The downside with reward miles and frequent flyer programs : gambling

There are downsides and potential minefields with frequent reward programs:

  • the program, or the airlines administering them, can change the rules ANY time they want. They can change the levels, the miles required, the routing, apply new restrictions: your points that you accumulated for a while, saving for a round the world trip in business or first class, or that special hotels that you planned, suddenly get more expensive: it is a devaluation.
  • In the Miles “game”, like a casino, it is inherently rigged in favor of the “house”: the airlines, the hotels, : they can restrict or release any numbers of seats they want. They can apply blackout, release seats only at least minute, or only at 333 days out, applies surcharges, extra fees, change the terms, etc. The house always win long term.
  • Like gambling, the “house”, hotels and airlines, tried to lure as many people to play as possible, to collect points, luring them with big rewards like possible first class travel, suites upgrades etc… They count on the fact that most players will lose, and will not have the time to learn, to maximize the value of the points.
  • To lure you to spend more money with them, the airlines are masters at luring you with potential upgrades, which does not cost them much more.They are usually unsold seats anyway.
  • Like a central banker, the airlines and hotels can print unlimited amount of reward miles and points without restrictions, devaluing the value of the points anytime. They are in firm control of their costs.
  • Similar to gambling, when you play the game, you cannot sue the house. The contract of reward points is tilted in favor of the airlines and hotels. It specifically said that they can change the terms and conditions of the programs anytime as they wish, when they wish, because it is the only agreement between you and the reward program. You can only “potentially” sue only under the terms of their contract, their rules.
  • to get the maximum value for the rewards points, it is complicated enough that you may need to hire consultants to help you. There are so many rules, restrictions, routing, different classes (not all first class are “equal”)

So why should you spend the time for the reward points game?

1. Unlike in a casino, where luck and probability are the  rules, if done properly, a small group of savvy travelers can always maximize the value of the rewards points.

2. Competition between airlines and hotels create opportunities

3. Human errors, omissions, managements mistakes, create unexpected deals

Once the initial learning curve is mastered, the rest is pretty standard and similar. Once familiarized to the way the reward system works, with any changes of any reward programs, it is very easy and efficient for you to get answers, to understand how to maximize the value of the reward programs.

IF you have time and health, and want to learn, to search, to travel, then it is worth it. The savings, or value, per hour of “work” spent on the rewards points is invaluable. It allow you to explore and experience the world, different cultures, different cities, to try aspirational products like international first class, hotels suites, at a fraction of the normal cost.

 

Stop dreaming to be rich ! and how to start traveling like if you are wealthy

 

It seems most people want to amass wealth. Being wealthy for most people means having x amount of money, be financially independent, be a multi millionaire.

A newspaper article said a million dollar is not what it used to be. So now most people aspire to be multimillionaire, and not only millionaire.

But first let’s clarify and redefine wealth in the luxemiles way: you are wealthy when you have time, health and some money:

Rule #1: if you do not have health, you do not have wealth.

Rule # 2: if you do not have enough time, you do not have wealth. Rich people think differently about time: if they can do something more efficiently. Or if their time is worth more money than doing other task where they can delegate someone else to do it for less money, then they will spend money to save time. But some rich people are so busy that they do not have enough time to travel. For them, being rich only means having money.

So if you are not money wealthy yet, how can you travel and enjoy the way the rich do, and most importantly NOT spend the way they spend?

Contrarily to popular beliefs, it is not about having lot money! It is not about generating lots of money though businesses. It is not about the accumulation of wealth through lifetime of savings. You just have to follow the proven secrets of smart travelers:

No 1: Decide to travel like the rich do:

You have to mentally stop being jealous of people traveling in business and first class, and start asking yourself the question: how do I travel like they do, but not pay what they pay?

Once I heard some young fellow travelers, passing by our first class cabin and said loudly: “ look at those stupid people, what a waste, they pay 10 times what we paid for the same flight, and we all end up going to the same destination”… Well, he would be partially right, it would be a waste to spend more money for the same product: going from point A to point B.

But he is also wrong as:

A. Most travelers in the business class cabin are being paid by their companies, or can deduct the expenses.

B. Some travelers like us paid little to nothing by knowing the secrets, the system, and properly redeem our points. Who would be stupid? Us that paid little or nothing and fly first class, or them that paid actual money, a lot more than what we paid, and fly economy?

We have been on most of the first class cabins, travel 200k to 300k miles annually on first class, stayed at expensive suites, all for little or no money relatively compared to the market prices, by applying what most smart travelers already know.

No2: Get rid of the thinking you need money:

The travel industry is the only few industries where most people pay the average cost, some pays a lot more (the wealthy), and a minority pays very little to nothing (hopefully soon you).

The wealthy, because they want to save time, they usually spend the most money, buying business class seats, paying at last minute, to fly the most direct route. It is a well known fact that business seats generate the most revenue and profits for an airplane company.

The rest, the vast majority of people actually subsidize travel for a small minority, by paying average prices, by collecting frequent flyer points and not actually knowing how to use them properly.

