Travel Tech Insider

State of Loyalty

• Gilad Berenstein, Cara Whitehill, Brett Catlin, Ryan Smith • Season 1 • Episode 6

Share episode

Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.

0:00 | 56:04

The loyalty program as we know it was pioneered by American Airlines over 30 years ago. A lot has changed since then. As travel has become commoditized in many areas, suppliers and retailers have become more innovative and creative about attracting, retaining, and rewarding customers. While customers have become savvier about maximizing and sometimes even gaming the system. The premium credit card companies have added their own layers of complexity. And of course, the pandemic accelerated many changes to the structure of loyalty programs that were already being tested.

So what does the state of loyalty look like in travel today and where is it heading? How do brands think about lifetime value, rewards, and community? How is that changing with the increased focus on Gen Z and millennial travelers? In an environment where nearly everyone has some form of “elite” status and loyalty points as a currency can get devalued, what exactly are travelers “loyal” to anyway?

And what are the most innovative brands in our industry doing about it? Innovations that include traditional loyalty offerings but go much further with subscriptions, personalization, and more.

We talk to two experts who have the inside scoop on what loyalty means in travel these days.

Follows:

Gilad Berenstein - host

Cara Whitehill - host

Brett Catlin - guest

Ryan Smith - guest

Go Deeper:

Cara: [00:00:00] Hello and thank you for joining us on the Travel Tech Insider. I am Cara Whitehill and I'm Gilad 

Gilad: Berenstein. And we are thrilled to have you with us for what is the second episode in a short series of conversations focused on the core of our industry's current evolution, the evolution of business models, distribution, and today's focus, loyalty.

Gilad: Last week, we dove deep into the world of airline distribution. We talked about GDSs and NDC and finished by briefly touching on artificial intelligence and social commerce, essentially creators and influencers selling travel and the like. And in today's conversation, we're going to dive into loyalty, what it means, how it works, and how new business models, including subscriptions, play into this whole thing.

Gilad: But before we jump in, Cara, how are you? What's new on your end? And I'm also curious, are there any travel brands that you're deeply loyal 

Cara: to? Um, well, I'm, I'm doing well. I've had a bunch of travel fourth quarter this year, and I'm trying to figure out how I'm going to be able to keep my Delta diamond medallion [00:01:00] status, which is looking at risk.

Cara: Um, but, uh, I, you know, in terms of brand loyalty, um, I've been a big hotels. com user for like a decade. And so I, I've. You know, they've, they've merged their program with, um, Expedia recently, so it's, it's changed up a bit, but I really liked the simplicity of their, their old program where it was, you know, every 10 nights you stay, you get a free night, basically, that's worth the, you know, the value of the average of those 10 nights.

Cara: And it was just really easy to, to use and really easy to redeem. So I was a little sad to see that go away, but how about you, what's new in your world? 

Gilad: Well, I am in the final countdown to Maui, which obviously is the best place to finish the year. Um, and on my end, you know, I've been a longtime loyal customer of Alaska Airlines.

Gilad: Um, I became loyal initially due to connectivity here in Seattle and just the fact that they had the most direct flights to places from Seattle. But then as I went up kind of the loyalty tiers, you know, back before COVID, when [00:02:00] changes fees were a big deal, um, they really had the most generous change fee and change product.

Gilad: And I used to joke that I never went to San Francisco and came back on the flight I originally booked. It was always like earlier or later or whatever. Um, and that's really what kind of got me hooked within there. And then, of course, they're the really good staff they have. So I'm really excited to have this conversation today.

Gilad: Great. 

Cara: Well, it's, um, it's a fun topic and I know I'm excited to dig in too. But, uh, you know, if we think about loyalty programs, the loyalty program, as we know, it was created over 40 years ago and a lot has changed since then. Obviously, um, as travel has become commoditized in many areas, suppliers and retailers.

Cara: have become much more creative in how they attract and retain and reward their best customers. And then those customers in turn have become savvier about maximizing and sometimes even gaming the system beyond the travel suppliers and travel agencies. We're seeing credit card companies now getting into the action with programs of their own.

Cara: And then, of course, the pandemic accelerated many [00:03:00] of these changes and Structure of the loyalty programs that were already being tested. So what does the state of loyalty look like in travel today? And where is it heading and who are the quote unquote best customers? And, um, you know, really what does loyalty even mean anymore?

Gilad: Well, and to dive into all those things, we have two outstanding guests. They're going to be joining us today. First, we have Brett Catlin, the VP of loyalty alliances and sales at my hometown airline, Alaska airlines. And Ryan Smith, a senior editor at Award Wallet, and someone who's been writing about this space for a long time.

Gilad: So with that, let's get started. 

Cara: Great, so thank you both for joining us. We're excited to have you here and digging in this conversation. Um, to start off, can you please each tell us a little bit about yourself and your background in the loyalty space? So Ryan, we'll start with 

Ryan: you. Sure. Uh, my name is Ryan Smith.

Ryan: I'm the senior editor at Award Wallet, which originally started as a website just purely for tracking all of your balances. How many points do I have in this account and that account? Um, and then eventually started doing editorial [00:04:00] pieces as well, helping people understand various facets of the loyalty programs and which credit card should I get to help me earn points if I want to go to, you know, this place on spring break.

Ryan: Um, so we really kind of tackle, um, award programs and loyalty from the consumer perspective. How do I earn status in this program? How can I use my points and miles from this program? Um, to go to where I want to go and, and just kind of understanding from, from the consumer perspective, how do these loyalty programs work?

Ryan: What's good about this one? What's bad about that one? How do they stack up against each other? Um, but I've been writing in this space for about seven years now. Um, and really got into understanding loyalty programs just because of my own personal travels. Um, that started when I began, uh, a goal of trying to visit every country in the world, which I have one left and I fly there tomorrow, [00:05:00] actually.

Ryan: So by the time that this program airs, Ah, 

Cara: which, which one is it? We have to know. 

