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NerdWallet: The market for travel subscriptions is expanding— here’s how they work

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This article is reprinted by permission from NerdWallet

Subscriptions have seeped into nearly every consumer industry, from TV to tacos. There are even services that help subscribers cancel all their subscriptions. But one industry has notably lagged behind: travel.

That could be changing.

The market for travel subscriptions has started to expand and includes cheap flights, airport lounges, luxury accommodations and high-end credit cards.

“Subscription models can add a lot of predictability to an industry that can be very spiky,” says Amy Konary, vice president at the Subscribed Institute by Zuora, a think tank focused on the subscription economy.

Travel purchases tend to be one-off and transactional. Airline and hotel loyalty programs aim to promote loyalty and benefits, but only those travelers who travel (and pay) a lot can reap the rewards. Subscriptions could turn this concept on its head by offering these benefits upfront.

“The subscription model lets you get access to those premium perks by paying directly,” Konary says.

Will customers take to this idea? Travel brands are rushing to find out.

Subscriptions take off

Alaska Airlines
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-2.07%

dipped a toe into the subscription waters in March with the launch of its “Flight Pass.” For a price that starts at $49 a month, subscribers can book one round-trip main cabin flight every two months for one penny plus about $15 in fees. The catch? The flights must be direct, booked within a limited time frame and, most important, fly between particular airports in California, Nevada and Arizona.

Confused?

“Communication has been the big challenge,” says Alex Corey, managing director of business development and products at Alaska Airlines. “It’s been hard for people to appreciate that this might not be designed for them. If I went to my favorite store and it didn’t meet my needs, I’d be like, ‘Hey, make this this way.’”

Instead of trying to be everything for every traveler, Alaska’s subscription has focused on a narrow niche: younger Californians with plenty of wanderlust and schedule flexibility. So far, just under half of subscribers are millennials or Generation Zers, according to Alaska.

It’s a niche product, to be sure, but Alaska is confident that it can appeal to a particular kind of West Coast traveler.

“Californians travel 3.5 times more within their own state than residents of other states do,” says Corey, explaining why the airline chose the state as the proving ground for its idea.

And Alaska focused on the lowest-cost entry point possible, starting at $49 a month to make a flight subscription seem feasible to almost anyone.

“We wanted to compete with an Uber
UBER,
-4.08%

ride or a bar tab,” Corey says.

Also see: ‘Travel has rebounded far quicker than analysts expected’: Passengers cheered the end of masks on flights, but they won’t be cheering these prices

Catering to nomads

On the other side of the price spectrum, the luxury travel platform Inspirato offers a subscription service for vacation rentals and high-end hotels starting at $2,500 a month.

That’s $30,000 a year for the opportunity to book high-end accommodations around the world. That might seem like a huge bill for a vacation budget, but it’s potentially more reasonable for remote-working nomads looking to travel as much as possible.

Yet Inspirato’s subscription, too, comes with a long list of caveats and exceptions. Pass holders may book just one trip at a time, bookings are on a first-come, first-served basis and many rooms and homes are available only during off-peak seasons.

Less spendy digital nomads can choose Selina, a co-living and co-working subscription service that combines the cost of accommodation, office space and dependable Wi-Fi into one monthly bill. Subscribers can bounce between Selina’s global destinations and take advantage of surfing lessons, yoga classes and other wellness activities.

These services offer one benefit to potential customers that is difficult to quantify: simplicity. Rather than searching through hundreds of vacation rental listings, subscribers can make one payment a month and choose from a range of vetted options.

Yet simplicity alone won’t cut it, Konary says. Consumers are wary of adding another monthly bill to their long list of active subscriptions and need to know they’re getting a good deal.

“As we’ve become more familiar with these models, we have a high bar for what we expect in terms of value,” Konary says.

More: As prices and coronavirus cases rise, Americans are conflicted about their long-awaited ‘revenge travel’ summer

What’s old is new again

Travel subscriptions aren’t a new idea. JetBlue Airways
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-3.51%

introduced an “All You Can Jet” unlimited flying pass way back in 2009. The promotion received plenty of attention but didn’t translate into a sustainable business model.

And successful travel subscription services already exist. Premium travel credit cards offer perks to travelers such as airport lounge access for a yearly fee. And services like TSA PreCheck and Clear let flyers bypass normal security lines.

But a new wave of subscriptions is coming to travel with one big difference — specificity. Instead of trying to be the Netflix
NFLX,
-4.59%

of travel, with something for everyone, new services are providing niche offerings to specific demographics.

You might like: Here’s everything new coming to Netflix in May 2022 — and what’s leaving

Not everyone wants to fly within California every other month or take surfing lessons in Belize at a co-working space. But for those who do, these subscriptions could offer a valuable way to travel without the hassle. Or they could go the way of MoviePass.

“I do think what we’re doing is unique,” Corey says. “I hope it catches on.”

More From NerdWallet

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Sam Kemmis writes for NerdWallet. Email: skemmis@nerdwallet.com. Twitter: @samsambutdif.

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