How to evolve the business model and lock in the new travel consumer

In the past, hotel management companies created and managed programs designed to “retain” guests. Doing so helped improve operating margin, as the acquisition cost for guests can be high, and hotels make their money on regular and repeat business from the same guests.

Today, in the travel and tourism space, the battle for customer acquisition remains intense, but many current loyalty programs suffer from member fall-off – people who sign up for free and then do nothing, essentially negating the purpose of the program. As a solution to all of this, travel companies have begun exploring lower-cost membership programs that allow them to market a variety of product offerings and experiences.

While appealing to those travelers who value flexibility and variety, this concept also acts as drivers of actual revenue and guest commitment, as many such programs now base perks on member purchases and fee tiers. We’re talking, of course, about subscription models – successful in many industries and now arriving in travel.

If loyalty programs are about collecting data from customers and then using it to drive better experiences and repeat revenue from hotel guests, the subscription model isn’t that different in its end goal, even if the experience is.

Subscriptions are a guaranteed, often monthly or annual model much like gym memberships, where consumers pay regardless of how often they use the services. Today’s model generally works across industries with many of the same consumers who have already been successfully recalibrated by subscription models in other industries.

Designer apparel, menswear, cosmetics, nail salons, kitchen goods and meal kits, for example, have all recently disrupted and altered now subscription-heavy industries. Overall, the subscription box industry alone is currently valued at $18.8 billion, with an expected compound annual growth rate of 20.1% between now and 2026.^²

Likewise, in entertainment, streaming subscriptions – pioneered by Netflix – are reshaping the entire TV experience, with unlimited cloud storage subscriptions and the data centers to support continued growth. This same dynamic is now playing out in travel and tourism with enormous potential for growth.

Travel industry change is in full swing. Global travel brands are investing in, and rolling out, dedicated subscription programs. Selena, with a focus on the digital nomad, blends urban city and remote destination travel with co-working amenities and flexible options for people who want to work on the go via its recent acquisition of Remote Year.

Eleven Experience is offering carefully curated experience lodges stocked with luxury brands and focused on exceptional ski, fishing, cycling and wellness experiences. Virgin Hotels launched “The Know,” a customizable experience for travelers with upgrades, personalized mini-bar selections, perfect pillows, daily cocktails, and other high-touch offerings.

Publicly traded luxury company Inspirato’s membership program climbed 42% from 2021 to 2022 with annual subscription income surpassing $75 million. Global subscription brand SoHo House, hit a $2 billion valuation in 20193 and according to Reuters has a global waitlist of 48,000, retaining 92% of members even during pandemic closures. Others, like citizenM, are creating monthly memberships for $600 that combine business travel with conference room booking.

The vacation ownership business too, recently disrupted by changing consumer preferences (a move toward a more flexible points-based program with additional fees to join timeshare exchanges) is now thinking of a purer subscription model as a supplemental line of business. As an example, we need look no further than the growth of Travel + Leisure’s global passport, with 29 consecutive night stays across any property for $50 per night.

Consider these steps when evaluating and building your own subscription model:

Wherever you sit in the travel industry, consideration should be given to assessing subscription models and their impact on growth. As you embark on your evaluation, consider the issues that best align your program with your business’ overall growth strategy. Do you have an appropriate concept that aligns with your brand, values, and mission, and how does that concept stack up against your closest competitors? Do you have the correct regulatory, financial and legal frameworks built before you bring your concept to market? And what are the technology platforms, marketing tactics, strategic relationships, and techniques of that market launch and promotion?

All of these will affect the nature, operations and success of offering a truly on-brand subscription experience to new travel consumers ready to arrive on your doorstep every day.