State of Airport Loyalty Programs (2023)

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1   Customer loyalty programs, introduced initially to the airline industry in the early 1980s, have now become an essential component of the airline industry ecosystem. Airline loyalty programs, also known as “frequent flyer programs,” produce profit margins by issuing and recycling miles at different rates, provide positive working capital through delayed redemp­ tion, and enhance passenger loyalty to airline brands. The capital market responds posi­ tively to these tangible financial benefits made possible by airline frequent flyer programs, evident through the programs’ high valuation. Compared with the airline industry, airports are late adopters of customer loyalty pro­ grams. Only within the last decade have airports realized the value and decided to create the airport version of loyalty programs. This trend mainly originated in Europe, where inter­ national gateway airports, such as London Heathrow Airport (LHR) and Singapore Changi Airport (SIN), collaborate with airport concessions to provide this value­added service to travelers. In the United States, airports have embraced this trend by offering various rewards and benefits to frequent travelers. The circumstances of U.S. airport loyalty programs are the inspiration for this synthesis. This report provides a comprehensive overview of the status of U.S. airport loyalty programs for airport managers, particularly those responsible for marketing, communications, and customer experience at airports. Other stakeholders, including but not limited to, airport authorities, dedicated airport consulting firms, academic researchers, and travel media, are also the intended audience of this synthesis. The project team utilized a hybrid approach, combining literature review, website exami­ nation, survey, on­site visit and interview, and international benchmarking. The literature review covers recent scholarly publications about customer loyalty from airports, airlines, tourism, and other business­to­customer (B2C) sectors. The examination and overview of airport loyalty programs include all 145 primary­hub airports as categorized by the Federal Aviation Administration in calendar year 2021 and six international gateway airports. The survey collected valid responses from 41 airports of different categories. During October 2022, the project team also visited three airports operating loyalty programs. Information collected using this hybrid approach enabled the project team to develop a holistic under­ standing of U.S. airport loyalty programs. The overall adoption of customer loyalty programs among U.S. primary­hub airports is modest. As of October 2022, less than half of the 145 reviewed airports were operating a program that recognizes and rewards customers who purchase or engage with a brand on a recurring basis. The survey responses also confirm this observation. More than half of survey participants indicated that their airports had either decided not to pursue the idea of starting a loyalty program or terminated their loyalty programs. S U M M A R Y State of Airport Loyalty Programs

2 State of Airport Loyalty Programs The vast majority of the current airport loyalty programs are essentially parking rewards programs. These programs track travelers’ spending at airport parking facilities and reward their recurring visits with free parking or discounted parking. Some programs provide con­ veniences to their members by letting them enter and leave parking facilities and pay fees with electronic toll collection systems such as E­ZPass to expedite the progress. Rewards earning and redemption are mostly limited to parking facilities of hosting airports, with few opportunities extended to other sections of airports, let alone outside of airports. Some airports and airport concessions are members of third­party multi­airport loyalty programs (e.g., Thanks Again). In the United States, there are a few small but special airport loyalty programs. These pro­ grams operate their own airport lounges and provide extra amenities for members. Some programs, such as Premier Lounge at the Colorado Springs Airport (COS), charge annual fees. But these programs typically offer attractive benefits, such as free airport parking for up to 90 days per visit. Operating personnel of these programs reported that their programs are part of airports’ efforts to reduce leakage of local passenger traffic to nearby large­hub airports. This report includes a dedicated section of case examples covering three selected programs. Compared with U.S. airport loyalty programs, customer loyalty programs operated by the selected international gateway airports are quite different. These international programs resemble typical airline frequent flyer programs. Members have plenty of opportunities to earn, accumulate, and redeem rewards from diverse business partners of airports. Not only do these programs offer utilitarian benefits, but they also enable members to earn symbolic benefits (e.g., achieving higher membership tiers and unlocking additional benefits). In con­ trast, symbolic benefits are not offered by any U.S. airport loyalty programs. In general, U.S. airport loyalty programs are in an early stage of development. Most air­ ports have not yet realized the full potential of customer loyalty programs, nor have they identified a sustainable business model that enables airport loyalty programs to produce sizable revenues. Airport loyalty programs remain secondary in managerial decision­making and resource allocations. The U.S. airport sector needs commonly accepted guidelines to help assess the following: (1) whether an airport needs to have a customer loyalty program and (2) if so, how the airport can mobilize internal resources and utilize external expertise to build a loyalty program that addresses the unique business and operational environment of the airport.