Can Subscription Models Enhance Resilience in the Travel Industry?

Subscription models for goods and services rose to popularity in the past months. In this article, Mike King explores the rationale behind this trend and takes a closer look at subscription-based offerings in the travel industry.
6 min read
1/12/20
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By Mike King
Director, Strategic Relationships, DataArt
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Can Subscription Models Enhance Resilience in the Travel Industry?

Subscription services have become an essential part of our everyday lives. Netflix and Amazon Prime are a go-to for entertainment, and Spotify and Apple Music provide our daily soundtracks. This was true prior to Covid, and the subscription market has exploded in the past six months, with many now subscribing to food, wine, flowers, makeup, pet and other services in an effort to streamline the purchasing experience. There are few consumer markets that subscription models have not touched, and the industry has grown a massive 350% in the past 7 years.

Travel is no exception to this trend; subscription and loyalty models have existed in the industry since the 1980s, championed by the likes of American Airlines, United Airlines, Holiday Inn, Marriott and Hilton. Skift called the subscription model a megatrend at the beginning of this year, and many subscription-based programs have become a lifeline, protecting income and providing much needed resilience.

Why Are Subscription Models So Valuable?

There are many reasons why subscription models make for smart business practices. An obvious benefit is the existence of a loyal customer base which pays regular fees, thereby ensuring cash flow even during uncertain times. In addition, subscriptions and memberships represent a compelling way for travel companies to create lasting relationships with consumers. Travel brands that leverage loyalty through subscriptions are building on solid foundations and are much better positioned to survive downturns or crises.

In addition, consumers who buy into subscription services are committed beyond a one-time purchase, enjoying access to products that fit into their lifestyle. This freedom and convenience engender loyalty, even if customers are not always rewarded for individual purchases or consumption patterns.

Who’s Using Subscription Models in the Travel Industry Right Now?

Brands both large and small are experimenting with subscription products, and others in this industry can learn from their successes, as well as their mistakes.

Airlines

U.S. Airlines’ flight pass programs were an early example of a travel subscription model, but most were driven by the need to generate cash to shore up balance sheets and were phased out as airlines’ financial situations improved. However, with the Covid travel downturn, airlines are again experiencing pressure to increase cash flow and may reconsider subscription or pass-based programs. AirAsia recently unveiled their own version of an unlimited pass, in an effort to help boost domestic tourism. Delta Air Lines introduced boarding perks for a flat fee each year, and car rental giants have experimented with a variety of subscriptions in this vein too. Spirit and Volaris both offer variations of annual subscriptions and membership services that generate additional ancillary revenue and stimulate sales for flights and vacation packages.

Rideshare

$19.99 a month is a small price to pay to get 15% off all car rides performed through Lyft Pink. Whether you are traveling for pleasure or hailing a ride to work, this discount equates to around $45 in monthly savings if you are averaging $10 per day on Lyfts. A few other perks of Lyft’s subscription service include three free 30-minute bike or scooter rides in select cities, priority airport pickups, surprise offers and relaxed cancellations.

Uber has never been one to miss a trend, and their Ride Pass monthly subscription is just $24.99. Perhaps the most useful part of this service is the price protection component, which eliminates surge pricing from your account. For a limited time, it boasts complimentary JUMP bikes and scooter rides for up to 30 minutes a day as well (when available).

Travel Services

eDreams has added hotels to its Amazon-style subscription service. Prime, which has grown to more than half a million members, is available across eDreams and its sister sites Opodo and GoVoyages. And BRB has introduced a service in which travelers pay a monthly fee in return for three surprise holidays a year. A month before you travel, the BRB website reveals your destination, hotel and flight details - you get to enjoy a surprise holiday a few times a year for a fixed fee without the hassle of planning and booking your trip.

citizenM has expanded its business model to subscription-based reservations as well. In summer 2020, citizenM launched the world's first contactless hotel experience across its entire portfolio – so any guest can manage their whole hotel stay (from pre-arrival to check-out) via a free app on their own smart device. With the help of their new program, citizenM continues to experience rising guest numbers in most of its hotels. 

Another example is Inspirato, a luxury hospitality club based in Denver, which debuted Inspirato Pass last year. This pass lets people book unlimited travel for a monthly fee. Inspirato lowered the barrier to entry for its Club and Inspirato Pass subscription platforms, switching both concepts to monthly, commitment-free payment models to encourage new members.

BeRightBack, a London-based subscription travel startup, sits at the other end of the travel market, with more of a budget focus. BeRightBack has sold subscriptions for two years, typically on an annual contract costing about $65 (£49.99) per person a month, for three trips a year. It is open to UK residents and offers up to 60 European destinations with centrally located hotels, all with at least 3.5-star reviews on TripAdvisor. Customers provide their preferences for destinations, ideal departure airports, flight times, and travel dates to ensure all the booked travel suits their needs.

The Technological Challenge of Subscription Models

Creating a subscription model requires research and planning, and relies heavily on good data. As such, a successful model needs solid data extraction, data management and data analysis tools. Without these, you will not have accurate pricing information or visibility to trends and forecasts to understand how hotels, airlines and other participants are adjusting their fees over time. Crafting offers and packages that make financial sense is simply impossible without this kind of input.

In addition, technology like artificial intelligence can be extremely useful for pairing individual user preferences with available offers, and customizing the front-end experience. Subscription models with no personalization are a lot less attractive, and you can be sure your competitors are going this extra mile to secure customers.

All of this may sound like you need a dedicated development team, but that is not actually true. A good outsourced team can help you to design, craft, implement and monitor your subscription model, to ensure long-term success. DataArt would be happy to talk to you about our experience with this technology and how we may be able to help you.

Is a subscription model right for you?

As the travel industry works to weather the Covid downturn and prepare itself for an expected recovery in 2021, it will need to adapt to changing consumer behavior and expectations. Subscription services are part of the new normal, and may be an innovative way to stimulate travel and ensure a steady cash stream for the long term. As you prepare your business for the Covid recovery, you may want to consider evaluating new membership based programs or revamping your existing loyalty program, before your customers find a better offer elsewhere.

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