BusinessWeek: Miles, Points and Service

Miles, Points and Service
Bring Travelers Back
Business Travelers Enjoy the View from the Driver’s Seat

As the travel industry limps along, one thing has become increasingly clear: The people driving the bus … are us. We business travel consumers have discovered new muscle in our always-complicated relationship with the providers of travel services.

While low-fare carriers such as Southwest, AirTran and JetBlue are thriving, others in the industry have been forced to take a new look at their pricing models, and the concept of customer loyalty — how they earn it, and how they reward it. For us consumers, it’s a grand time. We’re sitting on $500 billion of unredeemed miles. Blackout dates are disappearing. Free seats are a bargain if booked in advance.

A year ago, we were cashing in miles for anything but travel. Now, as we return to the skies in healthy numbers, we’re trading in miles and points for flights and lodging — not a happy trend for the people who sell that space, but at least we’re back in that space. To get us spending real dollars, in real numbers, the industry’s leading brands are seeking new ways to define themselves as the indispensable solution to our personal problems. Loyalty, in the end, is a feeling as much as it is a pot of points. We’re going to spend our money with the brands that make us feel better.

In the section that follows, you’ll learn who’s doing what to earn your loyalty — and dollars.

Awash in Miles, Travelers Search for Redemption
Abundant Bonus Miles Let Many Travelers Cut Travel Costs with Reward Tickets

As airline after airline ponders a possible stopover at Chapter 11, business travelers couldn’t be blamed for a nervous glance at their fatted miles accounts. Without a flight to book — free or otherwise — what’s the value of a miles plan? Good question. There’s plenty of value, and plenty of benefit for travelers, as airlines have turned to enhancing their programs in efforts to keep key customers — and attract new ones.

In the last year, for example, frequent United Airlines flyer Michael J. Rosenberg has noted “a marked improvement in service.”

It began with communications to customers, both in person and electronically. And it included extending elite status to Mileage Plus® members whose travel dipped below threshold levels in the wake of the September 11 events. “Even the flight attendants and crew seem more personable and caring than in the past,” Rosenberg says. “This is important, given all of the security and pre-boarding challenges we travelers face.”

These soft benefits are just part of the picture. In redeemable value, miles programs offer so much value that some industry observers see the extremely generous reward structure as one piece of the industry’s financial problems. “Over the last 20 years, people have gotten better at playing the game than the airlines have been at adjusting their programs,” says Hal Brierley, chairman of Brierley & Partners in Dallas, one of the original architects of American Airlines’ AAdvantage® program. Increasingly, people are using miles to avoid buying a full-fare ticket.

Combined with business travel fare wars, it’s a great time to be a road warrior. Everything they buy carries a fat bonus of miles. But there’s a caveat. When it comes to spending miles, options abound. However, when it comes to redeeming miles on reward travel, availability and price are at a premium. The base award level has crept up to 25,000 to 30,000 miles under the stratagem of removing blackout dates. Miles programs now have less to do with actual miles flown than with spending through affiliated services such as credit cards, cell phones and online booking.

How long can it last? Depends on where the airlines turn to balance their books. Right now, airlines are spending more on reward travel than travelers are spending to earn it. And the failure of most programs to set an expiration date on the use of miles has given another enormous benefit to travelers — frequent or otherwise.

In a year of soft economic news, British Airways has used its Executive Club® to boost the TLC factor for its best customers. Renee Levine, director of relationship marketing, says the airline responds to any travel disruptions by sending a letter to Executive Club members — apologizing and offering compensation. “A couple thousand miles and up, depending,” Levine says. That’s for adults. Kids 12 and under get a teddy bear.

When the airline notices that a club member hasn’t been flying as much, someone will call to ask if anything is wrong. “Most people are surprised that we noticed,” she says. Another program, called Special Rewards, delivers unexpected gifts to the airline’s best customers, “to say ‘thank you’ and that we recognize their loyalty,” Levine says. Here’s how major frequent flyer programs are fine-tuning the travel experience for you.

AeroMexico (Club Premiere®)
Through the end of the year, AeroMexico is announcing monthly specials for Club Premiere members. Fly once every two years, for example, and miles never expire. Clase Premiere (First Class) flyers can earn a 50 percent miles bonus on international flights, easy through AeroMexico’s affiliation with the SkyTeam alliance. To learn more, or to earn 4,000 Premier Miles with a first purchase and 1,000 miles with each subsequent online ticket purchase through October 31, click on www.aeromexico.com/.

