I was rummaging around on my Hotel Promotions page (check it out if you have any upcoming stays; current promotions are running as late as June 4, 2019) and noticed some funny language in the terms and conditions of the current Choice Privileges promotion. Once I understood what was going on, I groaned at both the idiocy and genius of the promotion design.
The first “top-up” promotion I’ve seen
How the Choice Privileges promotion works is that you are guaranteed to receive a total of at least 8,000 points when you complete two qualifying stays (a qualifying stay being one booked through the website, app, or over the phone). Your stays should still be eligible for the promotion if you book through an online shopping portal, where Choice has quite broad participation. You’re also guaranteed to receive a minimum of 5,000 bonus points. Here’s what the terms and conditions say:
“Registered members will be awarded a minimum of 5,000 to a maximum of 8,000 bonus points after the second qualifying stay. The number of bonus points awarded depends on the number of base points earned from the two separate qualifying stays, with points varying by hotel. The total of base points plus bonus points awarded, however, will be at least 8,000 points.”
To see how this works, take a real-life example: my two-night stay at the Quality Inn Harpers Ferry in October of last year. I paid $236.55 in room charges on that stay, which as a non-elite member earned me 2,360 Choice Privileges points (I guess they’re so stingy they round down).
If I’d had a second, identical stay, I’d earn another 2,360 points, for a total of 4,720 points, leaving me 3,280 points shy of the 8,000 minimum total points. In that case, I’d earn the promotion minimum of 5,000 bonus points, for a total of 9,720 points. If I’d booked a room rate half as expensive, earning just 2,360 points on my two stays, I’d earn 5,640 bonus points, for a total of 8,000 base points plus bonus points.
As this example makes clear, the value of the promotion (as opposed to the value of the program itself) is higher the lower your room rate: 640 bonus points higher.
A promotion design this dumb has to be a sign
Once I realized what was going on, I knew immediately this won’t be an isolated promotion. After all, despite the assurances of airline executives that they’ll never lose money ever again, nothing has fundamentally changed about the airline industry: it requires enormous, up-front, long-term capital investments and finances those investments by selling individual tickets to customers that are extremely sensitive to prices and the overall condition of the economy.
In other words, when the next recession comes, airlines will lose money hand over fist, just like they have in every previous recession, and will do anything possible to get more customers on their planes. The “rationalization” of frequent flyer programs into revenue-based earning will go out the window, and airlines will start shoveling miles towards anyone willing to buy a ticket.
The “top-up” promotion model is optimized to precisely target the marginal traveler: the airline can still award you 5 miles per dollar you spend on airfare, but, for example, guarantee you’ll receive at least one redeemable mile per mile traveled. Last-minute and business travelers can be handed a nominal minimum (like the 5,000-point minimum Choice is offering), while those buying cheap tickets and without elite status can have their balance “topped up” to the promotion maximum.