New Delhi, Mar 2: 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!
Popularised by growing shorts and reels talking about “free ka khana” (free food) in two rupees, passengers who were earlier eligible but unaware also took to the lounge culture at Indian airports. With higher credit and debit card penetration and banks making the “lounge visit” the main attraction for cards to push more cards in the market, the lines outside most lounges in the country were getting longer.
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.
What this has meant is that the erstwhile high-end high-rewards credit card and spending to visit airport lounges is a thing of the past and the exclusive spaces for an elite few has become a must-stop for thousands. This has led to a challenge for both airports and credit card companies.
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!
Lounge – no more the place for its erstwhile target market
Lounges were supposed to be the place to be for the business travellers with a possibility to network. With limiting the number of the times one can visit, every traveller is forced to look at the value for money aspect. Does it make sense to visit after standing in a queue or does it make sense to spend that access when there is less time to the flight?
A large chunk of travellers flying alone can now be spotted at the food court, with laptops open and not running movies but excel sheets – a typical business traveller. This is exactly the crowd which the lounge business was trying to get for itself.
Conflict of interest?
Some of the airports in India also run lounges or have partial stake in lounge management companies. The typical non-aero revenue of an airport comes from rental and revenue share in retail along with Food & Beverages. From an airport perspective there has to be a fine balance between the space leased out to the lounge, which potentially takes away passengers from retail and F&B sections leading to a lower income for the operator.
