AIRLINES & ALLIANCES

OAG report: Beyond the Ticket: Winning Traveler Loyalty with Rewards & Ancillary Services

OAG surveyed 2,000 North American travelers in April 2024 to analyze what services, ticket inclusions and rewards programs are driving purchasing behaviors.

Read full report here. 

Key takeaways:

Travelers are eager to take to the skies – but they remain cost conscious and less swayed by traditional airline loyalty programs.
Younger travelers show less interest in traditional loyalty programs: Airline loyalty and frequent flyer programs are popular among all travelers, with 82% enrolled. But when you dive deeper, an interesting trend emerges: Younger travelers are less likely to be enrolled than their older peers. Only 65% of Gen Z and 70% of Millennials report being enrolled in airline frequent flyer programs. This represents a big drop from Baby Boomers (89%) and Gen X (80%). 

• BRAND LOYALTY LOW AMONG YOUNGER TRAVELERS: Will traditional loyalty programs slowly fade as younger consumers make up a larger share of the traveling population? The data implies that the answer is yes. The number one barrier to joining these programs, according to Gen Z (61%) and Millennial (49%) travelers surveyed, is lack of consistent travel with a single carrier or brand, followed by it taking too long to redeem rewards, at 14% and 19% respectively. And 8% of Gen Z would rather have rewards that are specific to their travel preferences and booking patterns. 
• Additionally, 8% of both Gen Z and Millennials don’t want airlines to have access to their data, a close second to Baby Boomers at 10%, compared to only 5% of Gen X. 

Enticing younger travelers to reengage with loyalty programs will require fresh thinking from airlines – and it starts with knowing what experiences matter most to them. 

GEN Z AND MILLENNIALS VALUE VACATION RENTALS. ALL TRAVELERS WANT FREE CHECKED BAGS 

One of the best ways to improve loyalty program adoption and engagement is to allow customers to use earned points elsewhere in their travels, and vice-versa. For instance, travelers overwhelmingly desire to put their airline rewards program points towards hotel accommodations (73%), followed by car rental services (53%). Additionally, 50% of Gen Z and 49% of Millennials want the ability to use points with vacation rental providers.  

To entice sign-ups for airline credit cards, the majority of travelers want free checked baggage (63%) and sign-up bonuses (56%), with 43% wanting access to airport lounges. 

Travel experience and cost continue to be the most important factor for travelers, outweighing rewards programs in importance.

If all things were equal, most travelers are willing to pay more for a ticket with legacy carriers like Delta Air Lines, American Airlines, or United Airlines, as opposed to flying on a low or ultra low-cost carrier. Thirty-two percent are willing to pay up to $50 more and 21% up to $100 more.

But generational differences persist.

Gen Z and Millennials are both (27%) more likely to pay up to $100 more for a ticket to fly with a legacy carrier, while 25% of Gen X and 39% of Baby Boomers are not willing to pay more to fly with a larger carrier.

This challenges the conventional wisdom that low-cost carriers are more appealing to price-sensitive younger travelers. The reality: younger generations prioritize experiential factors and view flying as simply to get to and from their destinations of choice. This aligns with their desire to use airline points on experiences specific to their travel preferences, such as vacation rentals and hotels.

When booking, the majority of all travelers factor in additional service costs for things like baggage and seat selection when weighing their options for purchasing tickets.

THE OVERHEAD SPACE DEBATE

Both carry-on baggage and seat selection remain hot button issues for travelers, especially given they were historically included in the core ticket price.

OAG asked travelers which extra they would most like to see included in the core price of all tickets. The top two answers, in order, were seat selection and luggage.

Many airlines are also getting stricter about carry-on baggage. Specifically, some, including Delta and Southwest are starting to consider personal items (like a purse or a pillow) as a carry-on item, while still enforcing the one-bag carry-on limit. Travelers are split on the issue: 50% say they agree with this policy and that too much luggage is being taken into the cabin, and 50% do not.

The bottom line: Travelers expect to have space for their bags onboard and they don’t want to fight for it – but as we’ve learned, many will. If that requires airlines to be stricter so the allotment of space is fairer – so be it.

Despite this split, most travelers (67%) are willing to pay up to $20 to take more than one extra carry-on item into the cabin and another 19% are willing to pay $21-$50. Looking at generational preferences, Baby Boomers are most willing to pay up to $20 for additional carry-on items, with 88% willing to do so.

When asked about a different approach to baggage fees, the majority of travelers prefer to pay a flat fee for luggage (72%) as is the norm today, vs paying according to dynamic pricing (28%) – e.g., lower costs for shorter flights, higher costs for longer flights.

Most travelers purchase add-on services through an airline’s website (48%) or mobile app (37%), with only 10% opting for gate and 5% for in-flight purchases. The trends remain consistent across all generations with airline websites and mobile apps being the preferred platforms to purchase add-on services. Gen Z, the youngest age group, is the most likely to purchase add-ons once on the plane (12%).

Purchasing add-ons at the time of booking is a long-learned behavior. Gen Z’s affinity to continue shopping while on the plane offers new opportunities for brands to optimize their advertising and maximize their return on investment. For example, tech savvy brands can tap into aviation data insights to learn where Gen Z is flying the most and tailor specific ads that pop up on their TV displays once they are on the plane.

Half of all travelers prefer to purchase add-ons at the time of booking, with 26% purchasing add-ons in between booking and check-in. Another 12% are likely to purchase add-ons at the time of check-in, 6% at the airport and 6% doing so in-flight. This is again consistent with all age groups preferring to purchase add-ons at the time of booking, with Baby Boomers (57%) doing so the most

OAG surveyed travelers who have flown in the past year and users of OAG’s flight tracking app, Flightview by OAG.

Geographies:

NAM: United States, Canada, Mexico