Smart Travel: Upgrade Your Getaways Episode: The New Rules of Travel Rewards: Spend More or Lose Out Release Date: April 9, 2025

Hosts: Sally French and Megan Coyle

Introduction

In this episode of Smart Travel: Upgrade Your Getaways, hosts Sally French and Megan Coyle delve into the evolving landscape of travel rewards programs. They explore how economic factors are influencing flight delays and cancellations, the historical context of airline deregulation, and the intricate workings of modern airline loyalty programs. Additionally, they address listener questions to provide practical advice for optimizing travel rewards.

Travel Industry News

Economic Factors Affecting Travel

• Sally French opens the discussion by referencing her personal experience with flight cancellations, highlighting the broader economic forces at play that increase delays and cancellations.
  • [00:00] Megan: “Everyone has their own air travel horror stories. Sally, I am still shook by how you had two flights canceled in a row.”
  • [00:18] Megan: “But what if I told you there are economic forces at play that are making delays and cancellations more prevalent?”

Travel Spending Trends

• Bank of America Report Highlights:
  • Domestic travel spending in the US declined by 2.5% in lodging and tourism and 6% in airline spending from January to March 2025 compared to the previous year.
    • [01:18] Sally: “Their latest report found that, sure, domestic travel in the US Is still rolling, but it's definitely tapping the brakes.”
  • The slowdown is attributed to weather-related factors and decreased consumer confidence, particularly affecting lower-income households and redirecting higher-income travelers to international destinations.
    • [02:10] Sally: “But that might be because they are going abroad instead.”

International Travel Decline

• Tourism Economics Report:
  • Anticipates a 9.4% decline in international visitor arrivals to the US in 2025, driven by a 20.2% decline in visitors from Canada.
    • [02:37] Sally: “Tourism Economics announced last week it is now expecting a 9.4% decline in international visitor arrivals for 2025.”

Airline Alliances and Partnerships

• Fiji Airways Joins One World Alliance:
  • Enhances its loyalty program by allowing American Airlines’ Advantage program members to earn and redeem miles.
    • [03:28] Megan: “We just received some interesting data from bank of America about the latest in travel spending trends.”
    • [03:32] Megan: “Fiji Airways also made American Airlines a Advantage program, its loyalty program.”
  • JetBlue and Icelandair Partnership:
    • Enables JetBlue points to be used for booking flights with Icelandair.
      • [04:35] Sally: “Iceland Air seems to be partnering up with just about everyone.”

Interview with Ganesh Sitaraman

Guest Introduction

• Ganesh Sitaraman, a law professor at Vanderbilt University and author of Why Flying Is Miserable and How to Fix It, joins the hosts to discuss the airline industry's challenges and potential improvements.
  • [05:20] Megan: “Our guest today is Ganesh Sitaraman...”

History of Airline Deregulation

• Pre-Deregulation Era (1938-1978):

  • The Civil Aeronautics Board (CAB) regulated routes and prices, ensuring geographic access and preventing monopolies.
    • [07:40] Ganesh: “Everything that we think about in the country with flying is really a function of public policy choices.”
  • Stability in pricing, increased safety, and innovations like the jet age characterized this period.
    • [08:00] Ganesh: “Prices, interestingly, were also declining over this period.”

• Post-Deregulation Impact (1978 Onwards):

  • Initial surge in competition followed by consolidation into major hubs.
  • Emergence of low-cost carriers with no frills led to aggressive competition and eventual dominance by larger airlines.
    • [10:07] Megan: “But you argue in the book that prices were actually falling before deregulation.”
  • Increased prices and decreased quality of service as major airlines reduced competition.
    • [10:09] Ganesh: “By the end of the 80s, there had been dozens of bankruptcies, mergers...”

Airline Pricing and Competition

• Pre vs. Post-Deregulation Pricing:
  • Contrary to popular belief, average airline prices were declining both before and after deregulation at similar rates.
    • [12:02] Ganesh: “The conventional wisdom... prices went down after deregulation, but average prices were also going down before deregulation.”
  • Deregulation led to variable pricing based on competition levels across different routes.
    • [13:00] Ganesh: “So what you ended up with was a system where Even in the 70s, the biggest airlines didn't really have a huge percentage of any of the major airports.”

Loyalty Programs and Frequent Flyer Evolution

• Origins and Evolution:

  • Initiated as a strategic response to deregulation, loyalty programs aimed to retain customers amidst fierce competition.
    • [15:50] Ganesh: “After deregulation... airlines start thinking about what they can do to keep people with them.”
  • Transition from simple frequent flyer programs to complex points systems focused on customer spending rather than flight frequency.
    • [18:35] Megan: “And loyalty programs and frequent flyer programs...”

