The subscription pricing model is trending in the travel industry: What to know

Subscriptions have seeped into nearly every consumer industry, from television to online streaming services. There are even services that help subscribers cancel all their subscriptions. But one industry has notably lagged: travel.

That could be changing. The market for travel subscriptions has started to expand and includes cheap flights, airport lounges, luxury accommodations and high-end credit cards.

“Subscription models can add a lot of predictability to an industry that can be very spiky,” said Amy Konary, vice president at the Subscribed Institute by Zuora, a global think tank focused on the subscription economy.

Travel purchases tend to be one-off and transactional. Airline and hotel loyalty programs aim to promote loyalty and benefits, but only those travellers who travel (and pay) a lot can reap the rewards. Subscriptions could turn this concept on its head by offering these benefits upfront.

“The subscription model lets you get access to those premium perks by paying directly,” added Konary. Will customers take to this idea? Travel brands are rushing to find out.

Subscriptions take off

Some international airlines have dipped a toe into the subscription waters. Here’s what it entails.

For a minimum monthly price, subscribers can book one round-trip main cabin flight every two months for a fixed fees. The catch? The flights must be direct, booked within a limited time frame and, most importantly, fly between particular airports.

Confused?

“Communication has been the big challenge,” said Alex Corey , managing director of business development and products at a US-based airlines venturing into the subscription space.

“It's been hard for people to appreciate that this might not be designed for them. If I went to my favourite store and it didn't meet my needs, I'd be like, ‘Hey, make this this way’.”

Instead of trying to be everything for every traveller, the US airline’s subscription has focused on a narrow niche: younger people with plenty of wanderlust and schedule flexibility. So far, just under half of subscribers are millennials or Generation Z’ers, according to the airlines.

It's a niche product, to be sure, but the airline is confident that it can appeal to this particular kind of travellers. Moreover, the airline focused on the lowest-cost entry point possible, starting at $49 (Dh180) per month to make a flight subscription seem feasible to almost anyone.

“We wanted to compete with an Uber ride or a restaurant tab,” Corey further explained.

Catering to nomads

On the other side of the price spectrum, one luxury global travel platform offers a subscription service for vacation rentals and high-end hotels starting at $2,500 (Dh9,182) per month.

That's $30,000 (Dh110,193) per year for the opportunity to book high-end 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 the platform’s subscription, too, comes with a long list of caveats and exceptions. Pass holders may book just one trip at a time, bookings are on a first-come, first-served basis and many rooms and homes are available only during off-peak seasons.

Those digital nomads who spend less can choose another platform, which is a co-living and co-working subscription service that is experimenting with subscriptions by combining the cost of accommodation, office space and dependable Wi-Fi into one monthly bill. Subscribers can bounce between the platform's global destinations and take advantage of surfing lessons, yoga classes and other wellness activities.

These services offer one benefit to potential customers that is difficult to quantify: simplicity. Rather than searching through hundreds of vacation rental listings, subscribers can make one payment per month and choose from a range of vetted options.

Yet simplicity alone won't cut it, noted Konary. Consumers are wary of adding another monthly bill to their long list of active subscriptions and need to know they're getting a good deal.

“As we've become more familiar with these models, we have a high bar for what we expect in terms of value,” Konary added.

What's old is new again

Travel subscriptions aren't a new idea. There have been international airlines in the past that have introduced an unlimited flying pass way since 2009. The promotion received plenty of attention but didn't 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 a yearly fee. But a new wave of subscriptions is coming to travel with one big difference – specificity. Instead of trying to be the Netflix of travel, with something for everyone, new services are providing niche offerings to specific demographics.

Not everyone wants to fly within a country every other month, but for those who do, these subscriptions could offer a valuable way to travel without the hassle. “I do think what we're doing is unique,” Corey added. “I hope it catches on.”