Report Overview

The last decade has seen an explosion of subscriptions. You no doubt already have several services on autopay. The travel industry led the world in developing sophisticated loyalty membership programs. But it has struggled to convert from using these unpaid membership tools towards a paid membership model.

The travel industry needs to push forward on building paid subscriptions into the future. Why? Subscriptions create recurring revenue that can compound on itself. This lets companies grow at exponential, rather than linear rates. We think the time is right as the ‘great merging’ of how people live and work means that they have the potential to travel more frequently and for longer trips than ever before.

To study subscriptions in travel, we provide three case studies: eDreams ODIGEO in distribution, Selina in hotels, and Inspirato in alternative accommodations. We believe that the subscription model will help push travel marketing towards a feedback loop, driven by positive customer engagement experiences. The in-destination experience is not the end of the customer journey – rather it is just the start; the experience should be immediately providing inspiration for the next journey.

Based on this research, we offer six lessons for travel industry executives looking to build a membership or subscription in Travel.

Executive Summary

The last decade has seen an explosion of subscriptions. You no doubt already have several services on autopay. The travel industry led the world in developing sophisticated loyalty membership programs. But it has struggled to convert from using these unpaid memberships tools towards a paid membership model.

The travel industry needs to push forward on building paid subscriptions into the future. Why? Subscriptions create recurring revenue that can compound on itself. This lets companies grow at exponential, rather than linear rates. We think the time is right as the ‘great merging’ of how people live and work means that they have the potential to travel more frequently and for longer trips than ever before. Subscriptions have also reached a point of mainstream consciousness where it is possible to build and market more niche and expensive offerings.

This report looks at three case studies. In distribution we look at eDreams ODIGEO. Its Prime subscription plan now has three million subscribers paying for travel discounts. It uses a subscription to drive scale, customer loyalty and product differentiation in a commoditized marketplace.

In hotels, we look at Selina. Its colive membership plan allows for unlimited stays over a 30-day period. This plan maximizes occupancy across the growing network of hotels and hostels. It also builds a strong sense of community by creating a new class of hybrid locals – not true residents but travelers staying long enough in a single location to partially integrate into the locality. These hybrid locals help transient guests find a sense of place while also recruiting non-hotel guests onto the property to spend on food and beverage. This boosts non-room revenue and builds a halo effect for the brand. 

In alternative accommodations we look at Inspirato. Its Pass program allows for ‘all-you-can-eat’ travel in both first-party Inspirato controlled accommodations or in third-party supply. Because the Inspirato Pass is priced annually and not on a per room night basis, Inspirato Pass becomes an opaque luxury distribution channel. The subscription lets the company build a partnership ecosystem and maximize its 1st party occupancy. 

Across all travel subscriptions, high churn is a sure-fire way to kill a business. We believe that too many travel marketers have built out a linear path to purchase that ends in a transaction. We believe that the subscription model will help push travel marketing towards a feedback loop, driven by positive customer engagement experiences. The in-destination experience is not the end of the customer journey – rather it is just the start; the experience should be immediately providing inspiration for the next journey.

Performance indicators for travel have traditionally focused on volume, pricing power, and unit revenue (e.g. for hotels RevPAR, for airlines PRASM). A shift to a subscription model means that travel companies must also put in place training, systems, and procedures to track and understand a new set of engagement metrics like the upfront cost to acquire a customer, customer churn, and customer lifetime value.

We have six lessons for travel industry executives looking to build a membership or subscription in Travel:

  1. Clearly define your value proposition
  2. You live or die by customer engagement
  3. Powerful subscriptions should provide near-immediate value and require continuous investment
  4. Build an ecosystem and upsell
  5. Ensure reliability
  6. Create community

We elaborate on each in the report below.

Why Subscription?

The last decade has seen an explosion of subscriptions. You no doubt already have several services on autopay. But the travel industry is at risk of being left behind. Even as music, movies, TV, retail, software, and many other industries have seen businesses strike it rich by building recurring revenue streams, few travel businesses have taken the same leap. 

