What’s the Upper Limit of Travel Spending? Back of the Envelope Analysis

I’m on a plane right now and considering a hypothetical question: Given the physical constraints of reality, how much could the most loyal, most lucrative customers possibly spend with the airlines and hotel chains?

Airplane tarmac transfer

Tarmac transfer to a semi-private jet? Would you really want to spend those miles on MORE time in a plane or hotel? (Photo: commons.wikimedia.org)

As an aside, we’ll ignore meeting planning budgets since they can be all over the map and hotels have started segmenting those off to different programs.

Similarly, we’ll ignore food and beverage budgets for the sake of keeping the post to a reasonable length (though I suppose someone COULD order the $22,000 Diamonds are Forever Martini at the Ritz-Carlton Tokyo every time they pass through and expense it).

We also make some assumptions:

  • This person actually has a day job, which presumably requires SOME time on the ground.
  • This person is flying a route that actually makes logical sense for business (so no crazy backtracking) and has to be functional while on the ground
  • This person is buying walk-up first class fares and doesn’t have access to comporate discounts. (This person would be a moron, but hey it’s not their money anyway)

How much could you possibly spend with an airline?

The biggest realistic spending case I can envision is someone who flies longhaul (over an ocean) roughly three times a week, roughly 5,000 miles each way every week of the year, paying $8-10k to fly international first class, on the same carrier/alliance every time (God help them).

For instance, a medical device salesperson could be flying every week from New York to Tokyo to London and back to New York on JAL, British Airways and AA, crediting to American.

Because this wouldn't get old fast - Photo courtesy of gcmap.com

Because this wouldn’t get old fast - Photo courtesy of gcmap.com

This would translate to roughly 150 flights per year. Even if they were buying walk-up tickets @ $10,000 a pop, this would translate to about $1.5M spent annually and 750,000 butt in seat miles.

If you assume top-tier status (which they would hit in early to mid-February - getting roughly a 100% redeemable mile bonus) and that they use a co-branded card with 3x on airline purchases, they would be earning 2.25 million from flying and 4.5 million miles from spending, generating 6.75 million redeemable miles in a year, not a bad haul.

That would get them 270 round trip domestic economy tickets (not that they’d ever have time to use them) and roughly 37.5 roundtrips in international first to India or the Middle East, 33 to Africa, or 16 round the world tickets in three cabin first (assuming 400,000 miles per ticket). Not that they’d have time to enjoy it.

Comparing that to the world of leasing a private jet (typically $5000-10,000 per hour) and international First Class is still a bargain.

Do hotels rake in anything remotely close to that?

For hotels, someone could be doing the following:

  1. Staying in a hotel every weeknight of the year
  2. Pay $700/night on average (typical rates for a nicer room at a Ritz Carlton, Mandarin Oriental or Four Seasons)

This would equate to 260 room nights in a year and $182,000 in spending, far less than you’d expect compared to the airline example above.

Assuming they get a 500 point bonus for every check in (assume they are a salesperson and check in a different hotel every night)+4 points per dollar for being top tier at Starwood and get 2 points per dollar for using the credit card, they would generate 130,000 from check-ins alone, 728,000 from spending at the hotel and 364,000 from the credit card bonus for a total of 1.222 million starpoints, enough for 40 nights at the most luxurious properties (20 at the nicest all-suite properties). Assume 5th night free and you’d get to 50/25 nights.

So for the top tier spenders on airlines, you’d likely have more miles than you’d be able to use in a lifetime, which on the hotel point front, you’d eke out just a few more than seven weeks at the nicest properties.

Do points and status even matter at those spending thresholds?

If someone is banking six million miles a year, the marginal value of those last few miles are likely to be close to zero, particularly given the constraints on using them, finding acceptable routings and availability. Standard/High Award rates are probably a given, and people typically in these situations are flying a lot of family members and friends around for free. Splurging on gifts at the mileage mall and experience auctions (golf lesson from a PGA Pro and Taylor Swift backstage passes for the grandkids probably win out over spending yet more time on a plane or hotel.

Likewise, the onboard services and suite upgrades would likely get old. Given the grueling schedule, I can imagine most of those customers go straight to sleep once on board and want minimum internaction unless it’s absolutely necessary. The caviar stays in the can.

Airlines and hotels (if they aren’t completely asleep at the wheel) would have targeted them for Concierge Key / Global Services / Royal Ambassador ages ago. Anecdotal reports from friends in the industry allude that these customers have the direct line to the VP or Director of Customer Care and while a few call them at the slightest inconvenience or irregular operation, most are so seasoned and accustomed to hiccups that they are practically unflappable. Many even lurk Flyertalk and Milepoint. Spending that much time onboard or as a guest means you see a lot, so only the most extreme circumstances are likely to actually upset you. Even when I was flying weekly for work, a 30 minute delay in the back of the plane was hardly noticed.

So while most of us will never dream of spending or flying at the level (and we may have some serious soul-searching and “what am I doing with my life” crises if we did) it’s a nice thought experiment to see how expectations may be very different for uber-mileage earners.

I hope you enjoyed that fun example! Have other ways of calculating MAX spend? Comment below!

