No1 Lounges, the UK’s leading independent airport lounge group, began its phased reopening yesterday. The flagship site in London Gatwick’s North Terminal was welcoming guests for the first time in months.
Anyone who tried to enter with a Priority Pass, Lounge Club or LoungeKey card was in for a surprise – they weren’t getting in.
No1 is in dispute with Collinson, which runs all three products, in a row over money and pre-booking.
How much does Priority Pass pay a lounge?
I have never met an airport lounge operator which was happy with the amount of money it received from Priority Pass.
I was once told that it is around £12 – £15 per visit, although that feels a little high. Rate increases are rare, allegedly. Lounges apparently saw virtually no increase in their payments when Collinson hiked the guest fee charged to users from £15 to £20 a couple of years ago.
To be crystal clear, I am not criticising Collinson here. It is their job to negotiate as good a deal as it can get. If it was to pay substantially more to lounges, it is unlikely that American Express, HSBC, Santander etc could afford to give out lounge passes as they do now.
Lounges are free to take Collinson’s money or not. However, for lounges which do not have contracts with airlines to take their premium passengers or do not have a good sales operation, lounge club cards can account for 80% of visitors.
Pre-booking is part of the issue
For a number of years, No1 has allowed Priority Pass and other lounge card holders to reserve a slot in advance via this page of their website.
For a fee of £6, you are guaranteed access when you turn up. As well as increasing No1’s revenue from your visit, it also reduces queueing at the entrance.
No1 wanted to move to a ‘100% pre-booking’ model for its lounges. This would virtually eliminate queues, beneficial in a world of coronavirus, whilst also raising additional revenue for No1 via the £6 fee. Collinson was not prepared to accept this.
How does an airport lounge make money?
In terms of revenue, I would expect it looks like this:
Most profitable guests – lounge passes sold directly to passengers
Followed by – lounge passes sold by partners such as tour operators to clients
Followed by – airlines which take space for their premium passengers where they do not have their own lounge
Followed at the end by – Priority Pass and similar lounge club cards
It isn’t quite that simple though. Airport lounges have a high fixed cost for rent and staffing and (but we’ll come back to this) a relatively low marginal cost.
If the fixed costs are covered by direct sales and airline contracts, the money from Collinson should still be profitable if it covers marginal costs, ie the food and drink consumed. This assumes that Collinson guests are not displacing someone who would have paid more.
How has coronavirus changed the market?
This next part is pure speculation from me. No1 Lounges generally ran at very high capacity and getting in with a Priority Pass was a bit of a gamble at the best of times.
Covid restrictions are likely to have led to a cut in capacity. More importantly, it has led to the closure of buffets and the launch of table service. This is likely to have pushed up costs.
I am guessing that No1 believes that it can hit its revised capacity levels purely from direct lounge pass sales, partner sales (including via links on sites like HfP) and airline contracts.
It is still willing to accept some lounge card holders, but wants to move to 100% pre-booking. This will let it manage capacity, reduce queues and raise additional revenue via the reservation fee. Collinson does not appear willing to work with No1 to achieve this.
What does No1 Lounges have to say?
I spoke to John Upton, CEO of No1 Lounges, yesterday. He told me:
“We operate some of the best lounges in the world, and especially at Gatwick, so we are naturally disappointed for all of their [Collinson] customers to be honest. It’s sad, after 10+ years, that we’re no longer part of their programme. With COVID-19 the whole world’s changed and we are making great progress with a large number of our partners to agree smart and sustainable solutions that meet the needs of both our customers and our respective businesses. My team remains in dialogue with Priority Pass [which includes Lounge Club and LoungeKey] so let’s see what happens next. Other leading card programmes, e.g. DragonPass, remain very much welcome.”
I also asked Priority Pass for a statement. They said:
“As the world’s largest airport lounge network, Priority Pass has hundreds of partnerships around the world, which ensure we can offer members over 1300 lounges and airport experiences globally. We work with all our partners to build mutually beneficial relationships and support one another during the travel recovery. For example, earlier this year we rolled out the world’s first global Airport Lounge Standards guide, created by our medical experts, to help our partners reopen with the highest possible safety standards. We’ve also rolled out contactless lounge entry and are supporting our lounge partners with a solution that will enable them to introduce a digital food and beverage ordering solution.
While we constantly work with our partners to find solutions, we also prioritise our members’ experiences. During a time of such uncertainty – particularly around travel – we want to ensure our members have the confidence to travel, and to know that should something change – a trip cancelled or delayed – they have flexibility in how they use Priority Pass. Therefore, while we appreciate there are some advantages of being able to pre-book, a pre-book policy which is mandatory and at additional cost to the member is not in keeping with the Priority Pass global customer experience. We are disappointed that we have not been able to find a resolution with No.1 Lounges at this time, but are open to further discussions to find a workable solution.
Finally, we are confident this will have minimal impact for our members, as we offer alternative lounge options in all airport terminals where a No.1 Lounge is located.”
Will Priority Pass break ties with other UK lounges?
It seems unlikely, if only because No1 was the only lounge group encouraging pre-booking.
There is no risk of Club Aspire lounges losing access to Priority Pass and Lounge Club as Collinson is a shareholder in that business. Standard ‘Aspire’ branded lounges are not part-owned by Collinson but it would still be very odd if they pulled out.
I have seen no indication from Plaza Premium that they are reconsidering their links to Collinson. That said, Collinson is not working with Plaza Premium at their excellent lounge in Heathrow Terminal 5, preferring to funnel cardholders to the Club Aspire lounge instead. Plaza Premium has a direct deal with American Express Platinum to accept cardholders into lounges, which does work in Terminal 5.
What would be interesting would be if American Express or another key Collinson partner in the UK switched to DragonPass so that their customers could regain access to No1 Lounges. When NatWest swapped over to DragonPass last year, it made a selling point of now being able to provide access to the Plaza Premium Heathrow Terminal 5 lounge. It remains to be seen if the No1 brand is strong enough to drive such change.
The No1 Lounges website is here if you want to book Gatwick North access for cash, now that your Priority Pass or Lounge Club card won’t work …..