Subscription Model for OTAs: Should Your Travel Company Offer it?
It’s common to talk about subscriptions for streaming platforms, gym memberships or for additional services like faster deliveries on an e-commerce website. But what about services that didn’t usually work with subscription models, like booking flights? Is there a subscription model for OTAs that can be beneficial for the customer (lower prices, exclusive deals) while providing loyalty and a steady revenue stream for the OTA? This article will focus on showing that subscriptions to travel services may be more common than you may have thought.
Subscription models in the travel industry
The common approach to a subscription model on the mainstream side of the travel industry are the loyalty programs. Loyalty programs are able to offer you benefits for being an outstanding customer of their services. These programs are mainly offered by big hotel chains or airlines. Usually, the effort that the customer has to do for getting real benefits from loyalty programs is quite big. What if travel companies would give these benefits and more to the customer in the form of a subscription plan?
This is what eDreams Prime is doing. Their model is based on an annual subscription where their members can get exclusive deals in flights and, most recently, on hotels. When it comes to hotels, services like Bidroom are betting on a subscription model for OTAs as well.
The key: customer satisfaction
Running a successful subscription model for OTAs will always require that the customer feels pleased with the service. This is why travel companies that implement this option will have to work harder for maintaining its members satisfied enough to remain a subscribed customer. The reward? A stable amount of clients that will consume your company’s services during their whole subscription time.
Fidelity vs. One time higher margins
Let´s face it, the travel industry is filled with fierce competition, regardless of your sector or niche. Your customer today can easily become your competitor´s customer tomorrow. In an industry where new customer acquisition can be extremely expensive, the value of a repeat customer is tremendous, even at the cost of potential lower margins initially.
Does a subscription model suit my travel company?
First, it´s wise to analyze your existing business. What percentage of your revenue is from recurring customers? Do your current margins allow you to lower your commission for subscription customers? If your current margins do not allow you to lower your commission in exchange for loyalty, reach out to us so that we can help you increase your post hotel booking profitability by 36% . Even if this model doesn’t seem adequate enough for your travel company at this time, you may want to keep an open mind about it. If Covid-19 has taught us anything, it´s the value of a secure revenue stream.
Like every idea that has potential, this idea too is worth testing. Adding a subscription model does not affect your traditional business (eDreams for example continues to operate as a traditional OTA). If the "go/no go" decision falls on margins, Pruvo Revenue Maker can be a perfect partner for you, thanks to our capability to increase your hotel post booking margins. This way, you can offer your subscription customers the lowest possible price, while making your margins on the back-end once the hotel net price drops.