Why don’t airlines and hotel chains create higher elite levels?

A question I often see over on FlyerTalk is “why doesn’t [insert your favorite loyalty program] have a higher elite tier?” People “double qualify” for the highest elite tier, and think they should receive more benefits. As someone that consistently more than double qualifies for United 1K status, and is about  to double qualify for Hyatt Diamond status, I can appreciate the sentiment. Admittedly I’m not the most profitable customer for either of those companies, but then again, I wouldn’t be if I only traveled half as much as I do either.

But why doesn’t United, for example, have a 2K status level? If you fly 100,000 miles per year you get upgraded before someone that flies 50,000 miles per year, so why shouldn’t someone that flies 200,000 miles per year get upgraded before someone that flies 100,000 miles per year? Along the same lines, if you make 25 stays at Hyatt properties you get all kinds of benefits, while you don’t if you make only 10 stays. So why shouldn’t you get any extra benefits for 50 stays?

The incremental benefits of elite status beyond the top, published tier are minimal. At United I can earn eight confirmed regional upgrades and six systemwide upgrades for the first 100,000 miles I fly, while I earn a total of four systemwide upgrades for the second 100,000 miles I fly. For Hyatt I earn four confirmed suite upgrades for the first 25 stays I make, while I earn nothing additional for the next 25 stays I make. Yet interestingly enough the incremental benefits typically increase proportionally up until the top tier.

So what’s a rational person left to do? Well, probably shoot for top tier status with more than one program. There’s nothing wrong with diversifying, though I’d argue regardless of whether we’re talking about airlines or hotels, top tier status with one program is better than middle tier status with two programs.

But that doesn’t answer the question in the title of my post. Why don’t they offer more incremental benefits? I’ve thought about it for a while, and I don’t really have a good answer. I can think of a few answers, but they’re not necessarily good ones.

One argument is that the programs aren’t keeping up with the times. I have a feeling it’s only somewhat recently that the programs have thousands upon thousands of members that more than double or triple qualify for a status level. And that’s largely due to the double miles/segments/stays promotions they have.

Another possible answer is that they’re tackling this issue by creating invitation only status levels. United has Global Services and Hyatt has Courtesy Card, and they’re not the only ones. At the same time, that’s for truly high revenue customers and “important” people. That doesn’t address the person that spends a more “normal” amount on travel, contributing double as much revenue to a company as someone that just hardly qualifies for top tier status.

The third, and only truly practical answer I can think of, is that it dilutes the current top tier status levels. I remember flying from San Francisco to Washington Dulles last summer on a Monday morning with a seat assignment in regular economy (not even Economy Plus). As a 1K I nicely approached the gate agent and asked her if there was any chance I could get an Economy Plus seat as a 1K. Her response? “You’re only a 1K, I have five Global Services in economy that I’m trying to find Economy Plus seats for.” Hmm, so I “only” have the top published status tier with your airline? I can understand what she meant, but there are definitely more tactful ways to communicate that. And unfortunately this wasn’t just a bad reaction — that’s how the employees feel when there’s a new top tier; it does devalue the former top tier.

Along the same lines, if I’m flying business class, I’d much rather do so on a two cabin aircraft than a three cabin aircraft with a first class cabin. It should be the same product and feeling, right? Either way, you’re paying the same amount. Yet some airlines differentiate service between two cabin business class and three cabin business class, like American. They offer more service in business class on a two cabin aircraft than they do on a three cabin aircraft. How does that make any sense?

So I don’t think there’s a good answer. On one hand I’d love to see airlines have higher status tiers, but on the other hand I don’t necessarily think it’s a good idea, since it does dilute the current highest tier. If I flew 100,000 miles per year with United and there were a 200,000 mile or 300,000 mile tier, and American didn’t have those additional tiers, I’d probably want to fly American.

