Twist in travel: a ‘heads up’ on a new business source
Could subscription flying services be the next way to drive revenue? It is certainly not something to be ignored, as Sally White has been finding out
Subscription flying services for business travellers are taking off, according to US-based international tech consultants Cognizant Travel & Hospitality Practice. After all, if it works for music, videos and food delivery, why not flights?
In a ‘heads up’ on emerging new sources for online travel businesses, it names subscription packages on busy routes as potentially an important market draw.
Consulting giant McKinsey said last year, in a look at the whole subscription industry, that the subscription e-commerce market has grown by more than 100% annually over the past five years, with the largest such retailers generating more than $2.6 billion in 2016, up from $57 million in 2011.
The subscription e-commerce market has grown by more than 100% annually over the past five years
Frequent business travellers are the main target audience for subscription services, which charge monthly or annual fees for unlimited flights, says Cognizant. Its latest report on air travel – The Future of Air Travel: Eight Disruptive Waves of Change - names four companies already operating. These are Surf Air, Beacon, OneGo and Airly.
Cognizant believes that by 2025 consumers will be going online to subscribe for ‘mobility packages’ that allow them to mix, say, transportation modes (from road to air taxis) to flights and hotels.
It adds, as a take-away in its report, that industry players will need to monitor the impact of such emerging business models by doing the following:
- Monetize excess capacity: Traditional travel businesses need to leverage the sharing economy with operating models that identify idle and excess capacity across networks. Is it possible to introduce last-day cash or reward bidding for available seats? Is it feasible to allow social groups of friends to “share” available seats if someone in the group needs to cancel?
- Explore the operational advantages of subscription travel: In 2025, subscription-based air travel will likely outpace the sharing model. With subscription models, aviation retains the operational advantages of the standard commercial scenario and regulatory environment.
- Consider bundles, a new twist on subscription models: By 2025, subscription travel will likely extend to the entire travel journey. Annual bundles might offer, say, two all-inclusive holiday packages per year anywhere on the U.S. West Coast, including all transportation, lodging and entertainment needs. For incumbent carriers, subscription packages on busy routes could be an important market draw.
- Develop cross-industry offers: The travel sector is a natural to provide tour operator-like services. ‘Super packaging’ could offer a new means of distribution and address issues such as commoditization, brand loyalty, service trust and convenience, while making ‘club rewards’ increasingly important. Access to inventory and the ability to create unique customer services will be the keys to differentiation. Airlines are currently taking the lead in this area, but we envisage the hotel sector will also offer end-to-end packages as the fight for owning the customer journey intensifies.
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