Mileage Pro The Insider's Guide to Frequent Flyer Programs

SOMETIME DURING YOUR MILEAGE CAREER you will likely need to exchange miles or points between programs. Generally this is due to one of several circumstances:

• You are short the number of miles necessary for an award and need to add miles to your (or a traveling companion’s) account to qualify for the redemption. This is known as “topping off.”
• You may be worried about the longevity of your miles or points based on the possible bankruptcy or liquidation of your preferred program. As a result, you want to try to guard your miles and points by transferring them to a “safe” program that is less at risk to go bankrupt or to liquidate.
• You started earning miles a long time ago and, thanks to the information in this book, you now know that you are better off concentrating your miles or points into a single account, or, at most, into a small number of preferred accounts. You can clean up your accounts by transferring small amounts of miles or points (often called “orphans”) into a single account or into those few preferred programs.
• You are in danger of miles expiring in one of your “infrequent” programs. Exchanging miles or points into that account will qualify as an “activity” and will keep those miles from expiring.
• You are having problems getting an award ticket with one airline so you would like to take advantage of another airline’s promotional offer. You want to transfer your miles, and even some of your hotel points, into another airline program for a one-time redemption.
• Your preferred and secondary programs are now partners in an alliance and you are wondering how to move miles/points from one to the other.
• Your primary programs have changed because of a job transfer. Unfortunately, the airline in which you have earned all your miles does not fly from your new city of residence.

Exchanging miles or points between programs is possible though it is not a particularly pleasant or rewarding experience. While the principle is the same, it is nowhere near as easy as exchanging your dollars for pounds or Euros.

The reason? The premise of these programs is to promote loyalty. By encountering barriers to exchanging miles or points, members are convinced that the best way to earn benefits and free awards is to remain loyal to one program. If American AAdvantage and Southwest Rapid Rewards miles and credits were freely exchangeable, those living in Dallas or any other market would have no reason to choose one airline over the other. In that context, open exchanges simply do not make sense.

How to Exchange Miles and Points between Accounts
To exchange miles and points, you will need the assistance of a “middleman”: a program or conduit that will allow you to switch from one program’s currency to another. Be prepared for “sticker shock” though. Your miles are almost guaranteed to lose value, and thus the reason we discourage exchanges.

In most cases, because of the ease in earning miles, we think it is best for you to consider going up in value not down. For instance, in a press release by Points.com, their average exchange in the second quarter of 2005 was 17,380 miles/points. That is a lot of miles to be exchanging. In fact, exchanging that amount within Points.com would likely leave you with less than 2,000 miles in another program. As a further example, exchanging that amount through the Hilton HHonors Reward Exchange would give you between 3,000 and 5,000 miles. Using Club Rewards by Diners Club, you would still lose half of the miles with which you started.

In a day when some members decry that frequent flyer programs have become “devalued,” self selecting to devalue your miles even more through the use of a middleman might be considered a poor decision.
Before we get into the middleman process, keep in mind that a growing trend in airline and hotel programs is to allow members to exchange miles and points between one person’s account to another person’s. In the past, this was seen as a huge “no no.” Now, programs such as American AAdvantage and InterContinental Priority Club Rewards will allow members, for a fee, to exchange miles and points between accounts with no loss of value to the miles and points. This might be a new option for you, but remember, it is only for sharing miles or points within a particular program.

Essentially there are four types of exchanges: miles to miles, miles to points, points to miles and points to points.
The easiest is to transfer points into miles. All major hotel loyalty programs offer conversions from points to miles. Still, do not be fooled. The drawback is that each hotel has its own way to value the exchange based on the program’s earning ratio.
For instance, Priority Club Rewards exchanges points into miles at a ratio of four points to one mile. The Starwood Preferred Guest program converts their points into airline miles at a one-to-one ratio. Is Starwood four times richer in a mileage exchange? No. The Starwood program earns points at a rate of two points per dollar spent, while Priority Club Rewards earns 10 points per dollar spent. Therefore, carefully examine the value of the points you have before exchanging. Knowing the earning rate of each program prior to any exchange should be your first step. This example may change if the miles you are seeking had been earned as an elite member, or if you are exchanging more than 20,000 points (see below). Still, the lesson remains constant: Do your homework before exchanging a single mile or point.

