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There are plenty of travel companies who like to draw flattering comparisons between themselves and Amazon but some seem to be taking the approach a little too literally.
European online travel agency eDreams Odigeo, which operates brands such as Opodo and Go Voyages, has been quietly testing a new subscription model over the past two years or so under the name “Prime”. The very same title Amazon uses for its paid-for membership service.
Questions over the choice of name aside, it’s interesting to see an online travel agency experimenting with new ways to boost customer loyalty. eDreams’ big plan is to move from a transactional business — the same model used by other online travel agencies — to something different.
When asked about the use of the Prime name a spokesperson for eDreams told Skift “The product was launched more than one year ago and trademarks were successfully registered at the time.”
In the online marketplace where price is the defining factor in any transaction, loyalty is a very rare commodity. A subscription model would give it a deeper relationship with certain customers.
“Prime is our subscription offering, which is a revolutionary product in the online travel sector. It gives us the ability to move away from an entirely transactional client relationship. In fact, not only do we expand the relationship to cover the customer’s entire travel life cycle, Prime also allows us to engage the customer more throughout their full travel journey,” said CEO Dana Dunne on an earnings call following the release of the company’s full-year results on Tuesday.
So far eDreams has conducted 25,000 interviews and 1,000 A/B tests and across its different brands and the new Prime offering reached around 300,000 subscribers within 18 months of launching. It has so far tested the product in a number of its markets with the annual subscription price ranging from $46 (€40) to $68 (€60).
For that members get discounts on flights throughout the year, a priority customer service telephone line and access to special promotions.
In Italy, eDreams said that Prime took 25 percent of all booking across the course of a year and had a 63 percent renewal rate. It is planning to add additional discounts on other products and services in the future as well as rolling it out in more countries.
Sign of Things to Come?
The travel industry has been slow to pick up on the possibilities the subscription/membership model offers to companies. The likes of Dollar Shave Club (men’s grooming), Netflix (media), and Blue Apron (food) have shown the potential it offers.
Analysts at McKinsey estimate that the subscription e-commerce market has grown by more than 100 percent a year over the past five years. And while there is a difference between getting something physical versus a discount as part of a subscription, the same idea applies: hook customers in, make them stick around, and bring in more money at regular intervals.
eDreams seems to be aiming for something much bigger and ultimately its success will rest upon whether customers think that being a subscriber is really worth it.
The subscription strategy formed part of an update in eDreams’ full-year results announcement. Earnings before interest and taxes rose 26 percent to $103 million (€90.4 million) for the year to the year to the end of March, 2019. Revenue increased 7.7 percent to $627 million (€551 million).
Over the last couple of years eDreams has been moving away from relying on fees generated from flight service, cancellation and modification fees to things like vacation products, ancillaries and travel insurance. This “Diversification Revenue” stream is now greater than what it calls “Classic Customer Revenue”.
Despite challenges in its UK market as a result of Brexit-related economic and political uncertainty, eDreams expects its 2020 financial year to be “much better” than 2019.