Credit cards linked to airlines and hotel brands—offering airline miles, hotel points, airport lounge access and other travel-related perks—have become increasingly popular over the past two decades. For banks and card issuers, these partnerships are part of their growth strategy as premium and travel cards help acquire and maintain affluent customers.
According to Morgan Stanley Research, revenue generated by co-branded travel credit cards could grow from approximately $24 billion today to as much as $100 billion by 2035. The market’s trajectory will depend on several factors, including travel demand, spending patterns among higher-income consumers and the evolution of partnerships between card issuers, airlines and hotels.
But while premium card demand and travel intentions remain strong, investors are increasingly questioning whether the economics of these partnerships will continue to favor banks.
“For card issuers, premium and travel cards have a strategic importance to acquire affluent consumers, helping explain why they continue to invest more heavily in rewards and benefits,” says Jeff Adelson, who covers Consumer Finance stocks at Morgan Stanley Research. “At the same time, airlines and hotel companies are gaining greater bargaining power when negotiating co-brand agreements.”
Overall credit-card revenue has grown at an average annual rate of about 6% since 2019. By comparison, fees and remuneration from premium and travel cards have increased roughly 10% annually, benefiting from the rebound in travel following the COVID-19 pandemic. From that perspective, airlines have secured a larger share of economics as they renew and renegotiate partnerships with banks and card issuers.
“The premium card pie is growing, but airlines and hotels may be taking a larger slice,” says Ravi Shanker, the Lead North America Airline Analyst at Morgan Stanley Research. “This is a significantly underpenetrated market, with meaningful opportunity ahead for travel co-brand card issuers, though the risk is that it will remain a niche product.”
What Consumers Want From Their Credit Cards
A new Morgan Stanley AlphaWise survey of approximately 3,500 U.S. consumers found that annual fees remain the most important factor influencing card adoption. Specifically, 67% of respondents cited annual fees as the number one consideration, while 64% pointed to interest rates and 55% highlighted rewards.
But the survey also found that flexibility matters: Consumers generally prefer cards that offer rewards they can use across multiple categories.
Households earning $150,000 or more annually indicate greater interest in airline-branded cards was than households earning less. These consumers also placed greater value on travel-related benefits such as airport lounge access, elite status and other premium experiences.
“The survey reinforces the strategic importance of premium and travel cards to acquiring affluent consumers, helping explain why banks continue to invest heavily in premium card ecosystems and co-brand partnerships,” Adelson says. “High-income consumers spend more, are better quality credits, and those who are loyal to their airlines are stickier.”
