What the Loyalty Programs are Saying – From the Executive Summit

Please note this site has financial relationships with American Express and this post may contain affiliate links. Read my Advertiser Disclosure policy here to learn more about my partners.

The second session at the Randy Peterson Executive Summit was all about the loyalty programs themselves. To read about the session with the loyalty credit card issuers read this postI had to step out for part of this second session, but I had my friend take notes for me the whole time, so here are some snipits from the presentation entitled “Planes, Trains, and Automobiles”.

On the panel:

Bob Crandall (former CEO American Airlines), Jeff Robertson (VP, SkyMiles, Delta Air Lines), Greg Brown, (Vice President Loyalty and Relationship Marketing, Choice Hotels), Avis, National Car Rental and Hertz, Tim Doolittle, Avis Budget Group VP CRM/Marketing Analytics

  • Bob Crandall said that after the AA/US merger you should “see an airline that has a lot more to offer.” There are some cons such as retraining that takes time.
  • When asked about the merger from a competitors perspective Jeff Robertson from Delta was realistic in stating that this is a different time than when the Delta/Northwest merger took place. He noted that at that time all the airlines were in the same boat just trying to survive and build reputations. Now, it is harder to merge and work through the changing dynamics of the industry. United and Delta are very strong, so there is a different air of competition and economic environment for them to work through.
  • Bob Crandall passionately stated that airlines are “hosing the customer.”  He said ancillary charges are the fundamental mistake of the airlines right now. It does not cost the airline $200 to change your flight, so why should it cost the customer $200 to change it. He stated it would be better if airlines raised their base prices to a realistic level instead of relying on ancillary charges. Later in the session, he was asked what he though the dollar amount on that raise would be. He did say he has long been out of the industry to know those numbers but after figuring the profit the airlines were expected to receive this year he thought it could be in the 4% range.
  • Jeff from Delta said the reality is Delta will probably profit their best year ever this year with a lot of that being due to ancillary charges – bag fees, upgrade fees, change fees, etc. Without those fees though Delta would actually be losing money.  To balance out they need to raise prices or have ancillary charges. They need to make a profit to continue to provide a product people want.
  • Regarding the partnership between Delta and Starwood, the Delta rep said it was added as something that would make the customer happy, and give them an opportunity to earn something beyond just airline miles.  There needs to be more incentive and working with a hotel gets the airline out there in a way that is making people happier and giving them more options. Targeting “affluent, high business traveler” seems to be a goal of this partnership. He didn’t rule out other similar relationships in the future, but they are still in the early evaluations steps of seeing how this will play out.
  • Choice Hotels was posed with a question about whether his program would ever seek an alliance. He points out that back in April, Choice did start an alliance with Bluegreen Vacation Club but no desire in the near future to team up with an airline.
  • A question was posed about how to make the whole travel experience easier for the customer. Jeff from Switchfly answered that the biggest problem is separation of interface points. There are too many programs that don’t work together and there needs to be integration of those platforms that allow suppliers to do what they do best which is get you on your flights, get you in the best room, get you in your desired rental car, without hassle to the customer.
  • Mr. Crandall brought up the issue of $9 rental car gas, and there was a discussion about what happens when you return your car gives you a lasting impression of the company.  There was a mention of it being possible that rental car companies would make more by allowing you to pre-pay by the quarter of a tank or similar.
  • Bob Crandall said that some folks still believe that Southwest is a low cost airline, but that is not the reality.

Overall the tone was pretty interesting – especially toward ancillary fees.  Most seemed to agree that they tick customers off, but on the other hand they come in at a high margin for the company.  I very much agreed with Bob’s tone that travel companies should want to make travel easy and enjoyable so that customers want to do it more…not less.

Pingbacks

Comments

  1. One wonders at what point do the major airlines become so costly to the traveller that one of them re-invents themselves as the true LCC without all the extra fees.

    Glenn

  2. @ Glen I’ve been waiting for 1 year to see this happen. With everything going this way overseas I figured it’s going to happen soon. They’ll see $ signs and if a US company doesn’t do someone from overseas will.

