The Magic of Travel Packaging

AKA How flyers save hundreds to thousands by buying travel bundles of flight/hotel/car rental.

The travel world was taken by storm when JetBlue recently offered $150/$250 off vacation packages. The kicker? There was no minimum spend. As you can read on the linked Dan’s Deals thread, people were booking flights into their own city and skipping the flight just to get a free hotel night because the total cost was less than $150. Others booked free vacations to Las Vegas, etc. JetBlue quickly put a stop to this by requiring minimum spend of $2,000/$2,500 to redeem these codes, but many of us got free trips off of this!

At Legenda Travel (contact@travelwithlegenda.com), vacation packages are our bread and butter. You bundle and save lots of money, especially on long-haul business class travel, especially on travel to Europe.

Vacation Package Examples (American and Delta)

Consider American Airlines Vacations. Let’s say you’re flying from Los Angeles (LAX) to London (LHR) for business travel in March. A quick Google flights search shows that most fares are in the $8,000 range, with a one-stop for $6000:

If you try to book it as a vacation bundle, however, then you could save almost $4,000 for booking the exact same flight:

And this comes with a hotel!

You’ve got a wide range of hotels, but the Strand Palace is the top recommended hotel and it would increase our package by $100/night. Booking the Strand by itself costs about $518, so we only save about $200 in total on the hotel.

But on our total trip we’d save almost $4000 from the published airfare rate, and we’d be flying in business class! You could throw away your hotel booking and just book a different hotel that you want and still save way more from paying the public airfare rate.

Sound too good to be true? Let’s look at another example, this time with Delta Vacations. Same LAX-LHR roundtrip, except we’re leaving in mid February and want to fly SkyTeam. Google Flights says:

So similar pricing to the American/British Airways fares we saw before. But if we book this as a vacation package with Delta Vacations:

$2,666+8 = $2,674 for a business class flight AND a Hyatt Place hotel? That’s $5,000 off the airfare for the exact same flights. Insanely cheap.

So again, what’s the catch here? Well, the fare is listed as “First” but it’s a Z fare on Virgin Atlantic, which means it’s business class and not first class. The links on Google Flights/etc all book into a D fare class. What’s the difference, you ask? Check out V-Flyer if you want the details, but here’s the summary:

Z-fare rules:

• 150% of mileage flown earn for all passengers (200% for Flying Club Silver and 250% for flying Club Gold members) and 5TP’s per sector.
• No complimentary Chauffeur to/from airport.
• Basically no changes/cancellations.

D-fare rules:

• 200% of mileage flown earn for all passengers (250% for Flying Club Silver and 300% for flying Club Gold members) and 6TP’s per sector.
• Chauffeur driven car transfers to/from airport.
• Pretty flexible change/cancellation rules.

So you lose an additional 50% in mileage, which is about 3,000 miles for the roundtrip. That’s worth at most $100. If you credit these miles to Delta however, instead of Virgin Atlantic (VS), then fare classes D/Z earn the same amount per the exception fare chart. You’d also earn Medallion Qualifying Miles/Dollars (MQM/MQD) on the booking as a percentage of distance, so you’d earn approximately the full amount of spend in MQD.

The Chauffeur service is nice but you can pay someone $4,800 or less and still come out ahead :) The cancellation one is big — you don’t have flexibility to change or cancel things when buying as a vacation. So if your dates are changing or you don’t know if you will go on this trip, then don’t book a vacation package. Otherwise, enjoy your savings!

American has a similar policy where you earn miles/dollars based on distance flown, because these rates are considered bulk/exception/consolidator/unpublished rates. That’s why Google Flights or your favorite travel site can’t find them by default. The exact earnings/details vary, but when you’re saving thousands on flights, losing 5% miles or dollar earnings is irrelevant.

So let me repeat the question from above: what’s the catch?? How is this sustainable? Well, there are a few reasons why vacations packages are so effective, which we’ll explore below.

