"... we'll shortly announce a major investment to improve our Frequent Flyer program"

[Doctore1003]

It’s kinda amazing than Qantas thinks it can sell so many more points, given they are already ubiquitous.

Aiming for another quasi monopoly, perhaps!

 

[CaptJCool]

Given I save my points for J / F bookings ... or last minute classic Y rewards when it's $300 to fly SYD-BNK... I'm not wiling to pay 1,000,000 points for a $10,000 ticket to London in business class.

I’ve not got near holding that amount of points
Currently the CR rate is 216,000 = 432,000 for an F reward to Europe but like hens teeth impossible to find

On the 50% bonus top up points you can buy a one way tic for around $3,999 = $8,000 when the current F price is $19-20,000 so you’d expect Rewards + would fall into the 50-65% discount range.

Noting travel industry pricing is a 90% discount

 

[WilsonM]

One of the drawbacks of the FF model is that the price of points remains pegged to the dollar. As the value of the dollar erodes through inflation, there are more points chasing the same number of awards. So awards are jacked up in price, devaluing the points.

If the proposed model is to increase the dollar cost of points while leaving the point cost of redemptions alone, then it preserves the value of existing points while devaluing newly issued points. That seems fair.

What I am missing is the logic suggesting that adding a new tier of redemptions at a higher points price (compared to classic awards) is going to lead to an increase in value of the points - unless they really do believe that the lack of awards is so serious that their points have become worthless and that more (but more expensive) awards would turn worthless points into valuable points.

By this argument, wouldn't the value of points be also pegged to the dollar at a rate, although possibly not to the same level. My argument is that inflation affects airfares as well, thus allowing you to get higher cash value for your points?

Regardless, companies/bloggers valuing points by plucking a figure out of thin air, with only some consideration to earn/use rates. kinda misleads the general public.

For those of us playing the points game, a redemption value of 1c per point is pretty bad. Even then, with 4 CC signups a year averaging 75k bonus points, spending maybe $1.2k on annual fees (assuming you would spend money anyway) - you're getting a 3k flight for spending 1.2k extra. Not great, but still saving money. Massive for people that want to go on family trips over the school holidays, as an example, especially considering the cost of living pressures that many are going through.

 

[am0985]

If customers value them more, then you as a supplier can afford to raise your prices.

In the credit card space, I think we'll see a combination of the following:
1. Higher annual fees.
2. Higher minimum spend requirements
3. More multi-year sign-up bonuses, requiring you to pay two annual fees to get the full bonus.

That way banks can continue to offer the blockbuster offers (100K+ points) while preserving margins.

In order of preference, would definitely pick 2 > 3 > 1.

Higher minimum spend is fine, lots of places that spend can go.

Higher annual fees not ideal but would need to go up a lot for them not to be value for money.

More spread out multi year sign up bonuses would really ruin the CC game.

 

[Mattg]

"changes are expected to focus on improving member engagement, increasing the value of a point to partners. Over time, these higher billings are expected to offset the higher program cost and lower breakage"
So, Qantas plans to sell more points at a higher price to partners (banks etc) to maintain its margins.

How does Qantas plan to convince banks/partners to buy points for well over 1 cent each if their redemption value is set at 1 cent each?

Malaysia Airlines Enrich tried a few years ago to assign a fixed redemption value to their points. Surprise surprise, banks started asking why they should pay more than that to buy said points.

 

[levelnine]

How does Qantas plan to convince banks/partners to buy points for well over 1 cent each if their redemption value is set at 1 cent each?

Malaysia Airlines Enrich tried a few years ago to assign a fixed redemption value to their points. Surprise surprise, banks started asking why they should pay more than that to buy said points.

That's relatively easy to answer.

Banks simply assign each point a higher cost basis and therefore giver fewer of them out to customers per transaction.

So banks will start awarding 0.25-0.5 Qantas points per dollar spent on cards rather than the current 0.7-1.25 Qantas points per dollar.

And the Woolworths points conversion will go back to something like 700 Qantas points for every 2000 WW points rather than the current 1000.

If Qantas follow through with this in a big way, it is about to become a lot harder to earn Qantas points.

The big question for the Australian market is: will Velocity follow? If they don't, that could cause some interesting moves in the loyalty market.

 

[am0985]

Hopefully given interchange fees in Australia are still relatively high we'll still see decent sized bonuses. I'm not sure what proportion of our (still) generous sign up fees is down to the interchange fee factor and what proportion is down to the value that Qantas sets on the points when selling them to banks?