The travel industry led the world in developing sophisticated loyalty membership programs. But it has struggled to convert from using these unpaid memberships tools towards a paid membership model. 

Before we go any further, it’s worth asking why even pursue a paid subscription model in the first place. Don’t forget your mother’s advice: you wouldn’t jump off a bridge just because everyone else is doing it, right? Let’s lay out the business case for subscriptions. First is the effect of compounding revenue growth; second is subscriptions effect on client retention; and the third is that subscriptions can underpin a powerful flywheel effect for a business. 

The big challenge for the traditional sales model is that it restarts every year at zero. This leaves sales teams with a big hill to climb at the start of each cycle. Sales teams need to split their focus between re-winning last year’s business while also seeking out new clients to generate incremental growth. 

The beauty of a subscription model is that you generate recurring revenue as clients renew and roll into the next year. Sales teams start the year with a large amount of sales already “in the bag,” letting them focus on expansion.  Starting at a higher base allows for your growth to compound, which can lead to much larger sales figures even at lower growth rates.

Consider two examples. A traditional sales team makes $500k in year one and is able to grow revenue at 30% a year. By year four, the company will need to close $1.1M of sales, more than 2x the volume of products it was selling in year one. But what about a subscription model? Starting from the same $500k in year one, let’s assume zero growth — the sales team sells the same $500k every year. But because some clients will renew, the business is able to start with a built-in revenue base. With a 20% churn rate, subscription revenue will compound to $1.5M by year four. With a recurring revenue target, the sales team needs to sell less product per year and still winds up with a $400K larger absolute revenue figure. 

Of course, the challenge with a subscription model is that the emphasis shifts from pure sales growth to client retention. But in the two scenarios above, the subscription company could go as high as a 40% churn rate – far above industry averages – and still break even with the traditional sales.

The Opportunity for Travel In Subscription

It seems there is a subscription for nearly everything these days: music, movies, TV, retail, software, and more. Why are there so few in travel? The root issue, in our opinion, comes down to how travel is fundamentally consumed. For most it is a high ticket, low frequency transaction. The average U.S. leisure traveler spends only a few days out of the year on the road and in fact, nearly 40% of Americans do not travel at all. These trips are often expensive and discretionary purchases. 

Subscriptions tend to work best on high frequency purchases. Because the consumer is constantly interacting with the subscription service, they feel they are earning an immediate return on their spend, making churn less likely. An annual subscription for a product consumed once per year is no subscription at all! 

Business travelers travel far more frequently. But many of those road warriors are already locked into a loyalty membership plan that suppliers are loath to upend. And corporate travel buyers tend not to be eager to rock the boat anyway.  

It’s not entirely true that there has never been a subscription in travel before. Private social clubs with hotels for members is a decades old concept. Soho House is going on 25 years old now. Or take timeshares, which while not often framed this way, incur annual maintenance and financing costs that to a consumer feels a bit like paying for a travel subscription. 

But we see an opportunity to move beyond these niche use cases and for subscriptions in travel to go mainstream. What has changed to make the opportunity for travel subscriptions balloon in recent years? 
We see an opportunity in paid travel memberships due to a tidal shift in consumer behavior and lifestyles and work patterns made possible by the pandemic and flexible work – a trend we are calling the great merging. We also believe that the subscription ecosystem has matured to the point where consumers are willing to buy more complex membership products at higher price points.

The Great Merging

The pandemic and the embrace of flexible work will transform consumer behaviors. Our U.S. Travel Tracker Survey shows that 30% of Americans are still working fully remotely and that a further 18% are working partially remote, a setup that still allows more flexibility than being fully in office. 

