News and notes from around the interweb:
- El Al’s anti-missile system
- An attempt at valuations of the top 100 airline frequent flyer programs.
Some of these are wrong, for instance it seems unlikely Spirit Airlines Free Spirit is worth less than a billion dollars when the market lent them a billion against the value of the program. Bangkok Airways FlyerBonus is certainly worth more than $5 million (only 1/3rd the value of TAAG Angola’s program?) while Royal Air Maroc’s membership in oneworld surely pushes the value of Safar Flyer above the estimated $49 million. Can a oneworld program really be worth less than Sun Country’s Ufly Rewards?
- Why hospitality and leisure is still down half a million workers compared to pre-pandemic even though everyone’s working. They all got office jobs. (WaPo)
- How gross are hotel bathtubs? (Daily Beast, HT: Paul H)
It turns out, it’s difficult to say how dirty these tubs are. One study suggests that many bathtubs have a biofilm that only comes off with intense scrubbing. Another study found that 81 percent of surfaces sampled in hotels had fecal matter—suggesting that perhaps bathtubs aren’t the grossest thing in your hotel room. Another suggested leaving your luggage in the hotel bathtub to avoid bed bugs because “they prefer dark crevices where they can hide properly,” and these are unlikely to be found in a bathroom.
Then, there’s the category of wellness tubs and pools. In 2010, a woman died from a disease she contracted in a wellness hot tub. Between 2000 and 2014, hotel pools were cited as the most frequent locations for chlorine-resistant bacteria infections, according to the CDC.
- Mother and daughter brawl with Spirit Airlines staff after being hit with bag fees
Hotel bathrooms are even more disgusting since covid when most chains have eliminated daily housekeeping. Housekeepers cleaning rooms only once every five days aren’t allocated additional time for a more thorough cleaning. That aside I also think the average bathtub is cleaner than the average walk-in shower. All the hotels replacing tubs with showers seem to have bad designs that make it impossible to clean. Mold and mildew accumulates along the sliding door.
It IS always Spirit, isn’t it?
I laugh when you all write that this is not part of the airline business (or hotel business). It is a huge part since the WorldPerk credit card was launched in the 80’s. Today it is a key revenue source for airlines, more so then the old frequently flyer points alone. Airlines are not that different from each other in the grand scheme of things of how I earn and spend points is.
Living on the marketing side of this world for years (since have moved on), AA’s program right now is the best value out there and UA follows. DL’s continues to decline and it’s partnership are even worse (best partnership is the BA/AA/JAL/AQ for sure).
This is part of the business of travel, more beyond the business of simply flying. Since deregulation, few airlines have made money by flying alone and need support during the down times. This strategy works and will evolve to continue to be a key revenue stream for them.
As I have noted many times, Skymiles is now the most valuable loyalty program in the world and the gap between it and AAdvantage is growing.
Part of the reason is that Delta is becoming more global on Delta metal while AA is moving in the opposite direction. If AA says that its value in NYC is stronger by including its loyalty program, the same has to be true of DL on a global basis.
The fact that UA’s is 20% less valuable than DL’s speaks volumes about how much stronger AA and DL’s domestic systems are – and why UA’s attempts to spend tens of billions on new planes will take a very long time to make a difference in the value to the most loyal passengers
All of the biggest western carriers’ plans are increasing in value except for those carriers that are still reopening which is good news.
Delta and Amex have a formula which no one can match and the singular consumer focus response to how Skymiles is perceived clearly is not the totality of the program.
@Tim Dunn, What that study is saying is how much the value of the program is to the airline, not to the customer. This means the value to the airline has to be significantly more than the value to the consumer. I interpreted the study as Delta has convinced more of it’s customers to do more activities which get them Skymiles and status, while the cost to the airline of providing that status and miles is less than it’s competitors. If one is buying an airline stock, Delta has the more valuable loyalty program. If one is buying a ticket, that’s not necessarily true. Doing things like devaluing miles for awards by 20% and giving card-holders a 20% discount encourages people to get the credit card, where they may accrue more miles which have less value if they don’t keep the card. That’s not a compelling reason to fly Delta.
If there was a case to be made that Delta is a more valued airline to customers, it would be based on total ticket revenue as well as the ticket revenue per seat-mile, as that’s the value customers are paying to get somewhere. The cost per seat-mile is more of a concern to shareholders. I believe Delta has an advantage on both of these today. If a frequent flyer program value was a bigger concern for flyers rather than schedule, destinations, and experience, I don’t think Delta would get the nod, and that Delta’s performance is in spite of it’s frequent flyer program rather than because of it. If anything, that’s saying that customers are willing to overlook the deficiencies in the frequent flyer program because of Delta’s other qualities, which makes it that much harder for the other US airlines to take share.
