Coming out of the pandemic and even before, there’s been an unmistakable trend toward disruption and rewriting the rules of engagement in the accommodations space.
The lines between traditional lodging alternatives, shared arrangements and other forms of temporary accommodation continue to blur; at the same time, the rise of lifestyle-driven offerings continues to at once remake and respond to changing consumer expectations and preferences.
Nowhere is this more clear than in luxury travel, which is poised to eclipse $1 trillion in market value, according to a recent study.
The evolution of travel services and accommodations in the luxury segment should inform the strategic thinking of developers, owners and operators, across all asset classes – and may help set the stage for a future wave of investment in the sector.
What factors should players in the space consider?
What luxury travelers really want
American writer Henry Miller said it best: “One’s destination is never a place, but a new way of seeing things.”
The experience of luxury travel often involves carefully architected travel planning (even when the destination is not luxurious or glamorous); journeying via the most comfortable and convenient transportation options; and accessing stopping points and experiences that are rare, memorable and usually inaccessible at lower price points.
Sustainability, a sense of history and place and best-in-class service are also top of mind for luxury travelers, according to Virtuoso.
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Above all, these travelers place a premium on time.
For the affluent consumer whose every moment is aimed at the next stop on a busy calendar, time lost on unnecessary travel logistics or inefficiently planned itineraries is unacceptable; a multi-day stay at a property that does not promise what was delivered, is a catastrophe.
Avoiding such outcomes is the work of high-end travel agents, planners and travel providers.
Enabling the machinery of luxury travel planning to work efficiently and effectively, is the province of technology.
Increasingly, subscription-based innovation is being seen as a bridge that can join the affluent consumer’s desire for seamless, efficient travel experiences with accelerated upside for the B2B travel purveyor.
Why subscriptions?
Just ask any subscriber to Netflix or Peloton.
According to McKinsey & Company, “For consumers, subscription products ... offer a convenient, personalized and often lower-cost way to buy what they want and need.”
Our experience at Inspirato is that subscription-based purchases enable travelers not only to save on nightly rates - but to travel more, and to more places, enjoying great experiences in each destination.
Emerging from the pandemic, our bookings have rebounded smartly – with feedback from our customers indicating a solid resilience in the desire for subscription luxury travel.
As the technology undergirding the subscription travel model builds out further, it will provide additional avenues to ancillary revenue.
Brent Handler
In other words, for the discerning consumer, subscription travel is a way of increasing the diversity of travel experience, the ease and flexibility with which it can be booked and the certainty of a seamless, often surprisingly personalized experience.
For hotels, real estate owners and other accommodation providers, the obvious benefits are predictability and profitability. Subscriptions help solve the challenge of unbooked inventory, producing incremental occupancy and forecastable cash flow, at shoulder times as well as at busier moments on the calendar.
But that is just the beginning.
Allocating inventory to a subscription-based provider avoids brand degradation from discounting, especially in the luxury sector. It diverts guests from traditional opaque and “flash sale” channels. And it provides a brand-aspirational platform for driving new trial with negligible customer acquisition cost.
In sum, the subscription model helps drive sales efficiently and effectively, without negative impacts to marketing spend, brand equity or loyalty.
As the technology undergirding the subscription travel model builds out further, it will provide additional avenues to ancillary revenue, providing luxury brand executives and property owners with previously untapped avenues for increasing subscriber revenues.
As a company, we’ve already started to see the economic benefits of growth in the subscription space.
Equally interesting is the way in which it advances the broader industry’s move toward what has been called the democratization of travel.
In a world where you can have any type of cuisine delivered to your doorstep in an hour, or watch the greatest artists perform at the height of their careers from the comfort of your living room, why would travelers not be able to choose from the world’s finest hotels, resorts and real estate destinations, mixing and matching dates, locations and experiences to suit needs and budgets with a guarantee of quality and five-star service?
The new world of subscription travel makes it possible.
For owners, operators and brands, here is the best part: The same model makes possible greater efficiency, higher occupancy, improved economic utilization and increased RevPAR. It can serve as a support, maybe even an antidote, to the convergence of heightened consumer expectations and the pricing pressure of an increasingly fragmented, competitive marketplace in a post-COVID world.
As the subscription model continues to evolve, there’s every reason to believe the benefits on both sides will continue to increase and deepen - with the travel industry benefitting from the trend toward the expanded economic growth and diversified revenue streams that have bolstered online retail and other verticals under the subscription model.
Welcome to the world of democratized luxury travel.