It’s for the same reasons Allegiant’s branding a football stadium, building hotels, and running a point-of-sale platform for golf courses.
Naming rights for a football stadium, a vacation resort, a software platform for golf course scheduling, a chain of Dave & Buster’s-like arcade/restaurants: over the past two years, low-cost carrier Allegiant Air has been creating businesses that are related to aviation and travel in only the most indirect ways.
What ties Allegiant’s varied hospitality enterprises together? It’s the airline’s deep attachment to the leisure-mindset of its customers.
As the 20-year-old Las Vegas carrier prepares for its Q3 earnings call on October 24, it’s clear that Allegiant’s ambitions are fueled by its peerless record of 66 consecutive quarters (roughly 16 years) of profitability.
During most of its existence, Allegiant, which currently serves 124 cities with a fleet of 85 Airbus A319s and A320s, has been content to operate below the radar of most consumers’ attention. But its recent moves are designed to gain greater recognition –while generating additional revenue to match its divergent aspirations.
For example, in August, Allegiant acquired the naming rights to its hometown Las Vegas Stadium, the under-construction future home of the Raiders and UNLV football. Meanwhile, Allegiant's Sunseeker Resorts subsidiary is currently under construction with its inaugural property, at Charlotte Harbor in Southwest Florida.
As Skift and others reported in April, at least a few of the stock analysts following Allegiant have appeared more than perplexed by the carrier’s non-airline ventures.
But aviation operations analyst Jay Sorensen, president of the Product, Partnership and Marketing Practice at travel industry consultancy IdeaWorksCompany, believes Allegiant’s making some smart moves that will advance its growth. (Sorensen notes that Allegiant is not a client of his.)
Sorensen does have a word of caution for budget airlines thinking of taking a page from Allegiant’s playbook: think a bit longer and a lot harder before seriously taking a step outside of core airline operations. In his view, Allegiant has carved out a distinctive niche that allows it to pursue ventures that bare only a tangential connection to air travel.
Allegiant’s Hand In Glove
Allegiant officially broke ground on nearly 700 hotel rooms and stay suites at its Sunseeker Resorts in March 2019. Located on south Florida’s west side on the Gulf of Mexico, Sunseeker is about 7 miles from the Punta Gorda Airport (PGD). A base of operations for Allegiant, Punta Gorda has served more than 1.5 million of its passengers from 29 destinations in 2018.
Punta Gorda’s among several options within a two-hour airport drive that travelers can take to and from Sunseeker, which Allegiant expects be completed before March 2021. Allegiant flies into nearby St. Pete-Clearwater International Airport (PIE), Orlando Sanford International Airport (SFB) and Sarasota-Bradenton International Airport (SRQ).
Overall, the carrier currently sees nearly 8 million leisure travelers in and out of Florida every year. Allegiant is expecting Sunseeker to generate an increase of 300,000 visitors annually to the Charlotte Harbor area.
“The resort is an absolute home run because it's not easily duplicated,” IdeaWorks’ Sorensen tells Kambr Media. “They’re the only tenant [at Punta Gorda], so they have exclusivity. Having a top-notch resort within a few miles of that airport provides a tremendous opportunity for Allegiant. For one thing, they do such an excellent job of packages.”
Secondly, Sorensen says, Allegiant will be able to realize Sunseeker as an additional revenue stream on top of driving more air travel to the region.
The move also demonstrates Allegiant’s creative, and, perhaps too, adventurous decision-making process. For a while, the airline was even said to be contemplating a timeshare in the area, and while it was notably a novel idea, it was apparently unworkable. As Sorensen noted, “if you sell a unit to someone, how often will they visit it?
“The phrase that comes to mind with Allegiant’s Sunseeker plan is ‘hand in glove,’” Sorensen says. “There's just a hand in glove relationship there that they can succeed at. What's interesting about it is, is whether American, United, and Delta would attempt to match this idea with something similar. They won't.”
Among the reasons the legacy carriers won’t build a resort – or a family fun center for that matter – is that they simply don’t need to.
As for whether more direct competitors like Miramar, Florida-based ultra-low cost carrier Spirit Air, could do something like build a resort of its own, Sorensen is dubious (not that Spirit has even suggested any such plans to even consider it).
“For Spirit to do something in Fort Lauderdale, it would have to do a whole lot of learning about how to package holidays before they could succeed to the extent that Allegiant does,” Sorensen says. “Allegiant can develop resorts in their different hub locations. There is a reasonable concern that, at some point, it might end up upsetting the hotel community by becoming a competitor. I wouldn’t expect that given the location and the limited amount of locations it has indicated it wants to build.”
While Allegiant’s expansion into the resorts business has a natural relationship to air travel, it’s the carrier’s growing chain of family fun centers that provides the most surprising jumping off point from its foundation as an airline.
Allegiant Nonstop’s Brand Game
In 2018, a developer in Utah discussed the so-called “retail apocalypse” with Allegiant executives, sources tell Kambr Media. The trend was said to be leaving a swath of empty “big box” stores in many parts of the country.
Allegiant saw this as an opportunity to extend its brand where it wasn’t particularly well known. And because of developers’ desperation to fill vacancies, Allegiant could, at a discount, fill these “big boxes” with a “family entertainment center.”
That’s how Allegiant came to found G4 Complete Entertainment and open its first“G4CE” (as in “g-force”) in January 2019 in a 100,000-square-foot space that formerly housed an Asian-themed home decor franchise called Tai’pan Trading. Out went the home furnishings and in went arcade games, laser tag, go-kart racing and fast-casual dining – and all conveniently within a 12-minute drive to Utah’s Ogden-Hinckley Airport. Again, here’s Sorensen’s example of Allegiant’s “hand in glove” logic at work.
