I never write about politics and I’m not going to start today. But if there’s one thing we’ve learned in the last two weeks, it’s that we should always challenge and question the Conventional Wisdom. Even when we think the Conventional Wisdom is correct, it’s worth taking the time to test our assumptions, because no matter how widely they’re believed, they may still be wrong.
So with that in mind, today let’s tackle a common argument, one that even I think I think… or ummm, agree with. I’m referring to the idea that buying elite status outright at the end of the year is only for the foolish.
The Conventional Wisdom is that elite status is offered at such an outrageous price that it can’t possibly be worth the money. That may be true for them, but is it true for you? Is it fair to assume that everyone has the same excitement about random flying to nowhere, or access to free time, or ease in getting baggage fee waivers?
In other words, maybe everyone isn’t just like me. (OK, you in the back who just mumbled “thank god”? I can hear you.)
What does elite status cost?
American Airlines just started sending out e-mails offering the chance for those of us short on elite qualifying miles or segments to buy the remaining credit necessary to maintain our perks for 2017.
Delta and United will undoubtedly follow soon enough, but we only have American data points at this time, so we’ll use American as our test subject.
Unfortunately, American is not offering a straight up chart for buying status this year. Rather, they’re sending out personalized targeted offers. In my case, I’m currently about 10,500 miles short of the 100,000 miles needed to renew my Executive Platinum status, so American has kindly offered me the chance to earn those miles without even leaving my home.
The cost? A whopping $2,799.
Now, let’s get one thing straight right off the bat – there is absolutely zero chance that I would ever personally pay $2,799 for status of any kind on any airline. There is simply no scenario under which airline status is worth that much to me, and it’s especially not worth that much for next year’s heavily devalued AA Executive Platinum status.
It’s also easy to do “The Math” and calculate that paying $2,799 for an extra 10,500 elite qualifying miles results in an exorbitant price of about 26 cents per mile. Since I could easily buy and fly a $550 roundtrip ticket to Europe or Asia for a few days in December to make up the needed miles, it’s possible for me to pay just 5 cents a mile instead, a savings of roughly a gazillion percent.
But cents per mile isn’t the only way to value these offers.
The more typical business flyer.
Instead of using myself as an example, let’s assume the person receiving this $2,799 offer is a businessman or businesswoman who flies on American several times a month. His or her company will only pop for economy tickets when flying domestically, so any premium class flying has to come from either elite status or a mileage upgrade that requires a co-pay.
Additionally, unlike myself, let’s assume this typical business flyer has a life.
Therefore, he or she doesn’t have time to jet off to Hong Kong for a quick nap after partaking at the Champagne Bar and the Coffee Loft in Cathay Pacific’s lounge at HKG airport.
So perhaps American’s $2,799 offer is the only way this business flyer will be able to achieve Executive Platinum status in 2017. For that price, they’re getting regular (though not guaranteed) complimentary domestic upgrades, 4 systemwide upgrades, the standard baggage fee waiver, and a bunch of other perks that aren’t that terribly impressive in my opinion.
But again, we’re not talking about me here.
I’ve been keeping close track of my upgrade percentages for 2016, and while I’ll have a more complete record once the year is over, I can tell you that I’ve made the upgrade on about 70% of my domestic flights in 2016. So assuming this business flyer is traveling an average of twice a month, he or she will get upgraded on roughly 34 of the 48 domestic flights they take in 2017. If we value each of those upgrades at just the $75 co-pay that American would charge to use miles, that’s $2,550 in upgrade value alone.
Let’s also throw in those 4 systemwide upgrades and assume our businessperson uses those for a personal trip with their significant other to an international destination in 2017. The roundtrip for 2 people uses up all 4 upgrades, but the business class tickets for that trip would probably run at least an extra $2,000 per person if not more. So add another $4,000 for this perk.
We can assume any baggage fees while traveling for the company would be expensed, so there’s not any value gained there. But maybe there are a half-dozen personal trips for which the baggage waiver comes in handy for our businessperson and/or their family, which adds $150 to our total.
So for our business flyer, the $2,799 to make Executive Platinum gets them $6,700 in value for 2017. It might be a terrible offer for me, but clearly for them, it’s a worthwhile deal.
But $2,799 isn’t the only offer.
Our friend Ed Pizzarello over at Pizza in Motion has compiled some early data points on American’s upgrade offers, which you can find here in their entirety. Based on Ed’s reports, it appears American is offering the chance to earn Gold status for as little as $399 for those currently within 3,000 miles of Gold, and as much as $1,499 for folks who are just a few thousand short of Executive Platinum. Those are the extremes – there are a lot of offers for different status levels and amounts in between as well.
Is it worth buying Gold status for $399? The value proposition is somewhat more questionable as upgrades at that level aren’t complimentary. But if the offer is targeted at someone who flies American a few times a year with their family and isn’t going to get an American credit card, that $399 could make sense for the baggage fee waiver.
What about $799 for Gold for someone who doesn’t have any status or miles? That offer probably doesn’t make sense unless you’re going to fly on American more than 30 times in 2017 and need the baggage waiver. Even if that’s the case, you’re probably better off paying for an elite status challenge when you’re actually ready for it.
How about $899 for Platinum status in lieu of 8,600 miles, which is the offer received by our favorite consumer advocate customer Jeanne at Le Chic Geek? Flying 8,600 miles will cost roughly $500, so perhaps it’s worth an extra $499 to not have to leave the comfort of your own home. Or perhaps that $499 isn’t worth it to Jeanne. I don’t know, but to rely entirely on a mathematical calculation and say that “10 cents per mile isn’t worth it” doesn’t show the whole picture.
The Devil’s Advocate believes the value of status offers depends on your needs.
I’ve got time and the ability to work remotely, so it’s no big deal for me to do a quick roundtrip or two to finish up my miles. But not everyone has that luxury, and even for some folks in the cost-obsessed points and miles community, time truly is money.
So even if the Conventional Wisdomers dismiss this year’s elite status buy-up offers as prohibitively expensive, make sure you do the calculations for yourself. But don’t just figure the math. Figure the cost to your free time and stress level as well. I’m not saying that accepting one of these offers will make sense for everyone. But it might make sense for some. So do your own thinking.Devil’s Advocate is a bi-weekly series that deliberately argues a contrarian view on travel and loyalty programs. Sometimes the Devil’s Advocate truly believes in the counterargument. Other times he takes the opposing position just to see if the original argument holds water. But his main objective is to engage in friendly debate with the miles and points community to determine if today’s conventional wisdom is valid. You can suggest future topics by following him on Twitter @dvlsadvcate or sending an e-mail to email@example.com.
Recent Posts by the Devil’s Advocate:
- Why The New “World of Hyatt” Elite Program Is A Major Enhancement
- These 5 Credit Cards Are Turning Into The Only Ones You’ll Ever Need
- Could the New Amex Platinum 50% Rebate Mean the End of Miles?
Find the entire collection of Devil’s Advocate posts here.