Ryan: St. Vincent and the Grenadines. 

Cara: Oh, wow. Okay. Sweet. 

Ryan: Yeah. So by the time this podcast airs, I'll have been to every country in the world. And so I got into understanding loyalty programs just to try to defray my own costs. It's rather than just always paying cash.

Ryan: I started to understand that, you know, I could get points and, and, um, you know, try to use these loyalty programs to save money out of my own pocket. So, um, I, it's both a hobby and my 

Cara: job. Yeah. Nice. Nice. That's the best way to do it. Right. Um, so Brett, tell us a little bit about your role at Alaska and what you're working on.

Cara: Yeah, 

Brett: it's great to speak with you all. So at Alaska, as good mentioned, I oversee loyalty as well as our partnerships and our global sales team specific to loyalty. That includes our award winning mileage plan program as well as our program portfolio, which is a great critically important part of the [00:06:00] business.

Brett: Just in terms of my own background with loyalty. Well, I've had this role for about a year. I've been kind of deep in the aviation and loyalty space for 15 plus years. I was a consultant for many years and just by virtue of spending every week on the road became very familiar with, uh, with many programs.

Brett: Uh, I myself, maybe 15 years ago, status matched to Alaska. Um, from Delta as it were, uh, so a fun bit of background and then, uh, went on a mileage run maybe 10 years ago from Boston to Anchorage. So I, I want to enjoy running the program. It's a really fascinating part of our business, but to enjoy all the people and the uses and why folks love to engage with programs like mileage plan.

Cara: Awesome. So Brett poking into that a little bit more, let's start with what is a loyalty program and why does, why does this thing exist in our industry? Yeah, 

Brett: so I think specific to the current context in 2023, loyalty in an airline sense really carries a couple of purposes. One is to create kind of stickiness to the [00:07:00] brand, ultimately a conduit for somebody to engage with our platform and then hopefully to come back and become a repeat flyer.

Brett: I think two, and this has become increasingly important over the decades since the 1980s when it originally launched, is the tie into financial services. Uh, so the bank, the credit card, which in the U. S. Uh, the way our interchange rates are structured is enormously valuable for, uh, an end user like an airline.

Brett: I think the third it gets into broader kind of ecosystem opportunities, which here in the U. S. We haven't explored as much, but partnerships like lift, which Alaska has or others that bring people in. And engage people when they might not be traveling. So they've certainly evolved a lot in the past 30 or 40 years.

Brett: But at their core, it's about driving engagement with the brand and the end product, which for as last is flying people 

Gilad: all over North America. That's awesome. And Ryan, when you think about a loyalty program, what comes to mind for you? And do you think about it more like a currency or a perk or an exclusivity program?

Gilad: How do you think about loyalty [00:08:00] programs? 

Ryan: I guess it really depends on the context of the loyalty program. Um, and they really run the gamut. Um, I, I feel like Hotel programs and airline programs used to function in very similar ways. And in recent years, we've seen a real divergence in, in how, uh, hotel programs approach, um, loyalty and how airline programs approach loyalty, but then beyond the travel space.

Ryan: Um, or, or just branching out to, I guess, just more general travel. Um, Cara mentioned how hotels. com used to have this program and then Verbo had this program and those have been kind of merged together since they're all part of this one, you know, same umbrella company at this point. But then there are rewards programs even beyond that, like, you know, I get.

Ryan: that I can use for gas at my local supermarket just by signing up for, uh, you know, the rewards program. So I think rewards programs, as Brett said, have, um, you know, creates [00:09:00] this sense of, well, if I keep going to X coffee shop all the time, after I get 10 or 12 coffees, I'm going to get a free coffee. Well, then I might as well just keep going to that one.

Ryan: Um, but you know, the cynics in the industry also point out that sometimes. loyalty incentivizes non rational behavior because, you know, it puts people in a position where, uh, and this is obviously, I think part of the goal is it by incentivizing loyalty. Um, there's kind of a regular devoted customer who's going to spend money with that company because.

Ryan: Oh, well, if I fly with, you know, let's say American Airlines, uh, and I'll use an example out of, uh, my home airport in Orange County. If I wanted to go to Austin, Texas, there's a once daily nonstop American Airlines flight. I don't have any elite status with American Airlines. I don't have the American Airlines credit cards.[00:10:00] 

Ryan: So if I would fly with American Airlines, it's convenient. It's nonstop, but I would have to pay to check a bag. I'm not going to get upgraded to a nicer seat or anything. Maybe I have status with some other airline. But am I willing to take a [nonstop] flight? Um, and then you're going to route through another city, then you have extra opportunities for a flight to get canceled or delayed or miss a connection, but it might get upgraded to a nicer seat and it might get free checked bags.

Ryan: So loyalty programs sometimes, uh, lead customers into making sort of non rational decisions based on loyalty. And I think. Um, sometimes it's really important to make sure that when we understand these loyalty programs to, to understand what you're getting out of them, but to understand what you might be giving up in order to maintain that loyalty, whether you're giving up convenience, um, by taking a nonstop flight versus adding a connection, that's extra time.

Ryan: And if you've got kids that you've got to lug through the airport, that adds a lot of extra [00:11:00] effort. Um, so I think loyalty programs are very interesting in seeing, especially how they've responded to the pandemic when no one was traveling. How do we keep people spending money with us? And, and this has really changed loyalty programs a lot in the past years by especially travel companies wanting people to remain engaged with the brand while everyone was at home on the couch.

Cara: Yeah, that, that's a great. point. And, um, Brent, maybe you can touch on how did Alaska address that? Like, did you change anything dramatically coming out of the pandemic to kind of address that that issue? 

Brett: The pandemic obviously brought a number of interesting learnings for the airline industry. More broadly, I think specific to loyalty.

Brett: What we saw in this built on the comments from a moment ago is even in the depths of the pandemic, people continue to spend on their card. for many airlines, including Alaska. It was a lifeline. It brought in an [00:12:00] enormous amount of cash, allowed us to sustain operations in a way that might have been quite a bit more challenging.

