Hotels and airlines bet big on flexibility and peace of mind

It’s no secret that the COVID-19 pandemic walloped the travel industry.

But during the early, uncertain days of the crisis, travel companies made two significant changes to appeal to travelers, partly in the hope that people would remember these gestures when it was time to hit the road again.

Travelers have many choices in where they stay and how they fly, even during a pandemic. And though price and convenience have long been two of the most important factors, we know the global health crisis has changed everyone's priorities. And flexibility and safety have never been more important, according to a TPG special report from October of last year.

Major players in the industry are wagering that when travel returns, people will gravitate toward the airlines, hotel brands and other companies that put health, safety and flexibility over profit.

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Shifting to flexible policies

The first gamble travel companies made was allowing travelers unprecedented flexibility. Before the pandemic, travelers who needed to change their flight or hotel bookings could face high fees.

Several hotels responded to the pandemic by waiving points expirations and cancellation fees. And many U.S. airlines adopted policies that allow travelers to cancel or change their itineraries for no fee, as long as the new travel takes place within a year of the original travel date. (It's important to note that Southwest Airlines always allowed flyers to make changes without paying a fee.)

This didn’t happen overnight, though.

Travelers had to fight hard for refunds early on in the pandemic. A handful of airlines have since improved their refund policies; however, they initially offered only vouchers. Angry flyers often had to seek restitution through the Department of Transportation, their banks or directly through a travel company's Twitter account.

But it's not inconceivable that public pressure from travelers forced travel companies to rethink their strategy.

Early in the pandemic, Hilton and Delta Air Lines became the first hotel and airline, respectively, to announce elite status extensions.

This was a big move, as it was clear at that point travel would take a long-term hit. Travelers with expiring elite status wondered whether their preferred loyalty program would extend their status and praised companies that responded early. After these announcements, other travel companies were faced with questions about extensions from their customers and most quickly followed suit.

Travel companies with the most flexibility are likely to come out of the pandemic with a lot more fans. And travel companies that branded themselves the best are likely to be remembered in a more favorable light, said Savanthi Syth, an analyst and global airlines managing director at Raymond James & Associates.

"I get the sense that Delta has been a lot more flexible, a lot more responsive, and that probably will help their kind of brand," said Syth.

Some travel flexibility will likely continue — for a time — even after the pandemic.

We already see this as most airlines and hotel chains have extended elite status for members through the beginning of 2022 or 2023 and eliminated pesky policies like change fees.

However, Syth says "gone for good" policies will likely have a shelf life of three to five years — a signal that this goodwill from the travel industry may not last forever.

Investing in travelers' peace of mind

The second chance the travel industry took was rolling out policies to assure travelers that airplanes, trains and hotel rooms were safe. It was a massive undertaking, as airlines and hotels haven’t always had the best reputation for cleanliness. But travelers began paying much more attention during the pandemic.

Hotels gave travelers the option of skipping housekeeping services. Amtrak partnered with the makers of Lysol. Airlines rolled out cleaning initiatives, such as United Airlines’ CleanPlus program.

But one of the most popular changes has been blocked seating. While several carriers were criticized for flying full planes early in the pandemic, travelers praised airlines that limited passenger capacity.

The pandemic has changed many travelers' priorities. Just a year ago, a traveler might have considered flying on a specific airline because of perks like upgrades or free alcoholic beverages. Many travelers will now choose to fly based on an airline's policy of blocking middle seats or cleaning its aircraft between flights.

JetBlue, Alaska and Southwest initially limited seating capacity but have since gone back to selling full flights. Alaska will continue to block middle seats in its Premium Class section through May 31, but Delta Air Lines is now the only U.S. airline limiting capacity on board. It will continue to block all middle seats through at least April 30.

“We want our customers to have complete confidence when traveling with Delta, and they continue to tell us that more space provides more peace of mind,” Delta’s chief customer experience officer, Bill Lentsch, said in a statement.

Related: Which U.S. airlines are blocking middle seats, requiring masks?

The U.S. Centers for Disease Control and Prevention (CDC) has said most viruses don’t spread easily on flights because of frequent air circulation. However, the agency also noted that social distancing would be difficult on packed flights, and being in an enclosed space for hours “may increase” your risk of contracting COVID-19.

