One of the things we really do not like is the airline devaluation. It is always a disappointment since it takes away some of the value we have with the miles/points in the program. But, it could be that another airline devaluation is coming in March or early April – a Southwest devaluation?
Is a Big Southwest Devaluation Coming?
Let me say first of all, I am not saying anything that is going to make Southwest executives say “oh, that is a good idea!” These are all things they certainly already have thought through and I am just trying to lay out why I think a devaluation may be coming. Normally, we may have some kind of advance notice and while I think we will have notice, if it is in March or April, I do not think it will be a huge notice.
Points to Think About
We had the good news last week that Southwest would continue to allow hotel transfers to count for the Companion Pass – until March 31, 2017. That was most likely due to the large outcry of people who had been about to/already had transferred to Southwest and were finding out that by the time the points would get there, they would not count.
Hotel Transfers
While I still think that was a wonderful gesture by Southwest to extend it to March 31, I do think it may have come at a cost. When the Marriott/SPG merger first came about, I and most other bloggers had written about the outstanding value to be had in transferring 90,000 SPG Starpoints to Marriott and then to Southwest to get the Southwest Companion Pass, 120,000 Southwest points, and 7 nights in a Category 1 – 5 Marriott hotel. I know that many people were holding off to do that transfer until January 1 so that they could have the Southwest Companion Pass for all of 2017 and 2018.
Huge Amount of New Companion Pass Holders – and Blocks of Points!
This is going to create a huge number of new Companion Pass holders, just judging by the sample of readers I have that told me they were doing this. But more than Companion Pass holders, it also will mean that huge amounts of 120,000 point blocks will be dropped into these accounts as well. Southwest has a revenue-based redemption program so we can figure that, on average, it will be about $1,800 in ticket value (plus the Companion Pass) that Southwest will be issuing with these transfers. I do not know what they get from Marriott for this but I know it is not close to that!
Compensating for All of these Points and Passes
Southwest will have to make a move somewhere to deal with the loss of all these Companion Passes. Many people may say that this is giving Southwest more loyal customers. No, sorry, it is not. Flying for free on airlines is not a demonstration of our loyalty. We are not directly giving Southwest any money, in fact, this is worse than using credit card bonuses to get the Companion Pass because Southwest benefits more from their co-branded credit cards than partner transfers. Hey, I am all for flying free also but let’s not pretend that having 120,000 Southwest points and a free companion on every flight is us showing Southwest loyalty! 🙂
New Year, New Devaluation?
Right now, it is around 1.5 cents per point. They can afford to take that down to 1.3 or even a little less. At first I would have thought they would never do that because you can use Ultimate Reward points at 1.5 cents per point redemption (with the Reserve) or 1.25 cents per point (with the Sapphire). But, if you want to book Southwest tickets directly through Chase, you actually have to call them. And, sometimes, the best prices on Southwest are not available through Chase. So, Southwest really does not have to fear the Ultimate Reward push in value.
Also, remember that these new Companion Pass holders will be sitting on 120,000 Southwest points! Southwest can do what it wants with those in terms of redemption value!
So, Is a Southwest Devaluation Coming?
I wouldn’t have been surprised if they had a devaluation sometime this year anyway and maybe this decision to re-allow hotel points to count towards the Pass may have just hastened that devaluation. Again, something has to give because this could potentially be a ton of value in redemptions that Southwest is making room for at a time when Southwest is expanding more and more (so they are more viable for many more customers thinking of making these point moves).
For argument’s sake, let’s say that 1,000 people do the SPG/Marriott transfer for the Southwest Companion Pass. That means that Southwest will be depositing 120 million points into those accounts. At current redemption value, that is about $1.8 million in travel (double when you consider that each of those people would have the Companion Pass). If Southwest were to bring it down to 1.3 cents per point, that would cut that redemption value down to $1.56 million – a savings of 1/4 million dollars. Not a big amount but something.
What Should You Do?
So, what should you do? To be honest, I think it would be smart to wait a little while longer if you are considering making the transfer to Southwest and if you do not need to use the Pass just yet. Southwest would have to make some announcement in advance of making a devaluation and the closer you can wait until the March 31 deadline, the more certainty you would have as to whether they will be making such a devaluation around then.
Of course, I could be way off but I certainly do think that we will see some kind of change to make up for the points and passes. In the meantime, like you should be doing anyway, do not transfer Ultimate Reward points to Southwest unless you need them. This way you will not have points that become worth less in the event of a devaluation.