Brett: At the same time, I think we learned a lot about guest behavior and why people engage with our platforms because again, in many cases, they actually weren't flying yet. They continue to spend. They continue to have loyalty to the brand. I think that actually unlocked a number of changes that you've seen kind of run through the industry today.

Brett: That the most, I think, uh, prominent of which is this idea of spending for status. So swiping your credit card and having the ability to be treated like somebody who's, uh, spent an entire year flying on a plane. Um, which I think Alaska is stepping into that space in 2024. Uh, we did some tests and learns over the past couple of years and we'll, we'll jump in with, uh, with a more full, full throated effort next year.

Brett: But I, I do think that's something that the industry as a whole, both airlines, hotels, travel providers have really latched onto. Is leveraging the credit card is a different kind of loyalty, whereas it used to be people sitting in seats. Now it's engaging with the portfolio more broadly, which I think is actually very healthy in terms of how we think about value to an [00:13:00] airline and the behavior that we want to drive as it relates to loyalty.

Gilad: Brett, I'm an Alaska Airlines mileage program member. I have the 100, uh, 100 K MVP tier, which I'm very proud of. And Alaska has won a lot of awards and I want to know, why do you think that? Why do you think people love the Alaska loyalty program? Why do you think you guys have gotten so many accolades over the years?

Brett: Yeah, one. I think it's how we treat guests is very much in our DNA. I think specific to loyalty and we recognize it's a competitive advantage. We're the nation's fifth largest carrier, which we're really big. But in the context of being number five, it's kind of like Avis in the 1990s. We were number two, so we have to try harder.

Brett: And I think we've always taken that to heart. It's the core of how we think about loyalty. Um, and there's a lot that could be done that our competitors have done to make their programs more profitable. But you implicitly give something up when you make everything about revenue and profit. And impurely focus on the dollar that someone brings to your business.

Brett: It's a balance, right? Don't [00:14:00] get me wrong. It has to be profitable. It has to improve year to year. Uh, but we've been really mindful of balancing where and how we're generous with our guests and ultimately how we support our bottom line. And it's those two things that I think have allowed us over many, many years to sustain MileagePlan as one of what we believe to be the, the industry's best programs.

Cara: Yeah, we had um, We had a conversation last week on distribution and, um, one of the things that we were poking around and that was kind of interesting to think about from the supplier angle going forward and their new emerging business models is subscription models. And so that's something that is kind of interesting.

Cara: I know. Um, I guess it's Ennis more has a subscription offering. Um, What does Alaska offer? You have a something in the subscription vein that you, that you've developed with part of your program as well, right? Can you talk a little bit about that? 

Brett: Yeah, absolutely. I think subscriptions, they're an interesting one in that I would argue that say an affluent [00:15:00] credit card or a premium credit card, in many respects, that is a subscription.

Brett: You're paying 3. 95, for a guaranteed set of benefits, and yeah, it comes with, you know, some additional value, but that, in my mind, is a subscription. Uh, specific to Alaska, we do have a program that's maybe more what you're describing, Carolyn, in that, uh, it's a program called Flight Pass, where you can buy a set number of flights.

Brett: For a predetermined price. And then you have a lot of flexibility around when and how you fly. Um, but I think in the U S market subscriptions are a bit of a double edged sword, especially for larger cares with big co brand portfolios. For that dynamic I referenced, which is it's ultimately competing with the cars.

Brett: And that important part of the business. 

Gilad: Yeah, makes sense. And Ryan, Cara just referenced the NS Moore's disloyalty program, which is essentially a subscription program that gets you a bunch of benefits. Um, kind of similar to the way that Brett just described the credit card. So, what's your take on subscriptions and travel?

Ryan: I think, uh, they're a really interesting proposition. And, and they are good for some [00:16:00] people. But they're not good for everyone. And I think each person needs to really look at. Their travel goals and their travel styles and they're in their intended travel destinations To see am I the person who this is good for or am I not. Another program that doesn't get as much attention that has done something similar with hotels is My Citizen M Plus, um, which you pay for a set of benefits, um, and then you're gonna get room upgrades, late checkout, those kinds of things.

Ryan: But how much value is that adding to you? And I think sometimes people get lost in, um, Would you really pay for this if it came down to it? So if the room upgrade is going to normally cost me, I don't know, let's say 25 a night and I'm going to stay at this hotel for four nights. Would I have really paid for that upgrade if I had to actually pay for it?

Ryan: Maybe not. So just because I have this subscription plan, it doesn't really mean that I actually saved a hundred dollars on this hotel stay. I got something that the hotel charges a hundred dollars for. But I probably wouldn't have actually paid for that if I had to pull out my credit card and pay for the room upgrade when I arrived at the hotel.

Ryan: [00:18:00] So I think sometimes the numbers that we see sound really attractive. Like Brett said, you're, you're kind of paying for a subscription model. Like I'm paying for a subscription model to Priority Pass and the American Express Centurion Lounge by holding an Amex Platinum card every year. I'm essentially paying a, you know, kind of membership to these lounges every year.

Ryan: I think that what I get out of it is worth more because food and drinks at the airport are just ridiculously expensive. I think I'm probably consuming more than what I'm spending. So, in that model, it works. But these prescription, these subscription plans are really interesting for people who travel on kind of within a fixed set or they know this applies.

Gilad: Yeah, that's really interesting [00:20:00] because, you know, for me, as I mentioned before, I've always been very loyal on the airline side, but I've actually never been loyal on the hotel side.

Gilad: And my perspective has always been, you know, I want to be close to whatever event I'm attending, whatever business meetings I have. So it's been really interesting because I'm kind of this like funny dichotomy. And I wonder if you're seeing that, if that's an outlier, if that's normal, where some people might have a hotel or an airline they're loyal to, but really not care about other types of loyalty programs.

