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AmEx Opens Two Lounges to Offer Premium Amenities to Members

Sapna Bagaria

American Express Co. AXP and MAG USA announced the opening of The Centurion Lounge and Escape Lounge at Phoenix Sky Harbor International Airport (PHX). These lounges will be accessible to Platinum Card and Centurion members.

With more than 44 million passengers passing through this airport each year, the opening of these lounges provides American Express with a unique opportunity to offer world class lounge amenities, which would help it to retain existing members and get new ones.

American Express has a network of Centurion Lounges at major airports to cater to their Platinum and Centurion card holders.  The company has been constantly modifying benefits and rewards in its various card categories to provide premium services to its members. In the third quarter, it continued to refresh its Platinum Card portfolio across several international markets.

The company is also revising its Gold Cards and iconic Green Card. It also improved its Corporate Card program, which includes a number of new features like enhanced benefits with Uber, Hilton, and CLEAR.

These initiatives are likely to drive the company’s growth and boost spending and engagement on its refreshed products. Higher member engagement is also leading to growth of loans disbursed by the company. Over 60% of the total loan growth is coming from existing card members and enabling it to earn a steady stream of revenues.

Also, the company has been able to add new card members through its existing customers via  Member-Get-Member referral program. This program has helped it to acquire more than 250,000 new customers in the first nine months of 2019. Moreover, successful referrals have increased 35% compared with the third quarter of 2018.

American Express has been witnessing an increase in the adoption of fee-based products, which reflects the fancy of its customers for luxury services. Both Platinum and Centurion cards carry annual fees.

Nevertheless, the provision of these services and rewards to its members will increase the company’s customer engagement cost, card member services cost and rewards expenses.

The company expects this to be its fastest growing expense category as it includes the cost of many components of its differentiated value propositions such as airport lounge access and other travel benefits.

These services are difficult for other companies to replicate and support the engagement American Express is seeing on its fee-based products.
American Express is the fourth largest general-purpose card network on a global basis based on purchase volume, behind China UnionPay, Visa Inc. V and MasterCard Inc. MA. It is the fourth largest card network in the world, based on the number of cards it has in circulation.

The stock has gained 26.4% compared with its industry's growth of 16.5% over the past year. American Express carries a Zacks Rank #2 (Buy).

 

Another company worth considering is AXA Equitable Holdings, Inc. EQH, which also carries a Zacks Rank #2. AXA Equitable surpassed earnings estimates in each of the trailing four quarters, the surprise being 12.4%, on average.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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