American Express has probably the most interesting earnings call for me after the airlines. They’re going to offer a spin, but Amex numbers were good. Wall Street didn’t like it because increased earnings were all being ploughed right back into the business. But that’s actually good as a bet on their future.
What was most striking to me was this data point from Amex CFO Christophe Le Caillec: people are not cancelling when their Platinum cards come up for renewal with a higher annual fee.
Importantly, about 1/4 of the overall U.S. consumer Platinum portfolio has been billed for the higher annual fee, and we have seen no change to our very high retention rates relative to pre-refresh.
American Express makes a couple of important arguments about why Platinum is working:
- Increasingly, annual fees are a material part of the revenue they earn. The best cards give back the revenue generated from spending to the customer, but the flat fee for the card is growing, and consumers are paying it.
- Offering an attractive card with benefits is increasing spending, and keeping more of that spend inside their own ecosystem. Amex pushes people to their own travel platform and to Resy which they own. Chase pushes their cardmembers to Chase Travel (and away from Expedia and Airbnb) and also to the Shops with Chase, although the experience there leaves something to be desired.
Platinum card spend acceleration was reported to be about six percentage points, mostly from long-standing cardmembers rather than new accounts. That’s good – Platinum is a massive back book, and getting existing cardmembers to spend more after a fee increase is success.
I think this is overplayed though. Amex’s growth rates were already strong across the board (total billed business up 10% reported, U.S. Consumer Services up 10%, luxury retail up 18%, etc.). Amex gave a somewhat fuzzy number on Platinum, but if it were outperforming the company, we’d have probably gotten more there. So while the numbers aren’t directly comparable, it’s probably actually a drag on overall reported growth.
Annual fees are becoming a much bigger part of the model. Net card fees were the fastest-growing revenue line, up 16% (foreign exchange-adjusted), and management expects card fee growth to pick up eve more as more Platinum cardmembers roll into the annual fee increase. More than 70% of new Amex accounts worldwide are fee-paying products.
They’ve grown lodging spend through Fine Hotels and Resorts and The Hotel Collection 50% year-over-year. That’s not surprising. Platinum cardmembers get a bigger credit than they used to, and they’re using it. We don’t know what the baseline was, or how much this is driving increased bookings that do not use a credit.
U.S. Resy restaurant spend was up 20%. That’s also not surprising since they’re paying cardmembers to spend at Resy restaurants.
Amex wants benefits that feel rich to consumers but also deepen consumer engagement inside of Amex’s travel, dining, and partnership relationships. The restaurant spend credit seems too expensive relative to the value they might capture from it, but at a minimum we know that they can buy awareness and engagement with the platform.
They also claim to be acquiring young, affluent high wallet share customers early and seeing their spend compound. Platinum marketing is connecting with younger consumers, but whether they stick with Platinum over time, whether Amex continues overindexing on credits relative to the annual fee, is all an open question. They don’t just need to acquire customers, they need to retain them.
- U.S. Gen Z spend up 38%
- Millennials up 13%
- Gen X up 8%
- Boomers up 4%.
Where Amex is weak is mid-sized businesses. They claim to be strong in small and large corproate business, but they’re addressing gaps in the middle with expense management software and their new Graphite Business Cash Unlimited card. The problem is that Graphite Cash Unlimited is too expensive and delivers too little value.
ChatGPT credits are smart (Business Platinum and Business Gold) but those merchant-funded offers alone won’t be the killer app. And this is an area with real competition. Capital One recently acquired Brex. Ramp is making real inroads.
And all of this is expensive. Benefit costs are rising, 11% during the quarter, expalined by the Platinum card refresh and consumers actually using the benefits. I know I’m getting 3-4 times the annual fee in credits that displace real expenses I’d otherwise incur. I suspect that this may explain why we’ve seen a crackdown in what counts for reimbursement from the Platinum airline fee credit, among other changes.
The takeaway in all of this is that American Express believes the higher annual fee model works, that they can layer credits that keep customers and spending inside their ecosystem, and that bribing customers with enough value will retain them and grow their spending.
If you use Centurion Lounges, the hotel credits and Resy dining credits, the entertainment and uber credits, then there’s tremendous value in Platinum. But it’s a terrible card for actual spending. The business works for American Express because too many consumers appear to value prestige and perceived ‘access’ while tolerating low points-earning rates on most of their spending.
Platinum is only for airfare (5x) and where you’re getting statement credits and to get benefits. It is not a good everyday spend card. Too many customers don’t realize this, and that’s been great for the Amex business.