10 Responses to “What’s the Upper Limit of Travel Spending? Back of the Envelope Analysis”

  1. I would think you could have someone that is buying a lot of long haul first class tickets and traveling on nearly a daily basis. Because of business commitments or lack of they may need to always book last minute. I would think after awhile they would be at an extremely high elite status though and have that service booking for them or a home based PA doing the bookings and using some sort of travel service or arranger type setup.
    So say they spend $5k a day, maybe 5 days a week with say 5k miles per day plus hotels. Keep in mind though if they spend that much time on planes, the hotels would be less as they would be sleeping on the planes a lot. If you had to travel this much all over the world I would think you would try to always follow the sun going East to West to take advantage of time zones as well. It might be fun to do this for a few months. I would think this person would be in the aviation, medical or political realm and at a high executive level. I have a friend that is in aerospace and he has been know to fly halfway around the world for say a 1 hour meeting and then back on the plane. He doesn’t do this weekly though. They might not be as loyal to one carrier if they travel all over but would likely stick to one alliance as much as possible.

    • Yep, that sounds about right. Most have PAs and direct airline booking numbers (no IVR, it’s “Welcome back Mr. or Ms. So-and-So”) - the few that I’ve met have said the same thing about traveling West to avoid red-eyes

      Yes the loyalty is more at the alliance level, just due to route networks, so there is probably some serious concern on the airlines’ part that a loyal Global Services flyer might be tempted away by HON Circle without having to change any of their behavior.

      How long do you think someone could last doing this?

  2. These type of customers are particularly hard to win loyalty from. For one, they are already purchasing your best cabin/service, so you can’t upgrade them or offer them lounge access as a bonus. Additionally, assuming this person is traveling for business (as opposed to simply being the heir to an enormous fortune), they likely value their time above everything else, and thus likely chose flights based on timetables and routes, something the airlines simply cannot adjust for even their most loyal fliers. Ultra-personalized service (such as having the number of the VP or getting Porsche transfers) can be helpful, even these may not win over schedule.

    • You’re right that it’s totally a game of timing and privacy at that level. Most just want the most streamlined experience as possible. Hell, when I was traveling for work, I routinely booked non-stops and zoned out into my coffee and paper just to reduce cognitive load - everything just blurs into a routine.

      Anecdotally, airlines will prioritize landing or hold a flight for late high value pax, which can make a difference in weather or ATC throttling issues.

  3. My boss is one of these folks. I’m a long way off, but just starting out. Regardless, his loyalty is (well, was) rock solid to UA and hyatt. Many years a GS on ua, and on the morning rundown at any hyatt property he stays at. Until recently when the DL ceo was in town and literally spent an hour winning him over in person - what I would call “blowjob status”. He’s giving it a go - no doubt lots of loyalty was being sold. I don’t expect the hyatt thing to change though given that once you know a property and its proximity to things, that routine is helpful.

    • That’s fascinating - particularly the hard sell from the CEO (but I think Delta gets Customer Relations better than most airlines) - What caused your friend to switch loyalty? Fed up with something or wanting to build up another balance?

      I’m always curious about people who fly so much that they can split loyalty and still be two or three airlines’ best customers. There are some interesting economics (and many providers need to do better at creating incentives) past the 100/120k annual miles or 50 room night mark.

  4. There’s also the importance of courting someone at the head of a group. Could you imagine the revenue generated from, say, a presidential candidate if he’s not on a private jet? In addition to his flying you’ve got at least two dozen others who are constantly following him around. If he checks in, you’ve got a whole floor occupied. And hey, you probably just need to upgrade him and maybe a top staffer to the nicest room, give all the plebs standard rooms and you’ve got all of his business.

    • Not necessarily. Most of the candidate travel lightly in the primary, until they’ve won the nomination or nearly won it when they charter private planes, get Secret Service (paid for by taxpayers) and such. Traveling media also reimburses campaign for all expenses. Mitt Romney was flying commercial, by himself with 1-2 staffers, until a month or two before the 2012 primaries started. Then it was all private.

  5. I don’t think this is very common. There aren’t many people flying to multiple continents several times a week. I don’t even think it would be in the political sphere — those people, diplomats, foreign ministers UN-types — will have access to government or private planes. I can’t even imagine a medical device salesman traveling that much. Wall Street investment bankers, sovereign wealth fund managers, CEOs, sure. But again, that can’t be more than a couple hundred — tops. As someone else said, what could Delta give me if I was spending $15,000 a week on airfare — all in business-elite or first-class? I don’t people with this kind of money get excited about saving miles to take the kids to Disney World, if they’re even married.

    • I’ve met a few folks who do Asia-Europe-New York on a weekly basis (and many of them are in medical or pharmaceutical sales, hence the example passenger above). They definitely exist and think nothing of popping over to Europe in LH F for a weekend for a friend’s wedding.

      You’re absolutely right that these people aren’t excited about taking the kids to Orlando, that’s why airlines (and particularly SPG) are rolling out and finding success with experiential redemptions like SPG Moments and Virgin Atlantic is offering a way to redeem to party with Richard Branson on Necker Island - http://www.virgin-atlantic.com/gb/en/flying-club/flying-club-partners/virgin-group/necker-island.html

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