All across the travel and hospitality industry this week, I suspect that many managers and executives have been thinking the same thing — “Thank goodness we’re not Southwest right now.”
Southwest Airlines this month torched its relationship with loyal customers by announcing the end of its long-time “bags fly free” policy. The company will start charging most customers for checked luggage on tickets bought after May 27. Southwest also changed its frequent flyer program and ended other customer-friendly policies on flight changes. All this follows Southwest’s announcement last year that it would abandon open seating in favor of assigned seats, including paid upgrades for some options.
The moves enraged many Southwest customers, with some taking to social media to vow that they are done with the airline. Southwest abandoned its popular rules after an investment management firm targeted the company to force management to earn more money.
Charging for what you used to offer for free can be a great way for a company to raise revenue, at least in the short term. But if that change destroys customer loyalty, it can jeopardize a company’s long-term future. Of course, that is of no interest to investors who are looking to pump out a quick profit before they dump a stock.
The customers of Main Street can be better friends to a well-run company that the fickle investors of Wall Street. The backlash against Southwest reminds me of how many fans protested when Disney ended its free Fastpass program in favor of paid Lightning Lanes. In both cases, companies were chasing new sources of revenue. Unlike Southwest, however, Disney continued to provide its guests with a way to avoid its new fees.
To me, that’s the key to chasing new sources of revenue. Do not force customers into expensive new products. Instead, add them as new options for customers willing to pay for an enhanced experience.
Southwest could have done that with assigned seats, making them an upsell option for select rows on the plane. Let the people who paid for those seats board first, then let other passengers claim their free seats in the designated open seating section of the plane. But there was no good way to segment the “bags fly free” policy. Holding the free bags to come out after the paid bags at baggage claim? That’s not much of a benefit and more work for handling crews.
With thoughtful planning, Disneyland and Walt Disney World visitors can get on plenty of top rides without having to pay for Lightning Lanes. Yet people who pay for that access get a real benefit in time saved at the parks. That is why criticism of that switch quickly subsided and today is pretty much limited to social media naysayers who will complain about anything for views.
Complaining is as free as bags on Southwest used to be. Ultimately, Southwest will get what it deserves from its changes. If passengers really go elsewhere, the stock will give back its recent gains and both management and investors will lose. If not, well, maybe the investors were right after all.