Limited vs Unlimited Subscriptions in travel
Subscriptions are an emerging trend in travel, and to adapt to the industry’s unique complexities, they come in all shapes and sizes.
We have tried to bring some order and have created a taxonomy that classifies Travel subscriptions into two groups: Trip Subscriptions and Club Subscriptions. The mechanics behind these two types are the same, a user pays an automatic recurrent fee to access a set of benefits. What changes are the benefits. Trip subscriptions give direct access to trips, Clubs don’t. And this has a profound impact on how the consumer behaves.
In this article we are going to dig into Trip Subscriptions, how they work, explore the main types and what is their impact on a company’s market share, demand, and revenue.
Limited Trip Subscriptions
The most common type of Trip subscriptions are Limited or Quota-based subscriptions, where users pay a recurring fee to access a set number of trips. With each payment cycle, the number of available trips is reset, and unused trips are lost. This has a significant effect on user behavior.
Trip subscriptions give subscribers automatic access to trips, so all they have to do when they want to travel is pick their destination on their private page. This eliminates the need for users to search and compare different offers in OTAs and aggregators.
Instead, customers will book directly from the provider they are subscribed to, making it the default choice for their trips and boosting market share. This will also protect customers from the competition, leading to a drastic reduction in the company’s marketing and sales costs.
The benefits we just mentioned are true for most types of Trip subscriptions. But what makes Limited Trip Subscriptions unique is that they have a set (i.e. limited) number of trips that are lost if not used before the next payment cycle. This has an effect on users, that are more likely to travel even if they hadn’t planned to, just to avoid losing their allowance. For the company, this will result in a boost in demand and occupancy.
Limited Subscriptions in practice
Some travel companies have already adopted Limited Trip Subscriptions to accomplish their business goals. A good example is Alaska Airlines, who designed a subscription program to gain market share in California, one of the most densely populated areas of the US, that many airlines have tried to conquer.
For this reason, when the Alaska Flight Pass was first launched, it was only available for flights within California and key destinations nearby.
Going further, Alaska also strategically used the subscription to target and capture different groups of travelers. To achieve this they offered two main plans, differentiated by the advance booking window. The base version allows subscribers to book their flight 14 days before departure, mostly appealing to travelers who can plan their trip in advance. The plus version, instead, allows to book a flight up to 2 hours ahead, appealing to travelers who need to travel last minute.
This strategy will sound quite familiar to revenue managers, as it mirrors the usual price scheme of airlines, where travelers who want to travel last minute have to pay more.
Unlimited Trip Subscriptions
Another type of Trip Subscriptions is the Unlimited. True Unlimited Subscriptions, where subscribers have access to an unlimited number of trips, are rare to find in travel, because they can be risky.
The risk is linked to the complexity of travel pricing, as the value of a trip varies depending on the travel dates, occupancy, time of day, and advance booking. This makes True Unlimited offers hard to control, as users can easily use and abuse them, endangering the company’s margins.
To limit the damage, companies could decide to sell the subscription at a very high price. However, this would make it appealing only to a few people, and would not solve the problem. The company would still have difficulty in predicting profitability, as a subscriber could fly around for a coffee in Rome, a lunch in Valencia and a dinner in Paris, taking the place of a high-yielding customer.
A better solution would be to add some conditions to the subscription. This would help to ensure that subscribers are using the service in a way that is beneficial to both the company and the subscriber. The result is what we call All-You-Can-Travel (AYCT) Subscriptions.
AYCT are often mistaken for True Unlimited Subscriptions, as subscribers have access to an unlimited number of trips, but there are strict rules on what trips can be booked. These rules shape travel behavior, and help companies achieve specific goals.
A classic use of AYCT Subscriptions is to dump distressed inventory, by making available to subscribers only those trips that are unlikely to be sold.
For example, this could be the case of an airline who wants to monetize last minute seats that haven’t been sold, but doesn’t want to drop the price to avoid missing on high yields it could get from last-minute passengers.
By offering an AYCT Subscription that allows to book only one-way, last-minute trips, the airline can separate bargain hunters from high-yielding last minute travelers and fill otherwise unsold seats, boosting load factors.
This strategy is used by Volaris’ Pase Anual and Frontier’s GoWild subscriptions, and it has the added benefit of generating extra revenue through ancillaries and return flight bookings.
Different models can coexist
As we have seen, Limited and Unlimited trip subscriptions are designed to tackle specific business goals, and are not mutually exclusive, which means that companies may decide to adopt both models. This is what Volaris has done, first launching a Limited Subscription (v.pass), and then adding an All-You-Can-Travel Subscription (Pase Anual) to their offering.
Thanks to this strategy, Volaris is now benefiting from multiple sources of recurring revenue streams, attracting previously unreachable customers, boosting revenue and gaining market share.
To summarize, Trip Subscriptions can give access to a Limited or Unlimited amount of trips. On a business level, these two types can be useful to accomplish different goals, even if their nature and mechanics are the same.
This means that both type of subscriptions are a default-retain system where purchases are automatic and recurrent. Leading to better quality revenue streams that are not affected by seasonality and are more predictable than transactional sales.
To learn more about these benefits and the different types of subscriptions that are in the market, we recommend reaching out to our team at firstname.lastname@example.org and reading our taxonomy of travel subscription that will give you a more complete picture of what can be done with subscriptions in our industry.