Last month I wrote that Priority Pass brings huge passenger volume to lounges, at least in the U.S. where so many memberships have been issued to credit card holders. This is big business at an average of $25 per visit.
The small 3000 square foot The Club lounge in Phoenix has more than doubled the number of guests since Sapphire Reserve launched.
We now have a little more insight into the economics of Priority Pass for restaurants.
How Much Restaurants Get for Your Priority Pass Visits
Last year One Mile at a Time wrote that Priority Pass seemed to be reimbursing Timberline Steaks in Denver $24 for each $28 food credit.
According to Timeberline Steaks it’s $23, as they open the kimono on what Priority Pass has done for their business (and in ways that most certainly violates nondisclosure provisions of their agreement),
Last September, Timberline partnered with travel rewards company Priority Pass to give certain credit cardholders a $28 meal credit to use multiple times – the first DIA restaurant to do so. Nine months later, Timberline said the program is to thank for a significant boost in traffic: In May, rewards members accounted for over $400,000 in sales.
…Steinberg said the restaurant recorded about 6,000 Priority Pass check-ins during the program’s first 30 days last year. That number had tripled since then, with nearly 18,000 check-ins for May, or 38 percent of Timberline’s total business.
But the increase in sales doesn’t necessarily mean increased profit. The rewards program reimburses Timberline just $23 of the $28 credit; the remainder goes back to Priority Pass and its parent company, The Collinson Group.
“So from the front end, it’s bringing in a lot of traffic,” Steinberg said. “But if you’re sending out $5 per person back to that company, is it truly profitable?”
Is Priority Pass Profitable for Restaurants?
Priority Pass is now 38% of the restaurant’s business. $23 reimbursement on a $28 tab is an 18% discount, it’s not surprising that the restaurant’s biggest customer gets a better deal than retail. The discount cuts into profit to be sure but airport employees frequently receive 10% – 15% discounts at restaurants and these are all customers at the margin that the restaurant wouldn’t otherwise receive.
Of course if the restaurant is so crowded they’re scaring away full priced guests they’re made worse off.
Priority Pass Customers Don’t Tip Without a Nudge
According to Timberline’s manager the “restaurant credit can’t be used towards the gratuity” and that only 25% of cardmembers started out tipping, however they’ve since offered “coaching and printed notices” boosting tips to 75% of covers.
The Priority Pass website says “Any remaining balance cannot be used towards gratuity.” However when I was at Timberline Steaks in March I was going to separately tip but my server told me that the tip was included (I didn’t use my full $28 on food) and did not see any signs.
I think the issue here really is misunderstanding. If you’ve got a $28 credit you assume it can be used towards tip. The restaurant’s servers were similarly confused.
Will Timberline Steaks Stay in Priority Pass for the Long Haul?
The Timeberline Steaks manager says they may ask Priority Pass for an increased reimbursement when their one year contract ends in a few months. Denver will be getting a Plaza Premium lounge which will presumably be accessible via Priority Pass, and that may reduce Collinson’s interest in squeezing its margins on each visit. It will be interesting to see whether the Timberline Steaks relationship continues — at least past fall 2019.
Don’t have time to sit down and eat and use your $28 per person credit? Consider take away. Here are some of the other US airport restaurants where you can use your Priority Pass.