Study finds that frequent-flyer packages improve value of enterprise journey

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Airline frequent-flyer packages are a staple for air journey, notably frequent enterprise vacationers, however do they add to the price of enterprise journey for employers? A brand new examine says sure.

According to the examine, frequent-flyer packages are a win-win-lose on the subject of air journey. The airline wins as a result of the packages generate loyal and repeat clients. The factors program member wins due to incentives to obtain flight upgrades and free airplane tickets. But in circumstances the place the employer is shouldering the associated fee, they lose as a result of they could possibly be paying extra for the journey than want be.

The examine, revealed within the present concern of the INFORMS journal Marketing Science, “Reaching for Gold: Frequent-Flyer Status Incentives and Moral Hazard,” is authored by Yesim Orhun and Andreas Hagemann, each of the University of Michigan, and Tong Guo of Duke University.

The researchers analyzed the transactional database of a number one U.S.-based airline’s frequent-flyer program. This included the histories and level accumulations of three.5 million frequent-flyer program members through the 2010 and 2011 point-earning cycles.

“We found that the closer frequent-flyer program members get to ‘elite status,’ the more likely they are to choose an airline even when it may be more expensive than a competitor’s flight,” says Yesim Orhun. “While this decision is based on a number of factors, an important one is whether the air travelers are paying for the flight themselves, or whether it is covered by an employer or third-party.”

Other components the researchers cited included whether or not the traveler was nicely forward of tempo or far behind tempo to attain elite standing, and whether or not the traveler’s dwelling airport was the airline’s hub. In circumstances wherein vacationers have been off tempo to attain elite standing, they have been much less more likely to swap bookings to earn factors. At the identical time, factors members are extra seemingly to decide on increased fares and earn factors if their dwelling airport can be the hub of the airline sponsoring the factors program.

“We found that when travelers are close to their points program’s targeted pace, they are more likely to book with the airline on routes where the airline has lower appeal than competitors,” says Guo. “Loyalty program members, when they were close to target pace, on average showed an 8% increase in price paid when compared with others taking the same flight.”

The examine authors discovered that when points-program members are touring for leisure, their conduct modified.

“More than one-third of the overall increase in the average consumer’s willingness to pay in the marketplace can be attributed to booking instances where the consumer is not likely to shoulder the cost of the ticket,” provides Orhun. “If travelers had to pay out of pocket, our estimates suggest that companies would save at least 7% of their travel costs.”

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More data:
A. Yeşim Orhun et al, Reaching for Gold: Frequent-Flyer Status Incentives and Moral Hazard, Marketing Science (2022). DOI: 10.1287/mksc.2021.1341

Study finds that frequent-flyer packages improve value of enterprise journey (2022, May 5)
retrieved 5 May 2022

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