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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