Summer Travel Spending Gives Rewards a Starring Role

Summer travel spending has survived a quarter that was arguably rougher for travel companies than for many of their customers.

Higher fuel costs hit airline economics, while international hotel demand moved unevenly, as evidenced by recent earnings reports. American Airlines faced a sharp increase in fuel expense, and Wyndham Hotels & Resorts reported a 1% decline in global RevPAR (revenue per available room) even as its U.S. RevPAR increased 2.2%.

But the activity on the part of the travelers themselves was firmly positive. American’s premium passenger unit revenue increased 13.4% from a year earlier, and domestic passenger unit revenue rose 10.6%. Wyndham’s U.S. RevPAR gain came from increases in both occupancy and average daily rate.

Within that spending, data show that rewards, loyalty programs and credit cards are becoming increasingly intertwined with the decision about where to travel and how to pay for it.

American’s numbers offer one indication. AAdvantage enrollment increased more than 30% year over year, surpassing the record growth reported in the first quarter. Spending across its Citi co-brand card portfolio increased 8%.

American Chief Commercial Officer Nat Pieper put those figures in the context of the carrier’s commercial strategy. “Our final strategic pillar is lead in loyalty,” he told analysts during the Thursday (July 23) conference call.

The figures are notable because the card and the trip serve different purposes for the consumer. Travelers may fly several times a year, but they can earn travel rewards whenever they use a co-brand card. That creates a connection between ordinary household spending and the price of a future trip.

American’s premium results suggest that value-conscious travel does not necessarily mean trading down. Pieper told analysts that demand for premium travel “continues to be strong,” with premium unit revenue gaining as the airline expanded lie-flat and premium economy capacity nearly twice as quickly as Main Cabin capacity.

Consumers, in other words, can continue buying higher-priced travel while simultaneously looking for ways to make those purchases work harder.

Rewards Enter the Payment Decision

The same behavior has implications for hotels.

Wyndham Rewards, as detailed in earnings material released on Wednesday (July 22), has surpassed 126 million members, while the company’s second-quarter U.S. RevPAR increased 2.2%. Wyndham’s results also put credit card products, strategic partnerships and affiliations among the sources of ancillary revenue it intends to pursue alongside greater engagement with Wyndham Rewards.

PYMNTS Intelligence provides evidence for a rewards-centric mindset when it comes to getting away from it all. Our research found that 70% of consumers changed what they bought after seeing an offer or reward, while 43% changed payment methods to obtain one. Those behaviors make rewards relevant at two points in the transaction: the purchase and the payment.

Consumers using credit card installments were primarily motivated by their ability to collect loyalty points or cash back. The report found that consumers use their preferred cards to match purchases with the rewards they consider most worthwhile.

For airlines, hotels and card issuers, that creates competition well beyond the fare or room rate. The same traveler can compare destinations, brands, cards, points and financing options before making a purchase.

Fuel prices and international volatility can still overwhelm those gains on a corporate income statement. Rewards do not change that arithmetic. But American’s card and loyalty growth, Wyndham’s emphasis on ancillary revenue and PYMNTS Intelligence data point to a consumer who is still traveling while becoming more calculating about how each travel dollar is spent.