What Subscription Models Tell Us About Driving Loyalty and Revenue

By David Bilicic Senior Vice President , Magid | December 30, 2018

Consumers are subscribing to an ever-growing diverse set of categories and services – and at greater rates. There is easy access to everything from meal delivery kits to clothing and beauty products. Several automobile companies are even testing and making progress on their own subscription-based models including Porsche, Volvo and Mercedes. But gaps do remain in many industries jumping to offer and capitalize on subscriptions.

Where are the subscription offerings in travel, hospitality and leisure?

The subscription e-commerce market has grown by more than 100% percent a year over the past five years, with the largest retailers generating more than $2.6B in sales in 2016, up from $57.0M in 2011. As a whole, the subscription economy is growing at a rate nine times faster than the S&P 500. The subscription business is booming, but it appears there is a unique potential for hotel and travel brands to take advantage of this growing market and tap into a new revenue source.

Despite the potential opportunities, the travel and hospitality business seems hesitant to offer subscription offerings (with some well-known exceptions – AAA, Uber and Lyft, to name a few). Perhaps it's due to concern that offering subscriptions could somehow diminish or detract from existing loyalty programs. However, it's common for frequent travelers to be enrolled in multiple hotel, airline and rental car loyalty programs. And there is already significant cross-over between members of subscription services and loyalty program members. It's comparatively easy for travel companies to get people to sign up for their loyalty programs – much more of a challenge to get them to remain engaged.

Hotel Loyalty Members and Their Engagement With Subscriptions

Recent research conducted by Magid indicates varying degrees of consumer engagement in subscriptions, with some particularly interesting insights about loyalty program members. For people belonging to travel-based loyalty programs like hotels and airlines, there is comparatively higher levels of subscriptions and interest compared to people not belonging to travel loyalty programs. Nearly half (49%) of individuals who have at least one subscription also reported being a member of at least one hotel loyalty program.

Nearly half of individuals who have at least one subscription also reported being a member of at least one hotel loyalty program
On the barrier side, consumers dislike subscriptions when they feel they don't need anything that the subscriptions offer
This chart shows current subscriptions compared to future purchase intent broken out by category.
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Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.