These workers told us that they travel more frequently as a direct result of this added flexibility. 16% of remote workers said they were able to take more short-term trips because of this work status. More importantly, nearly a quarter of remote workers said that their flexibility enabled them to travel for an extended period of time (10 days or more). The rate of extended trip making due to remote work has more than doubled over the past years, up from 11% of remote workers in February 2021, to 23% today. 

Work flexibility is also enabling a new wave of combined business and leisure travel. Data from corporate travel agency Tripactions shows that the share of business trips that contain a weekend – which implies corporate road warriors extending their work trips with a leisure add-on – has grown from 31% in 2019 to 38% in 2022. 

This trend works in both directions. It is not just leisure being attached to work trips. But travelers are bringing computers with them to work during their regularly scheduled vacation time as well. This enables many workers to extend their leisure trips longer than they might have otherwise been allowed to take. The most common extension was by 3-5 additional days. But nearly a fifth of these “laptop lugging” leisure travelers extended their trips by an additional week or more. 

And these are still fairly typical travelers and workers. There is growing interest in digital nomadism. The OECD estimates that, on average, about a third of jobs across its core membership of 25, mostly advanced economies, can be performed remotely. So perhaps it’s no wonder that search interest for this lifestyle, which involves 6-12 months of travel a year, has doubled since 2020.

While digital nomads will always be a small subset of the population, they can have a huge impact on our industry. Skift Research estimates that there is a total addressable market of $972 million a year in U.S. digital nomads. We imagine ~180,000 part-time digital nomads in the U.S.. But given that these are long-term travelers, they could account for as many as 33 million room nights a year. For context, Expedia sold 389 million room nights globally in 2019. Said differently, this audience of ~0.1% of American travelers has the potential to generate ~9% of Expedia’s pre-COVID annual room nights thanks to the impact of long-term stays.

All of this means that length of stay windows for these digital nomads are converging on a mid-point somewhere shorter than the 365 nights a year of an apartment rental but much longer than the traditional 2-night weekend stay. 1-2 weeks stays are increasingly the norm and there are travel companies building for multi-month stays. 

The net result of these trends, more trips at longer length of stays, is creating a new market of high frequency travelers for which a subscription program can now be a very attractive opportunity.

Subscription Maturation

The other reason why the time is ripe for travel subscriptions is that consumers have been acclimatized to this way of shopping. Whereas recurring monthly payments was once novel, it is now the norm. What can be bought via subscription is also evolving. There was once a time when shoppers would have only associated subscriptions with a cheap $10/month streaming TV service. That $120 annual fee won’t cover even a single stay at an average hotel. 

But today, shoppers have been accustomed to buying a wide range of products and price-points via this model. Designer clothes, luxury workout bikes, and even cars, can now be bought via subscriptions. And so it no longer feels that outrageous to charge the premium monthly fees required to make a travel membership pass profitable – as Inspirato’s $30k a year travel subscription highlights. 

Taken together then, we are in a new consumer environment. The average customer intends to spend significantly more days traveling than in the past while at the same time they have grown accustomed to paying for premium products via subscriptions. This is a confluence of trends that did not exist before the pandemic. The current moment offers a unique opportunity to build a subscription or membership business in travel.

Case Studies: How Subscriptions Fit Into Travel

The time may be ripe to launch a subscription or membership business in travel, but it’s not so simple. There are many ways to build a subscription business and the exact model and value will need to be tailored to where each business positions itself in the market. 

In distribution, we look at eDreams ODIGEO. Its Prime subscription plan now has three million subscribers paying for travel discounts. It uses a subscription to drive scale, customer loyalty and product differentiation in a commoditized marketplace.

In hotels, we look at Selina. Its colive membership plan allows for unlimited stays over a 30-day period. This plan maximizes occupancy across the growing network of hotels and hostels. It also builds a strong sense of community by creating a new class of hybrid locals – not true residents but travelers staying long enough in a single location to partially integrate into the locality. These hybrid locals help transient guests find a sense of place while also recruiting non-hotel guests onto the property to spend on food and beverage. This boosts non-room revenue and builds a halo effect for the brand. 

