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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Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.