Banks and airlines are competing for consumer loyalty, but financial institutions appear to have an edge.
A new report from consulting firm IdeaWorksCompany, Kong vs. Godzilla: U.S. Banks and Airlines Clash Over Traveler Loyalty, highlighted strengths and weaknesses of both entities, likening banks to King Kong and airlines to Godzilla.
“Travelers are being wooed on all fronts. The competition is creating better rewards, more lounges and new travel booking options, but it’s also reshaping the balance of power in the travel industry,” said Jay Sorensen, president of IdeaWorksCompany and author of the report.
Amid the current $1.1 trillion annual travel market, the report found that banks, specifically the four biggest U.S. card-issuing banks, American Express, Capital One, Chase and Citibank, have a strong influence over consumer spending habits. This is thanks in large part to their pool of customer data and credit card accounts.
When looking at global card accounts, Capital One/Discover has the largest share (34%), followed by Chase (30.7%), Citigroup (14.7%) and American Express (14.2%). The biggest U.S. airlines, American Airlines, Delta Air Lines, Southwest Airlines and United Airlines, each account for less than 2% of total card accounts.
Banks' travel platforms also now offer flights from several different airlines, hotels and other bonuses, operating almost like online travel agencies, according to IdeaWorks.
However, airlines have a unique advantage because they have longstanding experience in the travel loyalty space. Additionally, they are “direct suppliers of travel” and offer their own loyalty programs and perks, which they can also discount as they see fit.
Airlines are building out their offerings to better compete as well. Over the summer, Alaska Air Group partnered with experiences platform Way, giving Alaska Airlines and Hawaiian Airlines customers access to Atmos Rewards Unlocked, through which they can redeem points for experiences.
JetBlue also recently replaced the Paisly by JetBlue website with TrueBlue Travel, the new name for its consumer travel booking platform. The company said the rebrand “broadens how and where points can be used, unlocking even more travel value for members.”
Banks also offer rewards for things like airline tickets and hotel stays, but they’re purchased from suppliers, with pricing then reflecting “routine retail pricing.” In general, they don’t have the margins to offer “super deals on rewards,” the IdeaWorks report reads.
IdeaWorks highlighted airport lounges as a specific “battleground,” as American Express, Capital One and Chase are investing in these to compete with those operated by airlines. But IdeaWorks asserted that this is another area where airlines win, as they have the “sheer scale and prime airport real estate.”
In the U.S., Delta has 54 Delta Sky Club lounges, United has 49 United Club lounges and American has 41 American Admirals Club lounges. This is compared to just 17 Amex Centurion lounges, nine Chase Sapphire lounges and seven Capital One lounges.
“Banks have a far smaller number of airport lounges. This is a crucial distinction between airline co-branded cards and bank travel cards—if you are loyal to a particular airline, the lounge network will serve your itinerary. With a bank travel card, obviously it’s hit or miss,” the report reads.
Still, IdeaWorks concluded that for now, banks (Godzilla) are probably winning the loyalty battle, especially with Capital One’s acquisition of Discover in May and the potential to “create a credit behemoth” in the U.S.
“Airlines invented loyalty programs, but banks have amplified them into multi-billion-dollar businesses,” Sorensen said.
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