United’s Sucker Bet: If You’re Hungry Enough, You’ll Waste Your Miles

Conde’ Nast‘s Barbara Peterson looks at the United MileagePlus option to redeem miles for meals at their Newark hub.

As part of an impressive re-do launching for United’s terminal at Newark, there are several top-end eateries going in. One feature that’s being played up is the ability to use miles for food as an instant redemption.

Peterson suggests that this could make sense if your miles have become so devalued that they are now less than a penny.

Roughly speaking it looks like the miles-for-food option gives you about 7/10ths of a penny per point. Which is pathetic. It’s a valuation at which MileagePlus ought to be ashamed of themselves. It’s as though they are telling members that their miles have been devalued to that point.

As much of a beating as United’s miles have taken over the past year, they’re still worth more than that. Don’t be a sucker.

The answer depends a lot of what type of flier you are, says Gary Leff, a loyalty program expert. He says he’s skeptical of the miles for merchandise options that airlines are pushing. “Miles should be used almost exclusively for travel,” he says, or “for experiences you couldn’t pay for yourself.”

But there’s one situation where the mileage shopping spree makes sense, he says: When you have an “orphan” account with so few miles —say, under 10,000—that you could never hope to score an award ticket. Those are typically the accounts that draw those cut-rate subscription deals for obscure magazines. Leff says he’s burned some low balances on merchandise in the past, and that it can be a good value.

“The bottom line is that an airline is going to have to come out of pocket for merchandise or food and isn’t going to give you a very good deal when they do it,” Leff explains. At the prices posted at Newark, he says, redemption is worth about 7/10ths of a cent per mile, and “redemptions don’t drive much less value than that.”

Airline miles for good for air travel. Hotel points are good for hotel awards, except that Starwood Preferred Guest Starpoints are great for airline mileage transfers.

Flexible points currencies that transfer at a good (generally, one-to-one or better) rate to airline miles are best for transfers to airline miles.Hotel points transfers are never as good a deal.

Here’s why: the economic model of airline saver awards is that the airline effectively sells distressed inventory at a discount to the frequent flyer program, and in mass quantities. That means the frequent flyer program can get a whole lot more value for its rebate investment than using the same rebate/expense in another way.

Hotel programs charge more per point, because their costs are higher, generally speaking a hotel program will give you any available standard room for their points and that can be a costly redemption.

In contrast an airline saver award is going to be for space the airline expects not to be able to sell.

If an airline buys you a $300 appliance, it is going to cost the airline close to $300. Sure, there may be a discount arrangement based on quantities purchased, but the discount isn’t going to materially change the economics of the arrangement.

In contrast, a saver economy seat on a plane might cost the program less than $30. There’s not just a rebate in the form of an airline seat, there’s also leverage.

Ok, I Give You This Limited Excuse

If you have a small number of miles in an account — and I usually suggest earning more rather than cashing out — it can make sense to redeem if you believe you won’t earn more.

I had about 4500 Etihad Guest miles and no particular expectation that I would build that balance. And I needed a new wallet. Etihad has some of the most extensive miles for merchandise redemption options.

Still, a new wallet is hardly a reason to remain loyal. Miles have been able to give me the sort of travel and experiences that I would never be able to afford in my entirely life. I travel more, and well beyond my means, because I’ve had access to these programs. I’d never trade them for merchandise, not even a lawn gargoyle.

And if you find yourself in United’s terminal at Newark, it’s highly likely you’re about to earn more miles so you’re not really in the situation of having orphan miles, an account balance that won’t ever grow.

The Only Other Great Value Redemption

Miles for experiences can be a good deal, something for which there’s not a ready market price.

When you’re leveraging the connections, the sponsorship, or other clout that a multibillion-dollar business has to open doors you can’t open on your own there tends to be much greater value.

These redemptions aren’t always cheap, but they can be for things you couldn’t buy yourself.. opening the door to experiences.


About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *