Showing posts with label Industry Outlook. Show all posts
Showing posts with label Industry Outlook. Show all posts

Wednesday, September 20, 2017

Why the Canadian market needs a rewards credit card targeted towards Millennials

There are lots of rewards credit cards in the Canadian market and we mean a lot. Well over 100 options out there and yet most follow the same premise. Pay an annual fee, meet a spend requirement, get rewarded for your spending. That will never change as that's what rewards cards are really about. However someone needs to break the standard. There is very little specific market targeting with cards. True you have to meet certain requirements to get cards like annual incomes etc. but outside of one or two cards targeted to students and one card targeting seniors/retirees there aren't any cards hitting up the biggest generational market out there: Millennials.

Millennials make up a huge portion of today's market and yet most credit cards on the market don't specify them as a market. Many of the cards on the market today, old and new are still running on the premise of non-generational targeting and rewarding what us gen x'ers and baby boomers (people born in the 50s, 60s and 70s) generally spend money on. Wonder why so many premium cards have bonus multipliers on gas station purchases? We drive minivans to soccer games and dance practices every day or in my case a huge SUV that guzzles gas so gas station multipliers make a lot of sense. But for the 20 or 30 something year old does that really appeal to them? Not as much. These are the people eating out more, ordering meals delivered to your door, taking ride sharing services everywhere and are even helping transit make a comeback. To them they aren't going to be buying a minivan or a big SUV any time soon.

The industry needs to follow the trends of what has become a big and appealing market. This on-demand generation likes pay as they go, spending money on subscription boxes, transit passes and enjoying food delivered through an app on their phone. Reward the Millennials on what they like to spend money on, a much different strategy of spending than those of us who are over 40. The funny thing is if a card company did target Millennials with a card it would more than likely provide a lot of spill over to other generations as those not considered Millennial do try to keep up with them. I’m not part of the Millennial generation but I can tell you as a parent of two very active teens we also use companies like food delivery services a lot when schedules don’t allow for a home cooked meal, we ride share on vacation and make use of many services that would be considered for the Millennial generation. So a credit card issuer would be smart to come out with a card that does target Millennials as in the end it could and would be a winner not only for them but the older generations and even the upcoming generation of Post-Millennials or Generation Z's. Right now Millennials are the 'it' generation and most reward programs and credit cards have not jumped at the fact that they are the trend that needs to be targeted right now and for 2018 at the very least!


The good news is there just may be such a card coming to the market sooner than you think. With lots of chatter happening on social, American Express is gearing up to launch a new card next week. Stay tuned for more details at that time. Cobalt.


Tuesday, January 5, 2016

The upcoming year in travel rewards for Canadians: current state and predictions for 2016!

Call this our start of the year update for you and also our prediction post on what is going to happen in 2016 in the world of loyalty programs for Canadians!

Airline Programs

What's happening:
Air Canada Altitude - We already know some of the changes for AC Altitude. We detailed them in this post but a quick overview: Gone is the Air Canada metal requirement, rather you have to earn Altitude Qualifying Dollars now along with your Qualifying Miles and/or Segments. This move should thin out the ranks of the Altitude program, especially SE100K

WestJet Rewards - Big growth with the airline over the past year means you have more flights to earn WestJet Dollars on and to redeem for. The big one is London-Gatwick. They have also completed their first year with an elite tier program which many of you should have now thanks to their status match and fast track offers.

Other programs - Both American AAdvantage and British Airways Executive Club have changes that are coming in the next few months. Of course the one that affects us the most is the major increase in Avios required for BAEC short haul North America redemptions. Used to be 9,000 Avios for a round trip, now it's 15,000. Still a good deal but a major devaluation nonetheless. With American we see them moving to a revenue based earning model like Delta and United and updates to their new award charts sees Canada being lumped in with Alaska rather than the lower 48 U.S. states which means it will take more AAdvantage miles to redeem for most award flights. See more at British Airways does away with the 4,500 Avios Short Haul Award in North America
and American AAdvantage changes coming in 2016 - Most of it isn't good news and its worse for Canadians than our US counterparts.
There is also news that Air France KLM Flying Blue will be moving to a revenue based system sometime between now and 2018 (Source: View from the Wing). 

Predictions:
Air Canada Altitude - All the details of the 2016/2017 program haven't been released, we should see it sometime soon however including what you get to pick as your bonuses/benefits. I'm guessing it won't be too different from last year as the new requirement of Altitude Qualifying Dollars is a major change and they won't want to change too much else to further infuriate their current membership base.

WestJet Rewards - Now that they have their elite tier levels set in place I believe that we'll see WestJet Rewards finally add more partners. Currently on the airline side they have American and Delta so I wouldn't be surprised if we see at least one more airline join as a Rewards partner in 2016. On the non-airline side I keep asking and telling WestJet at our lunch meetings about non-airline partners and I truly believe this will be the year that we see the addition of at least one hotel or car rental partner where you will be able to earn WestJet Dollars (and not have to book via WestJet.com) My bets would be on IHG.

Alaska Airlines Mileage Plan - This is one program I hope remains untouched as is. This is the hidden (well not really hidden anymore) gem of frequent flyer programs. While all programs around Alaska are changing, they really haven't and that has been their strength. However with more and more people utilizing Mileage Plan for great rewards like one way business and first class on Emirates we will probably see that great value change in 2016. I really hope I'm wrong but their is only so long that Alaska can hold out as more and more people become aware of this program. In reality you should even be looking at this program, just because they only fly to B.C. and Alberta doesn't mean you should pass it by. They have great airline partnerships with American, Delta, Cathay Pacific, Emirates, Air France KLM and more where their miles can be used on flights out of Canada. Just be forewarned to use your miles up sooner than later and not hold on to them just in case that devaluation comes later this year.

Coalition Programs

What's happening: In 2015 we saw strong growth from AIR MILES in terms of what they offer for credit card and general bonus offers. The program was hurting for a few years in our opinion but seems to be on a come back with new partners such as Lowes and a big push to fight against other coalition programs like Aeroplan and up and comer SCENE. Aeroplan seemed to put their focus back on the travel side as there weren't many additions to their non-partner portfolio. Most attention was paid to TD, hotel partners and advertising the program as the one for making travel dreams come true.

Predictions: I believe we'll continue to see strong growth from AIR MILES this year in the non-travel segment while Aeroplan will continue its focus on the travel segment, paying homage to its roots as a frequent flyer program. Aeroplan will no doubt remain a coalition program but it does seem that AIR MILES is winning the coalition war between the two in terms of places that you can earn miles. I think Aeroplan will put a big focus on fulfilling those travel dreams and push things like Air Canada's new Premium Economy seats as a great redemption option for those who won't get up to business class award but don't want to travel in economy. Finally we'll continue to see SCENE grow from its humble yet large domination as a movie based program into a full fledged coalition program by adding even more partners that you can earn and redeem points at. Will it ever become a travel reward program, not likely this year but I wouldn't be surprised if they team up with a third party travel provided similar to Petro-Points' relationship with iTravel2000.

I do believe however with the strong re-growth of AIR MILES there will be another flight mileage devaluation towards the end of the year. The big credit card bonuses, bonuses for shopping are boosting balances which means demand gets higher and to combat this as we see from most programs are award price increases. I hope this prediction is wrong but the fact that Aeroplan just had their award chart changes in December, AIR MILES won't be too far behind, even though most of Aeroplan's changes were on the business class and first class side, which of course, AIR MILES doesn't offer to most of their members.


Hotel Programs

What's happening: Two big mergers announced in 2015 will affect some of you this year. The first was Marriott purchasing Starwood. Starwood's Preferred Guest program is no doubt the best hotel program out there and some of you may be worried that it is on it's last legs. I would say you don't have to worry this year. Given how long it took Marriott to integrate South Africa's Protea Hotels and our own Delta Hotels (still not complete) the Marriott Rewards program and the Starwood Preferred Guest program will remain separate in 2016. The other major acquisition was France's Accor Hotels purchase of our Fairmont Hotels. Seeing that Fairmont Hotels President's Club is a much smaller brand compared to SPG, this is the one to be worried about in 2016.

After Marriott announced the Starwood purchase, Hyatt Hotels began offering status matches to try to attract SPG members who may have been displeased with the news and Hilton followed suit. In fact the Hilton status match is still going on so you should jump on that before Jan 11 (find out more here) Then you should take that status and get it matched with Best Western  (find out more here)

Predictions: As I mentioned above, I don't think we'll see any movement to have SPG integrate in Marriott Rewards this year. That will happen in late 2017 so don't worry yet. Fairmont President's Club may disappear towards the end of the year. This great program is an easy integration into Le Club accorhotels as it isn't points based. Elite members will be matched to the equivalent Le Club accorhotels status level albeit with less benefits than they currently enjoy.

We'll see the usual hotel category award night changes from Marriott, SPG, IHG Rewards Club and others later this winter or early spring. We may see more hotels in Canada move to lower categories as our economy continues to struggle especially in Alberta. Hopefully this also means that we'll see more hotels in the coveted IHG PointBreaks 5,000 points per night offer. Usually we only see 5-6 Canadian locations, I predict we may see that jump to 10-12. As we already know, Hilton's changes occur year round and we will continually update you on those changes as well.