But I do think it’s time for the airlines and hotel programs to provide more incremental benefits. It doesn’t have to be in the form of a higher published status level or even better recognition. But how about not reducing the marginal benefits? How about silently factoring in how much a person has flown that year when sorting the upgrade waitlist (even if it’s only after factoring in the fare paid)? Does it make sense that the time you choose to check-in online for your flight factors into your upgrade chance, while how much you fly doesn’t? How about offering at least as many upgrade instruments for each additional 100,000 miles as they did for the first 100,000 miles?

Anyway, just some food for thought…

Comments

  1. The cutoffs and benefits are quite arbitrary anyway.

    One might wonder for instance, why have a discrete scale at all? Just rank fliers according to the actual number of miles they’ve flown over the last x months, adjusted by whatever factors the airline uses.

    It would be just as legitimate to ask why they don’t transfer all the current benefits associated with 1K status to a new 2K status and give the 1K’s half of those benefits. Most people wouldn’t like that now, would they? 😉

  2. I too think that it dilutes the current highest tier and this is a big rationale for not wanting it. I like how UA does it by giving a little extra as one racks up significantly more EQM. Many Hyatt could give one more confirmed suite upgrade for each 10 stays past 25 🙂
    Also look at Delta, their Diamond tier resembles in many ways the platinum of a few years ago….just a lot harder to earn. Elite program inflation.

  3. For one it’s kind of silly EQM are still the measure of an airlines best customers. We all know the relation between miles and profit can be minimal.

    Secondly, how much more do the airlines want to give? If most people are happy to double qualify, than why give them anything extra? A new tier means extra cost, especially to make the benefits distinguished from the new lower tier.

  4. Status based on widely known, easily gamed metrics is a convenient compromise for the low levels. A significant portion of the 2P/1P/1K benefits is just sort order for standby/upgrades.

    So few people make it above top published tier that the airline/hotel can be much more discriminating and recognize/reward their high profit customers rather than their high activity customers.

  5. I think that after a certain point, airlines want to distinguish between those who fly a lot on them and those that actually spend a lot of money on them. That’s why in order to attain Global Services/equivalent status there is a spending requirement in addition to a mileage one. Obviously 1K and similar members (even those who achieve status largely due to mileage running) spend a lot of money on the airline to achieve that status, but don’t you also think it makes more sense past the 100,000 mile level to give more benefits to someone who flew 120,000 miles all in full fare business/first class than someone who flew 200,000 miles entirely on discounted coach? I guarantee you the first passenger is more valuable to an airline than the second.

  6. This is really only a struggle for the US carriers that continue to allow mass inflation of their mileage accounts and elite ranks.

    I compare this with BA that clearly distinguish among the ranks of Gold without having the need to have another tier.

    With BA you can earn additional benefits after certain higher tier points thresholds.

    More importantly every elite on BA gets a CIV score attached to them, which gives the purser/crew a direct indication of how important the passenger is to BA (it is based on revenue not miles travelled)!

    I certainly don’t believe BA have it right in every respect, but in regards to this area I definitely think they’re doing the right thing and the US carriers could learn a lot from it!

  7. The biggest reason is precisely your last one, telling the large # of top tier customers that they are no longer top tier outweighs the benefit of giving additional love for the smaller number of really frequent flyers/guests. Or at least that’s the fear. Meanwhile the unpublished tiers are at least an attempt for programs to have their cake and eat it to, provide additional benefits without insulting the mass top tier members. And those levels are usually more revenue other otherwise-commercially-important in terms of qualification criteria, the programs at times regret having other than revenue as the basis for benefits.

    I do have to wonder about this claim, though: “if I’m flying business class, I’d much rather do so on a two cabin aircraft than a three cabin aircraft ”

    I’d take business class on a 3-cabin aircraft over a two-cabin plane, given that the SEATS are generally far different, at least if we’re talking about US airlines…

  8. Itr all depends on which side of fence you are on. One one there are those who fly a lot on a tight budget but know the system well to gain the most benefits while minimize on cash outflow.