Perhaps an easier way to understand this is if you were to spend $1,000 in each of these two hotel programs. $1,000 spent at Priority Club hotels would earn you 10,000 points based on an earning rate of 10 points per dollar spent. At Starwood hotels that same $1,000 would earn you only 2,000 points (two points for every dollar spent). If you were to then convert the points in each program to miles, you would earn 2,500 miles from converting Priority Club points while earning only 2,000 miles when converting Starwood points. With Priority Club, four points convert to one mile, while with Starwood, one point converts to one mile.

Now, using the same example, change the scenario to spending $10,000 as elite members in each program. In the case of Starwood, elite members earn three points per dollar spent so the total number of points earned is 30,000. For Priority Club, Gold Elite members earn an additional 10 percent bonus on points earned, so spending $10,000 will earn you 110,000 points. (Remember: You earn 10 Priority Club points per dollar spent.) Converting 110,000 points with Priority Club earns you 27,500 miles. Converting Starwood points into miles earns you 35,000 miles. In Starwood’s program, all members who convert 20,000 Starwood points into miles receive an additional 5,000 miles. As you can see, the advantage is now with Starwood but it gets even more complicated because if the Priority Club elite member was Platinum instead of Gold, he or she would earn a 50 percent bonus, thus earning a total of 150,000 points from the $10,000 spent. Those points converted into miles would be 37,500. Now, aren’t you glad you bought this book?

The next two situations are similar in that they each require the use of a “middleman.” There are five exchange options in North America: Amtrak Guest Awards, Diners Club Club Rewards, Hilton HHonors Reward Exchange, Priority Club Rewards and Points.com. Note: Other than Points.com, these programs were not designed to be exchange programs. They are travel rewards programs that, when used in a particular way, allow members to convert or exchange points into miles, miles into points, or miles into points and then into miles in another airline program.

Amtrak Guest Awards: The first priority of this program is to build Amtrak passenger loyalty, but because of the richness of the program, there are opportunities to use it as a conduit to exchange miles between different airlines and hotel points between various hotels. The big caveat: This only works for a limited number of programs including Continental OnePass, Hilton HHonors and Midwest Airlines Midwest Miles. The benefit of exchanging airline miles through Amtrak is that Continental and Midwest Airlines do not provide a way for you to convert miles between their programs, therefore, you are using Amtrak as the “middleman.” Also, Hilton HHonors points convert at a ratio of 10,000 HHonors points to 1,500 Amtrak Guest Rewards points, whereas miles convert at a one-to-one ratio with Amtrak Guest Rewards points.

If making use of every earned mile is important to you, we will illustrate a way to save 5,000 miles. In the Continental OnePass program, a free ticket to Mexico is available to members for 35,000 miles. However, you could get to Mexico for free if you only had 30,000 miles. Using the Amtrak Guest Rewards program as your middleman, you would convert your 30,000 miles from OnePass into Guest Rewards points on a one-to-one basis and then convert those points on a one-to-one basis to Midwest Airlines’ Midwest Miles program. (You must be a member of both programs for this to work.) You will now have 30,000 Midwest Miles miles and a free ticket to Mexico using Midwest Airlines’ partner Frontier Airlines, which only requires 30,000 miles to go to Mexico. You saved 5,000 miles, which would have been required if you had wanted to redeem your OnePass miles and go to Mexico on Continental. Sure, it takes a little work, but 5,000 miles saved is, well, 5,000 miles saved. Now, it is a little tricky because Amtrak limits exchanges to only 25,000 miles per calendar year (unless you are an Amtrak Guest Rewards Select member in which case you are allowed to exchange more than 25,000 miles annually). If you were interested in the above example, you would need to plan the exchange at the end of the year, exchanging 25,000 miles in December and another 5,000 miles in January, and, of course, January is about the right time to redeem an award to Mexico. One hint: Do yourself a favor and make sure the award seats on the flights you want are available before you do all of this work.

