Loyalty programs are big business for travel brands, but they can sometimes present challenges for consumers unsure about how to get the most out of their memberships. Tiffany Funk, co-founder and president of Point.me, discussed the complex world of travel loyalty programs with Editor-in-Chief Sarah Kopit and Head of Research Seth Borko in this episode of the Skift Travel Podcast.

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Key Points

The Evolution and Importance of Loyalty in Travel: Loyalty programs, especially in the travel industry, are deeply rooted and have been around since the deregulation era in the late 70s and early 80s, initially pioneered by airlines. They are more complex and influential today, with credit cards now playing a central role in the loyalty ecosystem.

The Disconnect Between Consumers and Loyalty Programs: Despite millions of Americans earning points through credit cards, a vast number go unredeemed because consumers often don’t know how to use them effectively. There’s a significant gap between what loyalty programs promise and what consumers actually experience.

The Reality Behind Points Redemption: While social media often showcases aspirational rewards like first-class international flights, most consumers prioritize practical benefits such as free checked bags or discounted domestic flights. Programs like United’s are highlighted for being more user-friendly to the average consumer, providing more accessible reward opportunities.

Loyalty Programs Prioritize Revenue Over Emotional Loyalty: Many consumers may not be truly loyal to brands like airlines or hotel chains but are instead optimizing or “gaming” loyalty programs for rewards. The real goal of these programs is to drive top-line revenue for the parent company, not necessarily to build deep brand affinity.

Devaluation of Rewards Is Common but Managed: Airlines and hotels do adjust loyalty programs (devaluation, perk restrictions, etc.), leading to customer outrage. However, businesses often bank on the fact that consumer backlash tends to be short-lived, and many travelers will continue using the programs regardless.

Episode Summary

The conversation with Tiffany Funk, co-founder and president of Point.me, revolved around the complexities of loyalty programs, particularly within the airline and hotel industries, and the broader implications of these systems on both businesses and consumers. Loyalty programs, initially created to secure business travelers, now play a crucial role in driving profits, especially with the increasing role of credit cards in the travel ecosystem. As banks and credit card companies move from merely supporting airline programs to creating their own, they are capturing a larger share of the market.

Funk explained the growing complexity in understanding and maximizing travel points, noting that many people, like herself, have points but don’t know how to redeem them effectively. She said that loyalty programs have persisted because they provide a competitive edge for companies, though they continuously evolve in response to market demands.

Ultimately, Funk believes the core value of loyalty programs lies in their ability to make travel more accessible and affordable, especially for those who use points wisely to meet their personal travel goals. She also touched on the different cultural approaches to loyalty programs worldwide, with Europeans placing more emphasis on status and perks rather than points accumulation.