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Miles for Rooms and Cars: Another Frequent Flyer Scam?

The giant airlines, concerned about the huge backlog of frequent-flyer miles and their own stinginess with awards, are pushing nonflying uses for miles. As with everything else they do to these programs, the airlines will benefit. But for you, as a consumer—not so much. I’ve warned about poor nontravel values for miles, and a new report adds some additional reality.

Again, we have to thank Jay Sorensen at IdeaWorks for some great research: The IdeaWorks List of Hotel and Car Rewards for the World’s Top-30 Airlines. The researchers calculated the value of each mile when applied to hotel accommodations and car rentals and found some important differences among the big North American lines. Three lines offer reasonable value:

  • One Air Canada mile is worth 1.3 cents when you apply it toward hotel accommodations and 1.4 cents toward rental car awards.
  • One American mile is worth 1 cent for hotels and 1.4 cents for rental cars.
  • Southwest points are worth the equivalent of 0.7 cents when used for hotels and 1.5 cents for car rentals.

The others don’t do as well:

  • One United/Continental mile is worth 0.8 cents for hotels and 0.5 cents for cars.
  • And Delta—already renowned as stingy with award seats—scores a dismal 0.3 cents per mile for either hotels or cars.

Among the big foreign lines that allow use of miles for hotels and cars, British Airways scores 1 cent for hotels and 0.7 cents for cars; Lufthansa scores 0.5 and 0.7, respectively; SAS scored 1.5 cents for hotels (no cars); and Virgin Australia scores 0.7 cents for both.

I won’t go into methodology other than to say that, as a former researcher, I believe the analysis to be totally sound. If you want the details, check the report.

To put these awards in perspective, most industry observers figure each mile is worth between 1 and 2 cents when you use them for “free” seats in economy class and maybe twice that in premium classes. Thus, Air Canada and American at least come close to giving you a fair shake for nontravel use, but the others don’t.

The report also notes that many lines let you use miles for ancillary airline services, such as lounge access. Also, some airlines give their top-ranking elite frequent flyers special, more generous, award lists. But, in general, you don’t get to see these deals unless you’re an elite, yourself.

The report doesn’t cover use of miles for merchandise, although 17 of the top 20 lines do offer such deals. When I’ve looked at those options, I find that, at best, you realize about 0.5 cents a mile when you use them to shop the airlines’ “catalogs.”

Certainly, you can understand why airlines would want to be stingy with miles used for nontravel purposes. One way or another, they have to pay when they award something they themselves don’t provide. I doubt, however, that they pay anyone full retail for nontravel awards. In some cases they may well trade benefits, and I know that airlines often buy some outside services, such as advertising, with tickets rather than cash.

All in all, the IdeaWorks report confirms two widespread suspicions:

  • Despite all the hassles of scoring seats, airlines miles are worth more for travel rewards than for anything else.
  • If you earn most of your miles through a credit card, you’re better off using a card that pays cash back—as much as 2 cents per dollar charged—rather than airline miles. That’s true even if you use the cash back to buy airline tickets: At least you can actually find seats that way.

The main case where you’re better off sticking with the airline miles is if you like to fly in a premium class. There, miles are about the only practical way most leisure travelers ever see the front cabin of a plane.

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Ed Perkins on Travel is copyright (c) 2011 Tribune Media Services, Inc.

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