What do you think? Could we be facing a Southwest devaluation in the next few months?
The last devaluation was not 3 years ago. It was last year. Every year they’ve devalued points, but they haven’t published it. It used to be 60X, then 70X, now it’s close to 80X on many fares.
https://www.flyertalk.com/forum/southwest-airlines-rapid-rewards/1762539-points-devalued-again-70-pts-becomes-72-pts-2.html
Ah, you’re right! Thanks, I had grabbed an old post.
Every year over the past 3 years Southwest has quietly and slowly devalued its points. Yes there might be a lot of new people earning Southwest Companion pass but based on the false emails that were sent out last week, there seems to be just as many people who lost their passes at the end of 2016, including myself. I personally was able to redeem just under $20,000 worth of free flights over 3 years with the pass.
It seems to me cynical and unethical for a revenue-based system to “devalue.” When a chart-based system devalues, the purported reason is that reward prices need to go up to keep pace with increasing ticket prices. But when Southwest ticket prices go up, the AWARDS PRICE GOES UP AUTOMATICALLY. So there’s no conceivable “purpose” to a deval except to screw over their customers.
You are right – yet, Southwest does do it! I think they want to be able to keep the shock deal value of their sales so they would rather touch the point value. I mean, most people that are in this game and are familiar with Southwest know about the great $49 sale they run. It would not be as appealing if it became the $63 sale! 🙂
Southwest may very well use this as an excuse to devalue, but I’m not sure what percentage of travelers are so well versed in this hobby that they know the ins and outs of getting the Companion Pass or any other airline or hotel perk. We just may be in our own bubble here. For example, while on vacation at a Hilton resort, I met a woman who vacations there every year yet was unaware that for the cost of a $75 annual fee for a Hilton Amex Surpass she would attain gold status and free buffet breakfast for two (value $65) every day. I was happy to enlighten her!
Your information is out of date and inaccurate. As of January 2017, points transferred to Southwest no longer count towards Companion Pass eligibility. The Marriott vacation package loophole was closed.
have you been living under a rock?
they initially announced this, then extended the deadline until march, so hotel transfers do work still.
The other commenters are correct, Southwest had reversed that within a few days of closing it. Now, it closes March 31 like the post says.
The companion pass may not demonstrate loyalty, but it can certainly build it. As far as devaluations go, Rose has the right of it.
You are absolutely right – it certainly can build it.
“For argument’s sake, let’s say that 1,000 people do the SPG/Marriott transfer for”
Where did the 1,000 number come from? How about 10,000? That’s even a more dramatic scenario!
Sounds like you are suggesting a plan of action for Southwest. Let’s spread some more point doom. They are subscribers to you also.
As I said, nothing I mentioned is something they have not already thought of. I am trying to give some thoughts on it because, while it is a good deal, it may work better for some people to see what happens instead of watching their points lose hundreds of dollars in value because of a devaluation.
haha sw need’s charlie’s input? are you a teenager?
still the best deal out there, FF milage is a shadow currency and loss leader for the industry, a few million in miles is a drop in the bucket….of course there will be devaluations, as with every airline/hotel program but for those lucky enough to have the companion pass it will be a lot less painful due to the 100% extra value you get out of it…..SW is the true bargain carrier out there, spirit and frontier fee you to death and the big boys just don’t care…skypesos, united no warning changes, and everytime they merge they screw the customer…southwest is the best at keeping the customer in mind, which adds value to the program and builds loyalty.
What wise2u said.
wise2… you’re so wise. That is how I see it too.
“a few million in miles is a drop in the bucket”
Have you not read the WN filings? Award tix are now well over 10% of all seats on WN flights. IMHO, this has gone far beyond a drop in the bucket.
Yes, this could be very reminiscent of IHG’s Priceless Surprises, where a loophole caused a ton of points given out (likely unexpectedly for IHG). Then, over the course of less than a year, they had 2 devaluations…if I remember correctly.
Regardless, I’ll continue to fly them as their cancellation policy on flights booked with points is unrivaled.
[…] Is a Big Southwest Devaluation Coming in the Spring? – Charlie makes a good case for Southwest to devalue their rewards program. I hope he’s wrong. […]
[…] change of heart and decided to reopen that path through March of 2017 — some speculated that a devaluation must be on the horizon. The theory there was that so many people must have redeemed Marriott Travel Packages as to create […]