Points.com Hums Along With Growth Despite a Narrow Business Base
Points.com, the reseller of airlines and hotels points, reported gains in revenue and profit in 2018 thanks to resilient economies in its key markets.
Last year Points revenue rose to $376.2 million, up 8 percent, year-over-year. Net income rose 130 percent, to $7.79 million, year-over-year.
Yet the growth came primarily from the Toronto-based company’s legacy, flagship business, and only a few partners contributed to much of its revenue.
Last year, Points generated 94 percent of its revenue from services related to loyalty currency sales, such as helping travelers swap points and miles between programs.
The corporation’s three largest, though unnamed, customers for this service represented 70 percent of the company’s total revenue, according to earnings-related financial filings released on Wednesday. The rest came from approximately 35 other partners for its flagship service, the company reported Wednesday.
Having a small portfolio brings risks. Points has made contractual guarantees on the minimum value of points and miles that it will process for specific loyalty program partners. For the most part, the company has met these guarantees. However, sometimes, such as in 2015 and other years, it hasn’t. Stumbles can lead to a scramble to find money to purchase the shortfall.
Last year Points had nothing to worry about, in any case. The gross value of sales processed through its system rose 13 percent year-over-year from an undisclosed base amount, an executive said during an earnings call. Points saw its take for its services driven by a handful of customers rise accordingly.
Still, Points hopes to diversify.
In December, it scored a big win in a deal with Amadeus. The tech giant will cross-sell Points’s services to more than 80 airline customers that use its loyalty management services.
In a plus, Amadeus has many airline customers outside the U.S. That diversity may help Points, which generated 88 percent of its revenue last year from U.S.-based partners.
Yet Amadeus may ultimately have its own interests in loyalty in the long run. The company separately offers a Navitaire Loyalty system that it has paired with its New Skies passenger service system for airlines. The software helps airlines, such as AirAsia, manage their rewards programs. When an airline joins, Amadeus’s software ports over the airline’s passenger profile data and makes loyalty program details visible to airline staff via its software. The tool, for example, would let an agent redeem miles via a call center or allow a passenger cancel and receive a refund for points via the airline’s website with no customizations needed.
While Points doesn’t primarily try to offer to run airline loyalty programs, Amadeus’s loyalty services might have a mission creep that encroaches on Points’ turf over time.
As a separate matter, Points is also surprisingly dependent upon proprietary technology rather than the open source technology that is becoming more popular in the industry. Maybe its exposure to primarily cloud-based Amadeus will be inspiring.
During a call with analysts on Wednesday, Points said its performance would have been even better last year except for two incidents. One, the Toronto-based company lost a contract with Saudia Airlines due to a broader geopolitical dispute between Saudi Arabia and Canada.
Two, Marriott, another partner, stumbled in its merger of loyalty programs with Starwood and also suffered negative press due to a security breach. Those events “considerably reduced” the combined loyalty program’s performance relative to the first half of the year, Points executives said using coded language to describe the business partner. Points executives expected continued turbulence in the first half of this year for Marriott as it relaunches its program as Bonvoy.
Points also had victories last year. One of the most notable was Singapore Airlines, which began enabling members to redeem KrisFlyer miles for hotels and car rentals using tech from Points.
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