@Tim Dunn
“As I have noted many times, Skymiles is now the most valuable loyalty program in the world and the gap between it and AAdvantage is growing.”
This is a reflection of the 2019 Amex deal, we’ll see what happens with AA’s co-brand re-up.
“Part of the reason is that Delta is becoming more global on Delta metal while AA is moving in the opposite direction.”
Hardly, it’s the Amex deal. Becoming more global might have helped attract high value card customers pre-pandemic, it isn’t really right now, but may again.
“If AA says that its value in NYC is stronger by including its loyalty program, the same has to be true of DL on a global basis.”
No, New York is a unique market for card spend and cities around the world far less so because the number of markets where U.S. airlines have co-brands is limited, and the extent to which those markets are lucrative for card spend is limited. AA has a better international co-brand network than Delta.
“The fact that UA’s is 20% less valuable than DL’s speaks volumes about how much stronger AA and DL’s domestic systems are”
UA has had two issues for years. (1) lower spend volume, and (2) less lucrative co-brand deal. Regarding #1, UA’s hubs are strongest in the best spend markets (eg NY, SFO, Chicago) but Kirby makes the point that the weakness has harmed card uptake elsewhere. Just before the pandemic they closed the gap somewhat on #2, but not all the way.
AA and UA would love to replicate the size of the agreement that DL has with Amex but the gap is so large that it is more than a stretch to believe that they can do it with one negotiation.
Network most definitely does influence the strength of a loyalty program and the co-brand agreements an airline has. NYC might be the largest market but the principle still applies. AA walked away from NYC, saw its credit card signups fall, replaced a lot of markets with B6 and added some big international markets but is still smaller domestically on its own metal, and card signups have disproportionately increased.
The same principle does apply to DL except DL is growing its network overall in coastal markets where there are more loyalty free agents. AA’s network has still shifted resources from large markets to dominant hubs like CLT and DFW which helps the small and medium markets – precisely where AA and DL have long been strong and UA has been so weak. The small and medium sized markets add up and UA thinks it will be able to replace years of network preference for large cities over small and medium sized cities in a couple of years.
And DL is aggressively growing its international network – exactly where UA has had an advantage – which does translate into higher value coastal passengers. There is likely far more at risk for UA by DL’s growth than what UA can gain in the small and medium sized cities that AA and DL already have and are not going to give up.
So, network matters in the attractiveness of a loyalty program – and DL’s network is already 2 steps ahead of both AA and UA in covering all of the bases while DL has clear structural advantages with Amex that AA and UA would love to replicate – but are nowhere close to doing so. If they do, we’ll all know it.
Gary,
It’s nice to see you no longer argue that the math that shows DL as the most valuable FF program isn’t wrong.
John H,
Of course, what is best for the consumer is not necessarily the best for the bottom line or for value of an FF program. That principle is hardly unique to loyalty programs.
There is still a wealth of data that shows that DL does manage to attract and retain customers that do find ways to use their miles for DL redemptions in a similar way on a macro basis as on AA and UA.
I for one am surprised to see Skypesos at number 1, given how little attention is paid to the program in frequent flyer blogs. There’s always a greater fool somewhere, right?
@sunviking – who is saying that frequent flyer programs are not important? Given that the top 3 airlines all have market caps less than the estimated value of their frequent flyer programs, I think we’d all say that’s nonsense…
@Tim Dunn – I happen to think these valuations are inflated, because (1) I don’t think they accurately price in risk to interchange [including from competitor products that drive down processing cost] and (2) they seem to overinflate revenue growth prospects. I don’t think these particular guesstimates that don’t take internal data are especially meaningful except for *order of magnitude effects*.
However I’d shown internal data in the past that American has chased away many of its best customers, and United has always lagged American and Delta in charge volume. I haven’t seen the latest data on actual card spend, but AA has for many years outpaced Delta in this regard (though Delta’s 2019 deal got better terms, AA had largely matched the last Delta-Amex deal that was supercharged when Amex lost Costco).
One thing industry consolidation has done is shift the balance of power in co-brand negotiations from banks to airlines, with fewer big players available that the banks have to compete over.