Ryan: Yeah, I think there's actually, um, there are some people who have status all kind of all over the place, um, you know, because they travel a lot and they want to make sure that wherever I go, I'm getting these status perks. Um, but then there are other people who tend to just kind of pick one brand in a space that they tend to be loyal to.

Ryan: And I'm really kind of the opposite of you. Like I don't, I don't have any airline status. I'm going to pick the one that's going to give me from where I am, it's where I want to be in the best way possible. The cheapest, the quickest connections, the shortest layovers. [00:21:00] But I have top tier elite status with Hilton, Marriott, and Hyatt because I find that those are worth what I'm getting out of them.

Ryan: But for the airlines, I don't find that it's worth it. But that's based on my travel style. I don't tend to go to the same places over and over and over. Now, if I would. Well, then that would be very different if I, you know, let's say my parents lived in Seattle and I live in Southern California, well, I would probably be very loyal to Alaska Airlines because that's the best option for flying on that route.

Ryan: Um, versus, you know, if I had family in Dallas, I would probably be very loyal to American Airlines. But I think, um, part of. That becomes an understanding your own travel style and your own travel goals and where do you want to go, um, you know, A lot of people love the world of Hyatt program. But at the same time, it's important to [00:22:00] understand that the footprint of where Hyatt has hotels is nowhere near as large as the footprint of Windham, Marriott, Hilton.

Ryan: So understanding that What may work for you right now may not work for you next year. And I think that that's always an important part that I think sometimes people get into the loyalty thing and then have a hard time kind of like, you know, breaking and turning, which comes back to, I think there is a lot of, you know, is this still working for me?

Ryan: Even it worked last year, but is it still working for me now? And I think Brett mentioned status match. Status match is a great way that. Brands can attempt to sway your loyalty, which can be a really great time. If I realized, you know, maybe I had status with like Delta last year, but they're making all of these changes and I don't really go to where they're taking me.

Ryan: Well, a status match can be a great opportunity to, okay, if I say I'm done with Delta, let [00:23:00] me try out these other airlines that would be happy to have my business. Um, it's definitely a consumer's market in, in that, um, in that perspective. If you have some type of status that you could carry over 

Cara: when you know, when I think about loyalty outside of travel, right, you think of some of the brands that have the fiercest, most loyal customers like Apple and like Tesla, right?

Cara: And they don't have discount programs. I don't have a loyalty program per se. They're not like spending money to try to, um, you know, keep people in the in the fold, right? What is it that they're doing? Well, that travel could learn from, yeah, 

Brett: my point of view is it's around differentiation and you absolutely see this taking place across airlines.

Brett: Loyalty programs in many respects were a function of airlines being totally commoditized. And this started to unwind probably 10, 15 years ago. And that was about the same time you start began to see value of loyalty programs to [00:24:00] grade from a consumer perspective, because if you want to be in a premium calendar and have that great experience, well, you're probably just going to pay for it to the point that Ryan was making.

Brett: Um, and so I think ultimately it's around differentiation right when I think about Apple or Tesla, those products are distinctly different than what else is in the market and therefore this idea of loyalty is less 

Ryan: relevant. And I think if we bring up Apple as an example, it's beyond loyalty, but I think also, um, the, the idea of like kind of making this break becomes very different.

Ryan: Like, you know, I have an Apple computer and I have the Apple iPhone and those like sync up together very well. Plus, my mom has an iPhone, and my wife has an iPhone, so there are like certain features that we could use together that if I would say, you know what, they just keep raising their prices all the time, blah, blah, blah, I'm just going to get something else, well, I would lose a lot of those features, so am I kind of, you know, people sometimes, sometimes there's loyalty, but sometimes also part of it is I think that maybe people feel [00:25:00] stuck, and that.

Ryan: that right or wrong turns into a form of loyalty, whether they want it to be or not, is that, well, I've done all of this over these years, or, uh, a perfect example is how many people did we hear when Marriott acquired, um, Starwood Preferred Guests, um, and took over the SPG program. And a lot of the former SPG loyalists were very unhappy with what they saw Marriott doing to the program.

Ryan: But a lot of them said, I've been. I've been this loyalist for eight and a half years. I'm one and a half years away from lifetime platinum status or whatever. So I'm just going to slug it out for this another, another year and a half so I can get to that point. Like they felt kind of stuck, but they also felt like I've made all of this investment.

Ryan: I want to have something to show for it. So sometimes that. It's a form of loyalty as well. It's probably not the type of customer that the brand is looking for. The brand is [00:26:00] looking for people who love the brand and they're excited and they're going out and telling their friends, I love X brand, you should check it out, but they're probably also happy to have those people who are just like unhappily handing over their credit card because they're spending money in the brand's ecosystem.

Gilad: So Ryan, you recently wrote a great piece about free agency, and we've been talking about a lot of the changes in. loyalty programs. And we briefly touched on all the new entrants. You know, I'm a Chase Sapphire Reserve customer. Um, and of course, I'm engaged there and it's funny reference Hyatt. I have zero status on Hyatt, but I love transferring points from Chase to Hyatt to go stay at Park Hyatts for a relatively great rate.

Gilad: Um, so my question is really, is this good for consumers? The fact that there's all these new players, all these new type of programs, all these Interconnected connections between them, is that ultimately good for confuser for consumers or just way 

Ryan: more confusing? I think it's both. I think it is confusing because there are so many programs and understanding how this one is different from that one.

Ryan: Uh, you know, like we have [00:27:00] a full-time team of people who, this is our full-time jobs and even still, we have to ask each other questions like, is this new? Because I'm reading this list of benefits and I don't remember ever hearing about bullet point number seven before. So it is a lot of information. And that can feel inundating at the same time, it provides more choices, which, which is really great.

Ryan: Um, the, the rise of, uh, so Nesta hotel program is a great example. They kind of came out of nowhere and you had never heard of them a few years ago. And now all of a sudden they're adding another brand to the mix so that if you're tired of, you know, your experiences with maybe some of these other more, uh, legacy hotel brands.

