3 thought-starters from the 2019 Co-Brand and Travel Rewards Conference
Andrew Davidson, Chief Insights Officer/ SVP at Comperemedia, presented at the 2019 Co-Brand and Travel Rewards Conference in Wilmington, Delaware, earlier this month. Here, Andrew shares key takeaways from the conference:
Leaders in co-brand credit cards and travel rewards came together at the historic Hotel DuPont in Wilmington, Delaware, following a period of unprecedented innovation in the industry. More than 25 new or improved co-brand credit card programs have been launched in the US in the past 12 months, ushering in a new era of intense competition. Topics on the agenda included rising consumer expectations, new regulations, blockchain, partnership alignment, future proofing value propositions, product and marketing innovation and much more. I’ll be recapping my own message – a clarion call for synergy as a winning strategy – in a subsequent article, but first wanted to put pen to paper on 3 thought-provoking ideas presented at the conference.
1. Transformational value
Joe DeNardi, Managing Director, at investment bank Stifel, kicked off the conference with a proposal for what he believes will create transformational shareholder value in the airline industry. DeNardi estimates that Delta SkyMiles will represent an incredible 50% of Delta’s total revenue by 2023. He wants the airlines’ financial statements to show what he calls the “marketing business” separately from the “travel business” so that investors have clearer insight into what is driving revenues. According to DiNardi, the Delta-Amex deal has re-set expectations for the industry. United and American will expect similar economics when their contracts come up for renewal.
What we think: Provocative
On one hand, DeNardi’s message recognizes that ancillary revenue streams have become increasingly important to the airlines that reportedly made $14 billion from credit cards in 2018 according to IdeaWorksCompany. On the other hand, airline loyalty programs are built on the back of resource heavy airline businesses and the two are inextricably linked. The drumbeat for more transparency will continue.
2. Experience Ribbons
Next up, experience ribbons. Aaron Dauphinee, Customer Engagement & Loyalty Consultant at Bond Brand Loyalty, challenged the industry to identify where along the customer journey – including 40+ points on a travel experience ribbon – can co-brand credit card improve the experience. New types of partnerships can plug some of the gaps. He cited Airport Sherpa, an app that allows customers to order food directly to the gate, as an example of a startup looking to exploit an opportunity to improve experience at a single point on the ribbon. According to Dauphinee, the average consumer has 15 partnerships but only engages with 7. Ease of use is the key driver of engagement.
What we think: Necessary
What’s interesting is the idea of thinking of how the co-brand credit card can improve aspects of the experience across the entire travel ribbon- from searching and paying for a trip, to the travel experience itself, to getting home and paying the bills. In a world of richer rewards and stronger value propositions, finding new ways to add incremental value is key.
3. Alternative credit (for travel)
Uplift offers installment loans for the travel industry. The Fintech start-up was established in 2017, and earlier this year obtained $123 million in a Series C equity round. Rob Borden, Vice President Commercial, Uplift, presented “Building tomorrow’s co-brand cardholders through installment plans” suggesting that building credit through an installment loan could lead to qualifying for a co-brand credit card further down the road. Uplift differentiates itself from its closest competitor, Affirm, by focusing exclusively on travel. It offers 11-month installment loans ranging from $300-$15,000 to consumers in the 600-700 FICO range and is forecast to serve 1 million travelers by the end of 2019. The company is quickly establishing some major partnerships including United Vacations, Spirit Airlines and Kayak.com among others.
What we think: Threat
While Uplift positions itself as complementary, the reality is that POS financing is a threat to card issuers. Consumers faced with installment plan options that clearly show their monthly payments at the moment of purchase may be inclined to finance their travel with an alternative provider like Uplift or Affirm rather than a credit card. At the same time, it’s a win for travel brands as it drives up revenue without adding risk.