    On the other side, there are those people who fly because they have to fly to make a living. The hectic schedule and pressure of work take tolls on business travellers.

    I think it is fairly short sighted for the budget leisure travellers/Mileage Runners make reference that business travellers spend on someone else’s dimes to make status in the comfort of premium cabins. At the same time I hate seeing high paying business travelers act as if they own the airlines and looking down on those who earn their status on a minimum budget.

    Airlines are not supposed to be in the business to hand out benefits to those who fly a lot but generate almost no profit, although some people beleive that is their entitlement if they accumulate tons of BIS at the lowest cost.

    I think the current system is fair. GS qualification criteria should not be fixed. Planes are fuller and air traverls are more common now than say 10 years ago. One may also make an arguement that since it is so easy to accumulate 100K EQM (fare based EQM plus alliance flying), why not raise the threshold for 1K/1P/2P……we need to be careful what we are wishing for. 😉

  9. Existing top tier requirements are quite high enough, thank you. I like to diversify among programs, not limit myself to one or two where I can maintain a super-high level of.travel.

    Also, the timing of this post seems odd, as there are far fewer Double EQM/stays promotions this year at most chains.

  10. @ Will — While some are happy to double qualify, I’d say many choose to diversify and take their incremental business elsewhere. I’m sure the airline or hotel chain would like to capture that business too, which is why I’m suggesting *some* additional benefits.

    @ Mark — Valid points, and I’m not even suggesting they should create a new status tier, but why not offer at least the same amount of incremental benefits? Why not offer at least six additional systemwide upgrade for double qualifying. Isn’t it sad that a “smart person” would want to open two Mileage Plus accounts if they fly 200,000 miles/year in order to get the most benefits?

    @ Josh — I’ve heard a lot about the CIV score, and I’m not sure I see the value in it, at least for the flight attendants to have access to it. Sure, it’s useful when prioritizing operational upgrades or the like, but do you really want the crew to have access to that? “Oh, he’s *only* a low level Gold?” Psychologically, at least, it seems like a low level Gold in business class would be treated worse than someone without an Executive Club number, because they have status but are so low on the totem pole.

    @ Gary — All valid points. Seats different, though? Are you talking about American 767 vs. 777? For international airlines, I’d do SQ’s 345 over their 77W, Thai’s 345 over 346, etc. I do find service to be better on two cabin aircraft, for what it’s worth.

    @ UA_Flyer — Valid points as well. I believe in a power point from United management last year, it said the average 1K spends somewhere around $12,000 per year. Throw leisure travelers and mileage runners out for a minute. If I choose to fly United double as much (200,000 miles) and spend $24,000 per year (making me, most likely, a fairly profitable customer, double as much so as the guy that just made 1K), it just doesn’t make sense to me that there aren’t any decent incremental benefits. The airlines aren’t making any money, as you point it. Maybe it’s because they’re not managing their customers properly!

    @ Explore — My point exactly. The current system gives you an incentive to diversify. Wouldn’t airlines want to win over all your business?

  11. i’ve always wondered why they didn’t just award people points based on how many dollars you spend rather than how many miles you fly.

  12. To me it’s about the perception of attainability.

    When I moved to the US and had to pick a US carrier over the VAA Gold I used to have for internationals, I selected United as their program was easier to understand, colleagues said it was easier to hit top tier (true or not) and the benefits seemed better for top tier over AA or Delta.

    I knew I was likely to do about 80 EQM in year one and then 160k ish in year two and so reading some posts about dEQM campaigns I felt attaining (published) top tier on United. If United had a 2k tier I would have been very unlikely to select them in the first place as I wanted the benefits of being top tier.

    As a renewed 1k I would now love a 1.5k / 2k tier for all the reasons stated in this post, but I would never have given them all my revenue in the first place if this tier had existed.

  13. The super high-yield passengers you speak of are mostly already traveling J/F and don’t really need to be rewarded with upgrades. Programs like Concierge Key and UGS reward them with better service and handling during irregular ops.

