Chase is doubling down on travel as an aspirational business category for its customers, with giant numbers to back up its ambitions. Expect more travel mergers and acquisitions by these banks.
Chase plans to launch ChaseTravel.com later this year as a consumer portal for its cardholders and banking customers, a total of 66 million US households, in a big upgrade on its ambitions in the travel business.
It also discloses details of the size of its travel business for the first time: it expects to reach around $8 billion in sales volume this year and is aiming for $15 billion by 2025. He also said that in terms of US leisure travel, $1 out of $4 spent is on a Chase card, and $1 out of $3 spent is by a Chase customer. He also revealed that he has now identified and plans to launch eight Chase Sapphire lounges at airports, up from four previously disclosed.
All of these details were leaked at parent company JP Morgan Chase’s 2022 Annual Investor Day earlier in May, buried in hundreds of slide presentations and presented by Marianne Lake, co-CEO of Consumer & Community Banking at JPMC. on Investor Day.
According to Lake: “We saw an opportunity during the pandemic to own our own destiny in travel, and we acquired cxLoyalty, a two-sided proprietary travel platform, and Frosch, itself a top ten leisure travel agencies, now providing us with the booking engine, content, service excellence and concierge capabilities what our customers should expect. And today, we believe we are one of the top five travel providers in the United States. “
This move to oversize its travel ambitions and control its own destiny — compared to banks and credit card companies that typically work with third-party travel agencies — comes on the back of its acquisitions during the pandemic. travel loyalty program and rewards service provider cxLoyalty and luxury corporate and travel agency Frosch. Chase has already migrated its cardholders who use its Ultimate Rewards platform to the cxLoyalty platform and, as a result, dropped Expedia as the sole travel provider.
It also comes as financial rival Capital One has also taken a strong lean into travel during the pandemic with its acquisition of companies such as Freebird, Lola and invested in Hopper, and recently relaunched its travel site powered by Hopper. Another competitor, US Bancorp, bought travel platform TravelBank, backed by Will Smith, for $200 million in November last year.
From JPMC’s Investor Day presentation, these three slides below outline the status of its current travel business, as well as its plans for expansion.
From the transcript of the presentation, the description as presented at the Investor Day, is worth quoting in full:
“Travel has been the center of gravity of our Ultimate Rewards program for a decade and remains the most ambitious lifestyle category for many of our customers. And we partner with some of the most admired brands in the travel industry Travel is central to our card business.
In terms of US leisure travel, $1 out of $4 spent is on a Chase card, and $1 out of $3 spent is by a Chase customer. And the stats for meals are pretty similar. But only a small percentage of that spend went through our platform because our assets weren’t differentiated. But despite this, in 2019 we were already one of the top 15 travel providers.
We saw an opportunity during the pandemic to own our own destiny in travel, and we acquired cxLoyalty, a dual-sided proprietary travel platform, and Frosch, itself a top ten travel agency in leisure, now providing us with the booking engine, content, service excellence and concierge capabilities our customers have come to expect. And today, we believe we are one of the top five travel providers in the United States.
So, a moment on the business case. In addition to controlling the customer experience, which is everything, we now have full economic ownership. We have all travel commissions. We will be at scale and surpass $10 billion in travel volume on the platform next year, with strong underlying growth. And a benchmark, the Ultimate Rewards pre-pandemic growth rate was a two-year CAGR of 26%. And obviously, assuming a continued benign environment, we would expect to hit $15 billion in volume by 2025, if not sooner.
Today, our travel business is generating positive cash flow. Acquisitions are amortized in six years thanks to strong revenue margins. And for context here, the industry commissions based on the mix are around 10%. And now we get all of that, where before we weren’t. The business will require little marketing spend as we leverage our existing customers and channels bolstered by our Ultimate Rewards loyalty program. And so, net of all that, we’re expecting a net margin of about 5% more or less.
And the strategy we will launch ChaseTravel.com with card customers later this year and then open it to all our Chase customers. We will deliver distinctive content and experiences and become a full-service travel agency for our small business and high-end leisure travelers. And we’ll introduce those important customers to our strategic partners, and that’s how the flywheel begins. So let me bring this to life with our awesome scalable app and ChaseTravel.com.
So looking forward, we have 66 million American households, including 5 million small business customers. And now we have 4 million Infatuation restaurant enthusiasts. We have cutting-edge products, unparalleled first-party data, and a two-sided trading platform. And our strategy is to expose distinctive content to our broad customer base, making Chase the best way to buy, pay and borrow. Starting, as I said, with travel and introducing our customers to the main merchants on our large-scale platform. »
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