Everyone loves an upgrade – especially when it’s free. But would you be willing to pay for one, and, if so, how much?
Frequent flyers are au fait with redeeming their miles and points on higher room categories and seats at the front of the plane, but behind the scenes, new layers of virtual technology are enabling almost anyone to pay for upgrades with cash, and even bid on them in online auctions.
On the face of it, this is bad news for elite members of airline loyalty schemes who might be hoping to be upgraded to business or first for free. “I find the concept rather unpleasant,” says nathinfor, a contributor to our online forum. “I don’t want to fight for my seat. And I would regard negatively an airline that treats customers that way. Like throwing a bone to a pack of hungry dogs.”
Randy Petersen, founder of flyertalk.com, is sympathetic. He says: “If we have earned the right to be a platinum member and have access to a certain number of upgrades, I don’t like it when people can buy an upgrade to the same seat that I had to earn by flying 100,000 miles, missing the birthdays of my children, and all the other things that go with being a road warrior.
“To have someone off the street walk up and pay US$50 to get the same upgrade, that really is a difficult thing for loyalty members to accept.”
ROOMS FOR SALE
So how does it work, and do we need to get upset about it?
Let’s consider paid-for upgrades in hotels. Ten years ago, Jason Bryant founded Nor1 (nor1.com), “to help hoteliers price and merchandise their premium inventory”.
He created “upsell solutions” called eStandby Upgrade, FrontDesk Upsell and eReach. Each take the form of a different platform – online booking via the hotel’s website, check-in screens at the property, and smartphone apps – through which personalised offers are presented to individuals at various points of the reservation process and during their stay.
Imagine you are booking, say, a King Executive room (£350) at the London Hilton on Park Lane. When it comes to completing the transaction, you are presented with the chance of upgrading to a Mayfair suite for £75 (normally sold for £555), providing one is available when you arrive.
Bryant says: “Everybody wins – the guest wins because they get this higher level of service at a better value, the hotel wins because the room would have gone empty anyway so it’s perishable inventory, and we share in a modest percentage of the revenue.”
If you are a Hilton HHonors member, you might have the possibility of paying for the upgrade with your points – but assuming you’re not, you can’t or you don’t want to, the option of nabbing a better room at a bargain rate might be tempting. The deal breaker is that it’s not guaranteed. If you check in and the suite is unavailable, the money stays in your account and you get the room you originally booked.
Bryant says: “It could be that there is no discount but, typically, the sweet spot is about 50 per cent. You may book a standard room and we may make an offer for the next available room type as well as other larger suites. A guest can select all of those and the hotel can award them whichever is available. The pricing is based on the fact that they are giving up certainty.”
Who gets invited to upgrade? Bryant says: “We expose personalised offers to guests that book on hotel websites, as well as anyone who is getting a Hilton confirmation or pre-arrival email. There is a host of variables outside of room inventory, which means not everyone will be offered one.
“We invested very heavily in analytics so underneath the covers, what we are doing is very sophisticated as far as picking the right product and the right price, but also leveraging buyer behaviour dynamics.”
Big data, as we know, is behind everything these days. But for loyal guests it can, happily, be skewed in their favour. Bryant explains: “Your position in a loyalty scheme has a bearing on whether you get an upgrade awarded to you. What’s more, we abide by whatever the scheme dictates – if it is a free upgrade for members to the next available room category then the upgrade will show up as complimentary. Then we make them a value-based offer showing they can get a larger suite for this nominal fee.”
He adds: “To date we have not released the ability to use points. However, we are working on it.”
Nor1 has so far partnered with Hilton Worldwide, Hyatt, IHG and Carlson, with 30 per cent of participating properties located outside the US. Bryant says: “EStandby continues to gain traction. Our goal is to roll it out to every major hotel chain. I could see business doubling over the next 12 to 24 months – every month we make two million upsell offers, and that continues to grow.”
Is it for business travellers? Yes, because the lack of certainty surrounding getting an upgrade to a suite isn’t so significant – it will most likely be seen as a bonus if you are granted one, rather than a major inconvenience if you don’t. Still, you may prefer to spend your points on them rather than cash.
