Summer travel spending has weathered what was arguably a tougher quarter for travel companies than for many of their customers.
Rising fuel costs have hurt airline economics, while international hotel demand has moved unevenly, as evidenced by recent earnings reports. American Airlines Experienced a sharp increase in fuel expenses, and Wyndham Hotels & Resorts The company reported a 1% decline in global RevPAR (revenue per available room) even as US RevPAR rose 2.2%.
But activity on the part of the travelers themselves has been very positive. Americas premium passenger unit revenues increased 13.4% year over year, and domestic passenger unit revenues increased 10.6%. Wyndham’s US RevPAR gains came from increases in both occupancy and average daily rate.
Within this spending, data shows that rewards, loyalty programs and credit cards are becoming increasingly intertwined with the decision about where to travel and how to pay for it.
American The numbers provide one indication. AAdvantage enrollment rose more than 30% year over year, surpassing the record growth recorded in the first quarter. Spending across Citi’s co-branded card portfolio increased by 8%.
US Chief Commercial Officer Nat Pepper Put these numbers in the context of the carrier’s commercial strategy. “Our last strategic pillar is to lead in loyalty,” he told analysts during the conference call on Thursday (July 23).
The numbers are notable because the card and the ride serve different purposes for the consumer. Travelers may travel several times a year, but they can earn travel rewards when they use a co-branded card. This creates a link between normal household spending and the price of a future trip.
American’s outstanding results indicate that value-conscious travel does not necessarily mean a decline in the value of its stock. Bieber told analysts that demand for premium travel “remains strong,” with premium unit revenue increasing as the airline expands and premium economy capacity at nearly double main cabin capacity.
In other words, consumers can continue to purchase expensive travel while simultaneously looking for ways to make those purchases more difficult.
Rewards Enter the payment decision
The same behavior has implications for hotels.
Wyndham Rewards, as detailed in Profits material released on Wednesday (July 22), surpassed 126 million members, while the company’s second-quarter U.S. RevPAR rose 2.2%. Wyndham’s results also place credit card products, strategic partnerships and affiliations among additional revenue streams it intends to pursue along with greater involvement with Wyndham Rewards.
PYMNTS Intelligence offers evidence of a rewards-focused mindset when it comes to getting away from it all. Our research It found that 70% of consumers changed what they purchased after seeing an offer or reward, while 43% changed payment methods to get one. These behaviors make rewards relevant to two points in the transaction: purchase and payment.
The primary motivation for consumers using credit card installments was their ability to collect loyalty points or cash back. The report found that consumers are using their favorite cards to match purchases with rewards they consider more valuable.
For airlines, hotels and card issuers, this creates competition that goes far beyond the fare or room rate. The same traveler can compare destinations, brands, cards, points and financing options before making a purchase.
Fuel prices and international volatility could still overshadow those gains on a corporate income statement. Bonuses do not change those accounts. But American’s card and loyalty growth, Wyndham’s focus on ancillary revenue and PYMNTS Intelligence data point to a consumer who is still traveling while becoming more calculated about how every travel dollar is spent.
