5 Tips to Help Your Clients Turn Business Travel “Lemons” into Lemonade
Written by: Merriah Harkins
As an advisor, your goal is to help your clients become more financially secure. At the same time, you hope to give them peace of mind and, ultimately, make their lives better and easier every day.
One way you can add that little extra touch is to help clients who travel—senior executives, salespeople, consultants, and more—transform the “lemons” of business travel into a tangible financial benefit that is, yes, as sweet as lemonade!
From the outside, the fancy dinners, big cities, and ritzy hotels may seem exotic and exciting. But for most seasoned business travelers, the reality is quite different. Talk to any frequent business traveler and they have a sad story to tell about the important events they’ve missed while on the road. Reunions, parties, and family birthdays. A child’s first words, first steps, or first day of school. This list goes go on and on. Those personal sacrifices can wear down even the most stalwart road warrior. But while the downside of business travel is inevitable, by arming your clients with smart strategies to make the most of travel loyalty programs, you can at least help turn those sacrifices into some pretty spectacular rewards. Creating a strategy is the key.
I speak from experience. In my role at GWG Holding, Inc., I’ve created a lot of fond memories traveling across the US, and I’ve certainly been blessed to enjoy conferences at some of the most beautiful resorts in the US, Canada, the Caribbean and Mexico. But my travels haven’t always been so pleasant. A few years ago, I found myself a newlywed with a consulting job that required me to be on the road five days a week, every week. Worse yet, I was traveling to a single city that I didn’t particularly enjoy. Going back to that ugly, brown hotel all alone every evening made me acutely aware of how much I missed my husband and our social time with friends back home. I knew that to make it work, I had to create a silver lining. Luckily, I realized that by taking a strategic approach to earning travel rewards, I could at least begin to enjoy the level of luxury with my husband that I was enjoying (though not so much!) alone on the road.
You can give this gift of luxury to your road-warrior clients by sharing these 5 tips:
1. Get loyal.
Pick one airline, hotel chain, and rental car company and use them whenever possible. Choose the airline that has the most flights from your home airport to the cities you travel to most, and pick the hotel chain with the most options. Loyalty leads to elite status and more comfortable travel.
2. Add a credit card.
Once you’ve made your pick, earn even more loyalty points with a rewards credit card. Airlines and the major hotel chains offer cards with excellent sign-up bonuses, elite status, and free perks at airports and hotels. Whichever card you choose, use it to pay for everything you can, and then pay off the balance each month. The rewards will add up fast without the need to change anything except how you’re charging and paying your bills.
3. Opt in on promotional offers.
With only three loyalty programs to manage, it’s much easier to track and manage opportunities to earn extra miles and points. Open those promotional emails (and be sure they’re not going to spam) and always register for bonus promotions. Most programs have multiple major promotions each year, but you can only earn those extra miles and points if you take the time to register.
4. Spend your points and miles wisely.
You may not be paying cash for your flights, but remember that reward miles and points are still a form of currency. To get the best bang for your buck, book international award flights 8 to 10 months in advance, when availability for international award travel is plentiful. And before spending those valuable miles and points, be sure the value of your purchase is greater than what the miles and points are worth. Simply divide the cash-cost by the number of reward miles or points to determine the value of the reward and to see if cash is a better option, or if you’re getting a good deal, a great deal, or even an “I-can’t-believe-it” deal using your reward miles or points. Use these valuations (based on my own experience and industry research) as a simple points-to-dollars guideline:
- Hotels (value of one reward point): IHG – 0.7 cent; Hilton – 0.5 cents; Hyatt – 1.8 cents; Marriott – 0.7 cents; Starwood – 2.2 cents
- Airlines (value of one reward mile): Alaska Airlines – 2 cents; American Airlines – 1.5 cents; Delta Airlines – 1.5 cents; United Airlines – 1.5 cents
5. Mix points and cash to stretch your spending power.
Combining points with cold, hard cash can provide excellent savings and stretch your reward points. IHG, Hilton, Hyatt, Marriott and Starwood all offer particularly nice cash and points awards that are available for almost every hotel category. This option can make it much more affordable to travel in luxury at a fraction of the rack rate.
