Allegiant’s passengers are a lot more affluent than you think

Allegiant Travel Company’s plans to develop and run a resort in Southwest Florida is not generating a positive response from Wall Street, but its research is revealing some interesting facets of the airline’s passenger demographics.


Summary:

  • Allegiant Travel Company plans to develop and run a Sunseeker resort near its Punta Gorda base in Southwest Florida;
  • The company’s stockprice shows the markets are not comfortable with Allegiant’s plans to diversify outside the traditional airline business;
  • Allegiant is widely known for its ultra low cost offer, but Sunseeker will fall into the upscale to luxury hotel category;
  • Surprisingly, research shows that more than a third (37%) of passengers on Allegiant Air services have a household income of USD75K to USD149K.

Allegiant is in the midst of developing its Sunseeker resort near its Punta Gorda base in Southwest Florida. Sunseeker will feature 500 hotel rooms with 180 suites or condo units, a marina, restaurants and retail outlets.

The company’s plans has not curried favour with financial analysts. Allegiant’s stock price has fallen to USD129 (as of late Sep-2018) from a high of USD178 in Mar-2018, which shows the markets are not comfortable with Allegiant’s plans to diversify outside the traditional airline business.

But Allegiant’s management is undeterred by the scepticism. USA Today quoted company CEO Maurice Gallagher declaring the project was a “home run”, and is “as good an opportunity I’ve had to invest in, personally, in a long time”.

Sunseeker will fall into the upscale to luxury hotel category, and part of Allegiant’s bullishness about the opportunity stems from its determination that roughly 37% of its passengers have a household income of USD75K to USD149K. The company has also determined hotel spend on a roundtrip itinerary in Punta Gorda is USD1,024.

Allegiant estimates transporting eight million passengers to and from Punta Gorda between 2013 to 2018, so the company definitely believes there’s an inherent opportunity in Southwest Florida for a fresh, upscale resort. The company concludes the average age of the hotels in the area is 26 years old, and has also determined only 9% of hotels on the coast of Southwest Florida are categorised as luxury, and 14% are upper upscale.

Armed with data, Allegiant is pressing full steam ahead with its resort plans, and is ignoring the naysayers critical of its business diversification.

It has been a strong 2018 for Allegiant with latest traffic figures for Sep-2018 show a +18.0% year-on-year growth in passengers. With departing frequencies rising +12.1% and capacity (in ASMs) up +12.5%, it helped drive up average loads by more than three percentage points to 82.0%. The data concludes the 3Q reporting period and a +15.4% year-on-year growth in passengers.