Travel subscription models: what do online travel sellers need to know? Part I

You are not alone if you have recently noticed several online travel sellers launching variations of a subscription model.

But what exactly does a ‘subscription model’ really mean? More importantly, should your business be considering this?

We’ve interviewed our Chief Technical Officer, Matthew Chapman, for a two-part series to find out more and help answer some of the questions or doubts you may have.

Q: We’ve heard quite a bit about this lately, what is happening?

MC: Recently there have been a lot of growth in the number of online travel agencies that offer a subscription-based model of some sort, with three prominent launches in the last two months: Ultimate Travel Club in the UK in September; Russian metasearch Aviasales launching Aviasales More in October; and US magazine Travel + Leisure launching its Travel + Leisure Club.

Q: Are these the first entrants to the market?

MC: No, the basic model has been around for some time now. Tripadvisor launched late last year its ‘Tripadvisor Plus’ and Edreams ODIGEO has had ‘Prime’ since 2017 now – the later or which has millions of subscribers. What’s different is that now smaller players are entering into the fray and with more niche offerings.

Q: Is the concept truly new? What’s different?

MC: Whilst it might not have been called a ‘travel subscription’ we have really had this offering for a long time now. Think about membership clubs like Voyage Privé or other closed user groups such as the travel concierges provided by credit card and loyalty schemes – one way or another you were paying for this.

Q: What is the economic model here?

MC: This is where it is interesting as it seems that there are many different variants. Some are offering a ‘no margins, no commissions’ model where the traveller gets the trade price – and the seller is making their profits out of the subscriptions. Others however seem to be charging the fee in order for the traveller to access exclusive offers or discounted prices (but not necessarily trade prices). Others still are essentially charging the subscription for access to some kind of concierge service. In both of these last cases the seller is essentially getting paid twice: once for the subscription and twice for the commission or margin on the sale.

Q: What booking technology solutions do I need to power this?

MC: From a booking technology perspective whatever you have now will work in the same way: all that is changing is how you make a profit from the sale, nothing more. Nonetheless, you might wish to change your search and results configurations to suit the needs of your new model or indeed customers – as any online travel seller might when changing their proposition. Whilst a traditional OTA focuses optimising their user experience for conversion, a subscription model website also needs to consider demonstrating value of the customer’s subscription and measuring membership retention, which might necessitate the agent building their own solution (or finding a 3rd party) to host this additional functionality.

Q: Do I need to renegotiate pricing or terms and conditions with suppliers? Am I allowed to do this?

MC: As long as you don’t breach any of the terms & conditions of your distribution agreement, then no you don’t have renegotiate anything or warn anyone. However, you might want to have a close look at those terms & conditions. Are you allowed to unbundle packages? Can you forgo your commission or reduce the margin down to zero? Equally, even if you are legally able to do so you might consider that with a new model you need new content under new terms & conditions, and begin to either renegotiate or look for other suppliers.

Q: Does the extra information you can gain about the traveller provide a greater opportunity for personalization?

MC: The more information you can gain about the traveller before you provide them with results the better, evidently. And what better way to collect such information than making them fill in a form as part of their subscription? Not just gender and address and age, but also recent search and even travel history. Better still, that means you now have their email address and phone number, meaning that you can send them bespoke offers too (obviously with explicit member opt-in for compliance with GDPR).

Finding this Q&A helpful? Next week we’ll be back for the second instalment of this interview – with Matthew answering questions about the ATOL considerations, how you collect payment for the subscription, whether there are opportunities for TMCs here and more.