That said, in some instances there is more to exchanges than just miles to miles. Members may consider exchanging miles from OnePass and Midwest Miles to Amtrak to garner other award choices such as hotel room awards with Hilton, Marriott, Sheraton, Westin and Ritz-Carlton, as well as gift certificates to places like The Home Depot and Ruth’s Chris Steak House—awards not offered by either of Amtrak’s airline partners Continental and Midwest Airlines.
The process is similar to any other middleman exchange. A member exchanges his or her OnePass miles into Amtrak Guest Rewards points. He or she can then choose to further exchange those points for airline miles with Midwest Airlines and redeem a free flight. Or, he or she can choose to convert these new Amtrak Guest Rewards points for points within the Hilton HHonors program and redeem a free night. The process is always the same. The choice of what you have decided to exchange to is the differentiator.

There are other choices you do not even want to consider. For instance, 25,000 OnePass miles will earn you one week’s car rental from Hertz. We do not believe this is of great value since that same 25,000 miles could be redeemed for a free airline ticket, which would typically cost more than the car rental. Also, 22,500 Midwest Miles could get you one free night at a level three Starwood Hotel—a nice hotel, but not worth a free airline ticket.

Diners Club Club Rewards: This exchange middleman is one we rarely suggest because it only will work if you are a Diners Club cardholder. This means you must invest $95 to acquire the card, diluting the value of the exchange for most people.
If you are an existing cardholder, you can enact exchanges from both American AAdvantage and United Mileage Plus. You will receive 5,000 Club Rewards points for every 10,000 miles you convert. Conversions must be made in 10,000-mile increments with a conversion limit of 50,000 miles in one calendar year, per partner. Since Club Rewards exchanges their points to miles on a one-to-one basis, this means you can convert AAdvantage and Mileage Plus to miles in other programs with only a 50 percent devaluation. (That devaluation is because 10,000 miles equals only 5,000 Club Reward points.) Remember, though, that there are fees involved, both with the card’s annual charge and with the government induced fee of 95 cents for every 2,000 points.

Hilton HHonors Reward Exchange: This is the original exchange option. While many airlines have pulled out, this option can still be useful in certain situations. Currently among the U.S. programs that exchange miles for hotel points only American AAdvantage, Midwest Airlines Midwest Miles and Hawaiian Airlines HawaiianMiles participate. Others include Virgin Atlantic, Mexicana and LAN. The exchange ratio is 5,000 miles into 10,000 HHonors points, but 10,000 HHonors points will only gain you 1,500 miles when you convert back into miles—a devaluation of 70 percent. We think the best way to use this program is to exchange miles for hotel rooms rather than go from miles to hotel points and then back to miles in another airline program, or even just going from points to miles. Note: You must be a member of Hilton HHonors to use the Hilton HHonors Reward Exchange program. Also note: If you want to exchange HHonors points for miles the selection of airlines is greater and includes the airlines listed above, as well as British Airways, Continental and Delta among others.

Priority Club Rewards: Not many know you can use this program as a conduit. The choices are extremely limited, but they exist. Priority Club Rewards members can redeem American AAdvantage miles into Priority Club Rewards at a ratio of 1,000 miles to 800 points. You can then convert these points into miles with a variety of domestic and international airline programs, usually at a ratio of four points to one mile. Thus 10,000 AAdvantage miles would become 2,000 miles in another airline program—a devaluation of some 80 percent.