Airlines deeply discount airfare because they become “tour operators”

When you book a package with an airline, they are earning a commission from the car rental/hotel agency. The hotel business is extremely competitive with big commissions for agents/operators that drive business to a hotel. Did you know that 85% of Priceline.com bookings are international, driven by the European hotel market? The “name your price” and William Shatner commercials are funny and build the brand, but represent a small percentage of revenue. In fact they discontinued Name Your Own Price for flights a few months ago.

The point I’m making is that hotels are where the big commissions are in travel. Flights are pretty consolidated with most countries only really having one or two options, and the airlines control supply. With hotels, there are hundreds of thousands of hotels, and many are at a comparable price point. Since the marginal cost of filling a room is small (housekeeping), hotels want to fill as many room as they can. Vacation packages are a great way for airlines to earn hotel commissions and hotels can get more beds filled.

So as a tour operator, the airline is fine discounting their airfare, especially on premium cabins, because of the ability to make it up on car/hotel/cruise packaging.

Airlines can remove restricted business/first class inventory

Many business travelers can only fly in economy, or in refundable business class, or are traveling last minute. Vacation/bundle packages are much better when bought in advance since there isn’t much availability a week or two out. In economy there aren’t as many savings on airfare, and most leisure travelers are buying economy packages and not business packages.

This creates a sweet spot for business travelers looking for vacation packages because there’s lots of business inventory and it’s restricted change/cancel so a lot of the normal business flyers either ignore it or don’t know about it.

Vacation packages allow airlines to monetize their business/first inventory where it might have gone unsold.

The best deals are between North America and Europe

On American and Delta Vacations, the best packaged deals from North America are to Europe. This is driven by the highly competitive European hotel/cruise market. Similarly, websites like British Airways Vacations offer the best packages from Europe to North America.

You can get similar savings when going to Asia, Australia, etc., but the savings are rarely as pronounced. There are other suppliers that are only available to travel agents and not the general public who sometimes offer better packages, but EU<->NA tends to be the best corridor.

Concluding Thoughts

There are a few things to keep in mind with vacation packages:

1. Tickets are generally non-refundable.
2. You should book around a month in advance.
3. You will benefit the most if you’re flying business or first class, but can save a bunch in economy as well. My rule of thumb is “flying economy = save hundreds, flying business/first = save thousands”.
4. Your airfare earnings will depend on distance/fare-class. This really affects the dollar requirements for the frequent flyer programs. There are some great loopholes here like booking a $2,000 business class fare and earnings $4,000 in qualifying dollars because the earnings are distance based instead of price based.
5. You won’t earn hotel points. Most hotel programs will not give you points if you book through a third party. The trick is to discard the hotel and book directly with your preferred hotel to earn full points. Sometimes you’re going for a conference when the rates are too high so you can just keep the vacation package hotel and save money in lieu of points.

If you understand these five points, you’re good to go. Travel packages are one of the best deals in the industry and I highly encourage you to take advantage of them. So lastly, how do you actually book these? Here’s the recommended sources:

1. Airline vacation websites (American Airlines Vacations, Delta Vacations, United Vacations). Each airline should have one so you can search for “[airline name] vacations” to find them. Some like Alaska Air Vacations are literally vacation destinations and not business destination cities, so these won’t help you. Others, like United Vacations, don’t have deals as good as Delta/American’s sites.
2. Online Travel Agencies. I recommend Expedia Vacation Packages. I don’t like Priceline’s vacation search and the results aren’t as good.
3. Legenda Travel! I’m going to pitch my own company here. We do free package searches for you, just email contact@travelwithlegenda.com with where you’re going, for how long, preferred airlines/hotels, and budget, and we’ll get you the best rates. The advantage of a travel agency is that Legenda can access a bunch of suppliers not open to the public to search for additional rates. We don’t charge any booking fees since our business is straight commission from suppliers. Note that we specialize in business travel and premium fare travel since we can add the most value there, so don’t email if you’re looking for a family vacation to Cancun :)

Hope this article was informative. Please post below or email me at contact@travelwithlegenda.com if you have any additional questions or would like to learn about something else in the travel industry.