Air France (Fréquence Plus®)
To reward its top customers for buying a premium ticket, from October 15 through December 15, 2002, Air France is offering fat bonuses. Passengers in Business Class (L’Espace Affaires) earn a bonus of 5,000 miles per transatlantic leg of travel. Flyers in First Class (L’Espace Première) earn 7,000 miles per transatlantic leg. With other bonus opportunities, someone flying round-trip Business Class between New York and Paris this Fall could earn 7,280 base miles, 3,640 more for the 50 percent Business Class bonus, 7,280 more for the 100 percent bonus to Elite Plus-level flyers, and 10,000 Fall bonus miles. That comes to 28,200 miles — from one round-trip flight. That puts Fréquence Plus members well on the way to the 50,000 miles needed to earn a free round-trip ticket between France and the U.S. Learn more at www.airfrance.com/us/.

All Nippon Airways (Mileage Club®)
Through October 31, members of ANA’s Mileage Club can add a quadruple-mile bonus of 2,000 miles every time they stay at any of four participating Starwood hotels in Japan. Travelers booking rooms in advance at the Sheraton Hotel Sapporo, the Westin Miyako, the Hotel Kyoto or the Sheraton Grande Ocean Resort will, in addition to the bonus, get 20 to 30 percent off the standard room rate. To book a room, call Starwood at 888-625-5144 and mention rate plan “NHSUM.” And if you’re flying within Japan, check ANA’s discounted business fares at http://svc.ana.co.jp/eng/.

American Airlines (AAdvantage®)
With a grand prize of 100,000 AAdvantage miles to sweeten the pot, Marriott Vacation Club International’s All-American Adventure Sweepstakes offers load even for runners-up. The grand-prize winner can spend the miles for four round-trip tickets to take the family to Williamsburg, Orlando, Branson or Palm Desert — or stash them for future business travel. An American Tourister luggage set and Hertz car rental are included. Five first-prize winners get 25,000 Marriott Rewards® points, and five second-prize winners get 25,000 AAdvantage miles. To enter (no purchase necessary), go online to www.vacationclub.com/vc/partners/ and click on the sweepstakes link.

Delta Air Lines (SkyMiles®)
After eliminating blackout dates earlier this year, Delta continued to offer double miles with users of its SkyMiles charge card from American Express. For flyers who still don’t have enough miles in the bank, Delta now lets you go online and buy miles at www.delta.com/buymiles/. Corporations can buy miles in blocks of 60,000 or more to use as incentives. Individuals can top off their tank with blocks of 1,000 miles or more. When it’s time to spend, SkyMiles members can go online at www.delta.com/award-ticket to see available seats and book free travel.

JetBlue Airways (TrueBlue®)
Spinning a new variation on the theme of “flight credit” awards programs, earlier this year, JetBlue rolled out a loyalty program that matches the payback to the length of flight. Flights are rated short, medium, or long. For a short flight, passengers earn two credits each direction. For a medium flight, a round-trip earns eight points. And a long trip earns six out, six back. When your account hits 100 points in a year, you get a free flight — and a year to use it. Interested? Check out www.jetblue.com/.

Lufthansa (Miles & More®)
Miles & More members couldn’t be blamed for thinking Lufthansa is in a “family way” these days. It’s changed rules to let program members share flight and upgrade awards with friends and acquaintances. And program members don’t have to accompany the recipient of the reward. Maternity leave also carries extra benefits — extended elite status. Miles & More members who have achieved Senator and Frequent Traveller status but need to take a baby break can simply show a birth certificate, and Lufthansa will automatically extend their status one year. To learn more, stop over at www.lufthansa.com/.

Malaysia Airlines (Enrich®)
More than 1.5 million international travelers responding to a poll by Skytrax Research of London recently agreed —the cabin staff of Malaysia Airlines delivers the best service. Before and after the flight, too. For first and business class passengers booked on flights originating in North America, Malaysia Airlines will provide a complementary chauffer and car to and from points within 40 miles of the airport. The service is worth about $150. When you call to ask for a ride, the airline will tell you if there will be any extra cost. Get details, at www.malaysiaairlines.com/frame7.html/.

To Survive and Serve, Airlines Share Codes and Miles Plans
Expanding Alliances and Proposed New Partnerships Show Desire to Offer Seamless Global Ticketing

Welcome to the age of the global airline. First organized in the mid-1990s, the formal alliances of several airlines have matured into something closely resembling a single carrier, a long way from the days when they were little more than glorified code-share arrangements.

