Revenue-based Loyalty Programs To Increase Business Air Travel Costs

March 20, 2014, RADNOR, PA – Business Travel Coalition (BTC) today released travel industry survey results and analysis regarding airlines reformulating their loyalty programs to reward traveler dollars spent versus distance flown. According to travel industry executives who participated in the March 2014 survey, there will be public-policy issues and bottom-line cost implications for managed travel programs.

(Full survey results can be downloaded at http://btcnews.co/NvDHQ4. See also 3-20-14 Wall Street Journal story at http://btcnews.co/1nEXEoE.)

SUMMARY FINDINGS

-  82% of all participants agree that as airlines seek to maximize total revenue per passenger, and add ancillary fees to traveler financial incentives for the purpose of calculating award points, that travel policy will become more difficult to maintain adherence to; 84% say the new programs will result in higher prices paid for their organizations.

- 63% of all participants agree that as effects materialize from recent airline industry consolidation, parity at the negotiating table with airlines, on all manner of items, has been reduced for their organizations.

- 90% of all participants agree that given airline industry consolidation, the U.S. Department of Transportation should be increasingly vigilant in its enforcement responsibilities against unfair and deceptive airline marketing practices.

ANALYSIS

Airlines have a free market right to change their loyalty programs to recognize revenue in order to rationalize these programs after many, many years, and to better compete for and reward the most frequent of business-travel customers. However, airlines will no doubt secure higher yields and revenues from the vast number of less frequent business travelers for whom new incentives to earn valuable perks will be compelling.

Compounding problems associated with switching to revenue-central loyal programs will be additional airline enticements to travelers to purchase ancillary services to add to the total revenue attributed to each traveler for award-calculation purposes. Because airlines refuse to provide fee data to their partners and customers, an insufficient level of ancillary fee transparency and tracking can lead to traveler abuse where out-of-travel-policy services are purchased.

Moreover, because these fees cannot be effectively comparison-shopped, supra premium prices are being paid for these ancillary services. This is a major transportation public-policy problem. Unless the U.S. Department of Transportation restores true comparison-shopping and point-of-sale purchasing for ancillary services and associated fees the new revenue-based loyalty programs will drive upward the cost of business travel.

About BTC

Founded in 1994, the mission of Business Travel Coalition is to interpret industry and government policies and practices and provide a platform so that the managed travel community can influence issues of strategic importance to their organizations.

 

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