In alternative accommodations, we look at Inspirato. Its Pass program allows for ‘all-you-can-eat’ travel. This program is unique because it is a hybrid platform that allows travelers to stay in both first-party Inspirato controlled accommodations or in third-party supply. On the first-party side, membership helps boost utilization of Inspirato’s contracted-for homes, similar to Selina. However, there is an additional third-party angle. Inspirato is able to act as a unique opaque channel to acquire discounted luxury wholesale rates. Because the Inspirato Pass is priced annually and not on a per room night basis, the discounted room rates are never revealed to the customer. This assures the luxury brands that they can maintain price parity and their high-end market positioning while still releasing unsold inventory into the market at discounted rates. 

EDREAMS ODIGEO: Driving scale and differentiation in a commoditized marketplace

eDreams ODIGEO (“eDO”) is a flight and leisure focused European online travel agency. It operates brands including eDreams, Go Voyages, and Opodo. eDO claims to be the largest online seller of flights outside of China. 

Edreams calls its subscription program “Prime.” And while the name may be unoriginal, the program is one of the most uniquely successful in the travel industry. Launched as a small French pilot in 2017, Prime now has three million paying subscribers and the company has set a goal of 7.25M members by 2025. 

The program costs $60-75 per year and in exchange guarantees discounts on all flights booked via eDreams. It also promises up to 50% off eligible hotel properties, preferential rental car rates, and an exclusive customer service hotline. eDreams is primarily a flight OTA, making those airline discounts the most important value proposition. Flight discounts vary, but are generally in the range of 10-33% off. There is a sliding scale of savings, starting at $25 off for flights under $150, ranging to a max of $120 off for flights above $500. 

For the 12 months ended May 2022, eDreams ODIGEO generated €171M from Prime members, inclusive of both subscriber fees and commission earned on bookings made by members, representing 40% of its total €424M in sales. 

The average revenue earned per Prime user was €88 ($92). At the current level of three million members, this implies $276M in revenue affiliated with the Prime membership program accruing to eDO on a go-forward run-rate. 

We can also infer that if the sign-up fee is €60, then Prime members are generating €28 in commissions per year. Air fare commissions can be as low as 2-4%, while hotels are more profitable, typically 15-20%. If we assume a blended take rate skewed towards flights of 6%, this implies the average Prime member is booking €630 worth of flights on average. Cumulatively, eDO Prime members are likely purchasing more than €1.9B worth of travel. 

The online travel agency business is cut-throat and increasingly commodified. The flights business is even tougher given that commissions are a mere fraction of what can be earned selling accommodations. We have written that the trend in online booking is towards consolidation into one of the two major Western market players, Expedia Group or Booking Holdings, both of which prioritize selling rooms. 

eDreams seems to have bucked the trends. It is a mid-sized, regional OTA that specializes in selling flights, and it is succeeding. We believe that its unique foray into subscriptions is what has allowed eDO to grow despite tough market pressure. 

We wrote in our Deep Dive into Google’s Impact on Travel that deals are no longer a strong differentiator for online travel because brand consolidation and channel management software is making it easier for suppliers to enforce rate parity and train their customers that direct has the best deals. However, because the Prime membership fee funds traveler discounts rather than needing to rely on preferential supplier rates or commission discounting, eDreams has been able to circumvent the branded-direct push. 

In that same report, we also advise online travel to take more differentiated paths forward. One that we suggested was better customer service, a common criticism of OTAs, that is more relevant than ever to anxious travelers facing down against schedule changes, delays, and COVID restrictions. Prime members gain access to 24/7 custom support lines (similar to how brands or credit cards offer premium support call lines).

60% of Prime members are new customers, demonstrating the program’s ability to grow eDream’s audience. And they have strong incentive to return as repeat customers to maximize the discount offered by the membership, especially within the first year. This helps short-circuit the pull of Google search which drives online travel shoppers to click-around and forces other OTAs to spend billions in search engine marketing. 

