Introduction
Airport lounges are popping up everywhere, and almost every major airline and credit card company seems to want to get in on it.
Customers reward companies that take care of them, and we feel really strongly that the lounges are a big part of that for us.
If you pay up and you’re willing to commit to that airline over the long term and make it like a partner basically for your travel experience, and they’re willing to reward you with with better perks.
More than half of frequent travelers surveyed visit a lounge at some point during their journeys. But as their popularity increases, so do the challenges of operating them, like overcrowding.
I would say any wait is too long and we are doing everything we can to minimize that.
As companies invest more money and effort into improving travel, loyalty status and lounge access are becoming increasingly harder to qualify for a.
Declining exclusivity
There are over 3200 airport lounges worldwide. The United States has more than 300 of them, with individual airports in New York, Los Angeles and San Francisco home to the most locations.
And there’s a lot of ways you can qualify to get into them. First and business class tickets will typically come with lounge access for most international travel, but airlines like American, United and Delta restrict lounge entry for most domestic flights.
Many major airlines also have branded credit cards that allow you to earn frequent flier miles from everyday purchases to use toward free flights.
You get to earn elite status when you reach certain spending thresholds. Status at an airline comes with a host of benefits like free seat upgrades, free checked bags, premium customer service, and, of course, lounge access.
Modern lounges often include amenities like an open bar, unlimited food, spa, gym, and even local art installations.
Boston specifically, we have a tap room, right? Which really kind of leans into the Boston Beer culture, but with a sapphire twist.
Chase Capital One and American Express also have their own lines of premium travel credit cards that are not airline specific.
Capital one launched its first in 2021, in Dallas, and Chase opened its first US lounge in Boston in May of 2023.
Chase has announced the creation of five more lounges continues to be the number one reason why a lot of our customers get and keep the card, so it was a natural extension for us to move into creating our own proprietary lounge network.
And while these premium travel credit cards aren’t cheap, they offer travel credit kickbacks of up to $300.
The first Centurion Lounge was created in Las Vegas in 2013, and since then American Express has added over 20 locations worldwide.
The company currently operates 13 of them in the United States, with more on the way. 20% of overall foot volume on airlines are business travel or high frequency travelers and whatnot, and the other 80% are people that travel maybe only once a year.
And so you don’t necessarily have a loyalty to an airline at that point, but you may have loyalty to a credit card.
Premium tickets for those in business class are becoming more readily available, and customers appear more willing to pay for the additional space.
For example, from 2009 to 2019, the share of premium Delta tickets sold rose dramatically. United expects to increase its number of premium seats by 75% by 2026.
Overall, the average airline ticket price has also steadily decreased over the past 25 years. Adjusting for inflation, domestic flights averaged over $575 in 1995.
Today, the average trip costs $382. Historically, the difference between first class and economy was some eye popping number.
Today, it’s much more reasonable and it’s, you know, the minute you try it, the more likely you’re going to try it again in the future.
As lounges become more accessible, overcrowding can become a problem. We added 900 seats last year.
That’s what we’re taking it for so that our customers won’t have to wait. Delta told CNBC that it is not considering a reservation system for access to its lounges.
Do I hold your seat? Do I give it away? It works in in the restaurant scene when you have a table assigned to you, this is a little bit more complicated.
American Express allows its Centurion Lounge guests to check in via a mobile app, but access is still not guaranteed.
Capital one is currently experimenting with a digital waitlist system. We are testing in our app now, and I would think of the digital waitlist less like a reservation and more like the ability to kind of join a list ahead of time so that your place in line is secured and less of a guaranteed table.
The rise of luxury lounges
The clubs became so coveted that in 1967, American Airlines opened its doors to anyone that would pay its annual dues of $25.
Lifetime memberships went for $250. That would be equivalent to just over $2,000, accounting for inflation in 2023.
The 1960s saw the expansion of airport lounges across carriers.
United and Delta both launched loyalty programs that same year. Loyalty. Grams arose after the Airline Deregulation Act of 1978 and removed government controls over industry prices.
The intent was to allow market forces to determine the prices going forward.
We have to make sure that we can accommodate those guests. As more people traveled, lounges became more in demand and more accessible.
In 2002, almost 613 million passengers flew out of US airports. In 2022, that number was more than 850 million.
It’s about offering that experience for people who pay a premium to fly on Delta. We don’t look at them as a profit center.
That’s our main goal. Delta, for example, they’re expecting to get their Amex contribution up to about $10 billion over the long term.
The main goal is new customers. Airport lounges in general are the number one reason why someone would sign up for the credit card.
Increasing premiumization
People’s pent up demand to get out and see the world and willing to invest in premium products. And thankfully, the airline was one of the products that people are willing to invest.
Overall, economy seats from a configuration standpoint really haven’t grown in ten years or so, maybe even 20.
So it’s been a long time since the economy section has grown. But really the the growth in overall seats has really been more on the premium side.
But this travel surge may be cooling off, according to some analysts.
Please do not get mad at the messenger, but we have some annoying news for Delta’s most frequent fliers.
On September 13th, 2023, Delta announced changes to its SkyMiles program, causing customer backlash. They don’t care how much you fly. They just care how much money you spend.
Delta joins American and United, who have also raised their spending requirements to achieve status.
This is a copycat industry in general. So if someone has the new shiny object, there’s going to be a one up at at some point.
