Do Frequent Flyer Disaster Relief Appeals Offer Less Than They Seem?

Hilton will let you convert 10,000 points into a $25 donation to the Red Cross. That’s one quarter of one cent per point. More options to give to disaster relief are better of course, but is it cynical of me to point out that this is hardly generous on Hilton’s part? It costs Hilton less on e a per-point basis to redeem your points for disaster relief than for HHonors to pay a hotel for an award night.  They get liability off their books at a lower cost than actually giving you an award night.  Is it too much to expect Hilton not to actualy come ahead ahead through donating to Haitian disaster relief?

Meanwhile, you can earn points through American by giving to the Red Cross for Haitian disaster relief. Generous of American, right? Not exactly.

I contacted American to verify that this promotion wasn’t arranged differently than their partner promotions gneerally are. I didn’t get a call back. Presumably the Red Cross is buying these miles from American. And the miles cost a good chunk of what the Red Cross gets from the donation. It’s part of their cost to acquire a new donor. The contribution itself doesn’t really provide net dollars for disaster relief, it puts the donor on a mailing list and the Red Cross makes money because people who self-identify as likely to give to the Red Cross (because they’ve already given) are highly likely to give again in the future. The Red Cross really makes money for future activities off the the re-solicitation of people who give now, even though those current gifts only recoup the cost of the Red Cross acquiring new donor names.

That isn’t to say that the Red Cross isn’t spending money on disaster relief. No doubt they are. But the economics of new donor acquidition are such that an initial gift is unliekly to provide new net dollars, and the funds available to the Red Cross for disaster relief are unlikely to go up as a result of a new donor coming in off this campaign (unless the gift is uniquely large).

Yesterday One Mile at a Time posted about an offer of 5000 Delta miles for the first 5000 people who donate $50 or more to the Martin Luther King Jr. National Memorial project. Is that Delta being generous? No, it’s a charity buying miles to acquire donors, and then betting that they can resolicit those donors and make money in the future. A new donor is valuable to a charity, and if they can entice a first gift with miles they hope to entice future gifts without such expensive premiums. And why limit the offer to the first 5000 people? Because the charity has set a budget for this new donor acquisition campaign, and they don’t want to exceed it.

(Cf. Wikipedia on direct mail fundraising.)

There are real needs, Haiti is a real tragedy currently, and donating to organizations helping out there is certainly commendable.  But it’s also easy to delude ourselves into thinking we’re doing good, or congratulating our travel partners for their generosity while they’re working in their own self-interest.

Meanwhile, if you actually want to help Haiti… (Update: The U.S. federal government has, indeed, granted Haitians in the US temporary protected status. This will allow them to return to Haiti to assist and come back to the United States, as well as make it easier to work in the United States and send funds back to Haiti.)

Update: A Delta spokeperson emails the following:

Delta does not charge charitable organization for the cost of miles. We value the charities in the communities that we serve in many ways including: Delta’s Force for Global Good, of which the Martin Luther King Jr. National Memorial project part, and our SkyWish program (http://www.delta.com/skymiles/use_miles/donate_miles/index.jsp) which allows members of our SkyMiles program to donate to the charity of their choosing. Neither of these programs includes payment for miles by the charities associated with the programs.