I was considering canceling it or downgrading to Gold but they certainly don’t remind you your annual fee is coming up so I forgot to get ahead of it.
The Centurion lounges are effed now and when you book FHR hotels, they try their best to deny you any real usable benefits, especially in Vegas.
I’m curious how many US platinum card holders are in the military. Amex has a policy of waiving the annual fee to military and their spouses.
Of the 3 people I know in the military (which is hardly representative), all of them have the Amex platinum card.
Why would anyone cancel? They improved the card. As you note it is not a good card for spending other than airfare. But most people are not points maximizing. Just try and bring up Rakuten in everyday conversation with non-hobbyists…
The reality is Amex is overdue for a Platinum Pro or Executive Platinum card. $1999, a few more coupons, and guaranteed lounge entry with guests. Plus one yearly entry to Centurion club in NY. HNWI’s will trip over themselves to get one. And can still keep Centurion card as a more elusive tier.
What would be telling is how many Amex Biz Plat retentions happened at the $895 fee. There is just very slim to no value for holding this card.
Amex has begin diluting its offerings and the next few quarter results will show a clearer picture.
As annual fees go up, and the value of points/miles go down, I think I’m finally giving up the game. This isn’t supposed to be vitriolic “I’m never doing business with Amex/Hyatt/AA” grandstanding. I’m just saying soberly that the value is no longer worth the trouble.
I think I’ll hold onto the Venture X and only the Venture X, accumulate points as long as they are potentially worth more than a penny, and enjoy the fringe benefits that the card brings.
@ Dan
Switch anyway. Amex will pro-rata refund the annual fee.
As usual, @Peter gets it. 100%. Amex Platinum is now a better card. Bye-bye $100 at Saks (which was a pain anyway); hello $300 at Lululemon ($75/quarter). New $400 Resy ($100/quarter); yum! Formerly $200 annual, now $600 FHR hotel credit ($300 semi-annual), thank you, sir, may I have another? The only issue, $200 airline incidental fee credit nerf’d (no more United TB since Feb.)
@Dan — I’ve never once been denied FHR benefits like $100 property credit, guaranteed 4PM late checkout, or breakfast credits; which were you referring to (like, the optional ones, room upgrades, early check-in, etc.)?
I cancelled mine this week. 900 bucks a year is too steep.
I have been canceling each one as the new fee hits. The business card got a huge downgrade on all levels. I will keep one, only because it has the 2x option for large purchases, but the days of having 6 or more, like I had before, are over. Figured that was the point.
@1990 – ironically I did one United $100 TB charge, then waited a few days to do the next one as was my usual practice, and in the intervening period they nerfed it. So I guess I got $100 out of it and will see if I can use the other $100 organically. But there are so many good coupons and credits that even without the $200 incidental I’m doing better on the card than ever. Plus the hotel credits are FHR or Hotel Collection which provides great flexibility versus, say, the limiting and inflated The Edit.
Status quo Amex Plat has a great value/AF ratio for me. I’m sure they could create a higher AF card with a similar ratio. I like the idea of priority lounge access/guests and in a pipe dream world $100 Resy credit monthly or $300 FHC credit quarterly.
@ Gary — Now that they have eliminated the loopholes to get $200 airfare credited on Delta and $200 Travel Bank on United, this card is barely worth $895. Let’s see, Uber is worth about $180, FHR credits are worth about $200 each x 2, Entertainment credit $240, lounge entry $0, Lululemon $0, Resy $100, everything else $0, for a total of $920. The 5x on airfare is better than Sapphire 4x. Certainly not worth bothering with two of these per household. No retention offer would mean closing and churning in 12-24 months.
Would you also say that Gold is only for air travel?
For decades I was an Amex guy but after spending hundreds of thousands I threw in the towel
They lost me with customer service the bad domestic partners like Delta
And weird partners that may appeal to some but def not me
As redundant as it is you can keep their sardine packed lounges their crappy sub par service and all the rest of it.I dumped them years ago after some 40 years with them
As much as I despise Bank of America its hard to beat 3 points per dollar abroad and no Alaska partner fees. Citi Strata for AA points to miles transfers.1.5 to 12 miles/points per dollar on hotels
and lastly Chase Sapphire Reserve which I almost canceled till I realized it was the card that had better lounges than Amex (also Crowded but leagues better) and partners and partnerships that speak to me.Hopefully Amex works for others but when I break it down its simply a no go hard pass for me now and going forward.
