When did loyalty programs get so watered down?

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Loyalty is supposed to be a two‑way street, yet many rewards programs seem to have forgotten that, rolling out changes that feel like betrayals to longtime members.

And while loyalty programs need to stay profitable for the companies that operate them, years of tweaks have hollowed out much of their value for Canadian customers.

Let’s consider how companies benefit from the practice of breakage – when points will no longer be redeemed, whether due to expiry, inactivity, or even death.

“Keeping breakage low is important, as it signals high engagement and usage,” says Lia Grimberg, principal and consultant at Radicle Loyalty.

However, depending on the industry, companies may build breakage into their profit margins, she added.

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Adjacent to breakage profits are the creative ways companies have found to encourage customers to convert loyalty points into less value. And it’s not always obvious. Banks and travel programs now promote using rewards points to pay bills, or using a mix of points and cash to pay for travel. Marketed as convenience, these options often deliver far less value than traditional travel rewards.

While breakage may have been an early clue that loyalty could be more about accounting than rewards, inflation is likely what pushes programs to tweak the numbers to protect their margins.

Sometimes that means cutting back on how many points you earn for a purchase, as we saw with Starbucks. Other times, it’s simply raising the points cost of a reward, a move fast‑food brands use regularly.

Loyalty programs can still create meaningful value by building smart partnerships, which is something we’ve recently seen from Aeroplan teaming up with Hyatt, and Tim Hortons with Canadian Tire, said Ms. Grimberg. When programs boost member benefits while driving frequency and engagement, that’s loyalty working as it should.

Although partnerships can be a major draw since they may allow consumers to earn dual rewards on a single purchase or redeem points across multiple brands, we’re now also seeing brands rethink their coalition strategies.

The Metro grocery store chain split from Air Miles (now Blue Rewards) in 2024 to consolidate under its own Moi Rewards program, sacrificing the reach and arguably richer value of a larger, established program.

Another example is Lufthansa. Air Canada’s Aeroplan points used to be redeemable for first-class seats, but it now appears the only loyalty program those seats are available under is Miles & More – the program run by Lufthansa. While the airline and Aeroplan haven’t made an official announcement about this restriction, it does follow what other airlines have done.

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This further frustrates travellers who are invested in specific loyalty programs since partner airlines already typically only release one or two business class seats per flight – though not every flight – 12 months in advance or just a few days before departure, which severely restricts anyone who doesn’t have flexible travel dates.

“This strategy can definitely reduce exposure to new customers looking for that aspirational redemption, but airlines appear comfortable with that trade-off if it strengthens their relationship with more profitable frequent flyers,” said Sash Bhavsar, co-founder of pointspartners.ca, an award booking and points consulting service.

Those who tend to be the most frustrated when airlines reserve their best seats for their most engaged customers are the people who’ve invested time mastering each program to squeeze out maximum value. The reality is, most travellers won’t feel the impact of these changes.

However, dynamic pricing – where the number of points required for a flight or hotel redemption changes based on supply and demand – affects everyone. It’s also one of the simplest ways for programs to quietly devalue their points without making any formal announcement.

Airline programs – including Aeroplan – have moved away from traditional award charts, where flights cost a fixed number of points, and have largely embraced dynamic pricing instead.

Initially, many travellers viewed this as a reasonable trade-off: Dynamic pricing typically meant more seats were available to book with points, whereas fixed charts often came with tight restrictions. But over time, the model has become far less predictable and the number of points required for bookings has climbed across the board. Some programs now even offer lower-priced award seats to members who hold a co‑branded credit card.

“The complexity almost seems intentional, as it makes it harder for consumers to judge value and easier for programs to charge different members different prices,” said Mr. Bhavsar. “A better path would be clearer redemption pricing and more consistent access to rewards.”

Loyalty may not always feel reciprocal, but grocery and retail programs have largely struck a workable balance by keeping their programs straightforward for their customers. Travellers, however, increasingly feel their points have been diluted – a shift that may push them to chase lower fares.

Abandoning loyalty altogether isn’t always the answer. These programs can still deliver meaningful returns, but only if consumers stay engaged enough to make the math work in their favour.

Barry Choi is a personal finance and travel expert at moneywehave.com. He was previously affiliated with Canadian Tire, Aeroplan, Moi Rewards and Air Miles but currently has no relationship with any of the brands.