 

[Batterytraveller]

It’s too simplistic to see the value of a point isn’t fixed at all stages of the lifecycle. It will be different when sold to a partner, when held by the member and when transacted by the member. A point is deferred revenue and there are sound reasons why you might want it to have a high or low value from an accounting persecutive. However there is no reason why it can’t be both higher than the selling price to woollies and lower than the highest value redemption offered to the customer. If it wasn’t then classic rewards wouldn’t work. All of this to saw that revenue recognition is a dark art of accountancy and has a lot to do with managing how much Tax QF will pay.

Nonetheless QF will have on the one end; an average price target and volume for point sales. If I were negotiating with woolies I’d put in some juicy volume discounts to incentivise them to market & issue points in preference to shopping vouchers. Whatever it takes to maximise dollars in the bank.

On the redemption side of things the metrics are about maximising yield, seat utilisation and revenue per seat mile. It’s fine to tell people they are getting 1.5c/point and recognise revenue at 0.75c/point but the books are going to tell the tale. If that seat was for sale at $6k, you sold it for $3k. That may be fine, it certainly is better than the classic reward rate and better than an empty seat.

The ideal situation is that people use points for seats they wouldn’t have otherwise have paid cash for, and this is where classic rewards come in. Those 400k point for that one person return $6k J redemption to CGK ‘could’ be worth two people in J to Tokyo worth 8k a piece if the seats ever became available. So the flyer may get all the way through the booking process intending to use point and switch to getting the credit card out at the last minute because of the prospect of that unicorn. Which might be the best outcome of all.

All of which is a long way of saying - try not to be too literal about points values and that the house always wins.

 

[levelnine]

It’s too simplistic to see the value of a point isn’t fixed at all stages of the lifecycle.

It's no where near that complicated for the purchasers of points (ie banks, insurance companies, supermarkets).

They all will have a price that they are willing to pay for the issuance of points. For example, when Woolworths give you Qantas points in exchange for 2000 Woolworths points, there's going to be a fixed amount they're willing to pay for those points (eg $7).

If $7 currently gets them 1000 points, they'll give you that. If Qantas ups the price and $7 only gets them 700 points, that's what they'll offer consumers.

That's especially the case when the purchasers of points have alternatives to offer customers. In other words, if you don't like the reduction in points when you convert Woolworths points to Qantas, take the $10 off your next Woolworths shop instead.

 

[am0985]

All of which is a long way of saying - try not to be too literal about points values and that the house always wins.

The house always wins on aggregate but it doesn’t beat everyone.

This forum has a disproportionately high number of frequent flyer members who extract maximum value from their points. In reality the vast majority of QFF members don’t get great value from the program.

Of course any changes which seek to even this out will be of interest to the forum. It could be that a much greater pool of users gets a relatively small uplift in the value they can extract (see the new Rewards + tier) in exchange for a smaller pool of users getting much less.

 

[sudoer]

Banks simply assign each point a higher cost basis and therefore giver fewer of them out to customers per transaction.

So banks will start awarding 0.25-0.5 Qantas points per dollar spent on cards rather than the current 0.7-1.25 Qantas points per dollar.

I'm pretty sure this already took place last year when almost all the sign up bonuses and earn rates dropped 30-40%

 

[am0985]

One reason against CC points being less is that surely it would defeat the object of the changes and make the FF program no more attractive to members anyway?

If you’ve made a tier of flight rewards that’s 50% of what points + pay would be but at the same time cut the points they can earn by 35-40%, it’s not really going to lead to much greater satisfaction from the FF program.

We might see people being able to use their current balance more easily but that won’t last long.

The FF program is a golden egg for Qantas unlike many other airlines - the optimist in me thinks anything that makes the overall scheme less attractive to members (which includes points earning abilities on the ground) would potentially be a risk to Qantas.

 

[levelnine]

I'm pretty sure this already took place last year when almost all the sign up bonuses and earn rates dropped 30-40%

It'd be fascinating to know if Qantas have already upped the sell rates to banks and other partners, or if that is yet to come. The mega bonuses were during COVID, so Qantas may have been discounting points sales at that point. So the loss of the mega bonuses of 130K+ may simply be a product of Qantas' sale of points to partners ending, and the devaluation is yet to come.

