I found six things interesting in the second quarter American Express earnings call that should be interesting for travelers and Amex rewards card customers. Here are takeaways from CEO Steve Squeri about lounges, how they bump up your fees, and who is spending on travel:
- The American Express lounge strategy is (1) coordination with Delta (2) expand lounges (3) add satellite second lounges like their just-announced Sidecar spaces.
The other thing is we’re built we’re trying to make the lounges bigger. I think this whole lounge game has been a boon for airport authorities in terms of how many lounges they can put in. And the other thing we get innovative, look, in Vegas, we just did what we call sidecar, right, which is a more of a small kind of, I don’t know, maybe call it a speakeasy kind of of lounge where if you just want to go in for a quick drink or grab something quickly, you you can you can do that. And I think we work really, really closely with our partner Delta, in in those airports where we have, you know, either we don’t have a lounge or we do have, lounges together to try and to try and move move traffic around a little bit.
But I think you’ll continue to see more innovation here. You’ll look at more expansion of existing lounges where we can get space, and you’ll look at a strategy that looks at satellite locations so that we can handle the demand that we get.
Of course when Amex started opening lounges they focused on locations where Delta didn’t have lounges, since Delta’s lounges provided them with a base of a lounge network. But then they were really filling Delta lounges, and my impression is that Delta sort of made them open lounges in Delta terminals. Getting more continguous space with existing lounges is really tough, so offering more than one lounge is smart and offering a concept that lets them take advantage of smaller spaces that open up is, too.
- When Amex raises annual fees, it generates more revenue. They acquire more customers (they have been aggressive with this, so it’s likely unrelated to the product changes) and only lose a small amount of spend from customer attrition. In other words, they haven’t yet hit that part of the curve where higher fees chase away customers and depress spend volume.
[I]n each of the recent refreshes we’ve done for our U.S. Consumer Gold, Delta and Hilton cards over the last two years, customer demand has increased, driving double digit account growth. Revenue growth in each of the three portfolios is up over 30% with card fee revenues up at least 60%. And spend retention remains very high at 98% and we’ve seen no meaningful change after the refreshes. Additionally, the high credit quality of the new customers we’re bringing in has helped us widen the gap between our credit metrics and the rest of the industry.
- Amex Platinum is going to see a higher annual fee, along with more coupons (benefits from “world class partners” i.e. more merchant-funded offers) and the increase top-line benefit value will be greater than the fee increase.
As we look ahead to our U. S. Platinum launches, you can expect to see the same formula, providing the best premium experience to card members with more differentiated benefits and more world class partners joining us to offer card members more value that substantially exceeds the annual fee.
I’ll tell you what, if you don’t tell anybody, I’ll give you the preview. The look, I think that yes, look, I’m not going to get into ratios here, but what I would say is our strategy has always been to if we do raise the fee, it has always been to add incrementally a lot more value. In terms of so yes, that’s the same playbook.
- He admits they used to come up with benefits that were almost unusable, in order to contain cost. Now they have offerings that many consumers won’t want to use, but that picking and choosing benefits cardmembers see themselves getting enough value to justify the price.
In terms of as you think about the consumer, years ago when we used to do these things, we used to try and figure out how consumer couldn’t use the products and services. But what we find is we make these things really easy for consumers to use now.
And we make it such that it’s a wide range of value. And so while not every consumer will use 100% of the value, Getting back to your second point, we have enough disparity in the price and the value that you don’t need to use all the value to get the value out of the product. …not every card member uses uses every benefit. But but that’s okay because it gives people the opportunity to pick and choose, but they do use enough of the of the services and the benefits that it more than outweighs whatever fee they’re gonna pay.
- Airline ticket purchases are slowing, but mostly for coach. Hotel spend is slowing down, but not at the highest-end.
[W]hat we’re seeing right now is, very consistent spending. You’re seeing a little bit of a slowdown in airline, not necessarily front of the cabin. You’re seeing a little bit of a slowdown in lodging, but again, not necessarily on the high transactions, which which are up. But goods and services continue to be resilient and, you know, our our Gen Zs and our millennials continue to be, consistent.
- New cardmember acquisition is where they get their growth, since there’s only so much more spend they can drive from existing customers. American Express opened 1.5 million cards in the second quarter.
One of the things that provides support to our billing growth is the strength of our new account origination. And you certainly saw that we added a little bit more disclosures and details on our new cars acquired and 3,100,000 new cards this quarter and 1,500,000 in The U. S. Consumer.
American Express still sees headroom to charge customers more, and make them feel o.k. with it by selling access to their cardmembers to adjacent brands in exchange for coupons and discounts. That strategy will work until they reach some theoretical limit – but they haven’t found it yet. As long as they keep promising you a somewhat better experience in aspirational portions of your life like travel, you will keep paying and keep spending on their cards.
