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Why Did Some Travel Companies Thrive During The Pandemic?

Tien Tzuo

This week we’re talking to Sean O’Neill, a senior travel tech editor at the travel media site Skift. Sean recently interviewed the Subscribed Institute’s Amy Konary at Skift’s online Loyalty and Subscription Summit.

Welcome, Sean! I think it’s safe to say that the pandemic decimated the travel industry last year.

That is definitely safe to say. The World Travel and Tourism Council recently said that the travel industry was hit eighteen times harder by the COVID-19 pandemic than the financial crisis of 2008. Over 60 million jobs were lost.

But according to your reporting, a number of travel companies haven’t just survived over the past year, they’ve actually thrived. That’s kind of astonishing.

It doesn’t seem to make sense, does it? For example, there’s an online travel agency called eDreams, which is one of the most-visited online travel agencies in Europe right now. They have a subscription program called “Prime” (sound familiar?) that offers discounted flights and travel arrangements in return for an annual fee. And even during the pandemic, quarter after quarter, their subscriber numbers went up.

They’re a public company, so it’s all there on the investor site. They added 94,000 subscribers last quarter, growing their subscriber base 55% over the year to 758,000. They’re on track to exceed two million subscribers by 2023. The subscription share of their total bookings was 37% during the third quarter of FY21, compared to 9% last year. And as a result of all this new subscription revenue, they have roughly $24 million in deferred revenue waiting for them, a 126% increase from last year.

Which raises the question: How did a travel company actually gain subscribers in the midst of a global pandemic?

Now, don’t get me wrong. eDreams got hit by the pandemic. Their revenue margin, or the money they made after they paid their suppliers, contracted by 77% year-over-year. But overall, I would say the subscription model is becoming a staple of travel industry renewal as we emerge from the pandemic for three main reasons.

First, successful subscription models emphasize smart touchpoints and engagement. They make travel less of a discrete, transactional experience. Maybe it’s more aspirational, which is fine. Travel is fun to think about throughout the year, maybe even more so during a pandemic. And subscriptions align with that.

I think most of us have an inherent sense of wanderlust that doesn’t ever go away, even when we’re sitting at home. We’re an inherently curious species.

Agreed! That’s certainly why I’m in this business.

Second, there’s a clear value proposition. We’re seeing people start to budget for travel the same way they budget for entertainment or grocery deliveries or other subscription services. On their UK website, eDreams says that their Prime subscribers save anywhere from £30 to £70 pounds per flight, which if you travel twice a year makes the £60 pound annual fee kind of a no-brainer. There are hotel savings as well, of course.

Third, there’s a data story here. These planning services want to do one thing: make it easy to plan a great trip. Once they know what kind of traveler they’re dealing with, they can make better suggestions. They can prioritize relevant content, which makes your interaction with them better. They can fine-tune their offering.

We saw this happen in industry after industry last year — the smart companies who had direct relationships with their customers were able to adapt. Even if people were driving as opposed to flying, they still found a lot of value in these travel services. And the new world of remote work must be playing into this success as well. There’s so much more permeability between work, life and travel these days. You can take off and go work in Mexico for a month.

Yes, and the hotel industry is well aware of this trend. So, after this year, everyone wants to put heads in beds. But they also see an opportunity in the whole digital nomad and remote workspace. There’s a hospitality company called Selina that is aimed at younger professionals. They’re offering a monthly subscription called CoLive that offers “continuous month-after-month accommodation.” You pick between exploring Latin America, the United States or Europe, then you get to stay at up to three properties a month, with a co-working space included for a fixed monthly fee. (By the way, Tien, Selina’s leadership specifically told me they were inspired by your book Subscribed.)

That’s great to hear! I think the hotel and lodging programs are taking advantage of another key advantage of consumer subscriptions: personalized experiences. What’s something new, something unexpected? They understand that today people are more interested in experiences and good stories, not necessarily souvenirs.

Yes. This brings to mind Inspirato, which is planning on going public through a SPAC venture soon. Their motto is, “subscribe to safe luxury vacations.” They launched “Inspirato Pass” in 2019, which lets you book unlimited stays in luxury vacation homes and five-star hotels for $2,500 a month. No nightly rates, no taxes, no fees. They offer another membership plan for $600 that gives you access to their private properties, but you have to pay additional rates per night. And guess what? Their booking rates increased 30 percent last year. Lots of people used them for remote work. And again, they get to know you. Maybe you like places like Aspen, or Sedona, or Maui. They’ll curate the offering. Maybe they’ll send a sommelier over to your place to do a wine tasting.

Finally, what are some takeaways for travel companies interested in subscriptions? Any red flags to watch out for, flameouts to avoid?

I’d offer two suggestions. First, travel companies still tend to be pretty old school at times, because they either originated as family businesses, or the online component of their business runs as a separate function. They can still be a bit hierarchical. So they need to understand that while these programs might start off as a side project if they’re successful they’re going to entail some real structural realignment. You’re going to need buy-in from the top.

And second, going back to the earlier point about the episodic nature of travel, as a subscription travel company you’re going to need to come up with a foundation for an ongoing relationship with your subscribers. People are used to ongoing value out of their other services: food, media, boxes, etc. So as a travel company, you’re going to need to find an answer for that.

Thanks so much for your time Sean! I look forward to following your work at Skift.

Anytime, Tien.

******************* Disclosure: These opinions expressed are mine, not those of the company. The companies mentioned in this newsletter are not necessarily Zuora customers.

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