How does businesses make money from receiving Qantas points as payment?

Frequent Flyer Programs
1

Hello,

I am stumped on how businesses profit from allowing customers from airlines to pay for things using points and pay.

Hotel example:

  • I book a flight on Qantas and go through the payment process. It pops up that I can also purchase nights at a hotel on my trip using points and pay.
  • Lets say I purchase one night at the hotel using 40,000 frequesnt flyer points and $100.

Does the hotel receive the points, then sell them back to Qantas? Or do the points not even change hands, they are kept by Qantas and the hotel is reimbursed for the points value (40,000)?

Cheers!
Tom

2

Basically, the establishment will be paid a cash amount by Qantas.

3

The businesses themselves aren’t accepting the points as a form of payment; the airline is. The only time you ever get the points plus pay option with the hotels is when you’re booking with the airline who’s program you’re going through, so it’s all staying in-house and there’s no points going to hotels to then be sold back.

Qantas has multiple arms of its business aside from the airfares such as Qantas hotels, and it’s similar to booking through any other consolidator or travel agent - you pay the agent or website for the room, they in turn pay the hotel minus their fees or commissions.

Because the Qantas frequent flyer program and Qantas hotels is all a part of the same Qantas brand, they have made a business decision that they are happy to take points from you as a form of payment in lieu of cash, but they still pay the hotels whatever their contract says in real money behind the scenes for your room which they have sold you.

Qantas make more money through schemes like this because hotel redemptions aren’t going to leave them as far out of pocket, compared to if you used the same points for other more common uses such as upgrades or award seats. If the room is $400 a night say and they take 40,000 in exchange for $300 off it, your points are massively devalued compared to if you used them for say an economy to premium upgrade to LA, or an award seat to Singapore. Qantas would prefer to liberate your points for the hotel as opposed for the flight, because it’s less lost revenue for them in the long run.

 

 

 

 

4