A new group is rivaling corporate road warriors as airlines’ favorite customers. They travel on strange days, buy extra perks on top of already expensive tickets and are changing the economics of the business.
Some airline executives say hybrid work and other postpandemic changes have cracked open demand from travelers willing to spend more for extra legroom and other perks, helping offset revenue from once-crucial corporate bookings that still haven’t fully returned.
Workers no longer tethered to desks have more freedom to extend a long weekend, tack a personal trip onto a business one, or hop on a plane midweek rather than rushing to be back in the office Monday morning—a phenomenon some airlines say they see reflected in increased bookings on Tuesdays and Wednesdays.
“There’s a blurring of the lines that you see between business and leisure,” said Steve Sear, executive vice president of global sales and distribution at Delta Air Lines Inc. That’s why some in the industry dub them “bleisure” travelers.
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Before the pandemic, roughly 12% of airline passengers flying for business generated about half the U.S. airline industry’s profits, according to McKinsey & Co., and their disappearance during the pandemic threatened the viability of some big carriers.
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Now, American Airlines Group Inc. said nearly half its revenue is coming from people in some way combining business and pleasure travel and those customers are spending nearly as much as what corporate travelers once shelled out.
The shift is encouraging airlines to rethink schedules, prices, and in some cases the layout of the planes themselves, including with additional “premium economy” seats that offer more space. The goal, airline executives have said, is to offer attainable luxuries that more customers can afford to pay for themselves.
Airlines and hotels started seeing a shift during the Covid-19 pandemic. Algorithms and data used to set fares and sort leisure from business travelers were going haywire, and customer behavior stopped making as much sense.
Patterns haven’t fully returned to normal. The dropoff in vacation traffic that typically occurs after Labor Day didn’t happen this year. Airlines say they are seeing more bookings in once off-peak months such as September and October, and in the period between Thanksgiving and Christmas.
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Someone traveling alone in the middle of the week with no checked bags displays all the hallmarks of a person on a business trip. Why then, would a passenger like that be going to Bozeman, Mont., a leisure marker, Vasu Raja, American’s chief commercial officer, recalled during an industry event earlier this year. The airline realized as travelers returned that nearly half its customers no longer fell easily into its traditional “business” and “leisure” categories.
“People don’t have to keep a work life for five days and a personal life for two days, and carve out two weeks a year for vacation,” he said.
Popular vacation routes, such as Atlanta to Orlando, now have more seats than business-heavy routes such as John F. Kennedy International Airport to Los Angeles, according to monthly figures from OAG, a data provider.
Airlines have swung back to profitability after losing billions of dollars during the pandemic. Travelers have returned, with U.S. airport volumes hitting their highest level since late 2019 the Sunday after Thanksgiving. The unexpected speed of the rebound has created strains over the past year, overwhelming airlines’ abilities to ramp flight schedules back up.
Some analysts, consultants and executives say airlines are benefiting from a more fleeting phenomenon—demand for travel is outstripping their ability to add seats—and are unsure vacationers will continue to splurge on extra trips and premium seats at high enough levels to make up for missing business travelers.
Airlines continue to bank on companies bringing workers back to offices, hoping resumption of in-person work will unleash a wave of business trips by consultants, bankers, salespeople and others visiting clients. For decades, airlines have tailored their businesses to appeal to big corporations, whose employees booked expensive last-minute tickets and shelled out for the luxe seats at the front.
Business travel has started to return. Airlines say revenues from corporate accounts climbed back to 75% to 80% of 2019 levels in the third quarter of the year. That demand has started to plateau, however, and corporate travel budgets could shrink again next year as tech, media and other sectors face setbacks.
Companies including Microsoft, Walt Disney Co., and Meta Platforms have been reining in business travel, clamping down on non-essential business trips.
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That may not matter as much as it once did for some airlines. Andrew Nocella, chief commercial officer at United Airlines Holdings Inc., said: “Our profitability is not tied to returning to 100% of business traffic.”
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Delta said it is hearing from corporate customers that they plan to step up travel at the beginning of next year, but if corporate travel hits only 80% to 90% of 2019 levels, “that’s OK, because we have so many new forms of travel,” Delta CEO Ed Bastian said Wednesday in a presentation to investors.
United has said its flights are close to 10 percentage points fuller on Tuesdays and Wednesdays than they used to be on those days. Single day out-and-back-trips, a hallmark of corporate travel, are on the decline, airlines and travel agencies say.