Ryan: Now, there is another option, which is great because do I want to stay with a brand that I have had multiple negative experiences with? Probably not. But if there's no other option, then I'm going to have to stay there. So it's nice to see that there are additional options, but [00:28:00] yes, it, it is confusing how many brands there are and you know, with hotels, it's a lot of, you know, a state X number of nights done.

Ryan: With airline programs, I think, um, there was this kind of move into super complexity, and now a lot of the brands are realizing that this super complexity was difficult, and now we're seeing this move that Brett was talking about, how kind of like, the airlines are moving into this kind of, let's just measure one metric.

Ryan: Because that's probably easier for people to track, rather than, I need, you know, my flight segments, and I need my spending, and I need my number of miles flown, and I need minimum of X number of flights with this airline, but that I can have these other ones from these partners. That was confusing. So now, what if we simplify this and we just have to keep track of one number.

Ryan: Um, which we saw American Airlines really kind of do first with its loyalty point system. So, it's both. I think there's [00:29:00] a lot of great options for consumers, but it does provide, it does make for confusion because not all the programs are the same. And maybe you read a brochure about this program, but you're mistakenly applying that information to this other 

Cara: program.

Cara: Yeah. I'm, I'm living that, that free agency question right now because I, um, I, I won't make the, uh, diamond tier for Delta. And, you know, I'm in a small market, so there isn't a lot of non stop capacity. Um, Delta probably does the best of, of anybody, but, um, you know, trying to figure out, like, being diamond status, I was, it was to the point where I was not really even getting the perks, right?

Cara: And, you know, I, and I was just kind of realizing this as you were talking before, I'm not even paying attention to the number of miles that I, that I, you know, I have so many miles that, like, I could get as many free tickets as I as I want, but I'm more focused on the perks and the benefits and the upgrades and the lounge access and that kind of thing.

Cara: And it's been getting harder even as a diamond to make use of those So I'm thinking like, well, if I lose that [00:30:00] status and I don't have those benefits anyway, like what does that open up for me? Um, you know, if Alaska wants to start flying more frequency to Cincinnati, you know, I'm, I'm, I'm a free agent.

Cara: I'm open for bidding. Right. But, um, you know, it's interesting to think about all of the, The math that goes into that, um, that equation for sure. 

Ryan: And, and that may be something that, uh, Brett from, you know, from a loyalty program side may be able to speak to is, you know, you mentioned Delta, uh, Delta's CEO famously has said before they decided to overhaul the program, if everyone is elite, then no one is elite because those perks are finite.

Ryan: Only so many people can get upgraded into business class because there's only so many business class seats on a plane. So I don't know if Brett, if you want to share kind of what's the thinking of like we have finite amounts of things that we can give to people. Only so many people can fit into the lounge due to, you know, fire marshal regulations.

Ryan: [00:31:00] We only have so many business class seats. So how do you think about incentivizing loyalty while only having a finite amount of things to reward people with? Yeah, it's 

Brett: obviously the tension of the loyalty program and the desire to grow it but to manage tier sizes and I think you've seen many airline program, hotel programs approach it in different ways.

Brett: Ultimately, first class upgrades, it's not the industry it was 30 years ago when you had 20 percent paid load factors. Load factors sit 60, 70, 80 percent in some cases. And so I think that the value and ultimately what you prescribe are those benefits like for consumers that has to change. Um, but there's a lot of value beyond sitting in first class, right?

Brett: And if you move beyond that as kind of the end state, you actually have far more inventory to go around. Like, ultimately, Alaska's lounges, they're not overcrowded, you can have a great experience pretty much any time of day, any of our cities. We have a large premium class cabin, which gives you a bit more refined experience.

Brett: Things like bonus miles, right, [00:32:00] there's no kind of constraint on that. And so ultimately, I think elite status has moved beyond just this kind of singular idea of sitting in a first class cabin, which has actually allowed us to offer elite status to a more broad portfolio of 

Cara: consumers. Yeah. And when I think about elite status, I, my head immediately goes to, um, I think a lot of people's head goes to the road warrior, right?

Cara: The traditional business traveler who's, you know, like you were a consultant, Brett, like on the road, you know, three or four days a week. Um, Yeah. Yeah. Yeah. The changes that are coming to these programs are fascinating to me in that regard and what the implications are going to be on corporate travel, right?

Cara: Because if you think about changing the basis from the number of flights you take or the miles that you're flying and you change it to be based on spend, well, the road warrior is not spending his or her own dollars. They're spending their company's dollars, right? And they're using the company credit card, so they don't get the perks of being able to use their Um, you know, they're, they're Alaska credit card or their chase card [00:33:00] or what have you.

Cara: So like, as I'm playing that out in my head, I'm thinking, well, what is going to be left for the road warrior if they don't get the credit for all that travel that they're taking? And are they going to be willing to endure so much travel if they're not going to have access to that same base of status and perks and things like that?

Cara: Um, is that something, Brett, that you guys have kind of thought through? Or how do you, how do you see that changing? 

Brett: You know, the dynamic and this gets back to the pandemic question earlier on is the road warrior is not what it used to be. Uh, you don't have somebody in Boise making kind of sales trips every week.

Brett: Another city in the pacific northwest consultants aren't flying every week. They work from home now and hop on a zoom call. So I think those travel habits already changed, right? And when we looked at the data 

Ryan: for us, for Alaska, the 

Brett: people that were those historical road warriors, they actually tend to have a lot of disposable income and they put a lot of spend on their credit cards.

Brett: [00:34:00] So if maintaining status on Alaska is important to them, even in the absence of the volume of travel they had historically, we wanted to give them a path to do that because we heard from folks time and time again. That MVP gold, my 100 K status. It's so important to me and I'm so close. So can you just bridge me one more year?