Cancelled the Biz Platt a few weeks ago. They cut many of the credits I used and now it was mostly worthless except the Hilton and FHR we used. Seemed strange at the time they didn’t even ask why or try to save it. It was canceled within 4 minutes with no mention of retention. Never canceled a card like that before. Hearing their retention claim guess they dont feel like they need to now.
I couldn’t take the couponization and jacked up fees so I closed my platinum Amex.
I have technically never been denied FHR perks but a hotel in Canada refused to allow the $100 F&B credit to count toward alcohol. The same hotel strongly encouraged me to check out by noon. Like, are you really sure you need 4pm checkout?
That’s even more passive aggressive than my ex-girlfriend from Mississauga (whose p-word I loved to eat… story for another day!)
For myself totally worth it but I do make an effort to work all the discounts if they apply to me. For the longues they were lost long ago. Packed, noisy etc. If there is a line outside a lounge forget it.
I cancelled mine after 20 years. The new fee is just plain greed and the concierge service quality has gone way down. They used to answer the phone immediately. I was waiting 20 minutes just to speak with a representative. I chose to just keep my Gold card.
@ Gary — ” I know I’m getting 3-4 times the annual fee in credits that displace real expenses I’d otherwise incur.” Seriously? 3-4x is pure exaggeration. I’m sheptical that this is possible, and I am sure it isn’t worth the effort.
Current coupon book at higher price actually works better for me, wife and I both have Amex Plat.
We only use it for the stuff. All regular spend on venture x/citi 2x back
Actually was thinking of cancelling before the price rise, but its ok now
@ Gary — More specifically, you were wearing Oura ring and Lulelemon before these silly credits came along? If you are displacing these overpriced things, um, OK. Do you place full value on lounge access and Global Entry on each of 10 cards you hold that offer it?
I think that is totally worth it. For me, $400 back at restaurants, $50 to $100 each time at airport lounges (it beats trying to find a seat in the crowded terminal and paying $100+ at some cramped, crappy restaurant), and $200+ of entertainment credits is worth the annual fee alone. The hotel and airline credits and the rest are icing on the cake.
@Gene – I value Oura and Lululemon at zero, though my wife has spent at Lululemon at times. I do value the $200 airline fee credit (until they crack down further), the CLEAR+ credit, the Resy credit, the Uber credit and the hotel credit actually. The entertainment credit also displaces real spending I already do. That’s just a few. And I’m still on the old fee!
@ Gary — Literally one hour after I wrote the comment above, I learned that Delta was eliminating the DL Dimamond free Clear+, so that’s another $125 value! I researched the blogosphere and FT, and I don’t see any good work-arounds remaining on the airline fee credit. We have no need for bag fees, seat fees, wifi fees, lounge fees. We used the $200 add collect trick on DL tickets for years, now I am clueless on how to use the $200. Anyone have any suggestions?
@Gene, to value annual platinum benefits at $920, you discounted the $400 in resy credits to $100? Depends on your location and available options, but my area has several options where I regularly get takeout food orders where would go anyway so get the full $400 value
Also for Lululemon if don’t care about, can just buy their in store gift cards then sell on cardcash.com for 20% off face value. I waited till I had $500 in their GCs then sold all in one transaction
I joined the virtual queue at DFW yesterday while waiting at the Admirals Club. It took around 45 minutes to clear, and the lounge was a zoo. Granted, it was Friday evening at DFW. I just ate and had an old fashioned and headed back to the Admirals Club.
Have 6 Amex Biz Plats.. they are kind of useless these days outside of the sign up bonus.
FHR $600 sounded cool, however the nicest of perks are frequently denied these days (Upgrade).. the free breakfast is nice though so I value each FHR stay at $100 the value of the break/ Fine Hotels Credit if they have it. The prices for the nicer hotels are usually cheaper direct through the hotel or through Virtuoso or other Luxury Travel providers.. with similar benefits.
The airline credit was really the only thing that had full value to us.. but alas that is dead.
The Chase Sapphire Reserve is really a better card on the business side. Not so much on the personal side though.
Access to Centurion lounges is worse then eating at an airport restaurant these days.. plus if you fly a lot or in premium cabins you already have nicer or less crowded lounge access with the airlines. The centurion lounge is really for the plebs these days.. sorry guys.
The rest of the biz credits are useless to us.. like who pays for any adds on indeed when you get hundreds of applicants per job posting for free? Adobe.. hahah
We’ll be cancelling all the business ones in the next few months, I’ll likely sign back up for a few once I get targeted for another 300K sign up offer though.