Points and miles are liabilities to airlines and hotels since they are essentially promises for free travel. In order to reduce this risk, reward programs have begun to transition to dynamic pricing, which allows them to better calculate their risk.
Dynamic pricing of awards means that the price of a specific redemption (in terms of points and miles) can change at any given point since they are not explicitly listed in any written award chart.
Although different programs have gone about instituting dynamic pricing in very different ways, one thing is the same: the number of points and miles required for an award goes up and down depending on the paid price of that award.
Here are some of the pros and cons to dynamic pricing:
I will start off with the benefits since, unfortunately, this section will be much shorter. Individuals who travel during cheaper time periods, such as after students go back to school in September or in January, may see cheaper award prices due to cheaper paid rates.
By being able to deviate from a past award chart, programs will sometimes run promotions for discounted awards that end up being pretty sizable deals. There are instances when dynamic pricing can save a sizable number of points or miles, which makes them not all that bad.
For example, while an award chart might dictate that it costs 25,000 Delta SkyMiles to fly round trip from D.C. to Utah, during peak dates, with dynamic pricing it could easily be 50,000+ miles, but I’ve seen sales for as low as 14,000 round trip.
Unfortunately, dynamic pricing can take out a lot of the value from points and miles. With award charts, the flight previously mentioned would cost 25,000 miles no matter if the cash cost was $250 or $500. With dynamic pricing, when you are trying to fly to Utah to ski over the holiday season and the flights cost $900 per person, expect the mileage rates to be equally sky high, far more than 25,000 miles.
While even the nicest (and most expensive) hotels and flights were previously predictable in terms of cost of the award redemption, now it’s not uncommon to see hotels that cost 120,000+ points per night or even business class flights that cost 250,000+ miles.
Who would have thought that a 5 night hotel stay could cost 600,000 Hilton points?
This premium level of travel, which is truly an aspiration for many of us and is only possible with the use of points and miles, will be harder to achieve and less common to find with dynamic pricing.
The Last Point
In the points and miles world, the words devaluation and dynamic pricing are almost always synonymous, value is extracted from the consumer in the program in favor of supporting the company’s bottom line.
Although it is not all bad, especially if you frequently travel at off-peak times, those who travel during busier times, such as school breaks and holidays, will have drawn the short end of the stick. Just remember that points and miles are worth more today than they are tomorrow, so use them sooner rather than later.
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