When Up in the Air burst onto our cinema screens in 2009, it wasn't just George Clooney that made the film so appealing. It was also the uncovering of an obsession with airline loyalty reward schemes that had many corporate moviegoers nervously laughing in recognition. Clooney's character was an executive solely driven by his collection (and maintenance) of loyalty points, and the subsequent status and privileges they provided, one all too familiar to frequent business travellers.
Fast-forward to today and those coveted points are becoming increasingly more difficult to come by, particularly with recent changes to reward points schemes. This year some of the industry's largest airline groups have moved away from rewarding passengers based on the amount of miles they fly, instead rewarding them for the amount of money they have spent on their tickets.
In other words, the more a traveller spends, the more points they'll receive. While it does seem to be a fairer way of allocating and earning points, this revised model is causing significant impacts to business travellers but perhaps more interestingly, to their organisations.
How does this impact travellers?
While frequent flier miles may not be actual cash, for many travellers they're just as good. As such, there's no question that frequent travellers will be somewhat disgruntled by changes. Essentially they now simply need to spend more to receive exact the same amount of reward points. What's more, some schemes are becoming less appealing from a redemption perspective and more difficult to use.
A study by PriceWaterhouseCoopers found that when airlines switch to frequent flyer programs based on money spent rather than miles travelled around 45% of passengers could lose out on points. Some airlines are also capping the number of miles a passenger can earn per ticket so those who buy cheaper tickets are the most significantly impacted, particularly those who purchase economy fares.
For casual leisure travellers these changes may not result in a change in behaviour (instead, they may look to alternative forms of rewards like credit cards) but for business travellers, the impact could be significant. The perks are often the best form of reward for the inconvenience of travelling so business travellers may begin to purchase more expensive flights to earn and hold on to their points.
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Travellers expect quite rewards from their purchases ©sfref/iStockWhat impact does this have on your organisation?
By giving additional points to travellers who spend more money on tickets, airlines are inadvertently incentivising extra spending. This results in bigger profits for airlines but lower ROI for corporations.
Thus organisations are left with a dilemma.
On the one hand, they obviously like to see their employees rewarded. After all, travelling for business has inconvenienced them and these loyalty schemes are a no-cost and no-effort mechanism for organisations to see their travellers rewarded.
On the other hand, their travellers may now look for ways to secure a higher fare, either by leaving it later to book or by selecting more expensive options.
Of course, this means the organisation needs to pick up the tab, resulting in a potentially dramatic increase in business travel expenditure. As many executives will be aware, this is the exact opposite of what many organisations are hoping for in their travel budgets. Instead of optimising every euro or pound and making it go further, this change may see corporate travel expenditure rapidly expanding.
It has become even more critical for organisations to think about how to reward their employees for travelling, while maximising their investment in business travel.
How can your organisation best manage the change?
The most dangerous strategy for corporations managing through this change would be to bury their head in the sand. Instead, a concentrated approach and open communication with employees is critical to ensure travel budgets do not begin spiralling out of control.
Organisations then need to get creative about how they manage and incentivise employee travel. Working with a travel management partner to delve into their insights is a great strategy, but as a starting point, organisations can make their own small — yet impactful — changes.
- Create, communicate and enforce travel policies Travel policies may need to be updated to ensure travellers are prompted to book their trip as early as possible, to gain access to the best fares available. Your organisation may also look to mandate 'maximum cost per trip' restrictions to ensure more expensive options are not favoured by employees. Of course, once policies are set, it is crucial that they are actively communicated and enforced at all levels of your organisation.
- Choose airlines that reward employees in different ways One of the major benefits of airline loyalty programmes is the flexibility they may offer to frequent travellers. Services such as catering for changing schedules by allowing business travellers to change to an earlier flight when they can and allowing complimentary checked bags are important to many business travellers. Choosing airline partners that offer these benefits as standard may be a way to minimise the impact to your employees.
- Find different ways to reward employees Employees who are travelling for business make a sacrifice by being away from home. Good employers recognise this and reward their travellers appropriately, even in their selection of partners. Simply choosing airline and hotel partners that focus on providing superior service can make a significant impact on the traveller experience. Furthermore, providing employees with options that minimise the disruption to their everyday lives is essential. Selecting airline partners that fly where travellers need to be when they need to be there at the right price adds up to a business travel experience less taxing, and more rewarding for the traveller, while enabling the company to keep employees up in the air.
As airlines continue to make changes to maximise their own profits in this increasingly competitive environment, it is imperative that corporations look to do the same. By enforcing travel policies and finding creative ways to reward staff for travelling, organisations can continue to realise the strong benefits that can be gained from business travel.