Brett: I think my travel is going to come back and here we are four years later and the travel is not coming back the way it was 5, 10 years ago. And so giving folks paths and options to be loyal, perhaps in different ways. Like that's ultimately where we've landed and where I think the industry's landed and for a good reason.

Gilad: Yeah, a few months ago I was at a dinner with one of the CEOs of the big consulting firms. And he told me that before Covid, he flew an average of 800,000 miles per year and slept five or six nights a week on an airplane. And now post Covid, he still travels like crazy, still gonna do two to 300,000 miles per year, but he's only gonna spend two or three nights a week on an airplane.

Gilad: And that a lot of those things, like you said, are just never gonna come back. The fact that he would go to Tokyo just to have lunch with another [00:35:00] person who worked in the same firm, those kind of things are probably never coming back. Whereas of course. When you go to a sales conference and things like that, like I always like to say, as soon as your competitors send their salespeople, you're sending your salespeople, um, to definitely some changes there.

Gilad: One more question for you, Brett. As you look at various demographics of customers, kind of Gen Z versus millennials versus older customers, are they engaging differently with the loyalty program? Um, 

Brett: it's a great question. I'm not sure, at least in the data we're seeing, that they're engaging differently, but I might flip the question and say that we're having to engage with them differently.

Brett: Like once you can actually bring them into the ecosystem, their behavior looks a lot like those that came before them, like ultimately the incentives, the rewards of status where miles can take you like, I think that's exciting to anyone, but getting folks to engage in to see themselves in it. Like I heard Ryan talk about his dad flying to San Antonio three, three times a month.

Brett: Like that's not necessarily when we talk to millennials, Gen Z, how they see their, their own lives playing out. So they don't necessarily see themselves as aspiring [00:36:00] atop to your status. So what we've done to kind of bridge that gap, if you will, is we found new ways to kind of bring them into the fold. A couple examples.

Brett: So we have a partnership with the Mountain Collective, which is a ski pass. And the thought was, look, a lot of millennials, Gen Z, especially in the Pacific Northwest, West Coast, they're ski enthusiasts. So what a better way to engage people in kind of a something that's of interest to them and brings them in and we have a few more similar partnerships that we're working on and it really gets back to this idea of having a lifestyle program, having an ecosystem, meeting people when they're not necessarily flying because airline loyalty programs like we have kind of the that.

Brett: The anchor redemption, which is air travel. But there's a lot of different ways that you can accrue towards that very desirable benefit. 

Gilad: Yeah, absolutely. And Ryan, what, what about you? Are you seeing differences in, in generations in terms of the way they engage with loyalty 

Ryan: programs? Yeah, I think, um, a lot of this is, as we've said, just very, [00:37:00] um, different among generations that, you know, there used to be this kind of classic road warrior.

Ryan: Um, that we don't see a lot. And I think the pandemic definitely taught a lot of businesses that I don't need to physically be somewhere. But I think also the, one of the biggest elements is now that we've seen a lot of, uh, and this is where hotel and airline programs really differ, um, is that with airline programs, a lot of them are moving into a model [00:38:00] where spending.

Ryan: Towards status is really a more important metric than necessarily being on a plane and with the changes in Especially when American Airlines did this first and then with Delta as well That a lot of people said, you know I fly all the time for my company blah blah blah and that used to earn me the top status because I was on a plane So much.

Ryan: Well now actually I'm only gonna have like one or two tiers lower With the same amount of flying because I'm not doing this Spending stuff that the airline is kind of incentivizing and it becomes a double edged sword because yes, of course, the airlines want the programs to be, to be profitable, but it creates a conundrum where if I earn more towards status by spending more, then what happens if I find a cheap deal on a flight?

Ryan: Because if you're earning based off of how much you spend, well then finding a deal doesn't actually help you. If you're trying to requalify for status, it creates an interesting conundrum for. Travelers who previously when it was based on how far you flew well if you found a great deal on a flight to London you saved money but it was still based on it London was still as far away from my home as it used to be even though I spent less on my ticket so it creates these really interesting differences in how do people see earning and it it also it opens I think top status to a different sector of people than There's always going to be people who are spending a lot on [00:40:00] tickets, uh, and those people will still be happy no matter what. You know, coming back to this, if everyone is elite, kind of no one is elite, um, [00:41:00] yeah, the number one selling point for a lot of these airline programs, but also for hotel programs getting upgraded to the suite. There's only so many suites at every hotel. Um, and a friend of mine who has top tier status with, uh, an airline recently sent me a screenshot that he was, you know, his name was 61 on the upgrade list.

Ryan: For a flight that had only eight first class seats, and he was number 61 with the top status in that program So when these numbers become sort of inflated This is kind of why I say there's only so much of some of this stuff And I think Brett you made a great point that maybe maybe the programs need to teach people that these other perks Are what you should focus on because those are guaranteed and you know column A is guaranteed.

Ryan: You're gonna get the extra mile You're going to get, you know, priority board, you're going to get free checkbacks, um, a shorter line at, uh, check in a shorter line at the security checkpoint, [00:42:00] which everyone hates. But some of these other things are sort of, you know, if available and reinforcing the mindset that some of those perks are not always a guarantee.

Ryan: And I think that that could help people not be let down and also help people make a better value judgment about what am I getting out of this status. And if I look back and I say, well, I got upgraded zero times last year. Does that change your mind or does, or do you realize, well, but those aren't guaranteed.

Ryan: And I knew that going 

Gilad: in, you know, one of the cool line skipping, um, tricks is Alaska has a partnership. I can't remember the name of the company where you can kind of save a spot in the security line. Um, I don't know if it's available to all customers or just certain level of elite. But it's a really cool way for you to skip the line because, like you said, there's nothing worse than being stuck in a TSA security line.

Gilad: So, before we run out of time, Ryan, one more question, um, coming to you is, when you think about all the different types of benefits, I mean, Brett talked about some of them on the Alaska side, that are becoming more [00:43:00] popular. What are you seeing? What are people redeeming points for? What is kind of the most desirable, outside the first class upgrade, most desirable benefits from loyalty programs?

