Airport lounges once reeked of snobbishness, but have since come down to earth. What happened?
Passengers are flocking to the lounges in search of complimentary food, drinks and a chance to be seated comfortably and charge their devices. The problem? Almost every other passenger is doing that too!
With India crossing the pre COVID travel numbers, there has been a situation lately that we have more passengers, same sized lounge and a large number of people with debit and credit cards which grant lounge access and queue up to spend some time at the lounge.
The lounge when they began were meant to be exclusive, largely for business travellers who would want some quiet time before the flight to relax, work and have a quick bite. The idea was to make people productive at the airport. What it turned into instead is a place to hog on to food and cold drinks and charge devices. Part of the reason is also the increase in low cost airlines keeping passengers away from warm food in most cases and a full meal in all cases.
How do lounges make money?
To increase credit card penetration, the issuing banks and card companies started offering lounge access as a frill. What was earlier reserved for premium classes of service or certain frequent flyer status, suddenly became accessible for certain cards. But how does the operation really run when the entry charges are just ₹2?
The card company pays an airport lounge a pre-negotiated fee each time their cardholder enters that lounge in exchange for their cardholder’s “free” entrance. Then the lounge naturally stands to make more money if the passenger with “free” access decides to purchase something during the visit.
The money is typically paid by a mix of Card networks – Visa, Mastercard, Diners, Rupay and Card issuers – HDFC, SBI, ICICI, etc. Credit card penetration in India is at a nascent stage with estimated to be around 6% of the Indian population. Offering freebies is one of the ways of growing that penetration, with the card companies eventually aiming to make money by converting the payments to EMIs for a fee or charging interest on delays.
Things are changing fast
Over the past few months most credit card operators have started devaluation of the offerings. This also involves a minimum spend to be eligible for a lounge access in the subsequent quarter (Spend first, utilise later) and the number of visits being capped, irrespective of the spends. There is no denying the fact that there remain credit card products in the market that offer free lounge access. This will likely help stem the long lines, but does not guarantee as people have multiple credit cards!