  3. @glenn I think a true LCC will end up having the same fees regardless. AirAsia being one of the most successful LCC strip everything to the bare minimum, add fees for everything and anything. So if anything, the airlines are becoming more like LCC but without the low price benefit

  4. Southwest may no longer be a true LCC, but they do offer a unique value proposition – competitive fares without ancillary charges and with lots of flexibility (in addition to no change fees, their points bookings are fully refundable). As a result I now use them for most of my domestic travel.

  5. Where was Hilton HHonors? Hiding under the bed is my best guess. I still cannot understand how they think their new award chart is going to work.

    I have an AXON rate res at the Paris Hilton La Defense this September at the old rate. 125K points for 4 nights. The new AXON rate is 260K.

    Of course, they gave us this new benefit of “fifth night free”. So I searched PHLD for June 1st thru Sept 15. Fifth night free is only available on 5 arrival dates during that 3 and a half month time period. If you are signed in as an elite, and try to book 5 consecutive nights, it shows nothing available other than those 5 arrival dates. None of which are between June 1st and July 27. Who wants to be in Paris in August, when so many things are closed? Yet even in August only 4 arrival dates are available.

    If you are not signed in as an elite, and thus not eligible for 5th night free, they will let you book 5 nights on points. But despite the “low season” rate of 60K a night, many arrival dates price out at over 190K a night. 5 nights for arrival June 13th prices at a total of 1,570,935. Not a misplaced decimal point, one and a half MILLION points for 5 nights. For a hotel room in a business park 20 minutes on the Metro from downtown Paris. And where almost everything closes by 7 pm.{The owners of the previous downtown Hilton property canceled their contract with Hilton. Perhaps they knew this devaluation was coming}.

    Supposedly, HHonors members were told in advance, but I have still to receive any notice from HHonors. Luckily, I read several travel blogs, so I knew to use all of my HHonors points on res made before the deadline. But I’m guessing there are lots of business travelers with a million points in their account who didn’t know, or didn’t think it would be this bad, or simply couldn’t book them all in time. Those who didn’t know, thinking they have enough points for 32 days at HPLD, will now they find they only have enough points for 4 or 5 days on most dates.

    If the AXON rate is unavailable, 4 nights {except for those few nights in August} price out at a minimum of 615K points. But many dates are that 1.5 Million + rate.

    I can’t imagine how their “loyalty” plan is going to weather this. Not to mention what AXEX is going to say when spending on the AMEX HHonors and Surpass cards utterly plummets. Now that the drug store bonus is history, you would have to spend $87K at 3 X per dollar, for a 4 night AXON award at La Defense. Not only is that $800 in BB fees, the yearly limit on BB is $50K, so it’s going to take over a year and a half of total BB spend to get those 4 nights. Assuming the AXON rate is available for the dates you need.

    No wonder they waited to announce the new AXON prices until after the Freddies were over. I originally thought the HHonors devaluation was utterly horrible. Now that I know more of the details, it’s even worse than I that.

  6. Yes, those last couple of points–rental car fuel and–so simple, like marketing 101 simple–Make Things Easy for the consumer. The companies that do this will be quantum leaps ahead of those who don’t.

  7. Re the comment above mine, and the issue with excessive fees–both great examples of not keeping things simple. Consumers perceive this as draining, and insulting. It’s tedious. Over a million points for a hotel room–it’s exhausting just thinking about that. That’s why Southwest is considered less expensive than it really is, it’s more straightforward. Consumers don’t feel nickel and dimed and insulted. It’s simple good will. I’d rather pay more up front–same with resort fees and rental car gas, etc. Of course that stuff is resented and it certainly impacts on the perception of the company. They’ve normalized it with everyone doing it, but those that can get past all that, those will be the leaders and generate the most loyalty. (I think) Hope they catch on to this seemingly obvious meme.

  8. It turns out that as bad as the HHonors devaluation was, it’s not quite as bad as I had thought. Lucky pointed out that the high rates at PHLD were simply because so many people had burned their points before the deadline. Thus the basic rooms at that property were already full with award res, and only higher priced upgraded rooms were available.

    I found you can search for August 2014 by first searching for 2013 dates with “flexible dates”, then change to 2014. Sure enough 5 night awards with fifth night free are available every night in August 2014 at the minimum 240K rate. At least right now…

    So yes, the category jumps and increased AXON rates are terrible. But they aren’t as bad as I had thought they were.

Leave a Reply

Your email address will not be published. Required fields are marked *