Ryan: Uh, I think, uh, obviously it varies, but the, the tried and true is always going to be redeeming points for whatever the product is of that loyalty program. So, if you're in an airline program, yes, you can redeem your miles for, you know, a car rental, or redeem your miles for a gift card. Um, but usually those tend to provide the lowest value and redeeming for whatever it is that your loyalty program is from.

Ryan: So if it's an airline, flights. If it's a hotel, hotel rooms. Um, if it's a guest rewards program, uh, using your rewards toward filling up. Those generally are the best value. Yes, there are a lot of additional options, which I think A lot of this came about during the pandemic. [00:44:00] People weren't traveling and we want to convince people that there's value in this program, um, but I would, um, always encourage people to look at what are these points worth if you use them this way.

Ryan: So if I need to use, uh, a hundred points for a hundred dollar gift card, well then each point is worth a dollar. That's pretty awesome. If I need to use a thousand points for this gift card, each point is worth a cent. Well, if I use them in these other ways, what value do I get there? Is it, you know, more?

Ryan: Is it less? And making sure that you're redeeming your points in a way that, uh, provides value to you. The gift card is always going to be what the gift card is worth. But flights and hotel rooms, the prices go up and down. So, if you can redeem your miles to go visit grandma at Thanksgiving when all the flights are really expensive.

Ryan: it. That's going to provide more value to you. The gift card is going to still probably cost the same cause it's, you know, the face [00:45:00] value of whatever it says on the front. So I think understanding how do you use your points, but people are definitely looking for ways to use their rewards, but they're also spending a lot of time Googling.

Ryan: How much are my points worth? If blah, how much are my points worth? If I use them for gift cards, how much are my points worth? If I use them for flights, how much? The answer varies, and obviously redeeming them for a good value requires some skill and some investment and time because, you know, there aren't always the cheapest seats available when you want to use your miles.

Ryan: But I personally really think that it's worth spending that time because you can use them for the most value in that way. 

Cara: And Brett, on that point, so it sounds like part of your role outside of just the loyalty program are these partnerships and alliances. Are you seeing anything? Um, kind of different emerge in that realm of what people want to redeem for.

Brett: Yeah, it's an interesting question. I think industry kind of, uh, pundits have always [00:46:00] looked at the opportunity for redemption beyond kind of a core airline product in this case, because that's what everybody wants, right? 90 percent plus of our redemptions are for a seat on an airplane. 

Ryan: Like that anchor redemption 

Brett: is ultimately why people engage.

Brett: And moving folks away from redeeming their points for seats has been incredibly difficult because for most people, that's why they engage, right? Like, they want that aspirational business class seat to the Maldives or French Polynesia or Palm Springs. And if you can't give that to them, they might as well have a cashback card or something else that provides value in a different way.

Brett: And so ultimately, I think where Alaska's landed kind of understanding that dynamic is we're much better off ensuring that we can at least offer someone a seat on our plane or someone else's plane, one of our partner's planes. And it might not always be at the exact same fixed price, like it would have been 10, 15, 20 years ago.

Brett: But at least we have inventory on, say, Qatar Airways for that once in a lifetime trip with the Maltese. And maybe you can [00:47:00] find that diamond in a rough, the sweet spot where it's the base pricing, but if you want to go over the holidays, we're at least going to put something in front of you for you to consider.

Brett: But ultimately, and to the core of the question, people want to redeem their airline points for travel on airlines. And there are hotel points for hotel stays. And I think ultimately it's hard to see the industry moving away from that. Um, but with that being said, I think we're also thinking about how do we make the currency more flexible because in the face of ultimate rewards and membership rewards and what Capital One has built, those are incredibly successful programs and ultimately airlines like Alaska are competing with those car products as much as we're competing with Delta or United or American or other airlines.

Brett: And so we need to have a currency that's more interesting, more engaging. And I would say we've done ourselves no favors by kind of perpetually as an industry devaluing our currency, not specific to Alaska, but I think the industry overall has kind of gone down that path and consumers are just less interested in that as a currency, given decades of kind of value 

Gilad: being eroded.

Gilad: Yeah, I think it's one of those few things that everyone knows about [00:48:00] loyalty programs is that the value of the currency has been eroded. And when my wife and I got engaged, I got the wonderful news that she had over 2 million Alaska miles saved up. And we did get to take one of those once in a lifetime flights to the Maldives.

Gilad: Um, and it really was worth it, even though it took a lot of miles to get, uh, the round trip there. So anyways, guys, this was amazing, and I really wish it could continue, but we are out of time. And before we run out, we do have three lightning round questions for you guys. So try to keep your answers to 10 or 15 seconds, and Cara is going to kick us off.

Cara: Yeah, um, so starting with you, Brett, what is one non travel brand that you are loyal to, and why? That's a great 

Brett: question. Um, you know, I don't engage much outside the travel loyalty programs because I don't find outsized value to be totally honest. So there is a one that comes to mind. But I ask people all the time what brands they're loyal to and the ones that come up Starbucks and Sephora time and time again.

Brett: Oh, 

Cara: interesting. Yeah, I have both. Ryan, what 

Ryan: about you? [00:49:00] I would say that mine are just purely out of convenience. Uh, I'm I'm loyal to the CVS rewards just because it's the closest to my house. I'm loyal to, uh, Ralph's, which is part of the Kroger chain. Um, but Ralph's is like in the western half of the U. S.

Ryan: mostly. Uh, and just by swiping my card every time I pay for my groceries, I'm earning points that I can use for, um, you know, redeem towards future groceries or towards fuel, those kinds of things. But, I will be perfectly honest, I feel no emotional attachment to either, and if I would move and they were no longer the closest supermarket and the closest pharmacy, I would just simply switch.

Gilad: Alright, next question, and we'll start with you Ryan. If you could create one ultimate loyalty benefit, ignore the balance sheet and income statement, what would it be? 