Credit Cards

What's happening: The good news is that we were wrong at the start of 2015 with the new interchange rate agreement. We predicted that credit card rewards would be cut back to make up for the short coming in revenue and while it seemed to come true for select cards many came back to their pre-agreement offers realizing they could not compete with those issuers who chose to keep their card offerings the same.

Predictions: 2016 will continue to see strong credit card sign up offers and rewards due to the current economic conditions that Canada is seeing. With tens of thousands of lay offs alone in Alberta due to the struggling oil industry issuers will have to be on the ball to get new applications. Unfortunately for the issuers it doesn't appear that will be for high end cards but for cards that may offer lower interest rates as the amount debt being held on credit cards in Canada jumping over $500 million over the past year. This is not a good sign for consumers, it looks like a lot of you are holding debt on your cards which of course is something you don't do when it comes to rewards credit cards! Overall the offers on credit cards will fluctuate slightly but should be in line with those we've seen over the past few years like First Year Free, sign up bonuses increased by 5 or 10,000 miles/points etc. With the Canadian dollar continuing to be extremely weak against the U.S. dollar we will likely see one or two new cards come out with no foreign exchange fees. They won't be major cards like the TD Aeroplan, CIBC Aventura or RBC Avion cards rather it will be new issues looking to take a slice of the pie. Such has been the case with Chase's Marriott and Amazon cards and the recently released Rogers card.

Despite Marriott buying Starwood we'll see the Starwood Preferred Guest Credit Card from American Express continue on throughout this year and into early 2017. At that time Chase will see some major increases to people applying for their Marriott Rewards Premier Visa card! We would all love to see some other hotel chains start issuing cards in Canada but given our over saturation of card choices here it is a tough market to break into. Seeing that we lost two hotel co-brand cards over the past year from two very large chains I unfortunately don't see another hotel program coming in anytime soon.


What are your thoughts on 2016? Do you agree or disagree with some of the predictions? What do you think will happen this year?



Thursday, September 17, 2015

In Defence of Loyalty Programs

Recently, the loyalty industry has really taken it on the chin.  The latest coming from the results of a global study commissioned by Aimia on the perceived value of reward programs. Aimia (operators of Canada's Aeroplan program) polled more than 20,000 people representing 11 countries and came to the conclusion that collectors don't feel they're getting enough value in return for the personal data they give up.

But as much as we love to moan and groan about these programs one thing remains clear -- they're not going anywhere any time soon.  Marketers love the ability to target customer segments and create tailored offerings with the hope they will increase their likelihood to buy. The premise is simple -- the more information a marketer knows about its customer's buying preferences the greater their ability to put something in front of the customer of relevance.  Are there opportunities for improvement?  You bet.  But I think it's important to remember the bigger win/win these programs represent.  No one wants to go back to the days of clipping coupons and taking packaging flaps back to your favourite grocer.  Loyalty programs drive innovation and simplify the way we convert our loyalty into currency.  In the case of coalition programs -- they allow collectors to pool and save up points for something bigger like a trip or tickets for special event. Yes, like many, I've been frustrated with how difficult it can be to redeem for higher demand items. But the frustration quickly disappears when I do cash in and feel like I've somehow beaten the system by getting something for free. I don't have an exact number but believe I've gained more than five figures worth of value from loyalty programs, sit on close to 3 million points and miles and know some Rewards Canada readers who have racked up as much as six figures worth of savings.

How about you? Do you agree with the survey? Do you like sharing personal info like shopping habits to increase your ability of points earning and redemption?

See the full size infographic on Aimia





Thursday, January 8, 2015

2015: The Year Credit Card Rewards Come Crashing Down to Earth?

Short answer — yes.  But before you get alarmed, credit cards are and will continue to be one of the easiest ways to earn rewards for travel, cash back and more despite pending changes. However, moving forward it will take longer to rack up points and as a result we can expect big changes in the payment card landscape and of course to our Top Travel Rewards Credit Card rankings!

Over the past couple of years the value of miles/points/cashback for every dollar spent on a credit or charge card has increased as card issuers battled for your business. Card holders benefited with rewards returns ranging from 1.5%, 2% to as high as a 4%  on your card spending. That will change on some if not many of the cards in Canada from two of the three main credit card types by April of this year. In the 14 years since I’ve been covering the credit card rewards industry, this is the first time a self initiated industry change will have a large scale negative impact on the rewards industry.

Why is this the case?

