Southwest sent out rewards statements today and, tucked away at the bottom, was some bad news: Rapid Rewards will be worth 4% less starting January 1st, 2024. 
Currently, Rapid Rewards points are supposed to be worth 1.2 cents each towards Southwest flights (not taking into account various fees that aren’t charged on award tickets). After January, they’ll be worth 1.15 cents apiece. This change will not affect travel for 2024 that’s booked before January 1st, so at least folks will have some ability to book travel at the current rates through the end of the schedule.
Quick Thoughts
This is the second time that Southwest has devalued its points within the last two years, following a 6% overnight drop in 2021. At least they’ve given some notice this time, so everyone can take advantage of the current rates.
While 4% isn’t a gigantic kick in the pants, I still think these sorts of things are a little worse coming from Southwest than from other programs. Rapid Rewards is a revenue-based program, meaning that its points are supposed to be worth a fixed amount. If a ticket is goes up 50% in cash price, the award cost goes up 50% as well. This is in contrast to most airlines whose points vary in value from award to award.
Because of that, it doesn’t really make sense that devaluations like these need to happen in the first place. Unlike other airlines, Southwest should be insulated from rising fares by the fixed nature of its points. If the cash cost of flights is going up, folks will simply pay more points for those awards. So, in lowering the value of its points currency, it’s not changing the points needed for an award in order to reflect higher prices, it’s actually making Rapid Rewards worth less.
To me, that makes it sting a little more, especially given that it’s the second such devaluation within as many years. I wouldn’t be surprised if the long-term goal is to eventually get Rapid Rewards down to a cent each, giving Delta SkyPennies a run for its (low-value) money.
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To me, it makes Hyatt points even more valuable. I used to value my Chase UR points because they transferred into both SW (>1.5pp at the time) and Hyatt. At even 1.2pp I see limited value to SW as a Chase transfer partner vs just paying cash (via gift card at Costco.)
If Hyatt devalues or if Chase loses Hyatt, UR are going to lose incredible value in my eyes.
The companion pass is really the only way to get strong value from Swest. Their prices have increased in line with AA and Delta, but their flying experience is significantly more stressful for families and most people in general. SW customer service and cancellations have worsened. It’s not the same company it used to be, from a consumer standpoint.
Completely agree with your point about SWA’s not really “needing” to devalue given they already increase their ticket prices to devalue them, so this is a double whammy.
I want to point out that there is also another insidious devaluation happening with Rapid Rewards points – Southwest $500 gift cards are available anytime at Costco for $450, and frequently on sale for $430. And I mean really frequently! I was surprised they were actually hawking it at the store entrance the last time it was sale.
So to me, a dollar spent on purchasing Southwest flights with these GCs really costs 14-16% less (depending on how you calculate it) than a dollar of cold, hard cash. In other words, the points price of a ticket is based on an ~16-14% inflated cash price. So if I compare points prices against the real cash I was to spend (which I believe would be the true measure for a fixed value point currency), that also has further devalued the points much more and it is even closer to parity with a penny of real cash as you predicted.
BTW, while I have bought these discounted GCs at Costco and they are available with similar discounts at Sam’s Club too, I believe they are also available at Target, Walmart etc. from time to time and therefore generally discounted on resale markets too, so these aren’t some exclusive deals considered unavailable to non-members and factoring in a general discount of at least 10% is warranted.
What are your and FM team’s thoughts on this stealth devaluation?
PS: Same holds true for Alaska< – while those are not fixed value, I think there is a case for the easily available GC discounts to be considered when valuing award tickets, and possibly RRV, though it does complicate stuff a lot more.
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Why do you think they’ll stop at one cent? They’ll keep going as long as they can get away with it.
Fine with me.
We have so many points we get priority boarding & spouse flies for the next yr. Great program!
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