Net new paying cardholders would be interesting. They have cardholders close accounts, pass away, etc. Also pay (i.e. non military, etc) would be interesting as well.
So far, the Delta Reserve and Hilton cards are break even. Without them, I would spend the annual fee on benefits I actually use. If the fees go up more, what is already an annual reevaluation, may just be a cancellation timing event.
The economy is tightening and inflation is real. They can game the system all they want, but once most of us walk, we are gone.
So far, all the ride sharing credit, Retsy credits are useless.
I had to buy a Delta lounge membership again this year, MQMs provide nearly zero value to me based on current status and travel routes.
Amex lounges have proven to be unusable due to location and on the three times I’ve tried, could only get in once and that one was packed.
Priority pass, while the lounges aren’t as fancy, has been much more usable.
@Doug – where do you live? The Resy credit is very easy to use at a wide variety of restaurants I would go to anyway. I count it 100% in value against the AF. Also I get good value from Uber (Uber eats). The FHR records it is also easy to use and I have no problem getting value from the airline credit (and I’m lifetime elite on DL, AA and UA so not using it to offset seat or baggage fees).
There – I have already easily covered the AF and get the insurance, lounges, International Airlines Program etc for “free”. Can’t wait to see what they add. Already excited to use the new CSR benefits. That coupled with my Amex Platinum and Gold cards covers so much I would otherwise spend!
So the only winners here will be military….you know, those people who have 600 credit scores, applied for a government job, got the job, eat for free, live for free and get j**erked off at parades, NFL and MLB games.
Did he say anything about retention offers?
He hasn’t hit a limit but I have. Without offers, I’m downgrading or closing all premium cards this year, and the one exception I might keep will not be Amex.
Hey, @Gene, does this mean I should probably close at least two of our four Platinum cards, or, you know, keep screwing myself? ‘Thank you for your attention to this matter…’
Glad they are recognizing their occasional chintziness. I have a Delta Amex Reserve card. At DEN’s Centurion lounge, Amex walked me because I was not flying on a Delta ticket – DESPITE a big sign saying that the Centurion lounge is open to Amex cardholders. Decided on the spot not to make a stink (what would I have accomplished?!?) but have not forgotten – and will not forget – Amex’ gaffe.
@Richard Voit — Oh, so YOU were THAT guy… sheesh! (Kidding, didn’t see you, but I was literally just at the DEN Centurion. What you described is them just following the rules, apparently against your favor. Gotta read that fine print! Delta Reserve Amex access to Centurion is only when flying Delta. It’s been that way for a while. Don’t you have an Amex Platinum like the rest of us suckers? You’d probably need one of those if you aren’t flying Delta with only the Delta Reserve. Anyhoo…
@Richard Voit–I carried the Amex Delta Reserve card for many years. It has never been valid for the Centurion lounges UNLESS you were flying that day on DL. That has always been in the cardmember agreement for that particular card.
Richard Voit, you might want to fully read the terms and conditions of your Amex Delta Reserve Card.
@ 1990 – Um, yes, close those suckers.
@ 1990 — I have closed 6 Plat Biz and a Plat Personal in the past 2-3 years. Holding none now, but will be happy to snag another fat bonus at some later date. The Delta Plat and Reserve family and the Hilton Aspire are still keepers, but the rest is not worth the effort without 100k+ SUB, and then only for a year. My SO currently has the Plat business and Plat personal, but only for the business SUB and 5x on airfare.
In the last several years we went from Amex platinum, down to gold, and just last month down to basic green. Fees are too high. We don’t use Centurion lounges anymore due to long lines and not usually in the terminal we need. And then a lot of places that we used to use Amex for stopped accepting points transfers altogether. It now sits in my wallet as an emergency back-up card while traveling, in case one of my Chase visas gets rejected.
I do not have Amex because their “benefits “ suck, merchants get hosed and their fees suck. Other than that, it’s a great company! lol.
As a platinum member from the 1980’s, I’m seeing the real value diminish. Sure the uber credits are useful and so are the fees towards clear or global entry, however most of the rest of the branding is nonsense. Raising the fees might tip this team over the edge.
Dumped two platinum cards this year. Couldn’t get into the amex or for that matter the Chase lounge at LGA several times. As a retired flyer I don’t use the “perks” from AMEX enough to justify it. Most of my spending is on the Chase Sapphire (which I will probably keep) and the Capital Venture.
(I’m lifetime elite on DL, AA and UA so not using it to offset seat or baggage fees).
What other uses are there for the airline credit besides seats and baggage?
