EDreams is certainly putting a lot of effort into its Prime subscription offering. The test will be how it goes down in other markets and how it performs over a number of years. Do the numbers stack up over the long term and will people keep renewing?
European online travel agency group eDreams Odigeo has added hotels to its Prime membership service as it targets two million members by 2023, a fourfold increase from its current 450,000.
The plans, revealed at an investor event in Barcelona on Tuesday, also show that the company wants to add new products and move into other markets. Prime is currently active in France, Italy, Spain, and Germany, with Portugal and the United Kingdom as potential targets. Future product launches include dynamic holiday packages and car rentals.
A few other travel businesses have pushed subscriptions but with limited results. EDreams, on the other hand, is thinking big — and looking at the figures it has some cause for optimism. In Italy and France, Prime members have, respectively, a 26 percent and 22 percent share of all bookings, with around two-thirds of members in both markets renewing. Prime members book more often and at a lower cost to the company.
The U.S. subscription e-commerce market alone totals around $12 billion to $15 billion, according to consultancy firm McKinsey, and that doesn’t include digital services such as Amazon Prime, Netflix, and Spotify. (Skift has repeatedly asked Amazon about eDreams’ use of the Prime name but has yet to hear back.)
The idea behind Prime is relatively simple. When buying a product, customers in certain markets are offered the chance to bundle in the annual subscription for around $50 (€45) to $83 (€75). EDreams then offers discounts on flights and, in the French market, hotels as well.
The company claims an average discount on flights of $28 (€25) for bookings up to $166 (€150).
Prime is a central feature of eDreams planned move from flight-centric transactional business toward what it calls Your Trusted Travel Companion. The latter statement is pretty remarkable given the company’s somewhat questionable selling tactics of the past.
Dana Dunne took over as CEO in January 2015 following a tough few months for the company after its $1.5 billion IPO. He had been at the company since 2012 but in recent years has recognized that the need to change its ways and started moving toward greater price transparency for consumers.
Investors are seemingly behind the company’s current strategy and performance with the share price up around 67 percent since the start of the year.
According to its investor day presentation slides, eDreams is contemplating making acquisitions of its own.
“We have identified many potential targets that would allow us to reach more customers than we do today,” the document said.
“These targets would allow us to grow through additional brands and content in more locations in regions across Europe, the Americas, the Middle East and Africa, or Asia Pacific.”
EDreams sits in a very competitive field with a couple of global giants dominating the industry. The company does, however, claim to be the number one flight retailer in the online travel space in Europe, ahead of Etraveli, Expedia, and Lastminute.com.
Selling flights might not be as lucrative as it once was, but eDreams has managed to supplement this income by moving into other areas such as holidays and travel insurance.
The amount of money EDreams now makes from these products — what it calls diversification revenue — increased 20.5 percent $157.2 million (€142.1 million) in the six months to the end of September.
Overall revenue rose 8.1 percent to $328.3 million (€296.8 million), but operating profit fell 19.6 percent to $35.3 million (€31.9 million). The company did, however, swing to a pre-tax profit of $19.4 million (€17.6 million) from loss of $13.2 million (€11.9 million) in the prior year thanks to lower interest and finance expenses. The results were announced on Tuesday.
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Photo credit: In 2017, eDreams Odiego moved into new offices in Barcelona designed by Vimworks. The company is pushing its new Prime subscription product. Vimworks