Before you can travel hack your way around the world, you need to understand how travel rewards programs actually work. Travel hacking involves the goals of reducing your expenses to practically zero, while making your travel experiences more enjoyable. Travel rewards programs are the conduit that will allow you to realize these two goals. (If you have not read our Introduction to Travel Hacking, it might be useful for you).
Airline frequent flyer programs and hotel/car rental affinity programs are designed to motivate you to consolidate your business with a single travel company or brand. In exchange for your loyalty, companies provide you with free travel or other perks – if you do enough business with them or take advantage of special promotions.
If you’ve ever traveled (airline, hotel, car rental), you’ve probably been asked by a company to join their travel reward program. Our first travel hacking tip is to sign up for every frequent flyer or points program. If you think of travel hacking as a game, you won’t win the game if you don’t play.
The biggest mistake new travelers make is not signing up for these programs early! Even if you don’t think you will travel enough to make it worthwhile, you should still sign up. The reason is that you can never predict your future travel plans. Once you get serious about travel hacking you won’t hack every company, but being a member gives you more options.
So, now that you’ve signed up, how do these travel rewards programs actually work?
Frequent flyer or other loyalty programs reward you for consolidating your travel with certain companies. For airlines and hotels, it is more expensive for them to lure new customers than it is to retain the ones they already have. They desperately want to keep your business, so they will give you perks and rewards in the hope you will continue to spend your money with them.
Airline frequent flyer programs are mileage based. Fly a mile, get a mile. But not all miles are equal. The miles you actually fly are “preferred qualifying miles” – or base mileage (sometimes called butts-in-seats miles). Once you meet a minimum threshold level of actual miles flown (typically 25,000-35,000 depending on the airline), you achieve “status” (most airlines use a silver, gold, and platinum-type scheme, although the names can differ). At higher levels, you can achieve mileage bonuses (in the Star Alliance network, the bonuses range from 25% for Silver status to 100% in the highest tier).
If you do significant travel, these bonuses can add up. For example, because of our extensive work travel, we routinely fly 70,000 butts-in-seats miles, but with bonuses, can secure another 50,000 bonus miles (that’s enough for 2 free round trip flights within the United States on American Airlines). And that’s just the program benefits before we even begin travel hacking!
Hotels offer similar rewards programs. Unlike airlines, hotels are points based, so you get one point per dollar spent. With hotels, you have two options – accrue points via the hotel program or accrue miles in an airline frequent flyer program via a partnership agreement. You’ll have to pick the best option to meet your travel goals. Like airline programs, hotel frequent-stay programs are also tiered, so the more you stay, the more you can accumulate in bonus points.
The rental car industry also offers frequent traveler options – either rental car company programs or allowing you accumulate mileage with an airline partner.
The miles or points in travel reward programs are a bit like a currency. You can accumulate them and “bank” them for future travel. Generally these miles/points never expire as long as you have some activity on your account in a 12-month period (either accumulating or redeeming points/miles). You can spend your travel currency for completely free travel (free flights or hotel nights) or spend them for upgrades or something else (programs like Marriott Rewards let you redeem your points for gifts – everything from kitchenware to golf clubs).
Next month, we’ll look at how you can accumulate travel loyalty points/miles without ever getting on a plane or staying in a hotel.