Blocking middle seats is a PR move, United's chief communications officer, Josh Earnest, told reporters in July, according to CNBC. But Delta's strategy seems to be targeting travelers' desire to feel safe more than anything else.

As TPG's senior aviation editor Ben Mutzabaugh points out, Delta hopes to remove anxiety about packed planes as a reason travelers might delay returning to the skies, and Delta's statement acknowledges that much. Many customers have not flown since the pandemic first hit the U.S. last March, and flights in the U.S. are still only about half-full on average.

Reduced capacity did eventually hit Southwest's bottom line. From September to November, the airline expected to miss out on between $80 and $100 million in pretax income due to blocked middle seats, and so it rolled back the policy in December.

Delta didn't have a great year, either. The airline reported a whopping $12.4 billion in losses in 2020, and its revenue passenger miles — a model airlines use to measure the number of miles traveled by paying passengers — showed a 69% change between 2019 and 2020.

So, while Delta might have lost money due to the pandemic and blocking middle seats, it did win with passengers.

If you read the responses on Twitter to Delta's announcement that it extended its commitment to blocking middle seats, it’s clear travelers are pleased — and it's informing their travel decisions.

One Twitter user said Delta's decision to block middle seats was why they wouldn’t consider flying another airline, while another called the move the “responsible thing to do.”

Of course, Delta is hardly the only travel company to put capacity restrictions in place. A Mexico resort I visited in October had capped occupancy at just 30%. And even several bus lines, like Megabus and OurBus, also blocked seats for passengers.

Amtrak is also limiting bookings to encourage social distancing — and reassure travelers, as it pointed out on Twitter. While it lost over $800 million in 2020, it also won points with travelers by allowing business-class passengers to reserve Acela seats.

Though most international airlines didn't put seating caps in place, some relied on testing requirements and other measures to sell seats and reassure travelers.

Nicholas Panza, the North and Central America vice president at Air Tahiti Nui, the flag carrier of French Polynesia, explained that his airline eschewed blocking middle seats in favor of handing out hygiene kits on board and limiting interaction between crew and passengers.

Travelers headed to French Polynesia also needed a negative RT-PCR test, considered the "gold standard" of COVID-19 testing, to board. (French Polynesia has since closed to tourism after the French government ordered its overseas borders closed.)

"We have not [blocked] middle seats because everyone has the negative RT-PCR test, so we know that everyone is [presumably] negative," he said. Panza also pointed out that Air Tahiti Nui simply hasn't been flying at full capacity, so there is already space on board.

"Safety," Panza added, "is the most important thing for any airline, for its passengers and for our crew members."

Related: What do travelers want? Safety, cheap flights and flexibility

Travelers took notice

TPG ran an informal, non-scientific poll ran in its Facebook group about which travel brands handled the pandemic best. Readers overwhelmingly selected Delta, which received more than 550 votes.

"Because of Delta's blocked seat policies that are still [ongoing], I have taken 16 flights during the pandemic [without] a seatmate," said reader Bill Matthews.

Hotels like Marriott and Hilton also got several nods for their cleaning policies.

"Definitely Hilton [with] the door seals, [its] partnership with Lysol, mandatory wipes in the guest rooms and remote wraps, increased digital check-in presence and so much more," said reader Trey Motley.

Related: An inside look at how Hilton is cleaning hotel rooms between guests

Reader Sharon Chipouras said, "Marriott properties have gone all out in trying to protect their visitors and still [maintain] a warm, attentive presence."

Even an amusement park company, Six Flags, got props from readers with its generous elite status extension.

"Season pass holders got a one-year extension, even if your local park opened in 2020, [and] members get an upgrade to the next tier through 2021," said TPG reader Brandon Fredman. "For those on their top tier (Diamond Elite), they will get a lifetime upgrade to an unpublished tier (Diamond Elite VIP) which will let me skip four lines per visit."

Bottom line

It's uncertain how long travel companies will continue to block seats, reduce capacity or offer added flexibility after more people have been vaccinated and travel demand returns to normal.

The decision to prioritize safety, flexibility and making travelers feel at ease, however, will have long-lasting effects.

Travel providers like Delta, Amtrak and Hilton — brands that gave travelers unprecedented space and flexibility — may look like they've walked away from money. But they were really gambling on consumer loyalty and counting on travelers to remember these gestures long after the pandemic is over.