By April 2019, G4CE’s name was changed to the more airline-aligned Allegiant Nonstop as the carrier opened its second family fun center in Warren, Michigan, which is less than an hour’s drive from Bishop International Airport in Flint (or an hour-and-a-half’s ride from Toledo Express Airport across the border in Ohio).
A third family fun center is currently in the works in Fort Wayne, Indiana —that’s a 30-minute drive from the Fort Wayne International Airport. The planned center is also 1-hour-45-minutes from South Bend International Airport and 2 hours from Indianapolis International Airport, both of which Allegiant Air serves.
“As a fully-integrated travel company, we are always seeking innovative ways to serve our customers,” Sonya Padgett, Allegiant Travel Company spokeswoman, tells Kambr Media (Other Allegiant executives were not available for comment). “Allegiant Nonstop is an affordable entertainment option for our customers who are looking for fun activities in their own hometowns or in the cities where we fly…. We’ve been very pleased with their performance and are making plans for a third location to open in the near future.”
At the moment, sources tell us that Allegiant has not attempted to “activate” any marketing related to air travel at its Nonstop locations. But the potential is there, Sorensen says, albeit in a one-way direction.
Obviously, not many people are going to fly to Fort Wayne to visit Allegiant Nonstop. But the opportunity to bake in a feeling of familiarity and even loyalty to Allegiant from people who’ve never flown with the carrier before is a trick only established airline brands can hope to pull off.
Combine that with a marketing tool like a branded arcade that is both low-cost and produces enough revenue to at least cover expenses – and perhaps even profitable in their own right – and you have a level of symbiotic marketing that’s almost too good to believe.
That’s assuming Allegiant actually can turn its Nonstop outposts into growing businesses and not just a glorified pop-up shop.
“The magic will occur if they can connect the link between that idea and the airline,” Sorensen says. “There are two benefits for Allegiant with the Nonstop entertainment center model. Through brand exposure and brand extension, you create awareness among consumers in these small towns and cities for the Allegiant name. If I'm encountering Allegiant more in my life in my community, the next time I plan a flight, I’m going to consider Allegiant.”
After generating brand awareness generally, Allegiant Nonstop drives home the specific association that they are a carrier known for “fun.”
“As the owner of an entertainment center in a community, Allegiant sends the message to those consumers that it is not about business travel; it’s about fun,” Sorensen says. “That's very powerful.”
Defying The Rule
Allegiant is certainly not the first company to try an unexpected brand extension, and even in the realm of airlines, there are some antecedents, says David Berkowitz, head of Serial Marketer, a consultancy focused on branding, product marketing, and demand generation.
“One of the most striking examples that come to mind is Hooters Air, which had about a three-year run,” Berkowitz says. “Airlines are a much tougher businesses than ‘fun centers,’ so there's less of a risk for Allegiant with its approach.”
The biggest challenge is focus. Starbucks’ ability to add CD and music download sales in its stores was an example of a brand extension that made sense, Berkowitz points to Starbucks, which made a bold move with its music offerings.
The ubiquitous coffee chain considered music a core part of the Starbucks experience, rather than some afterthought. So it devised a program to tie it all together, Berkowitz says.
“There were undoubtedly tons of customers who came into a Starbucks location and wanted to hear more from the artists who were featured there,” Berkowitz says. “That's far different from WeWork opening up a line of schools, WeGrow, that it just shuttered; children's education has absolutely nothing to do with pay-per-desk-per-month workspaces.”
Amazon provides another template for successfully employing a lateral marketing play.
“Amazon veering from selling books to hardware to storage to original programming is all incredibly difficult, and yet somehow the pieces fit together,” Berkowitz says. “You could argue that every ‘Elon Musk company’ is really some conglomerate held together by Musk's ingenuity and will; so each is some off-shoot of the Musk brand, even if Musk also seems to be the best one at tarnishing his own brand. However you frame these approaches, they're exceptions that defy the rule. Most brands do far better with focus and limiting options.”
Arcades Are Not For Every Airline
Among Allegiant’s airline peers, JetBlue Airways’ decision three years ago to set up JetBlue Technology Ventures is the closest comparison, Sorensen offers. JetBlue set up its corporate venture capital arm in order to use investments as a method to spread its interests beyond airlines and into travel tech.
Like Allegiant in the area of “fun,” JetBlue has developed a reputation for being technologically advanced. That aspect of JetBlue’s identity was made in its earliest days when it was the first airline to offer its fliers access to live broadcasts from DirecTV (notwithstanding the famous incident in September 2005, when JetBlue Flight 292’s 140 passengers and were able to watch real-time news reports of the flight experiencing trouble retracting its landing gear).
Again, Sorensen contends that Allegiant is in a fairly unique position.
“The other airline that I would say is a kindred spirit to Allegiant is low-cost carrier Jet2.com in the UK, which, it could be argued, is even more financially effective when it comes to packaging holidays,” Sorensen says. “Jet2 has about 600 employees who are staffed at hotels in the airline’s destinations. They are there as customer service representatives, and their role is twofold. First, they are there to make sure that things go right for the holiday goers. Secondly, they also sell other services, such as sightseeing, for example. The point is, if doing these kinds of extraneous functions were easy and accessible to most airlines, then most airlines would be doing them.”