As you probably know, both Visa and MasterCard have voluntarily bowed down to pressure from the Canadian Government and the retail industry to limit the interchange fees charged to retailers each time a purchase is made with one of their cards. This agreement is set to start in April 2015 and will have the Visa and MasterCard interchange rate set at an average of 1.5% for five years. There aren't a lot of details surrounding this agreement but just a simple look at the numbers suggests card issuers can't give rewards of 1.5%, 2% or higher when they are only earning 1.5%.   When this same situation arose in Australia, rewards were cut back and card issuers also took other measures to make up for the loss in revenue. How much will rewards be cutback? We don't know yet but if you read into the agreed upon interchange rate, the word 'average' is used which leads us to believe Visa and MasterCard may actually still charge a higher rate for premium cards and a rate below 1.5% for non-premium or non-rewards cards to achieve that average 1.5% rate.

How do we know this is going to happen? Australia is a great example but sources at one of the top rewards cards have indicated to us that they'll be lowering the per dollar earn rate when interchange changes kick in.

What about American Express?

American Express is not part of the interchange agreement and as result their reward offerings shouldn't change. In fact, the interchange fallout could translate into a boon for American Express since, theoretically, they should be able to provide higher reward earnings per dollar spent than Visa or MasterCard. Of course, a potential pitfall for Amex may come in the form of a retailer revolt as other major players (and there are rumours) follow Costco’s lead in parting ways with the more expensive card issuer. 

Ultimately though, if I were American Express, I'd be mapping out an aggressive marketing plan to capitalize on the disgruntled Visa and MasterCard card holders looking for the highest reward returns.  Just saying...

What does this mean to MasterCard and Visa cardholders?

It means that while it may take you longer to earn credit card rewards you shouldn’t give up those premium reward cards just yet. There are ways to make up the shortfall. For example, if your annual credit card spend is $30,000 and you’re currently earning 2%, then your current return of $600 may fall to $300 or $450 per year.  Making that up will depend on staying plugged in and taking advantage of the thousands of bonus offers issued by reward programs each year. Any point optimizer will tell you, to maximize your earning potential, you need to work your credit card and the bonus offers. Maybe these pending changes will force you to put those best practices to the test!

Stay tuned right here on Rewards Canada or check out our global site FrequentFlyerBonuses.com for news and offers from more than 160 programs!

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Tuesday, January 28, 2014

How ‘Rewarding’ Will 2014 Be?

In its annual Global Business Travel Forecast , American Express claims 2014 will see modest increases to the cost of business travel. By and large airline prices should remain flat and in some cases even drop as low cost carriers expand their business travel offering — forcing more competitive pricing.

Conversely, hotel bookings could rise as much as 3-6 per cent in some regions across North America.  

Regardless, business travel costs are expected to reach into the hundreds of millions of dollars for many companies and managing this expense will be a top priority.

So what’s in store for frequent travellers who count on their reward points to fund leisure getaways?   For one thing, a glut of airline miles being issued and more demand for award nights as hotels fill up with paid travellers will continue to force unfavourable program changes as noted when United Airlines announced tweaks to their MileagePlus program late last year and when Aeroplan announced increases to certain International award flights not to mention Hilton HHonors, Hyatt Gold Passport, IHG Rewards Club, Marriott Rewards and Starwood Preferred Guest all increasing room redemption rates during the year. 



Related:


Further proof can be gleaned from a recent letter to members of Delta Hotels’ Privilege program.  In his letter, CEO Ken Greene spoke of some improvements (less stays to qualify for Gold status) but also a number of unfortunate cuts including scrapping the popular late check-out option for basic members of the program. This at a time when many hotel programs tend to be adding benefits at the basic level with the premise that they can glean more information about these travellers from the data trail they leave when joining a program to take advantage of those free benefits.


Related:


Perhaps most revealing (and encouraging to the glass half-full types) is the promise to strengthen the reward program in the fall of 2014.  What this means is anyone’s guess, but you have to believe the popular Canadian hotel chain recognizes the important role these programs play in attracting business travellers.

Related:
Extensive Cornell analysis shows real impact of hotel loyalty program - See more at: http://www.tnooz.com/articles/Cornell-analysis-shows-impact-of-hotel-loyalty-programs/#sthash.UcrFEu7E.dpuf

While we all know economic conditions have been tough for everyone including those in the travel industry, it’s my hope that reward program operators will do more to engage with their most active members.  Give us a chance to offer feedback before pulling the plug on features or switching up redemption rules.  After all, we’re deeply invested in these programs and make travel plans with point accumulation in mind. 

For our part, RewardsCanada.ca and FrequentFlyerBonuses.com will continue to track the best bonus offers and point to the strongest card offerings. You can also count on us to give you the scoop on what program changes mean and how to avoid some of the hassles.  Check back frequently and here’s to a ‘rewarding’ 2014!