• Current Mechanism of Loyalty Programs:

  • Airlines generate points which are sold to banks, linked to co-branded credit cards where points are earned through spending.
    • [18:44] Ganesh: “The airlines create points really out of nothing, and then they sell them for real money to banks...”
  • Points are redeemable for flights, but their value is often unclear and subject to change.
    • [20:42] Megan: “NerdWallet does this every year...”

• Challenges and Consumer Impact:

  • Lack of transparency in point valuation and deceptive practices like overpriced point purchases.
    • [21:16] Ganesh: “What's the average value?... the point system really feels unclear.”
  • Non-cardholders may face higher prices as businesses incorporate credit card fees into their pricing structures.
    • [22:40] Megan: “It's like people who don't have these travel rewards, credit cards are already losing the game...”

Future of Airline Loyalty Programs

• Regulatory Investigations:

  • The Department of Transportation (DOT) is investigating airline loyalty programs for fairness and transparency.
    • [24:49] Ganesh: “There was a letter from Senator Richard Durbin... asking... why do we have all these problems in the airline credit card systems?”
  • Potential reforms could include fixed exchange rates for points and greater transparency in point valuations.
    • [25:00] Ganesh: “They could try to preemptively take some steps... including having a kind of fixed exchange rate...”

• Consumer Strategies:

  • Diversify Points: Earn transferable points to reduce dependency on a single airline's program.
    • [26:38] Sally: “How important it is to earn transferable points... diversify your points.”
  • Use Points Strategically: Redeem points before potential devaluations and be cautious when purchasing additional points.
    • [23:11] Ganesh: “Using points when you have them in order to prevent really them being devalued...”

Listener Questions

Traveler’s Credit Card Inquiry

• Question: Should the listener upgrade their Capital One Venture card to venture X for a trip to South Africa?

  • [27:01] Producer: “I have to pay for that now... considering up leveling my Capital One Venture card to potentially the Venture X card.”

• Hosts’ Recommendations:

  • Megan Coyle: Encourages taking advantage of big expenses to maximize intro bonuses and refers listeners to NerdWallet’s lists for boosted welcome bonuses.
    • [27:40] Megan: “Whenever you have big expenses coming up, that's a great time to get a new card.”
  • Sally French: Endorses the Capital One Venture X for its $300 travel credit, bonus miles, and lounge access benefits, emphasizing the value outweighs the annual fee if utilized effectively.
    • [27:51] Sally: “The Capital One Venture X is a really good choice... you get a $300 travel credit...”

• Additional Tips:

  • Megan: Suggests exploring hotel credit cards for potential free night rewards, especially beneficial for long international trips.
    • [29:22] Megan: “If you wanted to explore some other card options, I'd look at a hotel card.”

Conclusion

Final Thoughts and Encouragement

• Sally French highlights the importance of diversifying points to safeguard against changes in loyalty programs.
  • [26:38] Sally: “Good reminder to diversify your points so there is less risk if your preferred airline changes their loyalty program.”
• Megan Coyle urges listeners to engage with the show by sending in questions and leaving reviews to help others discover the podcast.
  • [29:38] Sally: “Thanks for sending that one...”
  • [29:55] Megan: “If you are loving the show, review and rate our show...”

Credits and Disclaimer

• Acknowledgements: Production team and contributors are thanked.
  • [30:03] Sally: “This episode was produced by Hilary Georgi and Tess Viland...”
• Disclaimer: The hosts clarify they are not financial or investment advisors.
  • [30:12] Megan: “We are not financial or investment advisors...”

Closing Statement

• Sally French: Encourages listeners to keep their passports active and wallets full, hinting at future episodes.
  • [30:22] Sally: “Thanks for listening. We hope you're inspired to keep your passport full and your wallet even fuller. See you next episode.”

Key Takeaways

1. Economic Influences: External factors like weather and consumer confidence significantly impact travel trends and spending.
2. Historical Context: Airline deregulation in 1978 led to increased competition but eventually resulted in industry consolidation and diminished service quality.
3. Loyalty Programs: Modern airline loyalty programs have evolved into complex points systems that benefit airline and banking institutions, often at the expense of consumer clarity and fairness.
4. Regulatory Outlook: Ongoing investigations by the DOT may lead to more transparent and equitable loyalty program structures.
5. Consumer Strategies: Diversifying points, redeeming them strategically, and staying informed about potential regulatory changes can help travelers maximize their rewards effectively.

For more tips, strategies, and in-depth discussions on optimizing your travel experience, tune into future episodes of Smart Travel: Upgrade Your Getaways.