Southwest ditched free bags and MGM added all-inclusive perks: how the travel industry is reinventing itself to survive
Southwest is changing its business model to match shifting customer expectations and tighter margins, ending two free checked bags and moving away from open seating, according to EVP Tony Roach at Fortune’s COO Summit. He said the changes are needed for long-term sustainability. MGM also launched its first all-inclusive package to address value concerns, as Barry Diller proposed an $18 billion takeover while MGM focuses on execution.
Business-model reset (bags + seating) could alter unit economics and demand elasticity, driving near-term sentiment around margin durability.
Southwest is ending free checked bags and moving away from open seating, with management framing it as a core business-model change.
Moderate two-way risk: upside if changes stabilize margins; downside if premiumization or fee adoption pressures volume.
Background
The piece frames travel industry reinvention as consumer expectations shift and margins tighten, highlighting Southwest’s product/policy changes and MGM’s value bundling alongside takeover speculation.
Why it matters
For LUV, the key is whether fee/bag and seating changes preserve loyalty and demand while improving economics. For MGM, the key is execution of the all-inclusive offer and the probability/timing of the proposed bid.
Market relevance
MGM combines a concrete customer-offering change with a fresh, deal-driven catalyst; Southwest’s strategy shift is more incremental but can still move sentiment around margin resilience.
Market effects
Signals broader airline/hospitality pricing and packaging shifts (fees/bundles) as consumers demand clearer value amid margin pressure.
Las Vegas visitation down in 2025 adds context for MGM’s value redefinition and could pressure peer sentiment.
If bundling reduces perceived hidden costs, it may influence travel demand and pricing strategies across major tourism markets.
Alternative perspectives
All-inclusive and fee/bag changes may boost revenue per customer but can also reduce discretionary travel if customers interpret them as higher total cost.
Competitive responses (other airlines’ bag/seating policies; other Las Vegas operators’ packaging) and fuel-cost trajectory could dominate the effect of these initiatives.
Key entities
- companySouthwest Airlines
Ending free checked bags and open seating; management says it’s a necessary business-model change.
- companyMGM Resorts International
Launched an all-inclusive package and is subject to an $18B takeover proposal from a major stakeholder.
- personBarry Diller
Media mogul proposing an $18B bid for MGM; his company already holds a 26.1% stake.
