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Hanging with the high fliers

Hans Brasseler, a Hong Kong-based chief regional counsel for a US financial services company, typically flies every two weeks. After checking in, he almost always heads for that little patch of comfort known as the airport lounge.

'The single most important thing for me is the peace and quiet, without people looking over my shoulder,' says Brasseler.

As a member of Cathay Pacific Airways' Marco Polo Club, Brasseler has access to Cathay's business class lounges, and he prefers the breakfast of these venues to the airport restaurants. 'The food is not Paris, but it is nutritious, decent and quick,' he says.

Brasseler is part of the burgeoning population of fliers who can't imagine boarding without making a pit stop at the lounge. Indeed, for a segment of frequent fliers, such access borders on an obsession. After all, being waved into a special VIP room with Wi-fi and a dim sum buffet stands for a lot: lounges provide comfort, confer status and can offer an essential workspace.

But what is a traveller getting, and what is he or she paying?

The economics of the service are convoluted. Airlines do not generally break down what they spend on their lounges, nor is there is an easily identifiable financial pay-off for offering the service.

Airlines commonly let passengers exchange their frequent flier miles for lounge passes, and they have promotional tie-ups with telecommunications firms or credit card companies.

Visa's Black Card, which comes with an annual fee of US$495, offers unlimited VIP lounge access to customers; and American Express' Platinum (annual fee US$705) and Centurion (invitation only) cards offer lounge access as part of their plans.

Airlines are continuously expanding their programmes to let travellers buy or use frequent flier miles to gain access. Cathay's Marco Polo frequent flier club offers four tiers of memberships - diamond, gold silver, and green - which offer lounge access. All Marco Polo members have access to the business class lounges, and diamond members - the highest of the four tiers of Marco Polo membership - have access to the first-class lounge.

For travellers not wed to a specific airline, there are a growing number of pay-in lounges. The Plaza Premium Lounge works closely with commercial airlines that don't have lounges at Hong Kong International Airport. The company markets to corporate clients, banks, online booking and travel shows.

The independent companies charge a straight fee for access. Another independent lounge operator, Priority Pass, charges an annual rate of US$399. Alternatively, each visit costs US$27.

'I think it's a reasonable cost [US$27]. For that price you can have two glasses of wine and a snack. You might be able to get that outside in the airport but you miss all benefits of the lounge,' says Jonathan French, the London-based brand director of Priority Pass. 'Looking at the cold, hard facts, that's what you would spend somewhere else in the airport.' He says it makes sense to top off an economy ticket with pay-in lounge access.

A fee of US$27 per visit is a good baseline indicator of what it costs an airline operator to offer lounge access. The airline's main expense is staffing costs, followed by food and other consumables, says Jim Wong, a Hong Kong-based airlines analyst with Nomura. The leasing cost of lounge space would typically be bundled into the landing fees an airline pays to an airport, he adds.

Andrew Orchard, a Cathay Pacific analyst at RBS, says the premium airlines use lounge service as a point of differentiation from competitors, partly because they have largely hit their limits in terms of what they can offer in the sky.

'The current battleground is over what you offer customers before they board. We are seeing a lot of lounge upgrades, and quite a few airlines are looking at other services, such as picking up passengers [and taking them] to and from the airport,' says Orchard.

Cathay Pacific Airways is building more lounges (the Paris lounge is under construction and is set to open in the middle of this year), and recently closed down the first-class lounge for a facelift. That makeover includes expanding the dining space, adding an a la carte menu with hot dishes and a chef, and renovating the cabanas - private areas that include showers and bathtubs, along with toiletries, for each individual.

In the higher-end lounges, the lounge operators seem to be locked in a battle of one-upmanship, with touches such as cigar bars, champagne, full-body massages, and waiter service. Cathay Pacific even had a special chair, the Solus, designed for its lounges, where users can work, eat and relax in private.

'Passenger expectations have changed over the years,' says Melody Keung, a Hong Kong-based manager who oversees Cathay's lounges. 'For example, before, they didn't expect to have a real five-star meal in the lounge. Now are they are a bit more picky, and their expectations are getting higher, so airlines are trying to suit their demands.'

Travellers' needs are actually fairly basic. 'First and foremost I'm looking for Wi-fi and a power socket. That's followed by food and drinks, and then international newspapers,' says Ramy Inocencio, an Asia business analyst at CNN Hong Kong. A business traveller, Inocencio is a gold member of Star Alliance - the highest frequent flier level available in this group of over 26 airlines.

Frequent travellers such as Nicholas Wai are also airport lounge junkies. Wai - an executive career coach based in Hong Kong - takes as many as eight long-haul round trips a year, and is a gold member of Marco Polo. The lounge is especially convenient on red-eye flights.

When Wai lands in London, for example, he heads straight for the shower and then catches up on e-mail.

Wai has a wish list for lounges, which is no less than an art gallery inspired by the Rijksmuseum Amsterdam Schipol, at Amsterdam's airport, and an in-lounge 'hot spring', as seen at the airport in Nagoya, Japan. The way things are going for Hong Kong lounges, this may be realistic.

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