Sales calls and investor meetings don’t necessarily need to be in-person, but internal meetings and collaboration do, said Suveen Sahib, co-founder of K18, a hair-care company.
Since the pandemic began to ease, the company roughly every four months plans an off-site retreat to bring employees together, which has meant more work trips to what had been traditional leisure markets—southern California, Arizona, and possibly the Azores for a group of employees in Europe.
“When it comes to strategic stuff, we encourage people to meet up,” he said. “We actually have grown, I would say, our business travel beyond the prepandemic levels. Except the purpose of the business travel has changed.”
Some travelers are blending trips—working from the beach or mountains rather than the office, bolting vacations onto business trips or bringing spouses and family members when they travel for work.
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Sandra Umutesi, a project manager in the healthcare industry, last year started a new job that is fully remote, and says her company takes an agnostic view of where employees work. Most of the time, she doesn’t need to ask permission before jetting off.
Ms. Umutesi has taken more and longer trips to the East Coast to see family. Weekend trips for weddings can start on Thursday since there is no pressure to show up in person at the office on Friday. She and her husband, an attorney, keep an eye on hotel and Airbnb prices in destinations they want to check out, rather than waiting for a long-scheduled summer or winter vacation. When they want a change of scenery, sometimes they head to Cabo, laptops in tow.
“We travel a whole lot more now,” she said. “We’re able to maximize our vacation time because we have that flexibility.”
It isn’t clear if bleisure travelers will keep up their current pace, much less pay for swankier seats, as the economy cools and they burn through pandemic savings.
Some executives are skeptical. Ryan Green, Southwest Airlines Co.’s chief commercial officer, said there have been some shifts in behavior at the margins: people do seem to have more flexibility to travel, and trips are getting a bit longer. Leisure travel was stronger than the airline expected in September.
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“Tuesdays and Wednesdays are still Tuesdays and Wednesdays,” he said. “None of what we’re witnessing would cause us to do a wholesale change in how we manage the business.”
Jude Bricker, chief executive of Sun Country Airlines Holdings Inc., said there might be another factor behind changes in when people want to fly—sky-high prices.
“Fares change people’s behavior,” he said at an industry conference in November. “I believe many people are traveling on Tuesday today because they can’t afford to travel on the weekend.”
Convincing travelers to spend more to upgrade into premium cabins and for benefits such as lounge access and early boarding isn’t a new ambition for airlines.
What has changed, United CEO Scott Kirby has said, is that customers who have long had the money to burn on pricier plane tickets and vacations now also have the time.
United began seeing more “premium leisure” travel last year, but at first didn’t see it as a substitute for business traffic that wasn’t coming back, the company’s Mr. Nocella said. Now, the airline’s premium business cabins, once filled with frequent fliers getting upgrades and customers traveling on expense accounts, are filling with vacationers paying full price.
“These premium leisure customers…are clearly buying the type of products they used to have their corporations buy for them,” he said.
Jeffrey Ward, who worked in sales at a major airline in the 1990s, said leisure travel was low on the hierarchy. “Nobody cared about leisure,” he said. “Leisure was low yield, trashy fares. It was all about corporate sales.”
Now a travel adviser who helps people plan luxury vacations, Mr. Ward said he has been getting a lot more attention from airlines, with dedicated account managers and boosted commissions.
In the years leading up to the pandemic, U.S. airlines had been adding more upscale seats, creating more densely laid-out business class cabins that can still command higher prices.
They have also been dedicating more space to “premium economy” and similar products that can offer more space.
And as carriers order new planes, more space is devoted to more upscale seating. Delta said Wednesday that by 2024, 30% of its seats will be “premium” offerings–up 2 percentage points from 2019 and 21 points from 2009.
American is the latest carrier planning to nix first class on international long haul flights, which it said customers weren’t willing to pay for, joining United and Delta in replacing those seats with business class.
The shift isn’t necessarily a downgrade for customers–American’s new suites will include seats that lie flat and sliding doors for privacy, eclipsing what was once considered top of the line. The benefit to the airline is that it can fit more of them, and can in turn add more rows of premium economy. The change will boost premium seating on its long-haul fleet by more than 45% by 2026.
Henry Harteveldt, a travel industry analyst, said the shift toward high-end vacation travel has legs, though it may fluctuate along with the broader economy. The term “bleisure,” on the other hand—not so much.
“I refuse to use that other term,” he said. “It sounds like something out of a bad business textbook.”
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