Ryan: In general, or are we talking in a specific type of program? In any travel program. Uh, if I could create any guaranteed benefit I would say guaranteed [00:50:00] to always have a seat on a flight or always have a room at the hotel.

Ryan: Um, so never getting bumped. Uh, you know, even if it's oversold, you would be guaranteed that when they pull a name out of a hat and bump someone that it's not going to be you, right? Yeah. And I'm going to 

Brett: skip your question a little bit. I think Hyatt's created it in my mind, which is guest of honor. Like, ultimately, people that spend all their time on the road, for me, it's about allowing my, my wife or my parents to get to enjoy what I get to enjoy traveling as an elite, and I, I just think that's a 

Gilad: fantastic benefit.

Gilad: Yeah, I was gonna give my brother the, uh, the free, um, MVP gold, but then I took the lounge membership instead, so sorry, Val. 

Cara: Good, good. Okay, last one. Um, what is one travel hack or piece of advice that you share with your friends? 

Brett: Brett? Yeah, the one that kind of comes up, uh, is At least for redeeming airline miles, book it 330 days in advance.

Brett: Look when the window opens and it [00:51:00] doesn't work on every airline, but it's a pretty good way to score those once in a lifetime business 

Cara: class redemptions. Nice. Ryan, I know this is like right in your wheelhouse. I 

Ryan: would say the biggest tip is, um, repricing your travel bookings even after you've booked them.

Ryan: A lot of places will give you a refund of the difference if the price has gone down. Um, but that obviously means that you need to be booking. Uh, some kind of, you know, not prepaid, non refundable full payment upfront type of rate with hotels or airlines. But if the price drops, you want to be able to get the price difference.

Ryan: And that even applies, I think, at some supermarkets. So you should be either setting up some kind of alerts with Google flights, or, you know, if you've booked through a portal using their feature and be repricing your travel, because if prices go down. Why are you going to pay 350 for something if they're now selling it for 300?

Cara: That could be a great ultimate loyalty benefit too. 

Ryan: [00:52:00] Automatic matching if the price drops. That would be interesting. 

Gilad: Awesome. Yeah, I have a feeling we're probably not going to see that one. But with that guys, I really appreciate your guys time. This was a wonderful conversation and we're very grateful for your insights.

Ryan: You know, it was a pleasure.

Cara: That was super interesting. I really enjoyed that, that conversation. Um, Gilad, what did you take away? 

Gilad: A lot, but one of the things that really stuck out to me is the way that Brett described the credit card and the club membership as, as subscription products. And it's one of those things that seems so incredibly obvious when you think about it, but if you asked me before the episode.

Gilad: If I had any airline subscriptions, I would have said, of course not. Uh, so I thought that was a really interesting way to think about the credit card and the club membership and a way of keeping a customer really engaged with the brand and paying every single month. 

Cara: Yeah. The, I read this somewhere, I don't know where it came from or [00:53:00] who said it, but they, they talked about, um, Loyalty programs is really being, you know, airlines, not really being airlines, their financial services companies that fly planes, right?

Cara: And that kind of crystallized for me in this conversation because they were talking about, you know, the nature of all the airlines and hotels have their own branded credit cards and, you know, Pushing those those cards gives the suppliers access into a whole lot of data about consumer behavior outside of the handful of times they may be engaging with their actual product each year.

Cara: And so that can inform a lot of other things that they do in terms of their alliances and partnerships. And so that was that was interesting. Um, the other thing that crystallized a lot for me to, um, the idea of status versus redemption, Yeah. And and I didn't think about that explicitly until I think it was Ryan that was talking about all the nuances with where you can redeem things and the perks and the benefits and researching all of those things in terms of deciding which brands you want to [00:54:00] be loyal to.

Cara: Right? And I realized, you know, I have all these points on Delta. I rarely think about when I'm going to redeem them unless I'm planning a big family trip where I'm going to use them kind of all in one big batch. What I'm most focused on is lounge access and upgrades, right? And good quality service, which Delta has an amazing product.

Cara: And you know, they're, they're on time. Their staff is incredible. They have, you know, good connectivity and whatnot. So I realized that I'm, I'm loyal to Delta mainly on. The basis of the elite status, right? And there's those experiential things versus the redemption part. 

Gilad: Yeah, absolutely. I mean, a couple of years ago, Alaska Airlines added a new top tier, their hundred K MVP tier.

Gilad: And it's been really interesting because as soon as they broke it off, I started getting upgraded a lot more often and started getting new benefits that at the former top tier I really wasn't getting. Um, so I thought that was a really interesting move that obviously. Works well for someone like me, [00:55:00] but there's a lot of losers in that process as well.

Gilad: So it's interesting to see how the airlines are kind of stratifying further within their offerings. Just one other thing is I love the way Brett referred to their program as a lifestyle program. Yeah. As opposed to a flight program or something like that. And to me, that seems like a really smart way to think about it.

Gilad: Yeah. 

Cara: That, that tie, that ties into how I think of loyalty and other, and other examples, right, with, you know. Apple and Tesla that we, we touched on, you know, those are sort of lifestyle elite status brands that people want to be associated with. And so I think that, that, um, taking some cues from, from those brands outside of travel is an interesting way to think of that.

Cara: And then the last thing that, that struck me as they were talking is this notion, changing the basis to spend instead of actually flying or staying, you know, you could play that out and you could have people that earn. The highest tier elite status without ever stepping foot on an airplane. Right. And so that's, that's sort of interesting and getting beyond the redemption part, if you're not going to use that, those status elements on the [00:56:00] flight, like, what does that get you?

Cara: Right. And so that's where I think there's other, um, relationships come into play with the partners and alliances and things like that. So it's kind of interesting to think about. It'll be fun to, to watch, especially what happens in corporate travel too, because I think that's going to change a lot of behaviors.

Cara: As we see the these structural changes to the programs play out.

​