Look to the technical advances serving network travelers. Star Alliance® members have linked their computer systems and created a consolidated awards program called Star Alliance Rewards.

A Mileage Plus® member, for example, can now call a United agent who will use a feature called Redemption Availability and Sell, to book a single reward itinerary connecting any of the 14 member airlines.

As U.S. carriers tweak the service side of the business, alliance travel is introducing American travelers to international carriers consistently rated among the best in the world. In a recent poll by Skytrax Research of London, U.K., travelers rated oneworld® partner Cathay Pacific and Star Alliance members Singapore Airlines, Air New Zealand, Thai Airways and Austrian Airlines among the world’s 10 best for cabin service.

Technical advances smoothing links between airlines also help alliance members save costs. The ability to carry status across all member airlines means more than miles. It’s about access to executive clubs, it’s about upgrades, and it’s about the sense that all those miles mean something.

Here’s a view of the new shape in airline alliances.

Northwest (WorldPerks®), Continental (OnePass®), Delta Airlines (SkyMiles®)
In August, Northwest and code-share partner Continental joined Delta in rolling out plans to create a code-share alliance. If approved by federal regulators, the alliance would let each carrier sell travel on the others, extending their effective reach. The three U.S. carriers say they want to let miles program members earn and stash miles in accounts of their choice.

They also want to allow redemptions with partner airlines, but details are still being ironed out. The deal opens the door to future membership by Northwest and Continental in the SkyTeam® alliance, of which Delta was a founding member.

oneworld® (www.oneworld.com)
The eight member airlines of the oneworld alliance have created new travel packages that let flyers create global or regional itineraries at fixed cost. The oneworld Circle Trip Explorer derives from the oneworld Explorer program, which provided circum global bookings. The Explorer program lets people visit several continents, without circling the globe.

Prices vary, depending on the number of destinations and class of travel, just as it is with the new oneworld Circle Pacific program for travelers who want to fly to nations served by partner airlines on either side of the Pacific Ocean.

United Airlines (Mileage Plus®), US Airways (Dividend Miles®)
United and US Airways tried sharing the same brand a year ago, and that didn’t work, so now they have agreed to share ticketing codes. The result? A virtual merger, which will allow travelers in either airline’s miles program to cache and carry credits from flights with the other.

But because the programs remain independent, members of Mileage Plus and Dividend Miles will have to choose where they stash the miles they earn. They can’t combine miles from separate accounts into one, fatter pot. The code-share deal simply expands the reach of each carrier, and the ability of frequent travelers to accumulate miles — and support elite status benefits.

Your Frequent Hosts are Getting to Know All About You
Hotels Still Offer Points and Miles, But Add Personal Service Touches

On the road this year, we frequent travelers have been nothing if not emotional. So it’s appropriate that hotels are spending as much time thinking about how we feel as they are about how many points we’re earning.

To get at what really makes us loyal, hotels are turning to companies such as Market Metrix, a San Rafael, California, customer satisfaction market research firm that launched the Market Metrix Hotel Index last year. The MHMI is based on interviews with 30,000 hotel guests each quarter and measures 16 feelings, from comfortable, welcome and secure, to hip and cool. The authors of the index believe a guest’s emotions during a hotel stay are critical components of satisfaction and loyalty.

Not surprising, our sense of comfort, relaxation and security went down significantly — even at our favorite hotels — after September 11, 2001. “There were some cutbacks in the industry in services due to economic reasons, but that kind of drop can’t be chalked up to that,” says Dr. Jonathan Barsky, Market Metrix partner and University of San Francisco professor. Surprisingly, the ratings of loyalty program members dropped even further than for guests overall. Why? “Well, that tells me the programs are not addressing these critical emotional components,” says Barsky.

Joe Wheeler, executive vice president of the customer experience practice at The Forum Corporation agrees. “If a loyalty program is the only thing a firm is using to gain loyalty, they might not get the outcome they want. The loyalty card is a surrogate for a price promotion. Where we see them working well is when they’re part of a program that drives customers’ experience. Loyalty occurs when there’s a strong emotional engagement between products and services and the guest.”

Thankfully, many hotels are looking beyond customers’ passing interest in getting a good deal, and playing on our heartstrings to keep us coming back. When Fairmont Hotels, the small chain of 39 luxury hotels, re-launched its President’s Club program nearly three years ago, it didn’t base it on points. Yes, Fairmont lets us earn golf and ski passes, food, beverage and room awards, but the big thing is recognition. The company’s computer system lets it track our every heart’s desire at any hotel, so what we wanted in New York (such as sushi at 11 p.m., or the Wall St. Journal at 6 a.m.) will be waiting for you when you visit the San Francisco property.

