More and more businesses are moving away toward ‘subscription economy’

Subscription services have disrupted almost every industry during COVID-19, but the customer-focused model remains relatively nascent in the travel industry, observes GlobalData. The leading data and analytics company notes that its popularity could rise as travel subscriptions, whereby travelers typically pay a monthly fee to receive benefits such as discounted prices and personalized travel content, represent a compelling way for businesses to build brand loyalty.

Hannah Free, Travel and Tourism Analyst at GlobalData, comments: “More and more businesses are moving away from the traditional product economy to the ‘subscription economy’. The subscription economy refers to the increasing presence of subscription-based businesses in today’s ecommerce landscape as opposed to the traditional pay-per-product model. Subscription models have the potential to completely transform an industry that faces challenges such as seasonality and growth-decline cycles by ensuring a relatively stable revenue stream.”

One example of this would be Spanish travel company eDreams ODIGEO’s Prime subscription which reportedly reached two million members just six months after hitting one million in May 2021. More niche and targeted subscriptions are entering the market from the likes of Inspirato, Regenerative Travel and Bidroom.

Further demonstrating the shift from traditional loyalty points to subscriptions is increased patent activity for subscriptions growing at a compound annual growth rate (CAGR) of 10.4% between 2017 and 21. According to GlobalData’s Travel and Tourism Patent Analytics, a total of 7936 patent publications related to subscriptions were made in 2021, with growth continuing even throughout COVID-19. Travel companies investing in subscription services will emerge from the pandemic in a strong position to attract the tech savvy and deal finding travellers.

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Some companies integrate subscriptions to their mix of revenue streams, while others will go to market with it as a foundational offering. Regardless, COVID-19 has highlighted the need for more a predictable and recurring revenue stream for travel companies as the likes of Bookings Holdings and Expedia Group saw their revenues drop more than 50% YoY in 2020, when travel came to a virtual standstill.

Free concludes: “Subscriptions represent a compelling way for travel companies to create lasting relationships where engagement typically ends after a one-off transactional purchase. According to GlobalData’s Q1 2021 Consumer Survey, 35% of global respondents consider time-saving a key factor driving purchase, while 46% consider time-saving nice to have, but not essential. The subscription model is well placed to capitalize on increasing consumer demands for personalization, while the value and convenience enjoyed by members has the potential to outweigh a monthly subscription or membership fee.”

SOURCE: GLOBALDATA

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