“I think the idea of a hotel upgrade is still a bit fuzzy. You’re on the 15th floor instead of the third floor. What I didn’t get was the Presidential suite,” says flyertalk.com’s Petersen.
SEATS FOR SALE
Unlike many carriers, Alaska Airlines has been offering straightforward cash upgrades from economy to first class for about 20 years. At check-in or at the gate, you can buy an upgrade for between US$50 (flights up to 1,250 miles) and US$200 (from 3,751 miles), while free upgrades are given to top-earning members of its Mileage Plan programme.
“We sell paid upgrades after we have cleared all of our elite-level customers on the upgrade waitlist,” says an airline spokesperson. Sounds fair enough. But remember, Alaska’s “first class” product has only five inches of recline and four more inches of legroom (along with a three-course meal with wine).
British Airways also offers “buy-it-now” one-class bump-ups to Club Europe (business) on shorter sectors. On longer routes, its World Traveller Plus (premium economy) cabin tends to get in the way, preventing cattle class passengers from clawing their way into Club World. It has been reported on our forum, though, that some flyers have been offered WTP to CW upgrades at check-in for £399 to £599.
Forum contributor Senator says: “I frequently use the BA option of upgrades in Club Europe from Stockholm (ARN) to Heathrow for trips with no weekend stay, which allows for the cheapo Club Europe returns for £245. The one-way upgrades are roughly £60-£80 each way, and given that most ARN-LHR flights are two hours 45 minutes door-to-door, it is worthwhile.”
Another poster, esselle, was offered a paid-for upgrade with Virgin Australia. “I was checking in for a VA flight from Melbourne to Brisbane last week, a two-hour sector, and was asked if I would like to buy an upgrade. My ticket was about AU$175, but the upgrade was quoted as AU$745. Naturally, I declined, [and] all eight business class seats [were] empty for the flight. Had they quoted AU$250 or so, I would likely have said yes.”
PLACE YOUR BID
Long-haul airline upgrades are a different breed – they have always been far more desirable and elusive. What’s the trick? Dress up smart? Avoid ordering a special meal? Flash your gold card? Frequent flyers know them all, and are often happy to use their hard-earned miles to pay for one, as complimentary upgrades can come few and far between.
The situation is changing, though. A parallel trend is seeing companies such as Optiontown (optiontown.com) and Plusgrade (plusgrade.com) enable people to bump up to higher cabin classes, providing they can outbid the competition in an (albeit blind) eBay-style auction.
Ken Harris, who launched Plusgrade in 2009, says: “Everyone knows that if there is no one sitting in seat 2A on a flight from London to New York, it is a lost opportunity for the airline, while the people sitting in economy would probably love to sit in that premium seat.”
Plusgrade’s 18 airline partners include Virgin Atlantic, American Airlines, Air New Zealand, Etihad, Austrian Airlines, and, since last month, Avianca, Aer Lingus and Icelandair. KLM also sells and auctions upgrades, accepting bids from invited passengers up to 30 hours prior to departure.
Plusgrade provides white-label auction software to install on airline websites, so that from the time of booking, select passengers will be invited to name their price for an upgrade – usually to the next available cabin, although some are experimenting with “double ups” from economy to business, skipping premium economy. Normally, within 72 hours of departure, the airlines will then see how many seats remain unsold and assign the upgrades to the highest bidders.
Optiontown, which is linked with more than a dozen airlines including SAS, Air Asia and Air India, requires you to pay a £2 sign-up fee, after which you may be offered a discounted upgrade to business for as little as 25 per cent of the original fare.
Harris says: “Plusgrade has a slider that moves and a feedback monitor that lets you know the strength of your offer and, if there is space available, what the likelihood [of winning] will be. Most people are lodging offers well above the floor price. However, it’s not like eBay where you see what the top bid is, so there isn’t really a bidding war – it is a silent process. You put your offer in and you have the option to modify or retract it.”
Who is it marketed at? Harris says: “The programme is not designed to be a short cut to a premium cabin – if you want to guarantee a seat, you should buy it outright.”
