Is inflation affecting travel points and miles? | Tech US News

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After years of unusually low prices for airfares and vacation rentals during the pandemic, travel prices have taken off in 2022. And while travel price inflation cooled as demand slowed and fuel prices fell this fall, continues to affect travelers’ plans and budgets.

So, with travel prices still well above their pre-pandemic levels, what does that mean for travelers’ hotel points and airline miles? Rewards programs regularly increase the prices of awards, which are the number of points or miles needed to book a hotel night or flight. That practice devalues these currencies over time and makes collecting points and miles from customers less useful. However, interestingly, the opposite effect seems to be happening this year.

REWARDS ARE WORTH MORE THIS YEAR

NerdWallet has updated its annual analysis of points and miles programs and found something unexpected in a sea of bad inflation news: Points from many rewards programs have become more valuable this year compared to last year.

American Airlines miles increased in value, from 1.2 cents per mile in 2021 to 1.5 cents per mile in 2022. United Airlines miles increased from 1 cent per mile to 1.2 cents per mile. In fact, nearly all domestic air miles increased in value or stayed the same, year over year. This beats the conventional wisdom among points and miles enthusiasts, who expect to see those values drop over time.

“Miles and points aren’t really a hedge against inflation, as the various loyalty programs and currencies are always devaluing based on business and economic trends,” Tiffany Funk said via email. Funk co-founded Point.me, a service that helps customers redeem their travel rewards. “But the points can be a buffer against inflationary pressures in the short term.”

Bottom line: Cash prices have gone up a lot this year, and award prices (eg, the number of miles needed to book a flight) have also gone up, but not as much. Air fares were 33% higher in September 2022 than that month a year earlier, according to the September Consumer Price Index report. Meanwhile, airline miles are valued just 8.7% higher on average than last year, according to NerdWallet’s analysis.

If cash prices fall again, this effect of increased points and miles values could be erased. But as long as prices remain high, travelers can get outsized value from their points and miles, assuming they use them for high-value redemptions.

STATIC VS. DYNAMIC AWARD PRICES

In the old days of frequent flyer programs, a route cost a certain number of miles, regardless of the cash price. So a flight from Los Angeles to San Francisco would always cost, say, 5,000 miles. However, the industry has moved away from the award chart approach to dynamic award prices, which fluctuate to match the cash price. These programs generally offer less value when cash prices are high.

“The best bailouts when cash prices are high will be through programs that don’t peg their currency to the dollar,” Funk said.

Travelers should target programs like Hyatt, Wyndham or Alaska Airlines that still use an award chart to determine the cost of using points and miles. Instead, Funk cited Southwest Airlines and JetBlue Airways as examples of programs that closely tie their reward point values to the cash price of the flight.

“Instead, a program where concession prices are determined in advance (with published charts) or are flexible/dynamic based on circumstances (load factors, revenue data, etc.) will be better bets,” he said.

Hyatt, for example, still maintains an awards chart and saw the value of its points increase from 1.9 cents to 2.8 cents from 2021 to 2022, according to NerdWallet’s analysis. Marriott Bonvoy, which eliminated its award list earlier this year, was flat at 0.7 cents per point.

AWARD SPACE MAY BE HARDER TO FIND

Airlines continue to struggle with staffing difficulties and canceled flights, despite continued high demand. This means planes are full and seats reserved with miles are harder to come by.

“Historically, we advise that extra award space usually opens up a week or so before departure,” Funk said. “But right now, we’re seeing seats held up to two or three hours before departure.”

Hotel rates, driven by strong demand and staff shortages, also put pressure on prize redemptions. Most hotel programs use dynamic award prices that keep pace with cash prices, so finding bargain rates will remain a challenge.

In other words, hotel points and airline miles can be more valuable, relatively speaking, but they can be harder to use. Therefore, travelers should be flexible when making plans.

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This article was provided to The Associated Press by the personal finance website NerdWallet. Sam Kemmis is a writer at NerdWallet. Email: [email protected].