No 3: what you need is knowledge, and by that you need is to READ:

IF you have some time, then use it to save money by reading what you need to know. There is tons of free information, blogs and forums where similar minded people gather and share tips. You need to read everything that relate to the offer, or deal before properly making a decision if that deal is good for you. There is no point of buying a product that you do not use or need, as there is no point of accumulating points in some hotels that you will not likely stay.

Only you can determine if a certain program or deal is a good value or not, as only you know what pattern, limitations and lifestyle that you have.

You are going to get a travel job? Well better start reading! Do not let the points go to waste like most business travelers! Know when and how to get maximum value for the points that you worked hard to accumulate.

For example, if you are planning to have kids in the next year, that mean you will likely travel less, so there is no point of buying into a timeshare just because they offer tons of Hiltons points ! One of my friends once called me at last minute, as they wanted to pull the trigger on a timeshare that offer 2 million Hilton points with the purchase. We calculated that they would have 52 free days in top hotel in Maldives, Tokyo, or Paris (pre 2013 hilton devaluation), or equivalent to a rebate of 52 days x $600 value per day = rebate of $ 31500. Only problem is that they plan to have baby next year. And most smart travelers know, as with any points program, earn and burn is the number one rule. You should not let points accumulate for too long, as they can be devalued anytime! 2 months after, Hilton announced that the required points will triple!

Long time ago when I started university, when I got my first Scotia bank visa gold, I remembered that I read everything on the contract and any other offer that they sent me.

The bank sent offers of using their special checks to transfer balances from another bank, with the special offer of bonus points, WITH NO limits on how many times you can use the checks and NO limits on bonus points! Now normally it would be a bad idea to transfer money or use cash back option from visa cards, by reading the contract at that time, i knew that the bank not only charged full 18% interest from the day the transfer is made, but also the grace period on previous visa purchases is also gone as soon as you use any cash back or transfers, so you ALSO effectively start paying interest on all purchases, retroactively to the day when the purchase was made!.

But I used it anyway, but making sure to deposit money into visa to cover the full balance AND transfers BEFORE the special checks are made. By transferring money around visa to bank to visa to bank, I paid zero fees to the bank, zero interests, and I got enough points every year to travel for free, or option of cash back up to $1500, courtesy of the bank.

No 4: Stop spending and paying full fare

No one want to pay full fare if it is possible to pay a lot less, even the rich and wealthy do not want to pay full prices for something that they can get at a discount.

No 5: Do not focus all your energy on chasing prices and discounts:

To travel well at low prices, you need to know they way the system works. You need to learn the dynamics and relations of variables that can affect prices, supplies and demands.

For example, business hotels cost less on weekends because … there are less business travelers. Know when to book: Shoulder seasons or low seasons cost less…

Do not travel when everybody else is travelling: spring break, Xmas… it would be too busy, and too expensive. Potential for problems like delays, stranded, bad services, lost luggage greatly increases during those period.
There is a hurricane? Well prices are going to be cheaper after ! We went to Bora Bora and Fiji after a major hurricane. The advantages: prices are cheaper, local people are friendlier, and it is a lot less busy. It felt like a private luxury resort!
A bank launches a new visa? Likely it will have good promo on extra bonus points! Apply! (but also check when was the maximum bonus points available during past year, you want to get the max bonus points for applying)

A small airline joins star alliance? Or some airlines want to increase their frequent flyers memberships? Well they may offer status matches! You can get free status match and get free perks like priority boarding, free luggage allowance, free lounge access etc just because the other airline want to attract “high paying customers”. For example, before going to Australia a few ago, we got status match to virgin Australia, and with that, we got free Hilton GOLD (free breakfast at Hilton hotels, upgrades), free lounge access at Sydney and Melbourne, and did not have to wait in line at check in, as we have priority check in and boarding, and more frequent flyer points when flying with Virgin… all that because we read, plan and sent a quick email that took 5 minutes.

An airline that announce a new route ? Well more space for points reward redemption seats, even sometimes possibly errors by management,  allowing more rewards seats to be redeemed than usual = First class on Singapore airlines! First class on Lufthansa for the whole family!
A new grocery store open, a Safeway ? It may offer up to 200 air miles for just buying $100 dollars of grocery. 200 airmiles can be redeemed for movies tickets worth $30 dollars, or have instant cash back of $20, or future savings for flights. An instant minimum 20% to 40% value back? Why not..?
No 6: if you have health, and some time, you have the means to travel well:

First, as previously said, if you have no health, then you have no wealth, and will be very difficult for you to travel well. So if you are healthy currently, then you are already ahead of rich people that are not healthy.
Second, you do not need to have money now. IF you have some time, you are ahead of people that are rich but do not have time. You can use time to save money:
a. By flying indirect routes instead of direct flights. Direct flights cost more. Instead of paying money, or paying full fare, we have been redeeming our us airways points to fly the most indirect routes possible, as we have time to spend on airplanes. For example, we have been flying to Australia in first class, instead of taking the direct route Vancouver to Sydney, we flown Vancouver to Paris to Bangkok to Sydney.. taking 2 times longer, but all in first class comfort, paying similar prices (by buying extra points) as an direct economy ticket from Vancouver to Sydney.
b. By using time to plan properly in advance: If you buy a last minute ticket, it will cost you a lot more. Most “money wealthy” people do not have time, they tend to spend money to save time.

