I don’t have any special knowledge, but like to think that I’m a smart guy. So this is the time off year for brave people to predict the future. In this case, I will focus on what I see happening for travel and miles this year.
Airfares – Gasoline prices have fallen 40% this year, but airfares are hardly changed. Fuel is (or was) the number one cost for an airline. Naturally, you would think that airfares would fall as rapidly as gas prices. However, that is not how economics work. It is all about supply and demand. As long as the airfares are priced at values that the market will bear, they will not change. In other words, the airlines are going to rake in all that extra profit. Here is my prediction: Airfares will not fall until about May. Why May? Airfares are historically at their lowest point from the beginning of January until Spring Break starts in mid-March. Thus, the public perception will be that they have lowered already. As the higher summer airfares start, one of the heard is going to start to feel a pinch and start lowering their fares because they know they have a high margin built in. This will start a race to the bottom and you may see some of the best deals in years. Once the fares have lowered, the airlines will find it hard to raise them back up without hidden tricks like fuel surcharges. Keep in mind that geopolitical disruptions can cause the price of oil to spike back up rapidly, so here’s to a peaceful world in 2015.
Airline Miles – One key thing to remember about miles is that all the upcoming changes only affect redeemable miles (RDM), status-earning miles (EQM) do not change in 2015. So with that clarification, expect to earn many less miles from flying. Delta went to a revenue-based mileage earning RDM system on 1 Jan. and United will follow 1 Mar. They will now pay 5x to 11x the amount you or your employer paid for the ticket minus taxes. While the airlines could simply pocket the cost of handing out fewer miles, I think they will do something else. My prediction is the we will see a lot more targeted mileage promotions. They will take some of those miles they are not handing out to the savvy travelers like us who work hard to find low cost airfares on long routes and instead use those miles to entice mid-to-high fare customers to fly certain routes that the airlines have available seats on. This will be particularly true on routes where the airline has competition. We’ve already seen that with Alaska and Delta on routes to and from SEA, but expect more. If you see a great deal on a competing airline, the odds are high that your airline will match so keep an eye out for mileage specials.
Status – Expecting double or triple EQM like in 2008/9? Fageddaboutit! With an improving economy finally driving up business travelers, there will be plenty of them qualifying for status and no need for the airlines or hotels to offer it for people like us. Look for credit cards as the best way to gain middle status. Middle (Gold) status actually nets you pretty good benefits at hotels and is better than being a Kettle on an airline. Confused by that reference? Read Flyertalk or Google MA and Pa Kettle to get it. My prediction for 2015: status will be primarily given to business travelers with the exception of competing airlines in certain markets. That is just a carry over from this year and enabled me to be an Alaskan MVP Gold 75/k even though I only flew 32,000 EQM on them in 2014.
Hotels – Prediction: hotel rates are only going to go up this year. The hotel business is much more competitive than the airline industry and they are looking to cash in on the rising economy. Deals will be hard to find if there is also a business market buying up the rooms. Want a room in Palm Springs? Probably enough competition to lower rates there, but Honolulu where business and leisure travelers stay together, not likely. Look for promotions tied to significant stays or frequencies such as business travelers do. Two nights and get a third free; that’s probably gone for a long time.
Credit Cards – Prediction: More lucrative deals tied to business cards rather than leisure ones. This is a change from the past where CC companies were appealing to individuals who were not affected by the recession and could still spend a lot personally even if business was down. Now with business spending up, expect those cards to be the ones most lucrative to the CC companies and thus receive the better incentive offers.
OK, I stuck my neck and out and we can review in a year to see just how accurate I was. What do you think? Have your own opinion on where things will head in 2015?