More Travelers Redeeming Miles for Merchandise

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Frequent travelers may be having a harder time redeeming airline loyalty points for first-class seats, but apparently more travelers are trading miles for holiday gifts.

And travelers who have accumulated a lot of points for hotel stays are apparently doing the same thing.

“People are looking for noncash ways to get the things they want for the holidays,” said Christine Aguilera, president of SkyMall, a Phoenix-based company that publishes merchandise catalogs found on airplanes and runs online shopping malls. She said use of point and mileage redemption programs, for merchandise, is “up significantly over the prior year.”

Many airlines have made it more difficult to redeem accumulated miles for so-called free tickets, with added fees and requirements and fewer available seats.

Redemption programs that allow travelers to receive goods or services often require the expenditure of a significant number of points or miles. But Henry Harteveldt, travel analyst for Forrester Research, said they could appeal now to people trying to conserve cash “for the things they really need, like the mortgage, rent, the dentist or groceries.”

For hotels and airlines, loyalty programs are a way to establish or improve relations with frequent travelers. Online shopping malls, where travelers can accumulate points or miles with each purchase, are money earners for the hotel and airline companies; retailers pay airlines and hotels for the miles and points given for purchases. Merchandise redemption programs, which let travelers make purchases with their miles or points, require airlines and hotel companies to pay for the goods or services.

But Tim Winship, who tracks loyalty programs for SmarterTravel.com, said “at the end of the day, these programs are profit generators for the airlines and hotel companies because they are generating more revenue from the sale of miles and points” than their costs from redemptions.

While similar incentives have been offered in past years, many programs have become more diverse. Delta Airlines, for example, increased the number of retailers in its online mall to more than 500 in September from about 150.

Joe Rhodes, a vice president of Hilton, said the company got into the merchandise redemption business last year because “some members travel so much, they prefer giving gifts of merchandise to their family instead of using points for trips for themselves.” Mr. Rhodes said merchandise redemptions were 30 percent higher last month than in November 2007, an increase he attributed, in part, to members’ efforts to extend their holiday gift-giving budget.

Redemption options vary by travel company. Delta, for example, lets members redeem miles for merchandise and experiences like a tandem skydive. Hilton’s “Rewards Store” offers products from Apple and Cartier, and members can redeem points for items like a pair of tickets to “Saturday Night Live” and entry to the post-show cast party. (The price: four million points.)

Marriott and InterContinental allow members to create their own redemption opportunities — participants submit whatever goods or services they desire and request a price in points. Among items recently ordered this way from Marriott were a pair of tickets to the 2009 Masters Tournament, for 400,000 points.

Edward Pizzarello, a real estate developer based in McLean, Va., who participates in the loyalty program of American Airlines, said he is a devotee of the carrier’s online shopping mall. Last year, he earned 25,000 to 30,000 miles doing his holiday shopping there, buying presents like a Mac Mini computer for his daughter. This year, he said, he has used the mall to buy her a children’s digital camera at Target.

Doing holiday shopping at American’s mall also lets him “get the stuff I want, from the merchants I want to buy it from, at the lowest price possible,” he said. “And I don’t have to leave the house or spend money on gas.”

To make the most of loyalty program shopping opportunities, industry experts suggest first comparison-shopping online to find the lowest prices. Then compare bonuses or other incentives these retailers offer on Web sites like WebFlyer.com and EvReward.com. To receive appropriate mileage or points, shoppers must also visit the Web site of their travel loyalty program and register before making purchases.

Mr. Winship, of SmarterTravel.com, said he is skeptical about redeeming miles or points for merchandise rather than for airline tickets or hotel rooms. “Although it’s been very difficult to redeem miles for frequent flier award seats, generally speaking you get better value for your miles by redeeming them for a free ticket than for an iPod,” he said. “On the average, if you redeem a frequent flyer mile for a ticket, you get just below 1.5 cents per mile, but with merchandise redemptions, you often get less than 1 cent per mile in value.”

Randy Petersen, publisher of WebFlyer.com, disagreed. “If you have enough miles or points and feel comfortable spending this amount, go ahead and do it,” Mr. Petersen said. “Most people still view this as funny money.”