Points.com: Your last option for transferring miles is Points.com. While this program started out as an exchange, a recent change in strategy is trying to convert it into a “rewards management portal.” This means it is a little more difficult to determine the conversion rates and strategies for converting your miles and hotel points. Also, some airlines, such as Delta SkyMiles and US Airways Dividend Miles, do not allow travelers to “swap out” their miles though members can “swap in.” (“Swapping in” is a term that Points.com uses. Loyalty program members can use Points.com to swap their Midwest Airlines miles into Delta SkyMiles miles but they cannot swap back out their Delta SkyMiles for Midwest Airlines miles.) Because frequent flyer programs themselves set their own conversion ratios rather than Points.com doing so, no concrete formula is available. You will have to enroll on Points.com to test the most current exchange rates. Past exchanges show devaluations of up to 92 percent. Points.com membership fees are associated with exchanges including, but not limited to, processing fees.

As noted at the beginning of this chapter, many factors are to be considered when planning an exchange of miles and hotel points. We present options for you, but feel very strongly that you can learn to manage even a small amount of miles to your benefit without exchanging through a middleman and losing miles.

Here is an example: In the fall of 2005, members of the Northwest WorldPerks program could redeem their miles along with some cash for airline tickets. Commonly known as “Cash & Miles,” this promotion allows members with a minimal amount of miles to enjoy rewards. For instance, in the Northwest WorldPerks offer, members with 5,000 miles could travel to Florida from certain destinations in the United States using 5,000 miles plus $149. That is an excellent way to save money since 5,000 miles through an exchange program (also referred to as a middleman) would likely only equal 500 miles in another airline program. WorldPerks members with 10,000 miles could have flown to Florida for only $99 or to other destinations in the United States for $109 to $199. Generally speaking, you would not have been able to purchase any ticket for less money. Sometimes it is far better to purchase the number of miles you need to get to an award level rather than dilute the miles you have by going through an exchange.

Other types of exchanges are fairly common, but can be risky. Many members exchange miles and hotels points among themselves. It is not uncommon for a member of one program to “exchange” an award with a friend having miles or points in another program. While this certainly straddles the fine line between “bartering,” which is against some programs’ rules, it does present an alternative. For instance, maybe a traveler has miles with the Delta SkyMiles program and wants to go to Australia. Delta and its partners do not provide a convenient way to get there without routing through northern Asia. The member might consider borrowing miles from a friend who has miles in another airline program that offers direct flights to Australia. (Any member of a major U.S. loyalty program can transfer an award into another person’s name.) The traveler would then owe his or her friend the same number of miles for a Delta award later on. Also, someone with a lot of airline miles may exchange flight awards to a friend in exchange for hotel awards. But again, in some programs this amounts to bartering and may be prohibited. Check your program’s rules. Note: Transferring an award to someone without “strings attached” (such as in the case of a gift) is fully permissible. When we say that an exchange might amount to bartering, we are referring to a “strings attached” type of exchange.

Finally, there are exchanges of miles for money. You may have heard of “coupon brokers” who promise get-rich-quick schemes by trading your unused miles and points into cash. But, this type of transaction is prohibited in the rules of every frequent flyer program in the world.

These coupon brokers advertise heavily on the Internet and in newspaper ads by claiming there is no “law” against such a transaction. Law or no law, this type of transaction is very much against the rules of every loyalty program. Almost daily, members are busted for buying and selling miles for cash. As a result, airlines can close accounts, leaving members with no recourse. For more discussion on buying and selling frequent flyer awards through coupon brokers see chapter 14.

REMEMBER THIS:

• When possible, exchanging miles and points between various programs may not always be a pleasant or rewarding experience. Truth be told:
• It is much easier to exchange your dollars for pounds or Euros.
• There are four types of exchanges: miles to miles (hardest), miles to points, points to miles (easiest), and points to points.
• Many members exchange miles and points among themselves. It is not uncommon for a member of one program to “exchange” an award with a friend having miles or points in another program.