The most common excuse for not maximizing the value of miles is: poeple do not have time or are too busy.  Are you too busy to spend 1-2 hours, “saving” or creating equivalent value for a retail cost of $20000 to $30000 first class ticket around the world?!! Supposed the max cash cost of points is $3000 for that  first class ticket, you are too busy to “save” $8500 to $ 13500 per hour? Even if the cheapest paying cash economy ticket is $2500-$3000, return from north america to australia in january?

So unless you are truly money wealthy, and you can generate more money per hour working, to the tune of thousands of dollars per hour, especially after tax,  (don’t forget to account that a dollar saved is worth more as it is after income tax !), than preferring to “save” the money , then you should have enough time to plan, and to save

ironnically, most people will spend more time researching savings on clothes, electronics, small items, than trying to learn how to save on a major purchase, especially about travel.
c. if you have time, you can plan in advance your trip an redeem your points way in advance instead of paying cold hard cash.
d. If you have time, you can plan to accumulate enough points for a certain redemption in the future, by reading, and checking the offers and deals

NO 7: shift the focus to investing to get maximum VALUE:

people said, the rich don`t spend money, they invest. You buy cars, the rich have company cars or can deduct their cars.

You go on a trip, paying with after taxes money. The rich go on business deductible trips, paid with pre tax money, then mixed it with leisure after hours, and they charged their business expenses on their points cards, getting minimum 2% value back…
You spend money to go on vacation, the rich spend their points that they accumulated through their business travel and business spending to go on vacations for free. You spend your frequent flyer points to get a microwave, the rich the same amount of points to go around the world in first class.

You spend years saving points, the rich find ways to get more points, by business spending, promotions, even buying points.
The rich always consider the difference between the cost, and the value that they get. For example, If it cost 1.5 cent per points to buy, and the lowest paying cash economy seat are $750, the reward seat required is at 25000 points, then the cost of the seat is at $375 min (or less if points are accumulated by other means, visa, promos, bonus). But for the same amount of cash, $750, a business seat go for 50000 points, then the value proposition go much higher: paying business seats are usually at 3-6 times, min $2100!
If you can get business or first class seats for the same prices, or a little more than the cost of the economy tickets, either in cash or points, than the value of using those points increases !
Similarly, buy hotels points when it makes sense. For example, right before Hilton devaluation, i bought 90K points for $900. I transferred 40k spg points to 45k virgin atlantic points to 90k Hilton points. Total of 180K Hilton points, (cash cost to me was $900) equivalent to 6 free nights at top Hilton hotels worldwide (Maldives, Tokyo, paris, where the lowest prices for the year is $600-$800 dollars per night).

NO 8: to get maximum value, Don’t diversify, focus and concentrate on a few program:

pick the program , visa, bank airline, or hotel where you will most likely spend money and accumulate the most points in the shortest time. Like that you will avoid spreading yourself too thin, having too much points at many programs and not enough points to do anything.  When you have enough stays at a certain hotels brand, you get top tier benefits (free suites upgrades, free breakfast, free internet, free late check out etc)

Another advantage of hotel status is upgrades: we have been upgraded to suites costing $15k, because we are top tier status, while paying only $150 ! when you are top tier status at hotels or airlines, you get double to triple the points!

to get status, and free upgrades, while traveling, we have been known to switch hotels around every night!We normally do not “unpack”, even in 5 star hotels with butlers, as we prefer that our clothes stay clean inside our suitcase, wrapped in plastic to avoid any bugs, than displaying all over the place inside the cabinets. We do not want to bring potential bed bugs home

A few years back, to get spg platinum status, we went back and forth in bangkok hotels westin and sheraton bangkok, as they are both cheap and right across the street. The value? Spend 150$ a night, but there was a promo to get a free night at top hotels after 3stays. One stay :1 night at a different hotel. So after switching for 3 nights, spending $450,  we have one free night at maldives, worth $600! We racked up so many free nights during thst promo that we treat our friend to maldives! And we get so many extra bonus spg points with each stay, worth 1500 points after 3 nights!

Cost:$450, value back:$600 + $15 to $30 value points extra + 1500 normal hotel points for stays ( $30) + value of getting top status.. for something that takes 3-5 minutes per day max ( remember, we do not unpack)
NO 9: Earn and BURN: Do not let those points sit unused too long. They can easily get devalued overnight! programs changes when the costs are higher.
NO 10: Do not follow the herd, Act like the minority do: pay your visa in full and know the opportunity cost:

There is no point of trying to accumulate frequent reward points if you are not using it. There is no valid reason to spend money on visa cards to get rewards points IF you are NOT paying it in full. Remember that you do not want to be the majority of credit cards customers, generating interests for the bank because you do not pay in full each month. You need to get value from the bank, not the reverse!

NO 11: READ READ READ: deals come and go, programs changes, points get devalued, etc.. but there are so may free blogs and forum that dumbs it down for you, saving you time and money…