Amazon's subscription model — which has already disrupted music, groceries, and retail — could be the key to travel brands unlocking more revenue per customer. Here's the lowdown on the latest tests.
Editor’s Note: Skift’s Business Traveler newsletter is now the Business of Loyalty newsletter.
In this weekly missive, we’ll bring you the same insight into what matters most to the people who travel for a living, but now with an added focus on how airlines, hotels, and credit card programs battle for their attention and their business — a points geek with a Ph.D. of sorts.
While we are still looking at how these moves impact the consumer, the focus is on what the industry is doing to win their loyalty. The newsletter is being written by Grant Martin, who you’ve come to know as the author of our Business Traveler newsletter over the last three years. He’ll be able to take advantage of contributions from Skift editors including Brian Sumers (airlines), Deanna Ting (hotels), and Sean O’Neill (travel tech) to better explain what’s happening with loyalty right now. We hope you’ll stick with it, and we promise to never devalue your reading experience.
Amazon Is a “Prime” Example of a Smart Loyalty Program
It has become cliché to say travel companies can learn from the success of Amazon Prime. Yet there’s still truth to it — particularly for online travel agencies, airlines, hotels, and cruise lines.
Amazon famously spotted a lucrative opportunity to improve the way it treats its most loyal customers by creating a subscription service. What began as an offer of free two-day shipping in exchange for a $99-a-year has morphed into a package of services that includes movie and music streaming, online photo storage, and more. Amazon is estimated to have at least 50 million Prime members.
A “Prime” lesson for online travel players is that they should pinpoint what their best customers want the most and build their membership program to reflect those things.
For online travel agencies, this may mean reducing the amount of comparison-shopping that travelers feel they have to do.
A case in point: Prime membership simplifies the shopping experience for Amazon’s most loyal and high-spending customers by taking the shipping decision out of the equation.
Newly aspiring to that goal is FinalPrice, the first subscription-based travel app, which launched last month in the U.S. after a $4 million funding round. Users pay $99 a year for access to negotiated deals on flights, hotels, and rental cars. The inventory comes from wholesalers like Kuoni’s GTA and (soon) the suppliers themselves.
By charging an annual fee, FinalPrice can offer private sale prices at-cost, which are rates not available elsewhere online. In theory, that could instill confidence in consumers that they don’t have to keep shopping around.
Kutis says the fee also copies another Amazon trick. “Before I became a Prime member, I would begin my shopping searches at Google and other sites. Now Prime has trained me to think of Amazon first. I go straight to it for quick purchases for the office, kitchen, or home that I need right away. We think a subscription model could change people’s mindsets about shopping for travel, too.”
For airlines, the most obvious equivalent to Amazon Prime is an “all-you-can-fly” membership service such as Surf Air, seemingly the most competent and financially stable of the various such service providers.
Surf Air charges a flat monthly fee — typically $1,950 a month — to give a traveler unlimited bookings on scheduled short trips on private turboprops.
Thanks to the pre-paid membership model, Surf Air’s app enables a customer to book a flight in half-a-minute — dramatically less than the four-minutes or more it might take otherwise.
Competitor service Wheels Up can similarly offer sped-up mobile booking.
Unlike Surf Air, JetSuite is a charter service that offers membership for discounts and more flexible booking rules. While not all-you-can eat, the model also shows how to provide services to members that take the friction out of buying your product.
In lodging, the classic “subscription” model has been the travel club, in which you pay a fee to get access to either deals or product. In the U.S. market, players like Inspirato, Solstice Collection, and Quintess have offered membership programs for luxury vacation seekers.
In Asia, Afini charges a fee to gain access to vacation home rentals that cost upwards of $10,000-a-night. They’ve all learned lessons from the timeshare businesses promoted by global brands like Hyatt, Marriott, and RCI.
An obvious benefit of the subscription model is that it helps to make revenue growth more predictable.
But subscriptions could also align the company’s interests in designing products and services that appeal to the most valuable customers, namely, repeat users.
Exhibit A is the cruise industry. Crystal Cruises has a Crystal Society that begins after a customer pays full price on selected cruises. Members get “As You Wish” shipboard credits that can be used for nearly anything on the ship, a free cruise after booking 25 trips, and more.
Yet Crystal’s program — and others similar to it in the industry — could afford to be even more generous if they offered paid subscription models.
When toying with a Prime-like model for your business, cruise lines shouldn’t overlook the benefits of being able to build up a profile of customer preferences and behaviors, which is easier to do when you have a subscription service.
By matching the data up with customer profiles created by third-party sources such as analytics firm Adara, a broader picture emerges that can allow for targeted marketing.
Car rental, travel insurance, short-term rental companies, and other travel brands should also consider subscription models.
Additional services might mean offering exclusive access to deals in advance or a luggage handling service. Beyond the traditional travel categories, there’s the new U.S. company TrustedHousesitters. It charges an annual subscription of $119 for unlimited pet sits and trips.
One Amazon Prime lesson that we at Skift have taken to heart is this: Don’t create multiple subscription services.
Rather than have varied subscription services, Skift has built a Research service. It has added value onto it (20 research reports a year, plus webinar-like analyst calls, early access to our newsiest articles, and more).
That’s not an ironclad rule. Even Amazon itself offers a couple of modest exceptions, with discounted memberships for students and food stamp users. So some travel brands may also want to experiment with lower-priced tiers that come with fewer perks.
In short, now is a prime time to experiment before Amazon itself might decide to try to take travel seriously.
Skift Stories and More Expert Insight
Many airlines have rewritten loyalty rules in recent years to make their programs more profitable and reward the most lucrative travelers. But Skift’s new research shows that many U.S. travelers don’t want to play by those rules and aren’t loyal to any airline.
The success of JPMorgan Chase’s Sapphire Reserve Card has forced American Express to compete and spend the most in at least nine years on its card rewards. It’s time to check if you have the most generous card.
American, Delta, and United are bringing in more than $2 billion a year from the credit cards linked to their frequent flyer programs. But independent analyst Gary Leff lays out the case why there’s a reasonable chance that annual net revenue won’t keep growing at the same pace.
Travel + Leisure reports: “For the next month, frequent flyers with elite status on select other airlines can apply to JetBlue’s match program and be granted Mosaic status in JetBlue’s True Blue program for the rest of the year.”
In April, the Phoenix-Arizona-based chain ran a “Baggage Bucks” promotion in which members of its loyalty program could earn a $10 travel card good for future stays. The company is bringing it back to help promote two new hotels, Stratosphere Hotel & Casino and Aquarius Casino Resort between August 1 – September 30, 2017, offering a $25 voucher per checked bag.
GHA, a group of 35 independent hotel brands with 550 hotels, says it has succeeded in building profiles of customers, partly by offering 10 percent-plus discount member rates for booking direct.
The airline will provide unlimited data usage for Emirates Skywards Platinum and Gold members and ulimited data usage for all Emirates Skywards members traveling in first and business class.
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Photo credit: An Amazon.com package sits in a UPS truck in Palo Alto, Calif. As of 2017, the company is the biggest online retailer in the U.S., commanding more than a fifth of all e-commerce. Paul Sakuma / Associate Press