In sum, the Prime membership program helps eDreams differentiate itself in a crowded and commoditized market. It brings back the prospect of a significant online price discount, which had been in increasingly short supply on mainstream OTAs; offers enhanced customer service for a complex travel environment; and reduces the sites’ reliance on Google. It also helps set an aspirational target of multiple trips a year (to maximize discounts) for customers that are eager to be back on the road after COVID cooped them up for two years. 

While the program is no doubt expensive to run – most of those membership fees likely get paid back in the form of discounts – the overall impact on the companies’ market positioning, customer acquisition strategy, customer loyalty, and profitability make it worthwhile. In the latest fiscal year, fully 50% of eDreams ODIGEO’s adjusted profit came from Prime subscribers.

Lessons: Memberships fees, when re-invested in lower prices, can create a fly-wheel of add-on growth. Though the cost of discounts may offset the earnings from sign-ups, it generates customer loyalty and builds a differentiated ecosystem of products and services. This is especially important in the online travel and travel distribution space that has grown increasingly commoditized and struggled to build customer loyalty in the face of branded loyalty points programs and the rise of Google search. 

SELINA: Building Community and Optimizing Asset Utilization

The Millennial and Gen Z-focused accommodation segment has experimented with several versions of a subscription program. A highlight of the current batch is Selina CoLive and takes the form of a month-to-month package that lets guests stay in 3 different Selina properties within the same region over the course of 30 days. 

Upgrades to the base plan allow for access to more than 3 properties and greater flexibility in the stay window. Pricing varies by room type and region of travel. Starting as low as $450/month and maxing out at $3,300/mo. The average cost is ~$1,000/mo. Selina has sold ~5,400 subscriptions since the program’s launch in September 2020. It has ~1,500 currently active members. 

Assuming the number of active members and pricing stays constant for the full year, this would imply an $18M annual subscription revenue base. That’s impressive, but to put that figure in context, Selina generated $94M of revenue in 2021 and estimates it will reach $234M in 2022.  Selina says its customer acquisition cost is ~9% of monthly revenue, which translates to $1.6M in marketing over the full year. 

Sam Khazary, senior vice president and head of corporate development at Selina, highlighted an important nuance of the business. Selina’s subscription members are “not always more profitable, [but they] are helping to fill an occupancy gap.” 

It’s an important distinction: a long-term subscription member may not spend any more per day than a regular guest. In fact, they likely spend less. The monthly subscription cost in Latin America implies a daily rate of $38. A similar standard Selina room was selling for $85 a night when this report was written. Subscribers are also more likely to cook for themselves than to dine on-property. However, the lower revenue spend per day is offset by the boost to occupancy that a subscriber can bring to Selina properties. Khazary told Skift that whereas their typical leisure length of stay is 3-4 days, Colive subscribers stay 55 days on average. 

In other words, Selina is trading a ~50% discount on ADRs in exchange for a ~7x boost in property utilization (i.e. 92% monthly occupancy from Colive members vs. 13% monthly occ. from transient guests). 

Here’s another nuance that Khazary thinks is important to the Selina subscription strategy: colive members become “hybrid locals” that create a halo effect for the brand. Many hotels say they want to be integrated into the local community, but most fall short of this lofty goal. Selina seems to be able to actually walk this talk. Its colive subscribers are better able to integrate into the local community by dint of their long stays. This allows them to make connections outside the hotel – be it other fellow travelers or true residents – and bring them back onto the property, say for a beer at the end of the day. 

Having these hybrid locals also creates a better experience for inbound transient travelers. While everyone says they want to “live like a local,” most don’t want to get a job, go grocery shopping, and do laundry. They mean that they want to explore the places that make a destination unique. In this sense, true locals may not actually be the best positioned to offer these experiences. (How many times have you visited the “must see” site in your hometown?).

