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The above is a twitter interaction with me and reader “BF” about the expanding policy of Delta offering for you to buy “premium” drinks in the clubs with your SkyMiles at 1 cent each in value, that is, if you have say splurged for a $48 dollar bottle of Champagne, as recommend you do by the Delta management in the latest quarterly conference call, you would then spend 4,800 SkyMiles for this bubbly wine.
Well, gosh, that seems like a good deal right? I mean, I really value a $50 bill in my wallet! But 4,800 SkyMiles, uh, what are those worth when it is so hard to find a Delta award ticket nowadays (let alone the hidden award charts for crying out loud).
But when you stop and do the math, that is, Delta is CLEARLY telling us that we should understand that a SkyMile is just worth a penny, that hurts and can have much larger implications long term. Are huge profit margins on a few drinks in the Sky Clubs worth this?
Think about this for a minute. There are now so many travel cards that pay you 3x points (or more) when you buy a ticket with that card. Not just that but when you go to redeem those points you are getting even more than 1 cent in value each.
I hope you see my point. Why would you pay with a Delta co-branded credit card that is ONLY paying you 2x points for Delta purchases when the simple math from Delta is telling you that you are getting so much less value for your purchase compared to the competition. This is not that hard folks when you boil it down to 1 cent each.
Now I am not foolish enough to flush my SkyMiles down the Sky Club drain buying over priced drinks with either “real” money or SkyMiles at 1 cent each but I am sure many will. But the key point is the psychology of this move and the long term impact choices like this from Delta will have on the rewards program. If you take away the aspirational value of a SkyMile you have moved it from an intangible value of a dream trip in Delta One to pushing buttons on a calculator to see if value is to be found.
The Delta SkyMiles team has made a great number of bone headed decisions over the past few years but this one may just be one of the dumbest possible moves ever to finally convince the general public that SkyMiles has been dumped down to a penny in value. – René
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Not to mention, my Amex Platinum credits me the cost as a flight charge, so to your point, why would I commit points to this?
And Amex has absolutely no leverage to prevent this. With the recent Costco fiasco, Amex needs Delta more than Delta needs Amex.
Of course though, if the airlines keep moving in this direction, their ability to sell miles to credit card issuers will be diminished, and much less profitable. That’s a huge source of pure profit to the airlines.
The part of this that I take note of is how disingenuous Delta is being in their campaign to turn Skymiles into “penny a point”, and how underhandedly they are going about it in order to make people think its actually a good thing. Just as they do when they mess over their loyal customers with every devaluation and “knock down” of benefits that they insultingly portray as “enhancements”.
The actual valuation of one penny per point is completely arbitrary. It could just as well have been 87/100th of a cent per point, or 2.25 cents per point. Or $5 per point, for that matter. Its all arbitrary, and whatever Delta decides it will be worth. I suspect that they pegged it at “penny a point” because that was the lowest whole number that they could get to, and it just kind of “makes sense” to people who are not focused or thinking about it that a point should be worth a penny. Its just easier. Going lower in value (goodness knows, I’m sure they searched every which way to find a way to do it) just wouldn’t play right in people’s minds.
Well, maybe all of us “savvy DMs” won’t fall for it when it comes to buying drinks in the club. But don’t think we are immune. Why do you tink that the award charts are being hidden? When you pull up the award numbers for any given route, they are now generally an absurd amount of miles. Routes that were 80,000 miles now come up 170,000 for every flight. Routes that were 25,000 now come up a minimum of 60,000 or 80,000. But let’s say that a paid seat on the 170,000 mile award flight costs $1200. Or a paid seat on the 60,000 mile award flight would cost $425. And you have a “pay with miles” option. What will you do? Will you pay the 60,000 miles for the award ticket, or 42,500 miles for the pay with miles ticket (plus get MQMs for the flight too)? I suspect I know the answer to that question. And, in the most insidious part of this, we will be HAPPY that we got a deal and saved 17,500 skymiles! And then, all of a sudden, in your mind, you have just accepted that Skymiles are worth a penny a point. And are quite content with it. And tell our friends that they should get the Delta Amex card also, so that they, too, can get a “deal” using pay with points.
Its the same mentality that will get even the most committed purist – who says he will NEVER, NEVER, EVER buy a first class upgrade – to buy a first class upgrade for $9. Or $75. Or $160, if it is on a redeye with sleeper seats and a questionable upgrade list (that’s the one I fell for). And be happy that they secured an upgrade that really should have been their’s for free.
Delta can and will devalue whatever they decide to devalue. The devaluation is extremely upsetting, but not offensive. What is offensive is the insulting and demeaning manner in which they try to convince their customers that they should be happy and thrilled over the devaluations!
René,
There is nothing new here. Delta has told us that a SkyMile has been worth a penny for a while now. Look at the Pay With Miles that we get as an DL Amex card holder… 10,000 miles equals $100 off our plane ticket when using PWM.
Some times regular Amex points are worth a penny as well. When buying Home Depot Gift Cards or paying at McDonalds when inside the restaurant with a regular Amex card.
Gregg G
@Gregg G – The difference with PWM is the rebate you get back. As I showed, when you PWM in 1st class, you earn SkyMiles, MQMs, Crossover Rewards and even SkyBonus (if they did not kick you out yet). Thus, you are getting much more than 1 cent in value with PWM tickets.
@René, you are correct, I didn’t think of getting the SPG crossover points and MQMs back on my flights when paying with miles, but I would have earned the same amount of points when paying with cash, so it still a $.01 to mile conversion when paying for the ticket.
I use the PWM when the airfare is less than the points needed for a flight.
Rene, the PWM option is wonderful when leaving Canada and coming to the states, like last month.
250 miles for YVR-ATL:)
Much more than $.01/mile. hahahahahahahaha