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"Subscribe" - Could It Be The Pricing Model for Hotels?

We know that subscription business is the preordainment business model for modern software. In this blog, we explore the subscription business pricing models and how they could be adapted for the hospitality industry.

Fitness membership, content streaming accounts, meal kit services, and e-learning websites are examples of subscription business models in various industries. Even though the subscription business model is popular, it doesn't mean starting one is easy. This business model requires a constant focus on providing long-term value for recurring and potential customers. Knowing your customers inside and out will result in consistent and compounding value in businesses. Companies such as Netflix, ClassPass, Masterclass, Hubspot, and Amazon are subscription services that are doing exceptionally well.

SaaS, subscription boxes, e-commerce, and accessibility subscriptions are prevalent types of subscription businesses. It's the preordainment business model for modern software. Pricing models will help companies identify the optimum way to market, sell, and grow subscription businesses. Whether it's flat rate, usage-based, or tiered pricing strategies, a business needs to be compensated appropriately for development and other costs. Overcharging can throttle growth and push away thousands of potential customers. Leaders of industries need to find the right balance between value and revenue and having the ability to help customers.

The hospitality industry focuses on building relationships and generating loyalty. By being a loyalty member, you get benefits and features such as free breakfast, room upgrades, early check-in, low room rates, and gaining loyalty points. Subscriptions are an excellent fit for the hospitality industry because they continuously seek to make loyalty programs more appealing. However, hotels and travel sectors focus on one-time transactions or single product purchases.

Subscriptions are built around ongoing serveries that better meet consumer needs and emphasizing building a relationship with consumers. The hospitality industry is behind in the implementation of the subscription business model. These could be for many reasons. Due to significant investments in the current loyalty programs, having any subscription model would need additional value beyond what existing loyalty programs offer. There would be a need to require coordination between brand management and hotel properties to make a subscription to work if hotel Hotels may not own or manage their assets.

There is also a challenge of developing a subscription offering that appeals to customers when trying to find the right price to make a profitable return. Subscribers are guilty of not using the subscription they paid for at times. Signing up to be a loyalty member is free, and travellers don't need to have a financial commitment like subscribers.

During the pandemic, the immense ascent of subscription companies like Netflix, Peleton, and Spotify. Travellers want long-term lodging options during this market; what are their options? They range companies offering housing as a subscription to vacation rentals platforms and hotels adjusting products to target "workcationers".

InterContinental, Marriott, and Accor plan to launch monthly payment plans as hotels try to attract restless remote workers ready for a scene change. Repurposing rooms into private gyms, workspaces, and even recording studios. The "workcation" packages allow InterContinental's guests to access the hotel's workspaces, guest rooms, and facilities by paying monthly subscription rates. citizenM boutique hotels provide unlimited nights at a fixed price. Digital nomads, freelancers, and adventurers pay a flat rate of $1500 for 29 days straight. Hilton Sandestin Beach Golf Resort and Spa launched a program called Home at Hilton. Home at Hilton is a work-from hotel program catering to guests who want to escape from reality or cold months. Similarly, London's Milestone Hotel and Residences offers extended stay programs to encourage guests to stay longer. Though these hotel subscriptions target local guests, a few properties will find that model scalable.

Airbnb and Vrbo are great vacation rentals that offer discounts low as 40% offer customers who book by the month. Both platforms have sections and filters where customers can find rentals providing weekly and monthly rates. Vacation rentals allow guests to have more flexibility to travel mid-week, stay longer, or travel off seasons when prices are lower. Wyndham Destinations operates 230 timeshare resorts. As people continue to escape for a more extended period, Wyndham plans to start offering more subscription-based traveller benefits and focusing on workcations. Co-living accommodations are another alternative for guests to live and work remotely for an extended period. Selina, a boutique hostel group, introduced a program that allows a subscriber to stay at any of its participating hostels for $400 a month. The subscription includes co-working spaces, daily wellness activities, laundry, and meal discounts in addition to accommodation. Similarly, Hmlet in Singapore offers comparable benefits. Members of Hmlet go-to activities or events as a community and get together at their communal meeting spaces.

Luxury travel group, Inspirato, is a subscription-based operator to offer an all-you-can travel model. Paying $2500 monthly, subscribers can stay at 300 accommodation globally with no taxes, night rates, and more for Inspirato Pass membership. For Inspiratio Club, subscribers have access to stay at vacation homes and hotels for 2 to 60 days. Besides accommodation, it offers a range of activities such as safaris and cruises.

Changes in consumer behaviour, lifestyle, real estate, and social distancing measures lead to reduced travel, increased hybrid, and remote work and workcations. Now is a good time for the hospitality industry to create opportunities for experimentation, new offerings, and new habits. The greatest challenge for hotel brands is to figure out the right subscription offering at the right price point to maximize appeal.

Rev-Mantra management consulting services focus on our clients' most critical issues and opportunities: strategy, marketing (offline/online), distribution, sales representation, and analytics across the service industry and geographies. We bring deep, functional expertise, but are known for our holistic perspective: we capture value across boundaries and between the silos of any organization. We have proven a multiplier effect from optimizing the sum of the parts, not just the individual pieces.

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