Having long-term guests means that a community can form in Selina properties and these more experienced travelers can counsel new arrivals in the best way to experience the destination. “They build a safer bridge [for new arrivals],” explains Khazary. 

In this way, even a small core of long-term subscription travelers adds a competitive advantage to the Selina brand that extends beyond the pure profitability of a single member. It makes it easier to integrate residents and other non-Selina travelers into the property (and in turn boosting F&B sales). And the resulting community experience this builds gives an edge towards Selina for short-term travelers deciding between multiple accommodation choices. 

Lessons: Hotels have perishable inventory and expensive property operating and financing costs. This makes asset utilization crucial. Subscriptions can be designed to drive significant length of stay improvements. Subscriptions can also be designed to build strong communities that create a halo for the brand, drive local engagement, and power non-room revenue, such as F&B. 

INSPIRATO: Reinventing opaque distribution and pushing into new demographics 

Inspirato is a luxury vacation membership club. The company runs two subscription programs, both primarily built around its proprietary network of uber high-end whole home vacation rentals. 

The more traditional approach – and Inspirato’s initial business model – was a membership model similar to a country club. Members paid a large one-time initiation fee followed by a recurring annual or monthly ongoing payment. Joining the club buys access to Inspirato’s exclusive properties. But no travel is included in the membership, each individual trip must still be booked at an a la carte rate. 

Though pricing has shifted over time, the Inspirato Club currently charges a $600 enrollment fee and $600 monthly subscription cost, or $7,200 a year. On top of those club dues, the average daily rates for company residences is $1,888, easily putting total annual club members’ spending well into the $15-20k mark or above. As of March 31, 2022, the company has 11,971 club members.

In 2019, Inspirato launched an all-inclusive subscription plan, called Inspirato Pass. The Pass also charged an upfront initiation fee and ongoing recurring membership bill. But for a higher price, the pass offered all-you-can-eat travel.  This model is more similar to what modern subscription companies, such as Netflix, have built, than the more traditional club model. 

Inspirato Pass charges a $2,500 enrollment fee and a $2,500 monthly subscription, or $30,000 a year. The pass has 3,312 subscribers as of March 2022. This implies $99M in annualized pass subscription at current run rates. The company has said the average pass member travels for 22 nights a year.

Inspirato says that the average member across the Club and Pass costs ~$5,500 to acquire. In either case, Inspirato gets paid back on its cost of selling to new members within a year. That is, of course, before the cost of providing accommodation inventory and assuming that members stay for a year or more. For Inspirato’s economics to kick into high gear, the company needs to maximize utilization of its inventory, drive high client retention, and keep acquisition costs low.

It is interesting to note how the two models interact. The membership club still makes up the majority of Inspirato’s customers, but, in our view, the pass subscription is more interesting. As with the other subscription models we have looked at, it helps maximize utilization across Inspirato’s properties. The club model depends on its exclusivity but this means that Inspirato must invest extensively in acquiring rights to use these luxury homes and must also maintain them to exceptionally high standards. The subscription pass can help balance out demand within their system and drive utilization. 

Another interesting effect of the Inspirato Pass is that it gives the company an edge in driving partnership deals. The Inspirato Pass gives holders access not just to the core network of luxury Inspirato homes, but also to many luxury hotel chains including Rosewood, Ritz-Carlton, and St. Regis. It also offers cruise and multi-day tours. 

By building an all-inclusive subscription, Inspirato has effectively turned itself into an opaque distribution channel. Luxury hotel brands are often hesitant to discount, out of fear the rates will leak and damage their (very high!) pricing power. Inspirato can negotiate wholesale or otherwise discounted rates that hotel brands can offer, safe in the knowledge that the customer will never see the nightly rate. Lux brands can also feel safe that they will receive high value clients who are likely to spend more on property and perhaps also become repeat guests. 

