Should Companies Bet on Travel Credit Cards to Boost Brand Loyalty Amid Rising Costs?

Who doesn’t love a great trip? Travel credit cards have become essential companions for frequent travelers, providing rewards, perks, and exclusive benefits that elevate the travel experience. But that’s not just it, these cards are also a strategic tool for brands to foster customer loyalty and a reliable means for travelers to unlock extra value in their journeys. A recent study by Citi and The Harris Poll found that 28% of travelers plan to use credit card points or airline miles to book their next adventure, underscoring the appeal of these rewards.

However, with inflation affecting purchasing power and impacting the value of points and miles, it’s crucial for travelers to understand how to maximize these benefits effectively.

What is a Travel Credit Card?

A travel credit card is a specialized financial tool that rewards spending across multiple categories that can be redeemed for flights, hotels, car rentals, and other travel experiences, creating added value for travelers. Co-branded loyalty programs strengthen the customer-brand relationship, offering exclusive benefits that enhance convenience and add memorable experiences to each journey.

For brands, co-branded travel cards are an opportunity to drive loyalty with non-frequent travelers by enhancing the opportunity to earn rewards that align with their customers’ travel interests. By building these partnerships, companies increase brand loyalty and open channels for higher customer engagement and repeat interactions.

Types of Travel Credit Cards

Travel credit cards are generally divided into categories based on their issuer or partnership, often aligning with specific brands (airlines, hotels) or offering broader flexibility. These categories enable brands to tailor their loyalty offerings to different customer needs and preferences. 

1. General Travel Credit Cards

These cards appeal to customers who value flexibility, allowing points to be redeemed across multiple travel brands. By offering their own travel redemption portals as well as the ability to transfer points, they give loyalty program members the freedom to redeem points where they find the most value, even if they’re not loyal to a specific brand. Examples include the Chase Sapphire Preferred and American Express Membership Rewards cards, which let users transfer points to various airline and hotel partners.

2. Airline-Specific Credit Cards

Co-branded with airlines, these cards offer miles or points for flights on specific carriers and perks like priority boarding, free checked bags, and discounts on in-flight purchases. For instance, the Delta SkyMiles® American Express Card is expected to bring Delta $7 billion in revenue in 2024, highlighting the value of airline loyalty. These cards suit frequent flyers who are loyal to a specific airline, offering faster mileage accumulation and exclusive benefits within that airline’s loyalty program.

3. Hotel-Specific Credit Cards

Co-branded hotel cards reward users with points within a hotel’s loyalty program, often providing perks like complimentary room upgrades, free nights, and accelerated point earnings for hotel stays. For example, the Marriott Bonvoy Boundless® Visa and Hilton Honors American Express Card allow members to earn points within their respective hotel loyalty programs. 

4. Premium Travel Credit Cards

Premium cards carry substantial annual fees but come with high-end benefits, including lounge access, travel credits, elite status, and comprehensive travel insurance. Targeted at frequent travelers who want an elevated experience, these cards attract high-value customers. Examples include the American Express Platinum Card and the Chase Sapphire Reserve®, which offer exclusive access to perks that justify the annual fee for luxury-focused travelers.

5. Business Travel Credit Cards

Designed for companies, business travel cards reward corporate travel spending with points and perks. Brands benefit by building partnerships with business-oriented cards to attract corporate customers and increase revenue from business travelers. Examples like the Ink Business Preferred® Credit Card from Chase and the American Express® Business Gold Card align brand value with business needs, supporting customer loyalty from a B2B perspective.

How Inflation Can Affect Travel Credit Cards and Loyalty Programs

With inflation, brands are challenged to retain loyalty program appeal as the real value of points and miles decreases. Here’s how inflation affects travel rewards and loyalty programs, and what brands can do to keep customers engaged.

• Reduced Purchasing Power of Points and Miles
  As the costs of flights and hotel stays increase, so do the points or miles required to redeem them. Redemption rates have risen by about 15% across major travel brands, meaning travelers need more points for the same rewards. For loyalty programs, this can lead to lower perceived value. 

• Dynamic Pricing Models and Higher Redemption Costs
  With dynamic pricing, the redemption cost for flights and hotel stays fluctuates with demand. For brands, this strategy allows for more efficient resource allocation, but it can also lead to member dissatisfaction if not managed carefully.

• Increased Annual Fees
  Annual fees for premium cards are bound to rise in response to inflation. While the perks often outweigh the fees for frequent travelers, this may deter occasional travelers. 

• Limited Availability of Reward Seats and Rooms
  With inflation driving up demand, airlines and hotels are likely to tighten reward availability and reduce redemption options during peak periods. 

Strategies for Brands to Maximize Loyalty Program Appeal Amid Inflation

With consumers more value-conscious than ever, brands need to get creative to protect the perceived worth of points and keep travelers engaged. While inflation may impact how far points stretch, it also opens up fresh opportunities for brands to reinforce loyalty by responding thoughtfully to customer needs. Here’s how travel brands can adapt their credit card offerings to stay relevant and drive loyalty, even in a shifting economic climate:

1. Encourage Early Redemption
Brands can incentivize early points redemption to help members capture value before points devalue further. Promoting a “redeem sooner” approach can align brand messaging with member needs and improve customer satisfaction with the program.

2. Offer Transferable and Flexible Redemption Options
Offering cards with transferable points is a strategic way to increase flexibility and appeal. Research suggests that transferable points can yield up to 15% more value, enabling customers to find the best redemption fit, which is particularly valuable in times of economic uncertainty.

3. Run Targeted Promotions
Brands can drive engagement by offering limited-time promotions that provide more value for redemptions, such as bonus miles or discounted travel. These promotions can boost loyalty and help members see higher returns on their points during high-demand periods. For instance, offering 25% bonus points for off-peak travel dates encourages spending while managing peak season pressure.

4. Broaden Redemption Options
To adapt to inflation, brands are offering more diverse redemption options like redeeming points for car rentals, travel accessories, or partial flights. Broadening choices lets loyalty program members use points more creatively, reinforcing the brand’s commitment to value in challenging economic times.

Despite inflationary pressures, the demand for travel credit cards remains strong. Consumers are eager to leverage rewards for unforgettable experiences, and travel loyalty programs continue to be a powerful tool for delivering value. Josh Berwitz, Senior Vice President and General Manager of Business Development and Partnerships at American Express, shared with Select that they’re seeing a surge in cardholders redeeming points for long-awaited trips. This trend underscores the enduring appeal of travel rewards, as consumers prioritize experiences over mere transactions. For brands, this is a prime opportunity to meet that demand by refining their loyalty offerings to resonate even more deeply with travelers, creating lasting loyalty amid economic shifts.

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Lars has had a long and varied background in Loyalty over the past 20 years, working in several roles across multiple verticals, including launching new programs for clients in the travel and retail industries across the Americas. His love for the travel industry dates back to his first "real" job as a tour guide in Europe.