AAA may be known for its travel membership services, but it’s picking up some nice profits in the banking arena. The association announced this week that its partnership with Discover Bank (which most people recognize as the Discover credit card in their wallets) has raked in $1 billion across 25,000 accounts in the AAA Savings Program in a mere 18 months.The program exceeded $500 million from its launch in January 2008 to October.

Still profitable

Basically, 40 AAA clubs offer money market products, certificates of deposit and individual retirement account certificates of deposit at an additional 5 basis point interest rate over Discover’s competitive rates. The products are FDIC insured.

“The ongoing difficulties at some of the world’s largest financial institutions have clearly caused many consumers to re-assess their banking relationships,” said Doug Bower, AAA vice president of Travel and Financial Services. “AAA is a strong and trusted organization with a reputation for always putting its members’ interests first. The confidence consumers have in AAA, coupled with the outstanding rates of return we have been able to secure through our relationship with Discover Bank, are a winning combination in today’s unpredictable financial services environment.”

Which, of course, begs the question: Just how much clout will AAA’s 51 million members yield in the travel industry of the future if they can amass this much money from a splinter percentage? It already holds preferred relationships with 12 cruise lines, 17 tour companies and a deal with the almighty Disney amusements. AAA members spend $38 billion on 345 million U.S. room nights at hotels, which accounts for 39 percent of this country’s overnight business.

I’d say the message is that the travel industry has to ban together in similar consortiums and federations for survival — the independents Lone Rangers aren’t long for this world. And never be afraid to diversify, as you might just find an extra billion out of the deal.

mobile computing heaven

The race is on.

The Westin St. Francis in San Francisco’s Union Square is among the first hoteliers to sign up with LodgeNet Interactive Corporation to implement its Mobile Internet Devices and integrate them into their own hospitality system.

In English, this means Westin guests can order in-room dining, book a spa appointment, make golf reservations, sign up for their reward program points and even change the in-room temperature and electricity controls through their iPhones and Blackberries. Basically, guests’ smart phones replace the concierge function, which will no doubt trigger a rebuttal from the National Concierge Association. But let’s face it: the name of the game has always been “be relevant or be run over.”

The project is in the pilot stages this summer; LodgeNet says it should roll out more test markets between now and the end of 2009. Anyone who wants to see this technology in action can stop by the company’s booth at HITEC at the Anaheim Convention Center June 23 – 25.

It’s a smart move for anyone who read the American Hotel and Lodging Association’s 2008 study on customer satisfaction. A whopping 82 percent of guests say they care most about their wi-fi services, even over in-room entertainment systems and airline check-in kiosks.

Which could explain why Omni Hotels — the first luxury hotel brand to give guests free wireless access in their rooms — is focusing more on the basics. It signed with BelAir Networks to upgrade its network design to accommodate mobile computing. “With nearly 50 percent of our guests using wi-fi and their bandwidth demands continuing to accelerate, we sought a high-performance network partner” says Richard Tudgay, Omni’s IT veep.

Photography: Westin St. Francis

When Doug Parker, CEO of US Airways Group, told the National Post in late March that frequent flyer programs have hurt the industry — too many free trips, you know — it barely made a blip on the traval radar.

Frequent flyer programs aren't grounded yet

“The amount of our product we give away is not consistent with generating returns for shareholders and providing stability for employees,” he told reporters. Yet frequent-flyer miles are now a staple of U.S. travel. so airlines can’t retreat, and thus are trying to recoup lost revenue with the checked bags charges. That’s an estimated $500 million in US Airways’ pocket this year.

It’s certainly what most consumers have assumed for the past 18 months; as a travel agent, I’ve seen a marked decline in enthusiasm for racking up frequent flyer miles. A large chunk of Americans simply don’t trust the programs to be around when it’s their time to cash in — consider them the Social Security set up of the travel industry.

However, Rick Ferguson was listening, and as the editorial director of COLLOQUY, the custom magazine that interprets research from the loyalty marketing consultant of the same name, he certainly disagrees.

First, loyalty marketing is a way to use perishable inventory, i.e. empty seats on a scheduled flight. Every unbuckled seat belt lying across a cushion you can use as a floatation device in the case of a water landing represents a missed opportunity to flatter, impress and reward. As Ferguson points out, the only real costs on a balance sheet for filling this seat at the last minute is the extra fuel for the person and his lugggage  which they charged him for — a bag of peanuts nd a Diet Coke.

Second, airline executives have confided to Ferguson that they’ve made more money selling airline miles to partners than they do flying planes. Robert Sahadevan of United Airlines told attendes at the Frequent Travel Marketing Association conference that only 37 percent of the miles issued within its Mileage Plus program are actually used for ticket purchases. The other 43 percent are sold to third parties (credit card partners, hotels, etc.), which makes frequent flyer programs a valuable cash flow soarch approaching $5 billion by some market analysts’ calculators.

That’s a tad more than the luggage fee idea.

“The airline and the loyalty program are conjoined twins, sharing a heart and circulatory system. You might be able to separate them, but the surgery would be risky, and one or both of the twins might not survive,” Ferguson writes in COLLOQUY. “I may not know anything about running an airline, but I do know it’s usually not wise to mess with a good thing.”

Photography: Cliff1066