Just before you board, the airline attendant asks you if you'd like to pay a little extra for premier seats. What's the catch, and what do you say?
Do your homework before you spend extra money on upgrades. Whether you choose to upgrade or not, it is recommended to protect your travel investment by purchasing travel insurance.
What you stand to gain from last-minute upgrades
Extra room and access to the "VIP" lounges at the airport can be great travel perks. Of course, some get the luxury of business class. But while some people love the upgrades, others think they are far from worth it.
From car rental companies to cruise lines to hotels, companies across the travel industry are making these offers with greater frequency. These "upgrades" can add anywhere from 25 to 50 percent of incremental revenue to a business profit margin. In fact, the domestic airlines industry accrued a 7.8 percent profit margin last year.
To put it another way, it's almost always a good deal for the company, but it might not always be a good deal for you.
How the upgrade system works
To better understand the system, here's a breakdown of how it works. The goal of travel companies offering upgrades is two-pronged. First, they want to make these upgrade opportunities unpredictable so customer are caught off-guard, having not been able to do the proper research ahead of time. Second, they want to target the right travelers.
"The basic technology to offer the upgrades has existed for at least 10 years," Warren Lieberman, a travel industry pricing expert and president at Veritec Solutions, told The Seattle Times. "But we now know much more about you than we did before, so the offers are much more targeted."
Who gets targeted?
According to Joel Widzer, author of The Penny Pincher's Passport to Luxury Travel, travelers are more likely to get upgraded if they book directly with the property, on the hotel's website or by phone rather than a third party. This makes them a more direct source for travel companies to pinpoint.
They may also depend on the number of miles you have saved up. Between Sydney and Dubai, flyers need 45,000 Skywards miles to get bumped up from flexible economy, or 57,500 miles from the cheap seats on Emirates. The more miles you have, the higher your chances of getting an upgrade.
However, most consider upgrades a bad use of miles. For instance, an upgrade within the U.S. on United is 20,000 miles plus $75 for a one-way flight. You could redeem a first-class saver award for just 25,000 miles. With that being said, some people never save enough for a free flight, in which case, using miles in any way is better than letting them expire.
How to combat the instant decision
The tricky part about last-minute upgrades is that you have to make a quick decision. While customers usually spend weeks and even months researching their travel plans, companies ask for a knee-jerk answer. Is that SUV really worth an extra $30 a day? Is that four-hour flight worth an extra $60?
Patricia VanHooser, a traveler who lives in Kansas City, told the Seattle Times that she sets a spending limit on her upgrades.
"If I can get an upgrade for less than $50 on a flight that is more than 2½ hours, I'll take it," VanHooser said.
Once, she took a $35 offer to upgrade to first class on a red-eye from San Diego to Atlanta.
When it comes down to it, the upgrade depends on you, the customer. You might consider establishing spending limits beforehand so you don't end up overpaying. Knowing the ins and outs of the product helps too.
Travelex Insurance Services provides a variety of travel insurance plans to protect your trip investment while traveling.