Filed under: CG, Consumer Insight, travel/hospitality | Tags: attracting business travelers, destination marketing, destination marketing organization, global luxury marketing, interactive marketing travel sector, travel advertising, travel and hospitality
Say goodbye to "livestock" class
It is well known that the business elite are disproportionately heavy consumers for the airline industry. However, since the recent economic crisis, corporations’ decision making regarding purchases of tickets have shifted away from these affluent consumers toward senior executives, who have been forced to tighten corporate spending and minimize travel expenses. According to the International Air Transportation Association (IATA), 90% of travelers fly economy, yet the remaining 10% who fly business class account for 30% of airlines’ profits. These few, elite passengers, who pay 5-6 times more for their tickets, essentially subsidize the economy passengers’ flights. Recent losses due to rising fuel costs and falling passenger demand have caused business class ticket purchases to decline three times faster than economy class ticket purchases.
For years, airlines assumed business class travelers’ willingness to pay for perks – such as more leg room than economy class, reclining seats, higher quality meals served on dinnerware, and special frequent flyer mile programs – was inelastic. Yet with fewer business class travelers, the industry now sees these consumers as a flawed demographic. According to a study by CWT Solutions Group, business class travelers have traded both ticket flexibility and class comfort “in return for low fares. While many have turned away from business class as a whole, the business elite show a desire to see business class prices justified, thus preferring to fly economy on shorter hauls and business class on longer hauls. Unfortunately, many airlines, such as Aer Lingus, a low-cost Irish airline that offers flights to the U.K., Europe, and the U.S., have opted to remove business class.
Some carriers will create an amalgam of business class and economy class, which propose business class perks and services at economy class prices. Scandinavian Airlines (SAS), which offers flights to many northern European nations, introduced “Economy Flex,” which is 80-90% cheaper than traditional business class fares. OpenSkies, a subsidiary of British Airways, seeks to appeal to the “cost-conscious business traveler” with “an open bar, flat beds for some seats, [and] à la carte dining on china plates with silverware and real glasses,” at 50% lower costs than Air France and United’s economy class – its main competitors. The company’s outsourcing of maintenance and catering, as well as its smaller planes in less congested airports, allows OpenSkies to offer cheap rates and business class-style service.
It is clear that the airline industry is adapting to changes in consumer demand. The economic downturn has pressured corporations to limit employees’ travel spending. Airlines are evolving and offering more deals in hopes of regaining revenues lost due to high fuel prices and fewer customers. With all of this, will the airline industry ever bounce back to its pre-recession glory
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