Written by: Natasha Piedrahita
Is the subscription model here to stay or here to go? It is a business model successfully led by companies such as Amazon Prime, Netflix, Peloton and the like. The membership and subscription-based business models are relatively new to the hotel industry, a model that hotels considered with the onset of Covid-19. What sparked hotels’ interest in this type of business model? How do both sides of the equation – guests and hotels — benefit from a business model of this sort?
Loyalty programs have always been the hospitality sector’s method to create essential and long-term relationships with their guests. The most recent way for customers to prove their loyalty to a brand is not just by gathering points, but rather paying monthly or yearly fees to the brand to show their dependability. Consistency is key. Guests can show their loyalty to the hotel brand by spending more dollars consistently and thus, they gain more exclusive perks over the basic offerings.
Benefits for Guests:
Let’s think about you as a guest and how your journey starts with the booking process. As a customer you strive to look for the best deals and compare nightly rates across many platforms – be it directly with the hotel reservations center, platforms online including Booking.com and TripAdvisor, or your travel agent. If you become a subscribed guest, you will never have to pay a nightly rate again, you won’t pay higher rates because there are no hidden commissions in the set price and finally, you get much greater value with many more perks on top of the basic hotel offerings. Imagine, one month at a hotel and you can change hotel rooms to get different views at the same rate.
Benefits for Hotel:
Skift named the subscription-based business model a “megatrend” in 2020 and in 2021, coined it as a “staple of the travel industry renewal” (O’Neill, 2021). One of the greatest challenges for hotels, especially considering the lingering Covid-19 pandemic, is how unpredictable travelers’ booking patterns are and hotel’s inability to forecast cash flow. A subscription-based business model offers hotels predictability and forecastable cash flows because guests are paying monthly or yearly fees (Handler, 2021). A hotel does not have to wait until last-minute bookings to know they will fill inventory; with subscriptions, they have a recurring revenue. Most importantly, it provides a solution to un-booked inventory, which is one of hospitality’s biggest challenges (Handler, 2021).
Furthermore, on the marketing and sales front, hotels also greatly benefit. They typically have to break deals and lower prices to ensure their rooms get filled; however, this technique has been unfavorable towards luxury properties’ brand equity and luxury reputation (Handler, 2021). Inventory that is allocated towards the guests with a subscription allows hotels to maintain their brand mission, brand objectives and strategic plan without needing to discount hotel rooms (Handler, 2021). Also, it helps increase sales efficiently, as hotels can save on customer acquisition — such as less spending on marketing with Google Ads and Instagram to retarget customers to book again (O’Neill, 2020). Lastly, a subscription-based model provides a vital recurring revenue for hotels to maintain operations and staffing, as many hotels are currently unable to, due to low cash flows in challenging times.
Ready to become a subscribed hotel guest? Here are some of the hotels taking the lead that you should know about:
- Inspirato: Launched Luxury Pass, a luxury travel and lifestyle subscription that gives you access to over one million trips at $2,500 per month including luxury hotels such as The Ritz Carlton, Banyan Tree, One & Only, Auberge Resorts and Rosewood, amongst many others. Learn more here.
- Freehand Hotels: Launched Freehand Club — essentially stay for as long as you want. You pay one-price monthly membership fee and get unlimited access to all Freehand Hotels, exclusive perks and no commitment. More details here.
- Selina: Launched Selina CoLive and CoLive Flex, a month-by-month CoLiving program starting from just $450 per month. Learn more here.
- citizenM Hotels: Launched the corporate subscription model by citizenM — one subscription targeting people who travel work and the second targeting digital nomads. Unfortunately, it was taken off the market but it may return; stay updated here.
Natasha Piedrahita is a graduate student currently pursuing the Master of Science in Global Hospitality Business program, which is in partnership of three schools: EHL, the Hong Kong Polytechnic University, and University of Houston.
- Handler, B. (2021, August 20). How subscription models can democratize luxury travel. PhocusWire. Retrieved November 1, 2021, from https://www.phocuswire.com/how-the-subscription-model-can-democratize-luxury-travel
- O’Neill, S. (2020, December 2). Subscription travel models offer encouraging pandemic resilience to Inspirato and berightback. Skift. Retrieved November 1, 2021, from https://skift.com/2020/09/14/subscription-travel-models-offer-encouraging-pandemic-resilience-to-inspirato-and-berightback/
- O’Neill, S. (2021, September 29). Travel megatrends 2025: The subscription model becomes a staple of travel industry renewal. Skift. Retrieved November 1, 2021, from https://skift.com/2021/01/27/travel-megatrends-2025-the-subscription-model-becomes-a-staple-of-travel-industry-renewal/