How Do Americans Feel About Airlines and Hotels? - 7investing 7investing
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How Do Americans Feel About Airlines and Hotels?

The pandemic has created a unique set of conditions for companies in the travel space.

May 25, 2021

Travel has been greatly disrupted by the pandemic. For much of the past 15 months, people were hesitant to go anywhere and planes were flying with less-than-full passenger loads. Hotels — the ones that stayed open — had to close many of their amenities making them essentially just places to sleep.

That impacted customer satisfaction but it’s not necessarily indicative of how consumers will feel in a post-pandemic world. David VanAmburg, Managing Director of the American Customer Satisfaction Index (ACSI), joined Dan Kline on the May 24 “7invesitng Now,” to break down the results of the ACSI’s latest report and to explain what it may mean in the long term.

A full transcript follows the video.

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Dan Kline: We’re gonna pivot here a little bit I am very pleased to bring on David VanAmburg. He is the managing director of the American Customer Satisfaction Index. We talk most quarters I’ve done a lot of shows with David. But this one is really interesting. A lot of people are talking about investing in the travel industry. And I think this will give you some insight as to where you can go feel free as this interview is happening to throw your questions up. And I’m happy to grab them as we finish the show. Sam Bailey if you want to hit that video, it would be very very appreciated.

Welcome back to 7investing Now always weird to throw it to myself. I think I might be in a different location taping this than I am doing the show you’re seeing this as part of. But I am joined today by a regular guest on the program. David VanAmburg, he is the managing director. I get that title wrong all the time. He’s the managing director of the American Customer Satisfaction Index. David, welcome to the program.

David VanAmburg: Thank you. I didn’t know you get it wrong. You can call me director or manager

Dan Kline: I called you executive director more than once. Is that better? Is that a promotion?

David VanAmburg: And I’ll tell my ownership that Dan Kline is calling me executive director now. So that’s my title.

Dan Kline: It’s funny, I come from the editorial world. And like titles can be very vague like at one publication a senior editor is very important that the other executive editor is a put out to pasture title at some it’s an important title. So I always try to be really careful with titles but we’re going to talk about your recent study on travel, specifically, airlines and hotels. And let me ask you the question. Most of the viewers know that I’ve traveled a bit and I’ll tell a little travel story in a second. But have you traveled since the pandemic gotten on a plane stayed in a hotel?

David VanAmburg: That’s a very good question. got on a plane? No, absolutely not. I have not flown since like, I think a year ago, January or something like that. It was a couple months before the pandemic. Stayed in a hotel? I think that’s no as well. But now I can’t remember Oh, no, no, that is not true. We did drive we drove our kids up to Mackinac Island, which is a resort area in northern Michigan where the Mackinac Bridge is at the Straits of Mackinac, ah, and that was last August, we stayed at a very nice resort up there, you know, we drove up, did the whole masking and social distancing, and all that good stuff while we were there. But yes, we did take a nice vacation up there and stayed in a hotel.

Dan Kline: I’ve traveled a bit. And the only reason I’m sharing this is is I talked about it on the air, but I’ve been on a plane. And the numbers for airlines were up. The numbers for hotels were down, and I’m going to just set this off by saying is, most airlines had to become more like Southwest (NYSE: LUV) during the pandemic. And Southwest is your perennial leader here, they’re the only airline I would ever choose to fly.

But during the pandemic, all the airlines had to have liberal cancellation policies. And I think that made up for it’s not that much fun to wear a mask for five hours and to only have you know, water that I think there were four beverages on the flight I was on. And the person next to you maybe doesn’t understand how it works and takes their mask off to order. And you’re not supposed to do that like, so there was a little more stress on airlines. But the rules are a lot better hotels, the situation wasn’t necessarily great.

You know, I stayed at places that had no room service, you’d have to go pick it up, I stayed at places where you know, the pool was very limited or where the bar you could only sit in like a plexiglass booth and you certainly didn’t get that communal experience of just being with other travelers. So just wanted to give that context for these results. But with airlines, what did you see overall?

David VanAmburg: Yeah, and that in that context is exactly right on down in both in both cases. And we’ll talk about airlines being up a little and hotels actually tanking pretty badly. And all for the reasons that you described. Now to be fair to airlines. They have been inching up a little bit over the past three or four years, you know, kind of a point every year, so we don’t want to beat on them too much in the sense of Oh, they did better this year, or just over this past year as a result of the pandemic. And it’s just because of the pandemic, they have been going up a little bit year on year. But this this past year, even more so. And you’re absolutely right, there’s really two, there’s two factors.