Old opaque channels, like Priceline’s name your own price, focused on the discounts and attracted a thrifty customer. An Inspirato Pass member is paying $30k a year. They are on the exact opposite end of the guest spectrum. From the hotel perspective it is a win-win: they get access to a valuable guest and can sell inventory that would otherwise spoil at a discounted and guaranteed opaque rate. From Inspirato’s perspective, it is also a win. The more properties that it can offer to its Pass members, the more satisfied members will be and the more value the subscription provides. These doubly aligned incentives mean that the Pass model has the potential to create a virtuous cycle in the luxury accommodation space. 

The average Inspirato member, unsurprisingly, looks much different from one at Selina or eDreams. The vast majority are over the age of 45. You might picture an average travel subscriber as a tech-savvy millennial, but Inspirato proves that we might’ve really reached a subscription tipping point – that there are 55 year-olds paying $30k a year for unlimited travel benefits means travel subscription is going mainstream.

Lesson: Subscriptions offer the opportunity to be creative in new ways that are not available to purely transactional businesses. Inspirato has built an opaque luxury distribution that would be hard to replicate at an online travel agency or other loyalty membership plan. Another takeaway for us is that subscriptions today can exist for everyone and every market today, regardless of age or price point, as long as the program is designed with a target audience’s needs in mind.

Industry Lessons for Travel Subscriptions 

We have focused on three case studies of companies that have bet big on travel subscriptions. But from these we see several learnings that apply to all travel brands, whether they are considering a subscription model or not.

1) Clearly Define Your Value Proposition: There is no one-size-fits-all approach to building a subscription business that works for everyone. But what each of the successful companies that we profiled does do is to drill down on their biggest value-add and offer that up as a subscription. eDreams builds around price savings, Selina around community, and Inspirato around exclusivity.

Building a compelling subscription is about being internally honest about what brings customers to your door; what is the one thing you can do better than anyone else? If you can distill whatever that ingredient is into its purest form and bottle it up, you have the raw materials to build a powerful subscription offering.

In a subscription business, the booking also often comes ahead of the experience. The customer is paying an annual or monthly fee potentially well before they travel. And this makes the need to articulate the value proposition more important than ever. 

2) You Live or Die by Customer Engagement: High churn is a sure-fire way to kill a subscription business. Travel has traditionally been a very transactional industry. Many leisure and business travelers are transient by nature. They shop based on price and location; and many do not ever return to the same destination.

The result is that far too many travel marketers have built out a linear path to purchase with inspiration at the top of the sales funnel and the reservation where the sales cycle ends. In a subscription model, the trip planning funnel is instead transformed into a feedback loop, driven by positive customer engagement experiences. The in-destination experience is not the end of the customer journey – rather it is just the start; the experience should be immediately providing inspiration for the next journey. 

Recall that the main benefit of a subscription to the company is that recurring revenues can compound on themselves, allowing exponential rather than linear growth. But this only works if you retain your existing customer cohorts. 

Performance indicators for travel have traditionally focused on volume, pricing power, and unit revenue (e.g. for hotels RevPAR, for airlines PRASM). A shift to a subscription model means that travel companies must also put in place training, systems, and procedures to track and understand a new set of engagement metrics like the upfront cost to acquire a customer, customer churn, and customer lifetime value. 

3) Powerful Subscriptions Should Provide Near-Immediate Value and Require Continuous Investment: All too often, we see ‘lazy’ subscriptions. Many will take an ancillary service, say priority airline boarding, and sell that as a subscription. While we understand that this is likely out of a fear of cannibalizing their core businesses, we think these strategies are doomed to obscurity at best, failure at worst.

Our case studies have shown that subscriptions can co-exist alongside more transactional business models. But in all cases, the company is willing to step up and sell its core product via a subscription – be it flight bookings or hotel stays.

We also commonly see that many companies effectively dressing up a repeat customer discount as a subscription. If the program requires four bookings to get a discount on the fifth, you’ve effectively just rebranded a frozen yogurt punch card, not built a subscription.