In 2015, my husband and I traveled to Malaysia, Bali, Singapore, the Maldives, Oman and Dubai. Last year we celebrated our 5th wedding anniversary in Spain and France. This year, we’re headed to Vietnam. On each of these trips, we stay in luxury hotels and fly business or first class on every international flight. When I do the math (because I always do the math!) our savings have averaged an amazing 80% off the retail value. And the emotional and physical benefits? Priceless.
All the Talk of an Accelerating Economy and Rising Inflation Just Doesn't Add Up
The biggest news for the markets this week came from the Federal Reserve. On Wednesday, it released the January Federal Open Market Committee meeting notes and they were interpreted as dovish by some and hawkish by others as analysts raced to divine insight from the text.
The recent data isn’t supporting the narrative of accelerating global growth and inflation while equities continue to experience higher volatility. What does it mean for stocks, bonds and yields? Glad you asked! Here’s my take on why all the talk on an accelerating economy and rising inflation just doesn't add up when you look at the data.
Equity Markets — A Relatively Narrow Recovery
The shortened trading week opened Tuesday with every sector except technology closing in the red. The S&P 500 fell back below its 50-day moving average after Walmart (WMT) reported disappointing results, falling over 10% on the day, having its worst trading day in over 30 years.
Walmart’s online sales grew 23% in the fourth quarter, but had grown 29% in the same quarter a year prior and were up 50% in the third quarter. We saw further evidence of the deflationary power of our Connected Society investing theme as the company reported the lowest operating margin in its history.
Ongoing investment to combat Amazon (AMZN) and rising freight costs — a subject our premium research subscribers have heard a lot of about lately — were the primary culprits behind Walmart's declining numbers. To really rub salt in that wound, Amazon shares hit a new record high the same day. This pushed the outperformance of the FAANG stocks versus the S&P 500 even higher.
Wednesday was much of the same, with most every sector again closing in the red, driven mostly by interpretations of the Federal Reserve’s release of the January Federal Open Market Committee meeting notes. In fact, twenty-five minutes after the release of those notes, the Dow was up 303 points . . . and then proceeded to fall 470 points to close the day down 167 points. To put that swing in context, so far in 2018, the Dow has experienced that kind of a range seven times but not once in 2017.
Thursday was a mixed bag. Most sectors were flat to slightly up as the S&P 500 closed up just +0.1%, while both the Russell 2000 and the Nasdaq Composite lost -0.1%. The energy sector was the strongest performer, gaining 1.3% while financials took a hit, falling 0.7%.
The recovery from the lows this year has been relatively narrow. As of Thursday’s close, the S&P 500 is still below its 50-day moving average, up 1.1% year-to-date with the median S&P 500 sector down -1.0%. Amazon, Microsoft and Netflix alone are responsible for nearly half of the year’s gain in the S&P 500. The Russell 2000 is down -0.4% year-to-date and also below its 50-day moving average. The Dow is up 78 points year-to-date, but without Boeing (BA), would be down 317 points as two-thirds of Dow stocks are in the red for the year.
Fixed Income and Inflation — the Coming Debt Headwind
The 1-year Treasury yield hit 2.0%, the highest since 2008 while the 5-year Treasury yield has risen to the highest rate since 2010, these are material moves!
What hasn’t been terribly material so far is the Fed’s tapering program. It isn’t exactly a fire sale with the assets of the Federal Reserve down all off 0.99% since September 27 when Quantitative Tightening began, which translates into an annualized pace of 2.4%.
As for inflationary pressures, U.S. Import prices increased 3.6% year-over-year versus expectations for 3.0%, mostly reflecting the continued weakness in the greenback. The Amex Dollar Index (DXY) has been below both its 50-day and 200-day moving averages for all of 2018. The increase in import prices excluding fuel was the largest since 2012 and also beat expectations. Import prices for autos, auto parts and capital goods have accelerated but consumer good ex-autos once again moved into negative territory.