Keeping track of guests’ every desire can get complicated when you have over 13 million members in your frequent guest program. Just ask Jeff Diskin, president and COO of Hilton HHonors worldwide. HHonors members will book more than 30 million room nights this year.

“Our philosophy is that different groups are motivated by other things — some by miles, some by recognition, some amenities,” Diskin says. “The more they stay with us, the more we learn about them, the more we can tailor the benefits and offerings for them.” As even frequent travelers stuck closer to home this year, Hilton put its guest information to work, sending e-mail offers for special rates at properties just a drive away from frequent guests.

If points and miles are what it’s all about for you, there are still plenty of fabulous rewards out there. Starwood (brands include Sheraton, Westin and W Hotels) was voted number one in hotel loyalty programs in the country for the third year in a row at this Spring’s Freddie Awards. No blackout dates, no capacity controls, and plenty of emotional rewards, too. Here are other places — and reasons — to stay:

Hilton Hotels (Hilton HHonors®)
Hilton is making it especially easy this year to earn points and spend them, including at five new Hampton Inn hotels in New York City. Make your reservations online at www.hiltonhhonors.com/ and earn 500 Hilton HHonors bonus points, between now and December 31, 2002. And with those extra points, shop and earn with HHonors this holiday season. From now through January 31, 2003, shop with HHonors and earn 10 Hhonors bonus points per dollar spent, plus an exclusive 15 percent or more off the retail price on over 300 items from 40 name brands. HHonors members can shop online by simply visiting www.ashford.com/hhonors/.

Hyatt (Gold Passport®)
Hyatt has extended its “Faster Free Nights” promotion. When Gold Passport members pay with their MasterCard, they can earn unlimited free nights at Hyatt hotels and resorts worldwide. Get a free night after every two stays after October 1, redeemable from November 1 through the end of April 2003. Check out the newly re-launched Hyatt Web site at www.hyatt.com for Internet-only rates.

Marriott Hotels (Marriott Rewards®)
Marriott will offer two free weekend nights to Marriott Rewards members who stay three times at any Marriott hotel through January 31, 2003. Register for the “Take Two” offer at www.marriottrewards.com/. And to make sure elite level members of Marriott Rewards get just the room they wanted, just the way they wanted it, Marriott will give cash back.

Sofitel (Exclusive Guest and Privileged Guest)
Feel the need for a little French luxury? The Sofitel group of 160 sophisticated hotels in 50 countries is growing its U.S. presence. The chain, with headquarters in France, will open 20 more properties in five continents over the next two years. In December of last year, the company launched a new free Privileged Guest card. As a member, you will receive a special welcome gift when you arrive. You will receive a double room at single-room rates, and late checkout until 4 p.m. is available at no extra cost. For every 10 Euros (about $8.65) you spend, you earn 80 Compliments Points at Sofitel hotels. When you have accumulated 20,000 Points, you can convert your Points into Chèques-Compliments worth 200 Euros (about $173) each on the price of a stay at nearly 2,000 company hotels.Or, join Sofitel’s Exclusive Guest program for a fee of 230 Euros (about $199) a year and get up to 50 percent off on standard room rates year-round at all Sofitel hotels. (Check current exchange rates for exact exchange rates.) The company guarantees its Exclusive Guest members will always have a room available, too. Earn Compliments Points with each stay and use them to buy even better room rates. Learn more about these exciting hotels at www.sofitel.com/.

Starwood (Preferred Guest®)
Starwood Preferred Guest members earn triple bonus frequent flyer miles or Starpoints per each eligible stay, now through January 31, 2003. Many airlines are participating. To learn which, visit www.spg.com/. Go online to book a stay at a Starwood property (including 400 Sheraton hotels in 70 countries) through December 31, 2002, and you’ll earn 500 bonus Starpoints.

Technology Allows Travelers to Serve Themselves
As Web Sites Get to Know Us Better, Will They Learn to Serve Us Better?

The more technology gives travelers the tools to manage their travel, the more they can expect to share in the savings that such technology will provide to the travel industry. But will they? In subtle ways, “yes.”

“I’m seeing an expansion of miles and points programs tied into online booking and reservation,” says Joe Sisto, a vice president at the North Highland Company in Atlanta, which works on customer programs for such clients as Air France, Delta and Marriott. “They’ll give you points and improved services, as long as you make your own arrangements.”