Think of Amazon Prime – it does not make you wait for a return on your investment. On day one, you will get two-day shipping, full access to its streaming library, and many other ancillary perks. Or take a Costco Club membership. The full inventory of the warehouse is available on day one. 

In both cases, neither company is afraid to offer huge value to the customer immediately upon signing up, betting that the shopper will renew several times. Delayed gratification is a losing strategy in the subscription business.

We also note that neither of these programs are cheap to run; subscriptions cannot be afterthoughts. Costco effectively invests much of its membership fees in ‘paying down’ the cost margin on its groceries. Amazon spends tens of billions of dollars in logistics. 

Subscriptions will not move the needle at large travel brands as long as they remain centered on ancillaries or require patience on behalf of the customer. We think the key is to provide concentrated and immediate value to the customer such that they renew and remain engaged. 

The payoff is huge, but it may require a rethinking of how your brand is positioned. Many travel marketers focus on winning ‘organic’ market rather than creating their own demand. Being the top result when someone searches for ‘hotel in Seattle’ is great, of course. But that demand for Seattle existed with or without your efforts. By playing that game you are making yourself into a more commoditized product, competing for market share against similar peers. 

A subscription model is about offering such compelling value within your brand that customers will be location agnostic. The search becomes ‘Where can I stay with Selina?’ or ‘What flights can I book on eDreams?’ The benefits of this ecosystem lock are obvious; but can only happen if you invest in providing compelling and tangible value to customers. The subscription model calls for instant gratification for the customer and delayed gratification for the business; not the other way around.

4) Build an ecosystem and upsell: Returning to the Amazon example. As we wrote in our report on Lessons for Travel from Amazon, Amazon Prime has built a powerful flywheel by creating a win-win ecosystem. Amazon adds third-party retailers to its system, which increase selection, bringing in more customers and in-turn making the platform more attractive to third-party sellers; and repeat. This same logic also explains why a book selling company now produces TV shows and sells groceries.

Once you have a core subscription product up and running, it becomes easier to add on additional products and build out a fuller ecosystem. This both allows for the subscription company to upsell and offer more choice to customers, but by making the program more robust, it drives up customer retention and lowers customer acquisition costs.

The Inspirato Pass is a particularly good example of how to do this in travel. The company supplements its 1st-party home inventory with 3rd-party luxury hotels. It can buy those rooms cheaply as the subscription has effectively built a unique opaque distribution channel for luxury hotel spoilage. Having more rooms on the platform makes it more attractive to subscribers, and more subscribers makes it more attractive to hotels. Inspirato has now expanded its Pass to also offer cruises, multi-day tours, and other experiences as part of its subscription.  

We think that the travel industry is particularly well suited to building partnership ecosystems, given how many different sub-sectors and companies touch even a single trip. Airline and hotel loyalty plans already take advantage of this, offering crossover perks between flights, hotels, and car rentals. But we think the time is ripe to move these ecosystems from unpaid membership plans to paid subscriptions.

5) Ensure Reliability: This is a simple one, but it bears being explicit: if you are charging for a subscription, you will be held to a much higher standard, and for a much longer time frame, than your typical leisure, or even itinerant business guest. Be sure you can deliver a high standard of reliability before launching a subscription offering. Reliability is something you cannot launch first and fix later. Low reliability will lead to high churn and unfavorable subscription economics. You won’t be able to afford the investment to be able to improve reliability, leading to higher churn. Instead of a virtuous upward cycle, you will be caught in a vicious downward cycle.

6) Create Community: Following the pandemic, many are craving connection. And being on the road for an extended period of time (as many subscription travelers will be) can be lonely. Plus, people want to know that they are part of an exclusive in-group when they sign up for premium subscriptions and membership in particular (think of what it means to wear Peloton merchandise). Create the ability for networking and social opportunities. This will mean offering co-working spaces and organizing regular events such as cocktail hours or receptions at a local hotel.