American Express (AXP -0.39%) has been known as the leader in high-end credit card products for many years now, and recent news indicates a renewed effort from the company to maintain that position. Here's why the recent enhancement of American Express' co-branding relationship with Hilton (HLT -1.59%) is such a significant news item for the company's investors.

The AmEx-Hilton partnership

Earlier in 2017, American Express announced that it had been selected to become the exclusive issuer for Hilton co-branded credit cards in the U.S., starting Jan. 1. As part of the agreement, American Express is also acquiring Citigroup's existing Hilton credit card portfolio.

Hands holding a stack of about 10 credit cards.

American Express is trying to be the credit card of choice for high-spending frequent travelers. Image source: Getty Images. (Note: Image doesn't necessarily depict an American Express product.)

The two existing AmEx-branded Hilton cards will remain and will receive some benefit enhancements. The no-annual-fee American Express Hilton Honors Card will no longer have foreign transaction fees, and will maintain its benefits. And the Hilton Honors Surpass Card, which will be renamed the Ascend card, will add a free weekend night award benefit and 10 free Priority Pass Lounge passes.

In addition, the company is rolling out two new credit card products -- a small-business Hilton co-branded card and an ultra-premium Hilton credit card designed for frequent travelers.

The ultra-high-end hotel credit card

From an investor's perspective, the most significant piece of Hilton-related news is the ultra-premium Hilton Honors American Express Aspire Card, which comes with a $450 annual fee and some pretty incredible benefits that could make the card extremely popular among frequent travelers.

To name the most significant perks and benefits, the Aspire card will offer cardholders:

  • 14 Hilton Honors points per dollar at Hilton hotels and resorts, seven points per dollar on flights and rental cars booked directly and at U.S. restaurants, and three points per dollar on other purchases. These represent the most generous Hilton reward rates ever offered by a credit card.
  • Automatic Hilton Honors Diamond Status. This is Hilton's highest status level. There are several hotel credit cards that give holders a status upgrade, but a top-tier upgrade is a unique perk. Diamond status includes room upgrades, executive lounge access, and a higher bonus point earning rate when staying at Hilton properties.
  • A free weekend night at a Hilton property every year of card membership, and a second night after $60,000 in annual spending on the card.
  • Unlimited Priority Pass Lounge access.
  • $250 airline incidental fee statement credit and $250 Hilton resort statement credit. These benefits alone make the annual fee worthwhile for frequent travelers and are perhaps the best reimbursement perks offered by any mainstream high-end credit card.

The Aspire card will be available in January 2018.

Attacking the high-end credit card market

Here's the point, and why I'm thrilled about this as an American Express investor. The Aspire card, combined with the enhancements to the $550-annual-fee American Express Platinum card earlier this year show that American Express isn't going to give up any market share at the upper end of the credit card business without a fight.

The Chase Sapphire Reserve credit card, which was rolled out a little over a year ago, was a game-changing credit card product for frequent travelers at the time, and American Express is attacking it head-on with its own premium offerings.

The Platinum card offers better airport lounge access, and some unique benefits aimed at today's frequent travelers such as $200 in Uber credits annually, and the Hilton Aspire card will offer elite status that is unmatched by any of its competitors and (arguably) a better air and hotel reimbursement perk. The ability to attract and retain the most affluent cardholders has long been one of American Express' key competitive advantages, and the company is making clear that it intends to hold on to it.

What it could mean for the company

Obviously, the transition to being Hilton's only co-branding partner could produce a boost in revenue for American Express. The company's Starwood partnership has been rather lucrative, and not only is Hilton a larger hotel company, but with several tiers of credit cards, there is lots of potential to boost swipe fees and loan volume.

In addition, being that the Hilton Honors American Express Ascend Card is arguably the only ultra-high-end credit card offered in partnership with a mainstream hotel chain, and certainly the only that offers cardholders the highest possible level of elite status, it could easily become a favorite among affluent frequent travelers. Not only would this result in more swipe fees and loans, but since about 9% of American Express' revenue comes from card fees ($2.9 billion in 2016), the $450 annual fee could result in a big uptick in card fee income as well.

The bottom line is that the expanded relationship and the new Hilton co-branded products should be a welcome addition to American Express' product portfolio in the eyes of shareholders, as well as further evidence that American Express is serious about maintaining its position as the leader in high-end credit card products.