Each year I publish in advance my thoughts and insights as
to where the travel loyalty industry is heading.
While 2020 was a
tough one to predict, there were direct target hits, the most notable
being the #5 prediction for 2020 “Airlines That
Neglect Loyalty Will Suffer“.
It’s now evident that loyalty programs are worth more than
the airline group as a whole. Airlines with strong loyalty
propositions are leveraging that value to secure much-needed cash investments,
and thus, loyalty is the key asset for many airlines.
Where is the industry headed over the coming year? Given the industry-destroying events of 2020, what will airline loyalty
programs look like 12 months from now?
Here are my predictions on what we will see in the airline
loyalty industry in 2021.
1. A loyalty program, will buy or start a new airline
What a great time in history to get into the airline
business! Aircraft are cheap, there’s an abundance of pilots, cabin crew,
administrative and operational manpower. Airports are discounting fees,
Governments are supporting the industry through cash and non-cash incentives.
Access to capital is cheap, and competing airlines can be
carrying billions of dollars of debt on the books which put a new airline
entrant at a significantly better financial position than would otherwise have
been possible in previous years.
Best of all – in some markets, the incumbent airlines are
not even flying! So the competition is non-existent!
Starting a new airline (or buying one on the cheap) suddenly
looks mighty appealing, and since loyalty programs are worth more than
airlines, maybe now is the time for loyalty to step up, and run the airline in
a way that serves the loyalty company instead of the other way around.
2. A new wave of loyalty tiers added to existing programs
With that in mind – depending on when demand begins to ramp
up, one method to undo the damage caused by blanket complimentary status
extensions will be that programs create new status tiers.
Think super-premium tiers like American Airlines Concierge
Key or British Airways Gold Guest Guest. Another tier type might be
subsets of existing tiers, such as American AAdvantage Platinum Pro versus
American Platinum.
The third type of new status tier will be somewhere
between the zero and first-tier (think between base level and a typical
Silver-type status level) aimed at the frequent, yet not all that
frequent-flyer.
While airlines and hotels will need to manage how many elite
members they have in the program, the question will then become, can a loyalty
program have too many elite members?
3. A technology leader will head up an airline
In recognition that airline profit is driven by technology, ancillaries,
loyalty and other non-ticket revenue streams, it’s only a matter of time before
a non-airline, technology player steps into the CEO role of an airline.
Tech companies are driven by metrics like customer lifetime
value, they’re experts at serving the right ads, at monetizing the impossible,
and could – if they wanted to – generate more revenue from airline membership
bases than airlines currently bother to explore.
4. New elite member benefits
Airlines and hotels do a good job of delivering frequent
flyer loyalty benefits when you’re flying or staying at their hotels.
But that gold or platinum card is useless once you step
outside of the travel ecosystem. Headed down to the local pub and flash
your airline gold card for priority service? Good luck with that!
Now is the time in which loyalty programs are expanding their
horizons and stitching up deals with non-air partners so that airline elite
members can receive benefits of their elite status outside of the traditional
travel experience.
Increasing relevance to top-tier members through
everyday partners can bring value to both the loyalty program, and to the new
partner. It can also be a new revenue stream for the loyalty program if
deals are structured correctly.
Imagine if top-tier airline loyalty customers had dedicated
checkout lines at the supermarket, or lounge access at clubs around the
cities?
This new dimension of elite status reward could unlock a new
customer base while providing new revenue to the loyalty program.
5. Loyalty companies will acquire new, non-airline
businesses
As travel loyalty companies become more sophisticated, and
there is an increasing need to diversify away from the host airline/hotel, the
need to scout new revenue streams will begin to surface.
Instead of loyalty programs striking deals with third
parties (aka convincing the third party to buy loyalty points), the airline
loyalty company could simply acquire a smaller player in the industry or start
their own company in that industry.
So long as the new businesses are
profitable and provide value back to the host loyalty program, there is real
value in growth by acquisition.
* This article was originally published on Travel Data Daily