So is it for business travellers? Petersen says: “Premium passengers will remain premium passengers – the price of convenience will never be messed with. Equally, I don’t think that those who are trying to travel on the cheap will be engaged and moved up. They have already bought the cheapest ticket they could find so they don’t have the budget to buy an upgrade. It’s all about that big middle and, frankly, the middle is probably about 80 per cent of all passengers.”
However, premium passengers can always jump right to the front of the plane – tempting when the price differential between business and first class can be thousands of pounds (£3,426 on a return American Airlines flight between London and New York in April).
Forum poster MarcusUK, says: “Etihad offered for me to bid for any sector of a London Heathrow-Abu Dhabi-Sydney trip where we had already booked business class, upgrading to first. This was an excellent idea, and the barometer you moved ran from £400 up to around £900 each per sector. A modest bid of £580 for Abu Dhabi-Sydney was accepted two days before the flight.”
Some call it “gamification”, an example of how businesses are employing fun and competition to motivate people to spend. It could also be described as the democratisation of premium travel, at least relatively speaking – not that this goes down well with everyone.
“If people want to travel in the premium cabins they should pay for it either with money or with the full whack of miles,” writes forum poster JohnHarper. “I find more and more I stick to flying Lufthansa, Swiss, Qatar Airways and Singapore Airlines because they protect the integrity of their offering and the people around you are not gawping and looking to drink every last drop of alcohol.”
Others are more pragmatic. MarcusUK says: “The death of the free upgrade is not only a result of revenue gain, but of airlines better managing their customer base and booking numbers. Bids for upgrades prior to travel certainly enable them to run with a higher load factor, increased revenue, and a happier customer base, and with profit. It takes thinking ahead, and certainly matches capacity with demand.”
A pertinent concern is how it affects elite members of loyalty schemes who may not get the upgrades they might previously have done as all the spare seats in first and business have been auctioned off.
Harris says: “There is no discernable science for the travelling public to know if they are going to be invited or not. Some airlines have an objective to expose their premium cabin to a wider audience, while others will want to offer it to passengers on flight A but not flight B based on historical capacity.”
He adds: “Really, this should be seen as another valuable dimension to any frequent flyer programme. All of our partners have frequent flyers top of mind. American Airlines and Copa Airlines, for example, state that upgrades will only be processed after all of their top tiers have received the benefits that they have earned.”
If you are an Elite, Gold or Silver member of Air New Zealand’s Airpoints scheme, your “OneUp” auction offer will be weighted by 50 per cent, 30 per cent or 10 per cent, respectively.
Austrian Airlines unveiled its Smart Upgrade concept about a year ago. Powered by Plusgrade, it is available on more than 20 long- and mid-haul routes.
Stefanie Kunath, the carrier’s director of business development, says: “For Miles and More bookings, if they want to buy an upgrade redemption ticket with their miles, normally they would do that more than 72 hours before departure. We don’t save seats for the Smart Upgrade, we just sell the seats that are left.”
She adds: “It’s a different product. It’s more for the leisure passenger who says they are willing to treat themselves and if they don’t get it that’s fine.” She adds: “To be honest, we never really gave out free upgrades anyway.”
Plenty of airlines do, although anyone getting one is wise enough to know that they are extremely lucky. Forum contributor travelworld2 says: “Like many others, I wouldn’t risk not getting a fully-flat bed overnight on long-haul, [although] I might on a day flight.” Loyal flyers looking to upgrade with miles at check-in may find this option becomes a thing of the past.
One problem for the industry might be that bidding on upgrades eats into an airline’s premium revenue, as savvy passengers discover ways to manipulate the system and find out what winning bids are through social media (airlines tend to keep this quiet).
Petersen says: “The thing about frequent flyers is we have figured things out pretty good – over time we will work out what the chances are that we can buy a cheap ticket and still get offered an upgrade. Frequent flyers are great at crowd-sourcing; we love to talk to each other and compare notes.”
According to the Wall Street Journal, the average winning bid for a business class seat on Plusgrade partner El Al is US$800, which is like Christmas come early when you consider the full fare can be US$3,000-US$10,000. Just don’t tell everyone about it…