 

[am0985]

There’s already a couple fewer banks offering the really large sign up bonuses I think & NAB have pushed their period out to 18 months rather than 12. So evidence of some cooling there. Whether we see more remains to be seen…

 

[Gold Member]

AFR Insiders reporting that:

“The new scheme was likely to be called Classic+ and convert one Frequent Flyer point to 1¢ for economy flights, two sources close to the discussions who were not authorised to speak publicly told The Australian Financial Review. The conversion is likely to be more generous for higher cabin classes, they said. At its base, however, that would mean a $100 flight would cost 10,000 Frequent Flyer points under the proposed scheme.

“The existing program offers two ways to redeem points. Travellers can secure Classic Rewards seats, which use a set number of points, although these are often hard to find. Alternatively, they can use some points and pay the remainder – known as Points Plus Pay. This values the points at 0.7¢. The number of points needed for Classic Rewards is always much lower than those needed for Points Plus Pay.

Under the proposal being discussed internally, expected to be finalised next month, Classic+ seat costs are expected to be based on the lowest possible fare when Classic Rewards tickets are sold out. If a ticket from Melbourne to Sydney is on sale for $69, Classic+ would cost 6900 points, less than the 8000 needed for a Classic Rewards seat.”

Paywalled link at Qantas closes in on biggest frequent flyer revamp yet

 

[MooTime]

AFR Insiders reporting that:

“The new scheme was likely to be called Classic+ and convert one Frequent Flyer point to 1¢ for economy flights, two sources close to the discussions who were not authorised to speak publicly told The Australian Financial Review. The conversion is likely to be more generous for higher cabin classes, they said. At its base, however, that would mean a $100 flight would cost 10,000 Frequent Flyer points under the proposed scheme.

“The existing program offers two ways to redeem points. Travellers can secure Classic Rewards seats, which use a set number of points, although these are often hard to find. Alternatively, they can use some points and pay the remainder – known as Points Plus Pay. This values the points at 0.7¢. The number of points needed for Classic Rewards is always much lower than those needed for Points Plus Pay.

Under the proposal being discussed internally, expected to be finalised next month, Classic+ seat costs are expected to be based on the lowest possible fare when Classic Rewards tickets are sold out. If a ticket from Melbourne to Sydney is on sale for $69, Classic+ would cost 6900 points, less than the 8000 needed for a Classic Rewards seat.”

Paywalled link at Qantas closes in on biggest frequent flyer revamp yet

QF to have a $69 ticket..... MEL to SYD.

Healthy dose of humour right there.

 

[dajop]

QF to have a $69 ticket..... MEL to SYD.

Healthy dose of humour right there.

Although as taxes and charges would still have to be paid with cash, that would be a $100 ticket. Doesn't change that it's still a healthy dose of humour.

 

[shuuy]

My internal rule of thumb (moreso when using Asia / US / Europe programs)
. Y awards: aim for > 4c/point value
. J/F awards: aim for > 10c/point value

Good luck to you Qantas - I'm going focus on collecting program-flexible miles (Chase / Membership Rewards) to suit my needs

If only Marriott would partner to open a credit card in Australia.....

 

[am0985]

My internal rule of thumb (moreso when using Asia / US / Europe programs)
. Y awards: aim for > 4c/point value
. J/F awards: aim for > 10c/point value

Good luck to you Qantas - I'm going focus on collecting program-flexible miles (Chase / Membership Rewards) to suit my needs

If only Marriott would partner to open a credit card in Australia.....

Those figures seem far too steep, they'd rule out almost all FF redemptions in Australia.

Granted Qantas have one of the highest redemption rates but at 289,000 return in Qantas J or 318,000 return in partner J, this would only be worth it if the base price was $30k. This can't possibly be the case especially given how quickly classic rewards get snapped up.

This would even rule out Qatar's 90k one way in Q suites to Europe - that's not an $18k return ticket.

 

[muppet]

My internal rule of thumb (moreso when using Asia / US / Europe programs)
. Y awards: aim for > 4c/point value
. J/F awards: aim for > 10c/point value

Good luck to you Qantas - I'm going focus on collecting program-flexible miles (Chase / Membership Rewards) to suit my needs

If only Marriott would partner to open a credit card in Australia.....

10c per point???? How and where - am I doing calculations wrong?

Even QF F to LHR using classic rewards is not going to see that kind of value.

SYD - LHR F
Cash = $19,000
Classic Reward = 433,800 + ~$1,500

cents per point value = (19000-1500) = 17,500 / 433,800 = 4c/per point value