    I agree there should be incremental benefits for the folks who fly over 100k but aren’t the really high-yield types that will get whatever they want anyway. Some of the bonus programs last year spoke to that. I know AA ran one where you got extras for flying up to 125k. I only hit it due to the double eqm promos.

    If there is ever the issue of having too many top-tiers, they could always just raise the qualification levels of all tiers. It would be tough though, because the levels are set competitively by the market.

  14. This actually makes my decision easier by splitting status… I figure I can fly 80K on LH every 2 years, flying AC flights to Asia where I can earn a 25% bonus which is more than I would with UA and the fares can be 400 to 500$ less per ticket….

    Had thought of splitting OneWorld and StarA, but my god OneWorld is just awful, LAN has the best earning programme, but terrible redemption, then there is AA that won’t match, so in the end LH gives me 2 years Red Carpet for flying 80K and they have the 50% companion redemption knocking 25% off mileage redemption.

  15. 2K is a great idea, but tickets paid with vouchers and K,L and T fares won’t count 😉

    Seriously, UA or others don’t need another elite level. There already is one, UGS. Actual mileage doesn’t matter. Ticket price does. Do you, for example think that flying 200K on dirt cheap tickets is a customer worth more than a 110K who flies 4 times a year to Singapore on 8K USD tickets? If that same pax were to fly 200K on those tickets, he would be GS and he/she would deserve it.

    Another system that works is LHs Hon Circle. You can reach it on miles, but when traveling on K, L and cheapo parts of the alphabet soup, your miles only count. .5. Fair, don’t you think?

    There’s no way to classify this, so the system in place is modern and it actually works. So if you fly 200K or more and don’t become GS, you don’t deserve a higher level because you fly too cheap. And mileage runners get very good treatment with 1K in my book, they are the only ones who would benefit from your suggestion.

    So there you have it: 2K= bad idea

    My suggestion is to enjoy your status when you get it. That’s what it’s there for..

  16. “Another possible answer is that they’re tackling this issue by creating invitation only status levels. United has Global Services and Hyatt has Courtesy Card, and they’re not the only ones. At the same time, that’s for truly high revenue customers and “important” people.”

    And that’s the reason. UA doesn’t really care if you decide to double the trivial amount of revenue that you generate flying $129 transcons with four connections each way. Losing money but making it up in volume went away with the dot com bust 10 years ago.

    The people who actually should be treated notably better are treated that way. The rest of us just have to accept that we’re not particularly profitable for the airlines.

  17. @Scott: At least OneWorld has the Emerald tier. While the comment above you points out that the market largely sets the qualifications for each program’s tiers, *A and ST haven’t seen fit to match OW’s recognition of top elites. Of course, I can live without the International First Class lounges and being “just” *G in exchange for enjoying *A, the far superior alliance. 🙂

    @Mike: That’s a lame accusation, given that lucky obviously would (and will) still travel at the same high frequency.

  18. @Go Amtrak.
    It’s just a lounge. I will take OZ, SQ and over 20 carriers to choose from, than a lounge.

  19. I think that restrants shoud have awards for freakwent dinners. Espeshally the good ones. I went to a place called Olive Graden for the first time last weak and I was real imprest with how good the food was. They had this salat that had the best dresing I have ever had and when you were finshed they brought more! The same for the bread sticks. I tried the lasania and I think it is the best thing I ever tasted. I will be back soon!

  20. the simple reply is that there aren’t that many people past 100 miles/year (especially for a US airline, where pax usually are on domestic itineraries (vs. higher mileage international)). UA already has too many levels as you point out (and more than other airlines): 1K, PremExec, Prem., PremAssociate and GS.

    Miles and More is probably one of the few programs to have a REAL super-high level and has meaningful separations between tiers:
    FTL: 35k, SEN: 100/130k, HON CIRCLE: 600k (2 years).

    The thing is HON is SO HIGH (and hard to get) that most people are satisfied by reaching SEN

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