Does Amtrak make money/revenue when customers use Guest Rewards Points

[Mike S.]

If figured I'd post here instead of in the GuestRewards section since this is more about Amtrak than the points.

Basically, what I'm asking thinking: Is it good for Amtrak that people are traveling by rewards points?

Now, certainly rewards points earned from Amtrak travel earns amtrak no money. I travel X times, earn a bunch of points, and they give me some free trips.

However, how about credit cards/merchants. If I spend 20,000 on a credit card and earn 20,000 points...and now take a Bedroom trim somewhere...I went for free, but over the course of time, the credit company i'm sure has sent Amtrak $$$ in exchange for points.

I guess I'm just rambling, but I wonder if it a good thing for Amtrak.

Mike S.

 

[Trogdor]

I don't know the specifics of the agreement between Amtrak and Chase, but I would guess (hope) that the AGR program, overall, makes money. The credit card program must be profitable (otherwise, there's little reason for Amtrak to do it). Earning points on travel doesn't make Amtrak any money, per se, but, like any other loyalty program, the idea is that it gets people to travel more than they otherwise would, and when they travel, they would travel with Amtrak.

Airlines have generally found frequent travel programs to be significant profit centers (in some cases, it might be the only thing that makes money at certain airlines!). The deals they work out with credit card issuers (such as Chase) and merchants (in their equivalent to "Points for Shopping" on AGR) bring in tons of revenue, and cost the airline very little except for the occasional free ticket (and they limit the number of free tickets available on any given flight, sometimes they'll charge the passenger some cash to go with the miles they use, or they'll hope the passenger uses a bunch of miles on a low-value flight).

Amtrak probably makes a similar amount of income through these relationships. Now, as we all know, it's true that there aren't any capacity controls on AGR awards. However, although I don't have any data on this, I would guess that the typical AGR travel award is probably a short ride somewhere on the NEC. The round-the-country loophole trips that folks talk about on here are probably so small as to be insignificant in the grand scheme of things, which is why the loophole was left open for so long (AGR knew about it long before they shut it). If short rides are what folks wind up using their points for, then they really don't cost Amtrak all that much of anything.

 

[PRR 60]

If figured I'd post here instead of in the GuestRewards section since this is more about Amtrak than the points.

Basically, what I'm asking thinking: Is it good for Amtrak that people are traveling by rewards points?

Now, certainly rewards points earned from Amtrak travel earns amtrak no money. I travel X times, earn a bunch of points, and they give me some free trips.

However, how about credit cards/merchants. If I spend 20,000 on a credit card and earn 20,000 points...and now take a Bedroom trim somewhere...I went for free, but over the course of time, the credit company i'm sure has sent Amtrak $$$ in exchange for points.

I guess I'm just rambling, but I wonder if it a good thing for Amtrak.

Mike S.

The answer is basically yes, but it is not a simple yes.

First, points and miles earned for travel are designed to build brand loyalty. The idea is that the program encourages customers to concentrate their business with a specific carrier and, in turn, the carrier offers some goodies like free travel as a reward. The ability to cultivate and identify loyal customers is considered valuable and worth the cost of the occasional free trip. Then there is the competetive aspect: one carrier has to match what the others are doing or risk losing business. American Airlines was first into the frequent flier game with AAdvantage, launched May 1, 1981. How long did it take for arch-rival United to respond? Less than one week. United Mileage Plus was born on May 6. Monkey see, monkey do.

Amtrak's entry into the fray was a little different. Amtrak was a late comer to the frequent traveler game. They got in very reluctantly and for the benefit of Acela. Acela was going to go head-to-head with the northeast air shuttles for the New York - Washington and New York - Boston markets. It was the first time that Amtrak was going to try to seriously compete with air travel. Both of the primary shuttle carriers - US and DL - had active frequent flier programs. It was feared that the absence of a similar program for Amtrak and Acela would place the Acela at a competitive disadvantage. Thus was born Amtrak Guest Rewards. By the way, credit the late George Warrington for AGR. He made lots of mistakes during his tenure as the CEO of Amtrak, but AGR is to his credit. In fact, the name Amtrak Guest Rewards is the last place where his obsession with calling passengers "guests" is still used.

The AGR tie-in with Continental Airlines was critical. Many (if not most) of the typical Acela business travelers have little or no interest in Amtrak travel, but they love free air travel and especially upgrades. With Acela earning 500 points a pop (same as the shuttles), and then transferable to CO, Amtrak was now competitive with US and DL. The entry of CO into the Star Alliance (*A) last year made Acela and AGR even more attractive to business travelers (*A is the largest of the airline alliances). After free Acela travel, points to miles transfers from AGR to CO OnePass is the second most common use of AGR points. What does that do for Amtrak? It puts Acela on a level playing field with the air shuttles helps fill the seats, with Acela seats being the most lucrative Amtrak sells. The passengers can then use the AGR points earned for free or upgraded travel around the world.

