Should airline lounges be a reward for revenue, or for loyalty, asks Alexander Freeman.
Airlines used to mainly be in the business of getting passengers from A to B. And, of course, they still are. However, as part of running profitable and sustainable businesses in a highly competitive global market, the airlines have also become focused on something else: passenger loyalty, embodied in things such as frequent flyer schemes.
Many of us who travel frequently will agree that a key part of managing customers’ loyalty is managing their expectations. We customers are a demanding lot, particularly those of us who travel frequently as part of our work. No longer content with just getting to our destination, we expect the travel process to be seamless, well supported, comfortable and perhaps even a little bit special. We also expect to be recognised and rewarded, not just in the sky but on the ground as well.
Getting customer loyalty right is important for any airline that wants to attract and maintain those lucrative corporate and premium customers. In fact, most full service airlines rely on this higher yielding business to counter the poorer returns back in economy. Lounges are a crucial part of maintaining loyalty, both in terms of reward and recognition.
The lounge revolution started with the rise of the major airline alliances back in the 1990s. For most business travellers, a key benefit of holding a higher tier membership of Oneworld, Star Alliance and/or Skyteam is cross-airline lounge access, especially when travelling in economy where lounge access isn’t included in the fare.
To cope with constantly growing passenger volumes, fierce competition and customer expectation, airline lounges have slowly evolved from cosy spaces with armchairs, magazines and a coffee machine into vast spaces that rival good hotels, restaurants, bars or clubs in terms of their food, drink and service.
Lounges have become major projects in their own right, taking up a growing chunk of many full service airlines’ capital and operational expenditure. Airlines are continuing to invest hundreds of millions of dollars for the benefit of their most high-spending customers. Doha, Dubai, Hong Kong, Singapore, Istanbul and London Heathrow contain many lounges, which cover significant amounts of the available floor space.
Is this spending justified? Taking a look at Business Traveller’s online forum, one of the most talked about aspects of business and premium travel is what the airlines are doing (or in some cases not doing) with their lounges. The pre-flight experience has become a key part of the business traveller’s journey. A change in the brand of champagne or biscuits provided can lead to protests. Nevertheless, for business travellers, basic requirements such as fast and reliable access to wifi and power can make or break our productivity in the hours before a flight. Get that wrong and the airlines risk frustrating their most loyal customers before they even get on the plane.
And then there’s the question of comfort. With lounges now being heavily marketed as a key part of the travel experience, most eligible customers arrive looking forward to the lounge. We’ve paid a lot for that business or first class ticket and circled the planet multiple times to reach super elite frequent flyer status. So, we expect to be recognised and rewarded. We want spa treatments, premium food and drinks, and high-quality facilities and services akin to those in a four- or five-star hotel.
This sort of pre- and post-flight pampering doesn’t come cheaply for the airlines, especially when access is granted even to those in economy through their frequent flyer status. With some lounge visitors consuming more in value than they generate in profit, this begs the question: should lounges be a reward for revenue or loyalty?
Revenue versus loyalty
I recently flew from Sydney to London on Qatar Airways in economy class. But as I’m a loyal Oneworld Emerald frequent flyer (ie the top tier), before the first flight to Doha, I was able to spend two hours at the Qantas first class lounge at Sydney International airport. This is because I was able to gain access to any Oneworld member’s first class lounge before departure, an Emerald privilege. I arrived early, and so after a three-course gourmet lunch in the restaurant, several glasses of champagne, a complimentary 15-minute massage followed by a shower and then more champagne, it felt like I’d consumed a quarter of AU$1,500 economy ticket’s value in pure lounge extravagance.
Next stop was Doha before the four-hour transit to London. I’d been looking forward to enjoying Qatar Airways’ flagship lounge at their hub in Doha, so I was surprised to be politely told that I wasn’t eligible for entry. The Al Safwa lounge, described as “an oasis of luxury” complete with flowing waterfalls, a fine dining restaurant and spa, is available only to Qatar Airways customers holding a first class ticket. I was directed to the smaller but completely acceptable Qatar Airways first class lounge (there were no waterfalls) or invited to pay an additional 450 Qatari Riyals (about US$150) for access to the much larger Al Mourjan lounge where Qatar Airways sends its business class passengers free of charge.
What had just happened? In Sydney, despite flying economy, Qatar Airways had invited me to the flagship Qantas first class lounge. Now in Doha, despite being Oneworld Emerald, I was denied access to Qatar’s own flagship lounge. This, mind you, was in accordance with the terms and conditions on the Oneworld and Qatar Airways websites.
Not all lounges are the same
Qatar Airways is one of a growing list of premium airlines, including Singapore Airlines, Lufthansa and British Airways, which are distinguishing between revenue and loyalty when allocating lounge access, particularly at their busy hub lounges.
For example, even where a passenger holds a top-tier Star Alliance gold card, if they have an economy or premium economy ticket, they’re not eligible to enter the Silverkris and Private Room lounges at their Changi hub (see reviews at businesstraveller.com). Instead they’re invited to the Krisflyer Gold lounge, which doesn’t provide showers or even dedicated toilets. Similarly, at London Heathrow T5, top-tier Oneworld Emerald cardholders don’t get access to the Concorde Room, which is for those holding first class tickets. In Frankfurt, Lufthansa’s first class terminal is limited to customers travelling in first class or HON Circle members. Top-tier Star Gold cardholders don’t get access.
What this shows is that many airlines are now moving towards a model where, despite your frequent-flyer status, perks such as premium lounge access are provided based on the price you paid for your ticket, rather than your overall loyalty to the airline or alliance.
This arguably makes some sense. It corrects the injustice of a top-tier frequent-flyer status passenger who has paid $2,000 for an economy ticket getting a significantly better pre-flight experience in the first class lounge than the $8,000 business class ticket holder without frequent flyer status who can only use in the inferior business class lounge down the hallway.
In the United States, however, there’s an opposite trend. When travelling domestically using the three main US carriers – Delta, United or American Airlines – in most cases (excluding certain trans-continental flights), top-spending first and business class ticket holders don’t get any lounge access included in the fare. Only those with eligible tier frequent flyer status can enter the lounge before the flight. Here, loyalty truly trumps revenue.
What does the future hold for lounges?
Qatar Airways recently announced they won’t be providing complimentary lounge access to certain points-upgraded business and first class customers, at the same time offering a “pay-per-visit” option for those passengers without free access. Other full-service airlines such as Air France and Emirates already offer a similar scheme.
While ruffling the feathers of some frequent flyers, this new pay-per-visit strategy addresses the enormous cost of providing complimentary lounges and provides all customers the opportunity to have a luxurious pre-flight experience. Top-tier frequent flyers may feel neglected, or that their loyalty seems to be downgraded or ignored.
Will the changes alter purchasing behaviour? Perhaps. What is certain, however, is the growing importance of lounges to airlines and airports. The growth of Priority Pass and similar products show that lounge access – however it’s obtained – is likely to remain a key part of many passengers’ pre-flight experience.