1. American Airlines’ Award Chart Changes
On November 17, 2015, American Airlines announced several changes in its 2016 AAdvantage program, including massive devaluation in its award charts, which will kick in for awards booked on March 22, 2016 or later. To be honest, this wasn’t that surprising since in the past several years, American has had more lucrative award charts than its major competitors United and Delta, and we had anticipated that it would devaluate its miles after the merger with U.S. Airways. But the devaluation is still quite bad. The best redemption options under the old charts - longhaul business and first class awards are hit the hardest, as expected. The required miles on some of our favorite routes increase by 4%-27% for longhaul business class awards, and by 20%-63% for longhaul first class awards. Our value for American miles is thus adjusted from 1.8 cents per mile to 1.6 cents per mile, and obviously your mileage may vary. If you have a substantial balance of American miles, remember to book your flights before March 22, 2016.
Let’s see how this affects the credit cards after March 2016. This obviously made Citi or Barclays AAdvantage cards (see Citi Platinum Select / AAdvantage, Citi Executive / AAdvantage, Barclays Aviator Red, Barclays Aviator Silver) less valuable in terms of earning miles; however, our recommendation for earning American miles through credit card spending has always been one of our Top Listers, Amex SPG, which returns 1.25 miles when transferring points to miles in bulks of 20K. Even though SPG still has 30+ other partners to transfer to, such as Alaska Airlines whose miles we still value at 1.8 cents per mile, the value of SPG points certainly take a hit with American’s devaluation. This combined with the fact that the SPG program will be no more within a couple of years (see section 2 for details) makes us adjust the value of SPG points to be 2.1 cents per point, down from 2.25.
2. Marriott-Starwood Merger
On November 16, 2015, Marriott International announced that it would acquire Starwood Hotels and Resorts to create world’s largest hotel chain. This announcement was somewhat a surprise and will have a huge impact on the hotel industry in years to come.
Obviously it will take some time for the two chains to integrate as well as their loyalty programs, and we expect that Marriott Rewards and Starwood Preferred Guest (SPG) will continue to run separately at least through 2016 and eventually will merge into one single program sometime beyond 2016. SPG is one of our favorite hotel programs out there not only for its elite benefits but also for its revolutionary redemption options including points transfer to 30+ airline partners at up to 1:1.25 ratio. For travelers who have a large balance, they probably need to start planning ahead to burn these points, since even though Marriott promise it would keep the value of SPG (points), we highly doubt that they will be the same level of value when SPG points eventually turn into Marriott points. For those who are not very sure of their value, our current valuation for these two currencies are: 2.25 cents per point for SPG, and 0.65 cent per point for Marriott. We don’t think when the two programs finally merge, SPG points will be turned into Marriott at 1: 1 ratio, but we expect it won’t be 1:3 either. However, for those who has a SPG points balance less than 150K, we will suggest not worrying about them too much, since it will be plenty of time to put them to good use.
Now let’s look at the merger’s impact on credit cards. Firstly, as mentioned in section 1, our value of SPG points will be adjusted from 2.25 down to 2.1 cents per point considering American Airlines, one of the best transfer partners of SPG, will devaluate after March 2016, and the fact that you probably won’t be stockpiling SPG points as you might used to due to the uncertainty of this program beyond 2016. Secondly, Amex SPG, one of our favorite credit cards, not only returns slightly less value than before but will be completely nonexistent in a few years (it will probably be converted to another Amex product for existing customers). This will leave a huge hole that won’t be filled for a long time, since not only is Amex SPG a well-rounded product but also there will be one less program that allows flexible points transfer to airline miles. Please see our featured review SPG vs. MR. vs. UR. vs. TY vs. CR for this type of programs and you will see why we love them so much. Lastly, the impact on Chase Marriott and J.P. Morgan Ritz-Carlton credit cards will remain unknown. You may expect more hotels (SPG currently has 1,200+ hotels) be available for redeeming points, but we are not sure how SPG hotels will be categorized in Marriott’s system and if Marriott will again devaluate their points after the merger. You may expect the Gold or Platinum status earned through Ritz-Carlton Visa be more beneficial for similar reasons, but again we are not sure if Marriott will adjust the elite benefits after the merger.
3. Accor’s Acquisition of FRHI
On December 9, 2015, AccorHotels announced that it would acquire FRHI, the parent company of Fairmont, Raffles, and Swissotel. Accor, which may be an unfamiliar name to a lot of Americans due to its very limited footprint in North America, is actually a giant in the hotel industry with near 3,800 hotels worldwide, including brands such as Sofitel, Pullman, MGallery, Novotel, Mercure, etc.
Even though we haven’t know the timeline yet, we suspect that some time beyond 2016, Fairmont President’s Club will be integrated into Le Club AccorHotels. At that point, we will be very sad to say goodbye to one of our favorite hotel credit cards, Chase Fairmont Visa, which is also on the list of cards worth paying annual fees without spending. The generous signup bonus (two free nights at a luxury hotel with breakfasts, possibly in a suite), Fairmont Premier status (suite and room upgrades, third night free certificate, $50 dining/spa credit), an annual free night after $12K per year, and Lounge Club membership with two free passes per year, all contribute to this card’s uniqueness. If you haven’t had this card, we definitely recommend getting it before this program gets folded into Accor’s. Even if you had this card before, you may still get the signup bonus if the last time you received the bonus was more than 24 months ago per terms and conditions.
Right now, we don’t know if Accor will partner with a U.S. financial institute to offer a co-branded credit card in the future but we think it is very likely. At that point, we will evaluate it and definitely hope it will be a competitive product.
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