Outside the U.S. we see little evidence that inflation is accelerating. Korea’s PPI fell further to 1.2% - no evidence of rising inflation there. In China the Producer Price Index fell to a 1-year low – yet another sign that we don’t have rising global inflation. On Friday the European Central Bank’s measure of Eurozone inflation for January came in at 1.3% overall and has been fairly steadily declining since reaching a peak of 1.9% last April. This morning we saw that Japan’s Consumer Price Index rose for the 13th consecutive month in January, rising 0.9% from year-ago levels. Excluding fresh food and energy, the increase was just 0.4% - again, not exactly a hair-on-fire pace.
The reality is that the U.S. economy is today the most leveraged it has been in modern history with a total debt load of around $47 trillion. On average, roughly 20% of this debt rolls over annually. Using a quick back-of-the-envelope estimate, the new blended average rate for the debt that is rolling over this year will likely be 0.5% higher. That translates to approximately $250 billion in higher debt service costs this year. Talk about a headwind to both growth and inflationary pressures. The more the economy picks up steam and pushes interest rates up, the greater the headwind with such a large debt load… something consumers are no doubt familiar with and are poised to experience yet again in the coming quarters.
The Twists and Turns of Cryptocurrencies
The wild west drama of the cryptocurrency world continued this week as the South Korean official who led the government’s regulatory clampdown on cryptocurrencies was found dead Sunday, presumably having suffered a fatal heart attack, but the police have opened an investigation into the cause of his death.
Tuesday, according to Yonhap News, the nation’s financial regulator said the government will support “normal transactions” of cryptocurrencies, three weeks after banning digital currency trades through anonymous bank accounts. Yonhap also reported that the South Korean government will “encourage” banks to work with the cryptocurrency exchanges. Go figure. Bitcoin has nearly doubled off its recent lows.
Tuesday the crisis-ridden nation of Venezuela launched an oil-backed cryptocurrency, the “petro,” in hopes that it will help circumvent financials sanctions imposed by the U.S. and help improve the nation’s failing economy. This was the first cryptocurrency officially launched by a government. President Nicolás Maduro hosted a televised launch in the presidential palace which had been dressed up with texts moving on screens and party-like music stating, “The game took off successfully.” The government plans to sell 82.4 million petros to the public. This will be an interesting one to watch.
Economy — Maintaining Context & Perspective is Key
Housing joined the ranks of U.S. economic indicators disappointing to the downside in January with the decline in existing home sales. Turnover fell 3.2%, the second consecutive decline, and is now at the lowest annual rate since last September. Sales were 4.8% below year-ago levels while the median sales price fell 2.4%, also the second consecutive decline and this marks the 6th decline in the past 7 months. U.S. mortgage applications for purchase are near a 52-week low.
Again, that’s the latest data, but as we like to say here at Tematica, context and perspective are key. Looking back over the past month, around 60% of the U.S. economic data releases have come in below expectations and this has prompted the Citigroup Economic Surprise Index (CESI) to test a 4-month low. Sorry to break it to you folks, but the prevailing narrative of an accelerating economy just isn’t supported by the hard data. No wonder that even the ever-optimistic Atlanta Fed has slashed its GDPNow forecast for the current quarter down to 3.2% from 5.4% on Feb. 1. We suspect further downward revisions are likely.
Looking up north, it wasn’t just the U.S. consumer who stepped back from buying with disappointing retail sales as Canadian retail sales missed badly, falling 0.8% versus expectations for a 0.1% decline. Over in the land of bronze, silver and gold dreams, South Korean exports declined 3.9% year-over-year.
Wednesday’s flash PMI’s were all pretty much a miss to the downside. Eurozone Manufacturing PMI for February declined more than was expected to 58.5 from 59.6 in January versus expectations for 59.2. Same goes for Services which dropped to 56.7 from 58 versus expectations for 57.7. France and Germany also saw both their manufacturing and services PMIs decline more than expected in February. The U.K. saw its unemployment rate rise unexpectedly to 4.4% from 4.3%
The Bottom Line
Economic acceleration and rising inflation aren’t showing up to the degree that was expected, and this was a market priced for perfection. The Federal Reserve is giving indications that it will not be providing the same kind of downside protection that asset prices have enjoyed since the crisis, pushing markets to reprice risk and question the priced-to-perfection stocks.
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