Earning frequent flyer miles is easy. The challenge is to redeem them, conveniently and for good value.
The airlines have been slow to address that need, preferring to limit frequent flyer awards to free flights. That way, they’re limiting the cost of most awards to the real cost of flying one more passenger in a seat that would have been empty anyway.
The upside to that approach is that the airlines can give away a ticket with a perceived value of $400 that only costs them an extra bag of pretzels, a can of Coke, and marginally more jet fuel.
That makes the programs financially viable for the airlines, and potentially highly rewarding for travelers. It’s a win-win. Or can be.
But there’s a downside to the reliance on unsold seats as rewards: Award seats are limited at best, and not available at all on some flights.
Nevertheless, the airlines continue promoting the programs as though 25,000 miles practically guaranteed a free ticket. Members of the airlines’ programs are confronted with a very different reality when they go to cash in their miles.
That disconnect—between program members’ expectations and actual award flight availability—has gone a long way toward eroding consumers’ trust and engagement in airline loyalty programs.
Airline executives are aware of the problem, and the toll it can take on their programs’ health and vitality. In connection with United’s recent introduction of one-way awards and “Miles and Money”—both initiatives designed to make redemption easier—Robert Sahadevan, Vice President of United’s Mileage Plus program, acknowledged that award availability was a pressing issue, and vowed that “currency has to be rewarding.” “We get it,” he promised.
Proving, perhaps, that the world’s largest airline gets it too, Delta has rolled out the SkyMiles Marketplace—an online portal where SkyMiles members can redeem their miles, or a combination of miles and cash, for more than 6,000 items, including hotel rooms, car rentals, consumer electronics, clothing, jewelry, and so on.
(For the record, the SkyMiles Marketplace is a Delta-branded version of the American Express LoyaltyEdge award portal. So the look and content will be familiar to members of the American Express Membership Rewards program.)
With the new awards marketplace, Delta has made it simple and convenient for SkyMiles members to use their miles for a wide range of travel and non-travel goods and services. The question, though, is whether the SkyMiles Marketplace delivers good value. To find out, I priced a random sampling of awards, comparing the price in miles with the dollar price charged by mainstream Internet retailers.
A Tumi Alpha FXT Hanging Travel Kit, for example, can be had for 24,300 Delta miles through the SkyMiles Marketplace, or purchased from eBags for $95. That means you’re getting 0.4 cents (four-tenths of a cent) for every mile redeemed.
A TomTom XL 340S GPS receiver costs 48,800 Delta miles, or $149.99 at RadioShack, for a value of 0.3 cents each.
A Nike Golf I.C. Series 20-15 Putter is priced at 30,000 Delta miles, or $89.95 on Golfballs.com, again yielding a 0.3 cent per-mile value.
And a Saturday night stay, March 13, at the San Francisco Hilton costs 15,632 miles through the Marketplace, or $127.20 if booked on Hilton.com. That’s the best value of the bunch, at 0.8 cents per mile.
As a point of comparison, redeeming 25,000 miles for a Delta ticket with a market value of $400 yields a per-mile value of 1.6 cents each, twice the value of the hotel night, four times the value of miles redeemed for the Tumi bag, and more than five times the value of miles redeemed for the navigation unit or golf club.
Or, looked at from another angle, does it make sense to cash in 24,300 miles for a toiletry bag when a cross-country ticket can be had for just 700 more miles?
To me, personally, the answer is a resounding No. But I’m inclined to do the math, and to place a higher priority on value than on convenience and flexibility.
Your mileage may vary.
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