One, airlines had to be very accommodating. You know, you needed to change if you needed to cancel bank those miles for later or bank the money that you spent for a later flight, etc. very accommodating. And obviously, passengers appreciate that. And then the only other metric out of all the things we measure, you know, how how do you like the beverage service? How do you like the How did you feel about how your baggage was handled, or, you know, the onboarding process and the deplaning process? The only other metric in the entire study that actually improved was seat comfort? Makes sense, right?

Because those of you who flew and I haven’t had, you know, the experience yet, although now by the time I do, it won’t be a thing anymore. You didn’t have anybody in the middle seat, right? That was everyone’s dream. I mean, everyone wishes that could just always be that way when we fly. Nobody likes to be elbow to elbow with people.

So the fact that we were able to kind of be at least one seat empty in between everyone while they’re flying. It makes it a little better experience. And the airlines got that that little boost. Now is that going to hang on, I doubt it. Because we’re going to go back to being packed into planes. Again, as soon as it’s a, you know, as soon as it’s safe to do so. Which means it’s going to take a lot longer to get on the plane a lot longer to get off the plane a lot less comfortable and stuffier. And all those things while we’re you know, sitting on them for hours. But you know, there was a little halo effect there.

Dan Kline: Yeah, my Southwest flights to Vegas, three of the four legs, I had to stop each way. were entirely full, I had one leg where there was one open seat on the plane, and I must have looked intimidating or something because it was next to me. And I actually don’t care that much because I’m just kind of eyes for it.

If I’m on Southwest, I’m working. Or I’m watching television, it’s generally it doesn’t really matter me I just don’t want to talk to whoever’s next to me like it’s fine if we have a conversation, but I’m not going to entertain you for five and a half hours. Like that’s kind of what I do for a living it’s a little much so airlines Southwest has been the premier leader Southwest treats its customers markedly better. Their basic policies allow you to change bags fly free, their their flight attendants are nice, like did did these results actually show that there’s some benefit in putting customers first?

David VanAmburg: Yeah, absolutely. I mean, Southwest has been the model forever. I mean, we’ve been doing this since 1994. So we’re a little over a quarter century in now and and Southwest is perennially either all alone at the top or maybe tied with one other airline that you know has a has a boost from one year to the next. But Southwest is getting it right year in year out with a basic strategy that says we know what people who have to fly whether they whether it’s for business or you know for pleasure, but you still have to fly to get there because nobody wants to drive 10 hours to go to Disneyland we know what they want most and we know what’s most important to them right which is getting on the plane as quickly and efficiently as possible and getting off as quickly and as efficiently as possible and making changes when they need to and you know not worrying so much about seating and just trying to keep the basic comforts established and consistent.

And they’ve done a really really good job with that they just don’t mess around with a lot of other stuff which is what some of the legacy airlines have you know tried years and years and years and they can keep their prices down but they don’t go overboard like your true budget airlines that really dropped their prices but also well you know, they say you get what ou pay for. If you get almost nothing you can pay almost nothing for it.

Dan Kline: Let’s talk about that because we talked about it last year when this report came out but I’ve flown Spirit and Frontier a couple of times usually to trade shows when there was simply no affordable option and they hate you they make a point of hating you. But I actually think are they using like a no-frills Costco strategy where it’s the more uncomfortable they can make it the more value you think you’re getting so actually like treating people well would be like bad for their business. Are they using like a negative customer service strategy?

David VanAmburg: I’m not sure if they’re actually using I’m not sure if it’s inadvertent or by design? It definitely the outcome is there right i mean you You definitely feel like you know we got you there alive and that’s what you paid for and you literally paid for nothing else except you made it to your destination. And that’s about it for especially for Spirit and Frontier. To the extent that they’re trying to engender that type of negative feeling that I couldn’t say,

Dan Kline: I’ll argue that Frontier is because they have a pamphlet where they’re proud of they’ve taken padding out of the seat to lower their cost for gas, the plane is lighter. And they brag that they don’t have Wi-Fi, Wi-Fi is a profit center, you should make money on Wi-Fi. So it’s very strange, like, look how cheap we are. And I get it to a point because when you’re looking to fly on those airlines, I can see it. But I actually sort of factored those out from your results. If you do that you get sort of like an average industry score of like, somewhere in the 76s. Where does that fall compared to other industries?

David VanAmburg: It’s actually on the higher end these days, the National ACSI has been declining the last about three years, and it’s around 73 to 74. Now, so overall, airlines are actually a little better than average. I mean, they’re not going to be at a level of say, automobiles or cell phones or some of these other, you know, cool manufactured gadgets and big-ticket items that we buy. But as far as services go, I’m actually not too bad. Not too bad these days.