Partner participation is different. Using Chase as an example, the bank purchases AGR points in bulk, then distributes them to entice customers. What is paid by partners for points and miles is a closely held secret, but a presumption of something like 3/4 cent per point or mile would not be far wrong. If Chase buys 1 billion AGR points, Amtrak gets about $7.5 million dollars. In exchange for that, the bank gets access to customers who tend to travel a lot and spend a lot. And, if those customers are like me, the spend will be with the card that earns points or miles. it is good for the bank, and good for the carrier.

If everything works as it is supposed to, a program like AGR should be, at worst, revenue neutral, with the benefit of building brand loyalty and matching the competition. Most of the large airline programs are far more than that - they are huge revenue generators. A recent deal by Chase to remain the credit card for United Mileage Plus was over worth over $1 billion to UA. Run correctly, AGR should not be costing Amtrak a cent. Is AGR run correctly? Well......

 

[the_traveler]

As stated above, I prefer to use my AGR MasterCard by Chase for almost all my transactions. Chase offers me AGR points, which they paid AGR/Amtrak money for (to purchase their AGR points). Thus my "free" trips on Amtrak were essentially paid for by Chase, and Chase gets my business - and hopes that I do not pay in full so they can earn money from me by charging interest and/or fees (which they never do because I pay in full every month

)!

Some airlines (IIRC Air Canada is one) have sold off their frequent flyer programs for $xxx BILLIONS, because they bring in so much money. Thus by selling it for so much, the airline has that much more cash! For most airlines, they earn more cash from selling points/miles to partners - such as credit card companies, banks, car rental companies, hotels, stores, etc... - then by flying people!

 

[Gratt]

Thanks for the info, I too have wondered how Amtrak makes money from its AGR program. I wonder about my case though.

I travel on Continental at least several times a year because I have family in Houston and I live in NYC, I also have a Continental Chase MasterCard, so I manage to build up quite a bit of miles.

I can do a heck of a lot more with my CO miles by transferring them to AGR points, and then using them for a nice LD ride or a trip in the North East.

Am I paying Continental, but making Amtrak provide the service? :huh:

 

[the_traveler]

Thanks for the info, I too have wondered how Amtrak makes money from its AGR program. I wonder about my case though.

I travel on Continental at least several times a year because I have family in Houston and I live in NYC, I also have a Continental Chase MasterCard, so I manage to build up quite a bit of miles.

I can do a heck of a lot more with my CO miles by transferring them to AGR points, and then using them for a nice LD ride or a trip in the North East.

Am I paying Continental, but making Amtrak provide the service? :huh:

Not at all!

Any time you make a transfer, the transferring company (A) is buying points from the other company (B). So in the case of a CO->AGR transfer, CO is actually paying AGR to buy AGR points. In the case of an AGR->CO transfer, AGR is buying OnePass Miles. In the case where you fly UA but credit those miles to your US account, UA is actually buying Dividend Miles from US.

Also, if you stay at Hilton or some other hotel, or some car company, and credit the points to AGR, it is because those companies have bought AGR points for you.

I've lost count, but over the past 2 years, I've transferred over 150,000 OnePass Miles to AGR! So basically CO has bough over 150,000 AGR points for me. Assuming I could get the cheap redemption for each trip, that means CO could sell 6 trips more in the US (and earn money for them) - instead of providing me "free" travel for 6 trips! I think CO is happy to get money for those 6 seats than $-0-, so I think they would be happy to buy me AGR points!

 

[abcnews]

Good timing.... Case in point.

We are taking the Auto Train on 8/21/10. When we get to FL we are staying 3 nights at the beach in a condo. Then driving back to Virginia. There are six in our party (family trip), so I offered my oldest daughter a chance to fly back home, since I have a SUV that really fits five people much better than six. And I also have plenty of airline miles and AMEX Membership Reward points, so I figure that the trip back on the plane is really free. So according to AMEX Membership Rewards - I could book her a one way coach class ticket on Delta or United for about $110, or just use 11,000 Membership Reward points.

However - I simply swapped 15,000 Membership Reward points over to Continental Airlines, in order to transfer to AGR . Final result - a Roomette Reward on Amtrak for two people (one zone reward / 14,250 AGR points). So I booked a Roomette on the Silver Star - for two daughters - and we will drive back in comfort (4 total - not 6). I felt like we kind of "voted with our pocketbook" - In this case, Amtrak gets revenue, not UAL or Delta. At first we were going to fly, but upon a closer look - the train was a better fit. The two of them also like the train much better.