Airline and hotel travel subscription plans are on the rise.
These days, there are subscriptions for just about everything, including streaming services, pet toys, meal plans, even crime-solving kits, and millions more every year are willing to pay for it.
According to an international survey by the Zuora Subscribed Institute, 78% of American adults paid for subscription services in 2021. Financial services company UBS predicts that subscription business will continue to grow by 18% annually and reach 1 .5 trillion by 2025.
The travel industry stayed on the sidelines for much of the subscription boom. But that is changing. Airlines, car rental companies and a growing number of hotels and resorts are introducing or expanding their subscription plans, to attract the workforce from anywhere and the growing number of travelers leisure travelers who want to go to more places and stay longer.
The industry is “jumping on the subscription bandwagon because it secures customers and increases profits,” says trend expert Daniel Levin of the Avant-Guide Institute, a travel and trend consultancy. For good travelers, subscriptions can offer “double the lower price and greater convenience”.
But subscription offers also come with restrictions and fees that can make them expensive if a traveler’s circumstances change.
Last month, Alaska Airlines became the first major carrier to launch a subscription program. For a fixed monthly fee ranging from $49 to $550 and a one-year commitment, flight plan subscribers can fly up to 24 round trips, depending on the plan, among 16 airports in California, Nevada and Arizona, including Los Angeles, Reno, Phoenix and Las Vegas. But flights must be booked at the required intervals or flight credits may expire.
One such subscriber is Eli Cohen, a qigong instructor who splits his time between San Francisco and Palm Springs. He knows well how ticket prices can go up and down on this route. When the cost of a round trip soared to $400 last month, he decided to sign up. Now, “instead of $400 for a return flight, I’ll pay $600 and get six flights for the year,” he said. “And I’m also considering flying out for vacations in Los Angeles and San Diego.”
The Seattle-based carrier won’t disclose enrollment numbers, but “we’re tracking just ahead of our full-year projections,” said Alex Corey, general manager of business development and product for Alaska Airlines. He also said that 1 in 3 new subscribers had not flown to Alaska in at least three years, and most committed to flying more flights than they had taken with the airline at any time in the past.
“There has never been a more compelling time for airlines to consider developing subscription products than now,” said Henry Harteveldt, travel analyst and founder of Atmosphere Research.
“The travel industry is like the soda industry. The only way for brands to increase their market share is to steal customers from their competitors. And fewer travelers consider themselves loyal to airlines and hotel brands than in 2019.”
Alaska is still the only major carrier to offer a monthly plan. But smaller airlines, including Volaris, a Mexico-based low-cost airline, and FlySafair, a South African low-cost airline, have had subscription plans for some time, and several other airlines in South America and Europe are expected to announce new plans soon. , said Iñaki Uriz, CEO of Caravelo, a subscription platform for the airline industry.
“Before the pandemic, airlines were in their comfort zone and felt they had everything under control,” he said. Today, with the sharp decline in business travel and the rise of remote working, “airlines are much more willing to risk change, evolve and innovate.”
Hoteliers and other accommodation companies are also embracing the subscription model, as a way to build relationships with travelers in their 20s and 30s, who intend to blur the line between work and travel, and are at comfortable with monthly fees.
Selina, for example, is a network of high-end hostels based in Panama, aimed at remote workers and what it calls “digital nomads”. The company owns more than 90 properties in 18 countries, including the United States, Brazil and Costa Rica. Its CoLive subscription package starts at $450/month for dorm-style accommodations, with shared bathrooms, communal kitchens, and communal workspaces. Private rooms can cost $3,000 per month or more, depending on location. Subscribers can stay in one place for up to 30 days or change locations up to three times during the month.
Dutch boutique hotel chain citizenM, known for its hip, high-tech design, is set to roll out a revamped and rebranded version of a subscription plan it launched during the pandemic, when travel were in great difficulty. For Ernest Lee, the channel’s chief growth officer, that was the point. Before the pandemic, “we were never in a good position to risk our existing businesses because market conditions were quite stable,” he said. “But once your occupancy rate drops into single digits, you’re encouraged to try new ideas.” One such idea was Global Passport, which cost $1,500 per month, for up to 29 consecutive nights at its properties in Europe, the United States and Asia. The plan was discontinued in xxx, as the new one was being worked on.
Subscription travel also comes in luxury versions. Inspirato is one of the largest luxury travel membership companies in the industry. Its Inspirato Pass includes access to vacation homes and luxury hotels around the world, as well as experiences and travel planning. There’s a $2,500 sign-up fee, $2,500 monthly fee, and no minimum commitment. There are certain rules regarding booking stays and two weeks is the maximum for a pitch. Kathryn Wong, who travels frequently with her husband, said they were considering buying a vacation home. Instead, they signed up for Inspirato. “I tracked all of our Inspirato trips last year and compared our $30,000 in dues to the (prices) posted by the resorts for each trip,” she said. The value of the trips turned out to be more than double the cost of membership. “And we saved time by not having to do research and travel planning.”
If one part of the travel industry has been hit hard by the huge drop in business travel, it is the car rental sector, which has been heavily reliant on corporate accounts.
The industry is just “dipping a toe in the water” with subscription programs, said Mike Taylor of JD Power. Enterprise and Hertz have plans where renters pay a fixed monthly fee, with no long-term commitment, and have the flexibility to switch cars several times a month.
The Enterprise plan costs $1,499 per month, with a two-month minimum and a $250 sign-up fee. The plan is only available in Minnesota, Missouri, and Nevada. Insurance is included and drivers can change vehicles four times a month.
Hertz also has a two-month minimum and costs about the same at the high end, but offers a wider range of plans than Enterprise, with one as low as $599 per month. For now, the plan is complete, due to supply chain issues and the same rental car shortage that some travelers may remember pushing prices into the stratosphere last year.
Taylor expects more car rental companies to turn to subscriptions. Younger generations are comfortable with the subscription model, he said. “And they are also the highest margin tenants.”