Airfares to rise in 2025: How will this affect your hotel points and airline miles when travelling?
Airline ticket prices on most routes will rise between 2-14 per cent worldwide: Report
Dubai: Global airfares are set to become more expensive in 2025 even as gains moderate by the end of this year, according to a new report from American Express Global Business Travel Group Inc. But how would this affect traveller plans, particularly usage of hotel points and airline miles?
The survey noted that fares on most routes will rise between 2 per cent and 14 per cent, though the size of the increases will likely vary greatly by region. Increases in ticket prices next year are likely to more than erase any decreases before 2024, meaning some fares may return, Bloomberg estimates.
“When ticket prices rise, fewer people travel, and this logically pushes up hotel rates. Both these trends has a surprising effect on a different currency - your airline miles and hotel points,” explained Sophie Cortez, a regional manager at a UAE-based European tour operator.
“Rewards programs regularly increase award prices, which are the number of points or miles needed to book a hotel night or flight. That practice devalues these currencies over time and renders customers' collection of points and miles less useful.”
Are your rewards are worth more this year?
Additionally, multiple analysis of points and miles programs revealed that many rewards programs' points have become more valuable this year compared with the previous year, flagged Richa Dev, a Dubai-based travel consultant.
“This is because various loyalty programmes are devaluing based on business and economic trends. But points can be a buffer against rising price pressures in the short term. So as cash prices went up this year and award prices (e.g., the number of miles needed to book a flight) also went up, but not as much.”
“If cash prices dip again, this effect of boosted points and miles values could get erased. But as long as prices remain high, travellers can nab outsized value from their points and miles - assuming they use them for high-value redemptions.”
What this means is travel rewards are potentially worth more in 2024, given that travel demand has surged in recent years. So for travelers, using travel rewards to offset these higher costs can make them more valuable, as points or miles might cover a larger percentage of the trip’s cost compared to previous years.
‘Static’ versus ‘Dynamic’ award pricing
“Frequent flyer programs would cost miles on a route, regardless of the cash price. Yet the industry has trended away from the award chart approach toward dynamic award prices, which fluctuate to match the cash price. These programs generally offer less value when cash prices are high,” Cortez added.
"The best redemptions when cash prices are high will be through programs that don't tie their currency to the dollar or dirham. Travelers should target programs that still use an award chart to determine the cost of using points and miles.
“Conversely, Cortez said airlines and hotels globally have programs that tie their rewards point values closely to the cash price of the flight or rooms. Instead, a program where the award prices are either determined in advance or are flexible or dynamic based on circumstances will be better bets,'' she explained.
"Historically, we've advised that extra award space often opens up a week or so prior to departure. But right now, we're seeing seats held until two to three hours prior to departure. Hotel rates, buoyed by strong demand and staffing shortages, have also put pressure on award redemptions.
“Most hotel programs use dynamic award prices that keep pace with cash prices, so finding bargain rates will remain a challenge. In other words, hotel points and airline miles might be more valuable, relatively, but they could be harder to use. So, travellers should stay flexible when making plans.”
While static pricing provides simplicity and stability, it lacks the flexibility needed to adapt to changing market conditions. Dynamic pricing, on the other hand, allows businesses to respond to fluctuations in demand, competition, and other factors, optimising revenue opportunities and staying competitive.
Experts’ takeaways
• Many loyalty programs have already started adapted to pricier airfare backdrop by making travel rewards more flexible. For example, points or miles may now be easier to redeem for a variety of travel-related expenses (not just flights or hotels) or for last-minute bookings.
• Frequent travelers may find that loyalty programs have improved their offerings this year, including upgrades, lounge access, and priority boarding. Airlines and hotel chains are also using these perks as a way to differentiate themselves from competitors.
• While some programs are offering more rewards for the same spending, others have increased the cost of redemption for certain flights or hotel stays. Therefore, it's essential to understand how points or miles are valued in 2024.
• Many travel credit cards are offering boosted rewards in 2024, often through limited-time offers or new partnerships with airlines, hotels, or car rental companies. If you’re strategically using the right card, your rewards could accumulate faster.