"
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