Why your points keep losing value — the mechanics of loyalty programme devaluations

Every point you earn is a tiny IOU

When you earn 50,000 miles with an airline or 80,000 points with a hotel chain, something happens on their end that you never see. Those points become a debt — a promise to give you something later. A flight, a hotel night, an upgrade.

Companies track their debts in a document called a balance sheet. It lists everything they own and everything they owe. Your unspent points sit on the “owe” side. Delta, for example, carried billions in deferred loyalty revenue on their books at the end of 2024. United reported a similar scale. Marriott carries billions more in hotel points.

That matters because the bigger the debt, the more nervous investors get. And the airline can’t just delete your points — you earned them. But they can do something else: make each point worth less.

If they quietly change the rules so a flight that used to cost 50,000 miles now costs 70,000, the value of every mile drops. The debt hasn’t gone away, but it’s become cheaper to honour. No cash leaves the building. The balance sheet looks healthier. The accountants relax.

This is the core incentive behind every devaluation. Your points are someone else’s debt, and they’d very much like that debt to shrink.

The real customers aren’t frequent flyers

Here’s something that surprises most people: loyalty programmes make most of their money not from people flying planes or sleeping in hotels, but from selling points to banks.

When a bank offers a co-branded credit card — the Delta SkyMiles Amex, the Marriott Bonvoy Visa, the United Explorer Card — the bank buys points from the airline or hotel chain at wholesale. Every time you swipe that card at the supermarket, the bank hands over a fraction of the transaction fee and gets miles in return to pass to you.

The margins are enormous. In 2023, Delta received $6.8 billion in payments from American Express — a figure that dwarfs the airline’s own operating profit. United’s MileagePlus programme generated roughly $3.5 billion in loyalty-related revenue. These numbers sometimes exceed the profit the airline makes from actually flying people around.

This creates a specific problem. The programme needs to keep selling points to banks at a high price. Banks will only pay that price if cardholders want the points. Cardholders want the points if they can redeem them for valuable flights and hotel stays. But the more points the programme sells, the bigger the liability on the balance sheet — and the stronger the incentive to devalue.

It’s a cycle. Sell points to banks, accumulate liability, devalue to reduce liability, then sell more points because the programme still looks attractive enough. The trick is doing it gradually enough that most people don’t notice.

The devaluation playbook

Devaluations don’t usually arrive as a single dramatic announcement. They follow a sequence that most major programmes have walked through some version of over the past decade.

Step one: introduce tiers. A programme that used to charge a flat 25,000 miles for any economy flight within a region starts splitting routes into “standard” and “peak” categories. Peak costs more. The programme says this creates “more options” — but the cheaper tier is hard to find, and the expensive one is what’s usually available.

Delta did this in 2015 when they removed their fixed award chart — the published list of how many miles each type of flight costs. Before that change, you could look up exactly what a business class seat to Europe would cost in miles. After it, the price became whatever Delta’s system decided on that day, route by route, date by date. United followed a similar path. Marriott restructured its hotel categories in 2022, raising the points cost for popular properties while technically lowering it for less desirable ones.

Step two: remove the chart entirely. Once peak and off-peak pricing is established, the next move is to drop published rates altogether. Prices become “dynamic” — they float based on demand, cash price, time of year, and factors the programme doesn’t disclose. You search, you see a price, you take it or leave it.

Step three: raise the floor. Even with dynamic pricing, there’s usually a minimum redemption cost. Over time, that minimum creeps up. A domestic economy flight that once started at 10,000 miles now starts at 15,000. Then 20,000. Each increase is small enough to avoid outrage, large enough to matter across millions of redemptions.

The pattern is legible. If your programme still publishes a fixed award chart, that chart’s days are probably numbered. If it’s already moved to dynamic pricing, expect the minimums to rise.

Reading the signals

Devaluations don’t appear out of nowhere. They tend to cluster around specific business events, and the signals are readable if you know where to look.

New credit-card deals. When an airline signs a new co-brand agreement with a bank — or renews an existing one at a higher value — the programme has just promised to deliver more points. More points in circulation means more liability, which means a devaluation often follows within 12 to 18 months. Delta’s richest Amex deal renewals have historically preceded their biggest award-price increases.

Programme leadership changes. A new head of loyalty, especially one hired from a financial or consulting background rather than an airline operations background, often signals a shift toward treating the programme more aggressively as a profit centre.

Investor-day language. When airline executives start talking to investors about “programme monetisation,” “unlocking loyalty value,” or “optimising redemption economics,” they’re telling you the programme is about to extract more from members. This language appeared in United’s investor presentations before several rounds of MileagePlus changes.

Quiet category re-sorts. Hotels are particularly fond of this one. A property that sat in Category 5 — costing, say, 35,000 points per night — gets moved to Category 6 at 50,000 points. No announcement, no explanation. Marriott reclassified hundreds of properties in a single update in 2023. If you see your favourite hotel jumping categories, broader changes are likely coming.

None of these are guarantees. But when two or three signals appear together — a new bank deal, a leadership change, and some investor-day language about monetisation — it’s a reasonable bet that redemption costs are going up within a year.

What this means for your points

The structural reality is straightforward: loyalty points are a depreciating asset. Not every year, not on a schedule you can set a calendar by, but over any five-year stretch, most programmes have reduced what a point can buy.

That doesn’t mean points are worthless. It means they’re worth the most the day you earn them, and a little less with each passing month. Sitting on a large balance and waiting for the “perfect” redemption is a strategy that works against you — because the programme is working to make that perfect redemption more expensive.

Check what your points can buy today. If you hold a large balance with a programme that’s moved to dynamic pricing, look up a few flights or hotel stays you’d actually book. Divide the cash price by the points price. That ratio is what your points are currently worth — and it’s the number to watch. If it was 1.5 cents per point last year and it’s 1.2 cents now, the direction is clear.

The programmes that have historically held their value best tend to share a couple of features: they still publish fixed award charts, and the loyalty programme is still run as part of the airline rather than spun off as a separate company. Once a programme becomes its own business with its own revenue targets, the pressure to devalue accelerates.

That’s worth knowing when you’re choosing where to concentrate your earning.