The updated Chase Sapphire Reserve hits the spot for me, particularly due to the Edit, Stubhub, and dining credits, the new earn rates and most importantly the $0.02 redemption per point on The Edit – – I find that I can get most luxury hotels for about Hyatt point prices. If Amex does not increase the redemption value per point to at least $0.015 in the Amex portal including FHR, then I feel Amex will have a lot of turnover among membership, particularly those who hate using small periodic credits. I canceled my Amex Delta Reserve and Delta Platinum cards a few months ago due to the small credits and the hard to use BOGO certificates.
The Chase changes will cause me to cancel: Hyatt personal, Hyatt business, Hilton Surpass, and Hilton Aspire. I will reevaluate Amex Platinum early year, particularly due to limited lounge access from overcrowding.
@Gene — I’m thinking of slimming down. As we’ve discussed before, it feels wrong to spend upwards of $10,000 in credit card annual fees each year, especially when there are duplicates!
When the fees go up I’ll be dumping my Amex. I’ll take advantage of some other airline card that’s cheaper…hardly any usable benefits with Amex other than Uber credit and the TV entertainment discount. The rest of the benefits are like those discount coupon books.
Where in the earnings call did the CEO actually say verbatim, “We Made Benefits Hard To Use On Purpose”, as the title alludes to? Seems like what he said was that not all benefits will be useful to all customers.
This will be my 2nd and final year with amex Hilton business. Their hotels play fewer games than their bonvoy competitors, but quality is sinking.
Amex has turned premium rewards into a behavioral experiment that counts on customers overestimating how much value they will actually capture. The more complicated the perks become, the more breakage works in Amex’s favor while still feeding the illusion of luxury. Eventually the brand risks losing its halo when people realize that simplicity and honesty from a competitor can feel more exclusive than a maze of conditions wrapped in high fees.
Becoming less valuable every year, hate the “offers”, why can’t we use airline credit for tickets? Lounges full all the time.
Looks like I’m cancelling after 20 years.
I’m have been fighting AMEX on JUNK FEES since last January!I went to the the CEO Steve ? He said that his company has the right to charge me $57,000 because I borrowed money from my husband’s bank account to which I am on. Because I had surgery at America’s has been a great company and they have always been there.BUT THE CEO NEVER HAD THE TIME TO HELP ME STRAIGHTEN IT OUT AND THEN HE SENTA EXECUTIVE WOMEN WHO SAID SHE COULD NOT SEE MY ACCOUNT? I had thought that was strange? I am not stupid about people in this world then I asked her about 3 payments I had made? Then when she said that she could see them ? I said why are they not showing up as a $21,000 subtraction?She said that she didn’t know? So, I said, I don’t understand why you lie about not seeing my account that’s something so simple to tell the truth on so how I believe where I’ve never had this experience with anybody else in this company now I’ve seen the CEO at the executive are both not credible people. THEY ARE GOING AFTER MY OTHER BANK ACCOUNTS WITHOUT MY PERMISSION AND THATS IS ILLEGAL AND WE HAD A 3 WAY CALL WITH MY OTHER BANK MANAGER TO STOP THEM UNTIL THEY RESOLVE THIS MATTER ?They are still doing this as of yesterday. They will not call me to settle this issue and I will not paid them a cent until they call me back and they really changed their policy and I have called for 7 months! This mis ridiculous and I don’t really give a shit about them anymore or if they’re not gonna credit me the 21,000 and why should I give another set? That’s exactly why I feel or I only owe them another 18 for they would’ve had it, but they have to take away the drug fees because I have been a valuable customer for over 39 years! I watched to talk to Steve the CEO so I challenged him after I talked to the government to get sewer protection and they gave you some kind of crappy letter back. You know what I went right back to Steve the CEO I said you know what prove the coffee that I saw it but I never signed it. There was no technology back then they could actually charge you 6 to 9 times a day and why are they giving me the credit for the 21 I’m tired I could care less right and I don’t really care if I go to court, who is the idiot you said a rookie? This was my old card OK and yes, So I am challenging the CEO?PROVE THE DOCUMENT,TIME I because there was that technology back. There was no way it could only be done manually. It could never be done by a machine so to be done by machine is illegal and that’s against the law SO MR CEO PROVE ITS THERE?
If not I win !
@PlatSG,
“In terms of as you think about the consumer, years ago when we used to do these things, we used to try and figure out how consumer couldn’t use the products and services.”
@Laurie Liloia — That’s quite a story; perhaps, consult with a lawyer, because, while Gary’s website is a fun place to vent, I’m not sure we can help you much. None of us like getting screwed by banks (or hotels that don’t honor elite breakfast benefits either). Good luck, though; sounds frustrating.
I closed my platinum card last month. Had it for 8 years but couldn’t justify the annual fee anymore. The benefits became so difficult to use with the “coupon” style benefits. That and lines were so long the lounges weren’t even usable. Suffice to say I dont miss the platinum card one bit.