(UPDATE 10/4 – thought this was worth rerunning given the recent fiasco with the Dosh / CVS deal from earlier this week. It was first announced, then limited to $20 / day and excluded gift cards, then limited again to $5 / day. Anyone with any sense could have figured out this was going to end up EXACTLY how it did…)
Multiple stories in the past couple weeks have highlighted how quickly people figure out a way to exploit “the system”, whether that is a promotion or other deal that a company offers. It surprises me that in the age of big data that this still happens. Yet it does. Many times, it seems, companies don’t vet their promotions thoroughly enough. They need to operate with the assumption that someone will find a loophole and spread it like wildfire across the internet, and to therefore guard against all possible loopholes.
(SEE ALSO: Why do companies give away free money then act surprised when everyone wants it?)
The Iberia debacle
Unless you were living away from all civilization for two weeks, you surely heard about the Iberia “promo of the year“. The Spanish airline offered a promotion of 9,000 bonus Avios on flights, but with one unexpected twist: the points would be awarded 10 days after booking. Not after flying. And it would apply on up to 10 tickets. The promotional Avios can be used up until December 1.
This meant that many people were able to book 10 cheap one-ways and qualify for 90,000 promotional Avios for as little as $250 or so. If you don’t know the value of Avios, this is insane value. We’re talking nearly enough for a one-way flight in Cathay Pacific first-class from Hong Kong to London. For $250.
Today we’ve seen the first of the Avios post. But we’ve also heard about numerous reports of people’s accounts being locked, and some where Iberia is indicating that the terms of the promotion were violated and the tickets would be refunded. Some of the time Iberia has reached out for identity verification. As they start to send out more and more Avios to people, I really don’t expect things to get much better. At least they appear to be honoring those with established accounts who took the promotion at face value. Burn those Avios fast. I wouldn’t expect to see much Oneworld award space in the next few months.
The Chinese restaurant that was eaten out of business
I just came across this story today and I love it. It is such a great comparison to the award travel community and how we can operate. Just like those who exploited the generous terms of the Avios promotion, lots of people exploited this restaurant’s generous offer.
The news article details how a restaurant in Chengdu, China went from launching a phenomenal promotional deal to shuttering its door within two weeks. How? Someone in management decided to sell monthly all-you-can-eat passes for the insanely cheap price of ~$25 USD. During the two weeks, the Chinese hot pot eatery was seeing over 500 patrons per day, often in a giant queue out the doors. Besides already being an unsustainable offer at $25 for a month’s worth of restaurant food, many patrons were obviously sharing their purchased card with friends and family.
The restaurant closed over $100,000 in debt. It had been in business 18 months.
What boggles my mind is how no one at the restaurant realized how terrible of an idea this was. It also boggles my mind how companies don’t vet their promos with a miles and points guru who can point out any potential for exploitation or major financial loss.
And then there is MoviePass
Don’t get me started on this one. I have friends who have MoviePass, and they are putting it to fantastic use. They are also putting up with MoviePass changing its terms on a whim, which has gotten worse and worse as times goes on.
When MoviePass launched, it was pretty much the best deal ever for cinema-goers. At one point you could pay $90 per year for one movie per day. There were other, likewise amazing, deals offered by the company. When something is too good to be true, it probably is. And this is too good to be true for moviegoers. I don’t see a sustainable future for this company. People who would not have gone to the movies more than once or twice per month are suddenly going as much as they like. They want to get their “money’s worth” out of their pass. And MoviePass is on the hook for every ticket.
MoviePass has since added things like “surge pricing” for popular movies, and limiting people to seeing a specific movie one time. MoviePass offered a limited subscription as well of something like 3 or 4 movies per month. Even with these changes, the company has millions of subscribers who may a mere $10 per month in most cases. There is no way that this is sustainable. The company is like one giant promotion for moviegoers that will one day fizzle into nothing.
MoviePass’ parent company is looking to borrow over $1 billion to keep it afloat. It still has cash reserves and a line of credit, but the company is bleeding $22 million monthly. I have no idea how this is a sustainable model, but their CEO seems to think that somehow they will pull it off. Whatever “it” is.
Conclusion
While I am definitely one to get excited about a stellar, too-good-to-be-true promotion or deal, I am also one to be a bit skeptical. And for good reason. Companies sometimes roll out ill-informed promotions (or they are just an poorly-conceived idea, like MoviePass), and have to figure out a way to limit their losses. In the case of the Iberia promotion, I hope everyone gets their Avios.
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Dan Miller travels with his wife and 6 (SIX!) children. He loves to help families travel for free / cheap, especially larger families. If you are looking for help, drop him an email at 
“Burn those Avios fast. I wouldn’t expect to see much Oneworld award space in the next few months.”
What is this Oneworld space you speak of? LOL, the Asian OW space in long haul premium has been a ghost town for a few years now, AA is still stingy so the good uses for Avios have been few and far between. They’re mostly best for short flights inside regions, where last minute one-ways can be a ripoff, and that space isn’t going anywhere.
ChoiceHotels is running 2 stays= x1 $50 gift card. Problem is they discounted 5 various GCs to 8,000 points, Then everyone else who had points racked up, blew out all the discounted cards. Now all that is left if full price GCs at 16,000 points (or about 4-5 stays value). Some one needs to do a class action, these didnt last 3 days into the 45 day promo. Customer service email and twitter refuses to respond. #Lame
I see MoviePass as different from the others, they knew they were swinging for the fences: they want to get big so they are seen as having valuable consumer data and tie-ins they can monetize as their real product, the pass itself was never intended to be a profitable business model.
Agreed. But they are bleeding so much cash. I’ll be surprised if they actually pull it off.
A friend told me about an all you can eat prime rib special that turned into a money pit. Only offered on Sunday and by a restaurant chain that may have one unit still open. Players from the local NFL team started coming in for the prime rib. Also servers allow customers to reorder just the beef and skip the baked potato and dinner rolls. My friend said a typical football player could eat 2 or 3 pounds of prime rib at a sitting.
My nephew is a data analyst for an advertising firm. He often has to tell clients their promotions are hair-brained. Some times they listen. Sometimes not.
Iberia business class is my favorite way to get from the East Coast to Europe. There is lots of availability as soon as the calendar opens. Not so much a month or two later. I’m relieved I booked our flights for next May two days before the promo hit.
This reminds me of the story a few years back where a lot of companies crashed and burned because they sold TOO MANY Groupons. They were usually the ones that provided something tangible or labor-intensive. I discovered this effect first hand when I bought cupcakes from a bakery start- up, a talented baker that was a one-woman show who reserved a space in a commercial kitchen. She did not have a store front or any walk in traffic. You had to call ahead and reserve the 2 dozen premium cupcakes that you bought on Groupon. The trouble was, it was such a good deal, and she only received half of the money from Groupon as per the agreement. I think I paid $30 for the cupcakes to Groupon, so the baker received $15 from that deal. It may have seemed amazing to her to get all that money up front from selling like 1000 or 2000 of those deals. But she did not have enough time in the day to fulfill the orders, and she was not getting any referrals or future business because people were so irked that she was so immensely backlogged and could not get the cupcakes they wanted asap for parties and events in the very near future. Who thinks of booking a couple dozen cupcakes three weeks out? Also, she was having to bake bigger batches, and could not really let the customer have a say in the colors and flavors as much as was implied. So it was a total disaster, and she had to close shop after just half a year. Which was too bad, because she was an amazing baker!
I hope she didn’t give up on her dream.