The battle from the travel industry’s perspective is for the hearts and minds of people who aren’t driven by price, aren’t driven by brand, but are driven by such factors as utility, familiarity and service, according to Sisto. As the industry migrates its sales to the Internet, Web-based travel agencies — the Orbitz, Expedia, Travelocity models — will be looking for new ways to compete for actual bookings and repeat business.

To pour a few miles, points or both into your tank, or simply manage your travel experience better, check out these opportunities.

Citibank AAdvantage MasterCard (www.citibankonline.com)
Citibank, which has issued credit cards linked to American Airlines’ AAdvantage program since 1987, continues to expand its offers. The Citi AAdvantage World MasterCard now offers miles that may never expire, more reward seats to more destinations, and no pre-set spending limit to hinder miles accrual. This year, Citibank also rolled out a debit card that earns AAdvantage miles. Users of the basic card, which has a $25 annual fee, earn one mile for every two dollars purchased with the debit card, in person or on the Web, by phone or mail. Sign up for the Premium Card, at $65 a year, and earn a mile for every dollar spent.

MilePoint.com (www.milepoint.com)
Now this online mile redemption site has added mortgage fees to its list of spending options. Through two new partnerships, MilePoint.com users can spend up to 25,000 miles or points toward up to $500 in closing costs on financing with Chase Manhattan Mortgage Corporation and CitiMortgage, or whittle a quarter-point off a loan rate with CitiMortgage. MilePoint miles and points can be used from any combination of participating frequent traveler programs, including Delta Air Lines, Northwest Airlines, Continental Airlines, US Airways, America West Airlines and Midwest Express Airlines. Also taking part are American Express Membership Rewards and Hilton’s HHonors program.

Cingular (www.cingular.com)
Tired of leaving wireless minutes on the table? With a new policy it calls Rollover, Cingular wireless now lets customers take their unused minutes with them — into the next month and beyond. The Rollover feature comes with any local plan costing $39.99 or more a month. What are you going to do with those extra minutes? Read your e-mail, perhaps. With Cingular’s new Xpress Mail plan, business travelers with Internet-ready phones can securely and simply dial in to their corporate e-mail from the road. The service is $10 a month, and links up with Microsoft Exchange or Lotus Notes e-mail, address books, calendars and more. Access through Xpress Mail first requires a subscription to Cingluar’s Wireless Internet or Wireless Internet Express.

MasterCard Business Bonuses (www.mastercardbusiness.com)
To expand flexibility for small business owners, MasterCard allows users of its BusinessCard earn a point for every dollar spent, and then redeem those points in the form of a MasterCard Bonus Card. The Bonus Card works like a debit card. Points are good for such things as air travel, or whatever else the business owner would usually use their MasterCard to purchase.

AT&T Wireless (www.attws.com)
Several new AT&T wireless features let business travelers track and connect with each other on the road. In addition to using its Office Online feature to link remotely to office e-mail and contacts, mMode features such as Find Friends let you locate and send text messages to someone on the same network. Once you connect, you can use 10Best dining to find a restaurant, or Vicinity Brandfinder to locate other services.

American Express (www.americanexpress.com)
AmEx and Delta Airlines have paired up to provide a charge card totally pumped up on miles. For a $135 annual fee, people signing up for the Platinum Delta SkyMiles Business Credit Card get a free companion coach ticket every year on Delta, plus lots of miles — 10,000 bonus miles, 5,000 bonus base miles (toward Silver Medallion elite status), 10,000 more miles whenever spending tops $25,000, and double miles for the amount of every purchase. The card gives users access to discounts available through AmEx’s OPEN Small Business Network, including discounts on such travel brands as ExxonMobil®, Hertz, and Hilton. To get details about the cards, call 1-800-NOW-OPEN (669-6736). To enroll in SkyMiles, go to www.delta.com/.

Travelocity.com (www.travelocity.com)
New tech goes old tech. Travelocity has taken flight information previously available only on its Web site or wireless phone to a toll-free, voice-activated land-line number. Users can call 888-TRAVELOCITY (or 888-872-8356-2489), and speak the date, name of the airline and flight number, or departure and arrival cities. The service complements My Messaging, flight information tools that launched earlier in the year.

Writers: Stuart Watson is a business travel specialist. Kathy Watson is a hospitality industry expert.
Print Design: Sundberg & Associates Inc.
Produced by: MeigsMedia, Ltd., Millbrook, NY
E-mail: jon@meigsmedia.com
www.meigsmedia.com