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By SAM KEMMIS
NerdWallet
Inflation has made the cash prices of flights and hotel stays skyrocket this year, but it's having a surprising effect on a different currency -- your airline miles and hotel points. Across the board, your airline miles and hotel points are actually worth more than last year, which is unusual because points and miles generally devalue over time. However, this year's increased value of points and miles isn't enough to keep pace with inflated cash prices for hotel stays and flights. Travelers should still target redeeming their points and miles with loyalty programs that use an award chart to get the best value.
After years of unusually low prices on airfare and vacation rentals during the pandemic, travel prices have taken off in 2022. And while travel price inflation has cooled with slowing demand and falling fuel prices this fall, it 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 award prices, which are the number of points or miles needed to book a hotel night or flight. That practice devalues these currencies over time and renders customers' collection of points and miles less useful. Yet, interestingly, the opposite effect seems to be happening this year.
Rewards are worth
more this year
NerdWallet refreshed its annual analysis of points and miles programs and found something unexpected in a sea of bad inflation news: Many rewards programs' points have become more valuable this year compared with the previous year.
American Airlines' miles increased in value, from 1.2 cents per mile in 2021 to 1.5 cents in 2022. United Airlines' miles jumped from 1 cent per mile to 1.2 cents per mile. In fact, almost every domestic airline's miles either increased in value or stayed the same, year over year. This bucks 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 programs and loyalty currencies are always devaluing based on business and economic trends," said Tiffany Funk by email. Funk co-founded Point.me, a service that helps customers redeem their travel rewards. "But points can be a buffer against inflationary pressures in the short term."
Put simply: Cash prices went way up this year and award prices (e.g., the number of miles needed to book a flight) also went up, but not as much. Airfares were 33% higher in September 2022 than that month in the year prior, according to the September Consumer Price Index report. Meanwhile, airline miles are valued only 8.7% higher on average than last year, according to the analysis from NerdWallet.
If cash prices tumble again, this effect of boosted points and miles values could get erased. But as long as prices remain high, travelers can nab 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 would cost a given number of miles, regardless of the cash price. So a flight from Los Angeles to San Francisco would always cost, say, 5,000 miles. Yet the industry has trended away from the award chart approach toward dynamic award prices, which fluctuate to match the cash price. These programs generally offer less value when cash prices are high.