Spring into Luxury
The spring of 2003 has proven to be an arduous time for travel providers. Likewise, expectations for the summer of 2003 are dim. The result is travel opportunities for the customer not seen in decades. The travel industry is dealing with a triple whammy, a “perfect storm” if you will: an anemic economy, war fears, and health concerns over SARS. The result is record losses for travel providers, bankruptcy for some, while many others fight to survive. To illustrate the travel industry’s frail condition, U.S. airlines lost approximately $1.4 billion last quarter. As a whole, the airline industry estimates that they will record losses exceeding $5.5 billion in 2003. Demand for hotels has dropped as much as 60%, representing equally profound losses for the hotel industry. Car rental companies have vehicles unrented for months, while cruise ships are sailing at 50% capacity.
This spring and summer is a travel contrarian’s dream come true. Without a doubt, this is the best time to enjoy first class luxury travel at bargain prices. For example, American Airlines is offering a round trip fare from Los Angeles to Rome for as low as $299 and round trip transcontinental flights can be had for $99. What’s more, rooms at five star hotels sell for under $125 and cruise fans are enjoying luxurious staterooms with as much as an 80% discount.
The path to greater value this spring and summer is to develop a mutually beneficial relationship with travel providers. This means that you have to give a little to gain a lot. Travel providers are willing to dole out preferred services and upgrades to the “Right Customers.” Currently, travel providers are forced to sell their services at a huge discount to remain competitive. Therefore, any additional revenue squeezed from rates or fares lessens their escalating losses. To gain additional revenue, travel providers are tacitly offering certain customers upgrades and preferred services. Usually these services do not add to the cost of doing business but can certainly get rid of some of the red ink. For example, an empty hotel suite, ocean front room, or first class airline seat perishes after that night or flight and forevermore will not provide revenue for that period of time. Therefore, by leveraging otherwise unsold premiums, travel providers gain the benefit of added cash flow, and customers enjoy preferred services and upgrades, thus creating mutual benefits for both parties.
How Do You Create Added Value?
Represent greater customer equity—The buzzword question for travel providers is how much customer equity do you represent? The equity equation is a combination of your current revenue represented by your airfare or room rate, your future revenue represented by your re-purchase intent, and the travel provider’s cost to service you.
Enhance your equity value—Book your ticket directly with the travel providers’ 800 numbers or on their websites. This saves commission cost and generates greater revenue for the travel provider, making you a more valuable customer. Do not pay the lowest discounted fare or rate. This at first seems to contradict the idea of bargain travel. However, remember that the key is to build a mutually beneficial relationship where you and the travel provider both receive added value from the transaction. When a travel provider issues deeply discounted fares or rates, they view these transactions as counterproductive to their objective of adding value to their business model. These fares and rates are only issued to maintain competitive market share, providing little if any benefit. Therefore, by paying a fare or rate one level above the most discounted fare or rates, you are perceived as adding some value to the company and providing a benefit. In turn, you’re rewarded with preferred services and upgrades. In many instances, the next price level is only a 5% to 25% premium. For example, if an airline’s lowest discounted fare is $200 and the next fare level is priced at a 15% premium you end up paying $230. For your additional $30 investment you benefit by having fewer restrictions and a greater opportunity for a first class seat. Similarly, if a hotel offers a discounted room for $125, and the next rate level is priced at a 10% premium, your rate increases $12.50 or to $137.50 per night. But for your additional $12.50 you might be upgraded to a suite versus staying in a marginal nondescript room.
Position yourself as a valued customer to your travel provider—Whenever possible express your intent to build a loyal relationship with your travel provider. Make small talk with the travel provider’s contact employees—those who have the most contact with the customer—and express your interest in continuing to purchase services from them. Remember, even though sometimes they do not act like it, their jobs depend on your consumerism.
Use the contrarian travel approach—Travel on the flights with low demand (call and ask the airline what their load is on a particular flight), stay at hotels with low occupancy rates, and travel to destinations that are experiencing low travel demand. Depending on your fortitude, currently certain locations offer greater bargains. For example, travel to Asia offers exceptional value. However, the risk of SARS can make this a costly proposition for some, emotionally if not physically. Some Asian-Pacific locations such as Australia, Bali, and Tahiti are considered relatively safe and still offer low fares and rates. Locations in the Middle East are also understandably offering good bargains. Two locations to consider are Jordon and Egypt. Curiously, domestic locations do not offer good bargains this spring and summer, because many travelers are opting to remain close to home, thereby driving up the prices of domestic locations.
Become an elite customer—Enroll in a frequent user program. Request an upgraded membership to elite status for the reminder of the year. Use this status as your first step towards demonstrating loyalty.
Join your airlines’ private lounge at no cost—Simply request a temporary membership saying that you are thinking of joining the club next year. You will receive better service and have better opportunities for upgrading.
Upgrade to the Club Level—Many hotels offer a special floor with dedicated concierge service and usually provide morning breakfast, lunch, snacks, and evening cordials—saving you money on food costs. When you’re upgraded for free these floors are especially a good bargain.
Follow the dollar—This is part of the contrarian theory. Go to destinations where you will get good value for the dollar. Europe is not the place to go this spring or summer; the euro is trading at a 30% discount to 2000-2001 rates. However, Mexico, Canada, and the Caribbean all offer good value this spring and summer.
Do not assume luxury costs more than an average travel experience—Most luxury hotels do not like to stress their lower rates, however, when they only have 40% of their rooms filled, lower rates to fill otherwise zero revenue rooms makes sense.
Use frequent flyer miles wisely—Buy inexpensive air tickets and use miles to upgrade to first class.
Build partnerships—A long-term perspective will build partnerships with quality companies that will pay dividends.
Ask and you shall receive—You would be surprised what this simple question will yield.
This spring and summer should offer an unprecedented opportunity for upgrades. The basic formula in the travel industry is Loyalty = Leverage = Luxury. With historically low demand for travel services, and travel providers facing record breaking loses, a wide range of travelers will be privy to a bounty of preferred services that providers will offer to stimulate cash flow.
In general, when supply exceeds demand, opportunities for consumers abound. Travel providers offer the best bargains and first class opportunities when the industry is financially troubled. Further, based on my experience, the simplest technique for an upgrade, beyond building your preferred customer status, is just to ask. Although my strategy lacks the fancy advice found on various travel web sites, like Mr. Buffett, I have found my profits or upgrades in all situations by focusing on the long-term relationship. Learn more about how to do this for yourself, and other valuable information in The Penny Pincher’s Passport To Luxury Travel: The Art of Cultivating Preferred Customer Status.
About Joel Widzer:
Joel Widzer logs more than 100,000 air miles a year and he has accumulated more than 1.6 million frequent flyer miles. He has developed the unique ability to view traveling from both a consumer and business perspective. Through his own travel experience and his extensive research of the travel industry, he has developed firsthand knowledge of heretofore-undiscovered travel secrets and an understanding of travel programs. It is this insight that allows him to travel the world in ultimate luxury while paying coach prices. He is the author of The Penny Pincher’s Passport To Luxury Travel, and has been heard on syndicated radio and seen on MSNBC, The FOX News Channel Travel Channel, CBS, NBC, and CNN.
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