Subscriptions are coming to travel – should you get on board?
Subscriptions have infiltrated almost every consumer sector, from television to tacos. There are even services that help subscribers cancel all their subscriptions. But one industry is particularly lagging behind: travel.
That could change.
The travel subscription market has started to grow and includes cheap flights, airport lounges, luxury accommodations and high-end credit cards.
“Subscription models can add a lot of predictability to what can be a very tricky industry,” says Amy Konary, vice president of the Subscribed Institute by Zuora, a think tank focused on the subscription economy.
Travel purchases tend to be one-time and transactional. Airline and hotel loyalty programs aim to promote loyalty and perks, but only travelers who travel (and pay) a lot can reap the rewards. Subscriptions could subvert this concept by offering these benefits upfront.
“The subscription model allows you to access these premium benefits by paying directly,” Konary says.
Will customers embrace this idea? Travel brands are racing to find out.
SUBSCRIPTIONS TAKE OFF
Alaska Airlines dipped a toe in subscription waters in March with the launch of its “Flight Pass.” For a price that starts at $49 per month, subscribers can book a return flight in the main cabin every two months for a penny plus around $15 in fees. The problem? Flights must be direct, booked within a limited time frame, and most importantly, fly between particular airports in California, Nevada, and Arizona.
“Communication has been the big challenge,” says Alex Corey, general manager of business and product development at Alaska Airlines. “It was hard for people to appreciate that it might not be designed for them. If I went to my favorite store and it didn’t meet my needs, I would be like, ‘Hey, do this.’ »
Instead of trying to be everything for every traveler, Alaska’s subscription focused on a narrow niche: young Californians with lots of wanderlust and schedule flexibility. So far, just under half of subscribers are millennials or Gen Z, according to Alaska.
It’s a niche product, sure, but Alaska is convinced it may appeal to a particular type of West Coast traveler.
“Californiaians travel 3.5 times more within their own state than residents of other states,” Corey says, explaining why the airline chose the state as a testing ground for its idea.
And Alaska has focused on the cheapest entry point possible, starting at $49 a month to make a one-flight subscription seem doable for almost anyone.
“We wanted to compete with an Uber ride or a bar tab,” Corey says.
CATERING FOR NOMADS
On the other side of the pricing spectrum, luxury travel platform Inspirato offers a subscription service for vacation rentals and high-end hotels starting at $2,500 per month.
That’s $30,000 a year for the ability to book premium accommodations around the world. That might seem like a huge bill for a vacation budget, but it’s potentially more reasonable for remote working nomads looking to travel as much as possible.
Yet Inspirato’s subscription also comes with a long list of caveats and exceptions. Passholders can only book one trip at a time, reservations are on a first-come, first-served basis, and many rooms and houses are only available during off-peak seasons.
Less spendthrift digital nomads can choose Selina, a co-living and coworking subscription service that combines the cost of hosting, office space, and reliable Wi-Fi into one monthly bill. Subscribers can bounce between Selina’s global destinations and enjoy surf lessons, yoga classes, and other wellness activities.
These services offer potential customers a hard-to-quantify benefit: simplicity. Rather than searching through hundreds of vacation rental listings, subscribers can make one payment per month and choose from a range of approved options.
Still, simplicity alone won’t be enough, Konary says. Consumers are hesitant to add another monthly bill to their long list of active subscriptions and need to know they’re getting a good deal.
“As we have become more familiar with these models, we have raised the bar for what we expect in terms of value,” says Konary.
WHAT IS OLD IS NEW
Travel subscriptions are not a new idea. JetBlue Airways launched an “All You Can Jet” unlimited flight pass in 2009. The promotion received a lot of attention but did not translate into a sustainable business model.
And successful travel subscription services already exist. Premium travel credit cards offer perks to travelers, such as airport lounge access for an annual fee. And services like TSA PreCheck and Clear allow flyers to bypass normal security lines.
But a new wave of subscriptions is coming to travel with a big difference: specificity. Instead of trying to be the Netflix of travel, with something for everyone, newer services are delivering niche offerings to specific demographics.
Not everyone wants to fly to California every other month or take surfing lessons in Belize at a coworking space. But for those who do, these passes could offer a valuable way to travel hassle-free. Or they could go the MoviePass way.
“I think what we do is unique,” Corey says. “I hope it will hang on.”
Sam Kemmis is a writer at personal finance website NerdWallet. This article was provided to The Associated Press by NerdWallet.