Dan Kline: So I don’t want to belabor hotels, because the numbers were abysmal. But is there anything you see in trending from the hotels that wasn’t necessarily related to the pandemic?

David VanAmburg: No, I think everything because the big drops we saw were all of the things that you know, matter to people most when they’re at a hotel, all of the amenities, things like pools and gems, many of which have just been shuttered. Even if you could stay at the hotel, you know, you weren’t allowed to use a gym, you weren’t allowed to use a pool, etc. Not so much now, but I’m talking about earlier days of the pandemic last summer, for example, restaurants, you know, many of them just shuttered or you could only have takeout.

You mentioned the bar, you know, my wife and I go on trips, we love to just go meet people just go hang out and have a couple of drinks and just start talking and hearing and telling stories about what we’re doing while we’re here. And what are you doing while you’re here and so on. And you just can’t do that. Right? So a lot of the drop in hotels was related to, and I think we talked about this another time. You know, you nobody likes to fly, at least I don’t know anybody. I’ve flown, however many million miles and I don’t personally know anybody who says I love to get on a plane.

Dan Kline: There’s one exception there. Anybody who has a newborn at home is thrilled to fly the peace and quiet of getting to be on an airplane when my son was, you know, zero to six was absolutely delightful.

David VanAmburg: Sure. But generally speaking, it’s a thing we do, because we need to get from A to B, it’s not, there’s not a pleasure in the flying itself, right. But the hotel is the opposite experience where you know, we’ve gotten from A to B, and now we want to do the fun things while we’re at B, and you don’t get to do them, because of you know, what’s going on out there, which is, you know, awful and understandable. But I think that’s that’s why the hotels have taken a hit. They’ve really tanked. But by the same token, I think once we are really out of this and we return to whatever normal is it’s an aberration, we’re going to see that rebound. And it’s going to be as if it didn’t happen.

Dan Kline: Final question here. Do you think either hotels or airlines have learned something from this? Because I think maybe airlines maybe a little have learned to treat customers a little bit better. But maybe I’m wrong there.

David VanAmburg: Yeah. I mean, it’ll be interesting to see coming out of this if airlines have, you know, picked up some things that could be beneficial in the long term. Long term. We’ve talked about so many industries that have had to pivot during the pandemic, various restaurants that will now be able to say to themselves, hey, there’s no reason why we can’t continue to do some business this way. Because this is really cool. And a lot of folks that couldn’t get a reservation to dine in, they’re still happy to get delivery now through Doordash. And we’re selling more food that way, and so on.

So I think there’s going to be a lot of industries that will learn a lot from this in terms of just how they can do things more efficiently, do things more satisfying, or, you know, more beneficial Airlines maybe will learn some things from that. Hotels, I think hotels are just desperate to just get back to delivering exactly how they were delivering and we’re going to see people a lot more satisfied with them when they can do so.

Dan Kline: I actually think with hotels that you might see hotels that offer experiences have a bigger bump. I’m in Orlando, Florida right now and the resorts that are operating at mostly normal, they’re not fully normal, there’s still some distancing, there’s still maybe some capacity limits, they are selling out. I talked to you off-air that we’re buying a property at a resort and because it’s kind of an isolated place with a lot of pools and ability to spread out it’s been very very heavily booked whereas maybe the less features hotels, they might have to add pools and who knows what other things. Complete aside there, I’m sorry to step on your —

David VanAmburg: It’s valid Dan because the ACSI data showed that your budget hotels didn’t take the hit in the first place. That big drop wasn’t really because the budget hotels, the Motel 6’s, and all of those sort of lower-end hotels that are all about your Spirit and Frontiers of hotels, right? Because there wasn’t that much to give up. I mean, when there is no bar when there is no breakfast other than maybe a buffet with some cold coffee and a Danish there wasn’t as much to miss. The JW Marriott’s of the world right that’s where you go to really have a luxurious time and you couldn’t really do much there except sleep in your bed. That’s where I think you’re right you’re gonna see that boost for them because people are excited to get back to those kinds of of hotels and and enjoy the things that they are used to enjoying there.

Dan Kline: David VanAmburg. Executive Director, you are not the executive director. You don’t

David VanAmburg: Just keep using it!

Dan Kline: You are the managing director of the American Customer Satisfaction Index. Thank you for doing this.

David VanAmburg: Always a pleasure, Dan.



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