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Subscriptions Drive Innovation in Hospitality Loyalty Programmes

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Customer loyalty has become a central focus in the hospitality industries. In the Americas, hospitality providers are experimenting with subscription-based loyalty strategies. Subscriptions aim to improve customers’ experiences, drive repeat business and create brand advocates. Their clear value proposition for both customers and hospitality providers has proven critical in driving their growth.

Subscriptions offer hospitality companies a strong way to drive additional revenue from their loyalty programmes

Source: Euromonitor International

Subscriptions offer hospitality companies a strong way to drive additional revenue from their loyalty programmes; how hospitality providers position them to consumers is a critical factor in determining their success or failure.

Subscriptions growth in response to inflation

Inflation has been the largest factor driving consumers’ interest in subscription services. In the second half of 2021 and into 2022, markets across the Americas saw the highest rates of inflation in decades. This inflation strained American consumers’ disposable income and drove pessimism about the economy.

In the US, Euromonitor’s consumer confidence index fell to 56.1 in the third quarter of 2022, down from 93.8 in the same period in 2019

Source: Euromonitor International

Subscriptions have traditionally focused on low-price, high-frequency purchases. Amazon’s “Subscribe & Save” feature is a strong example of the concept’s success in the retail industry. Travel subscriptions are typically much more expensive than retail subscriptions. As inflation continues to increase prices in the travel industry, however, consumers are increasingly willing to embrace a subscription model to save on these purchases.Subscriptions Chart1.svg

Many hospitality providers have positioned their subscriptions as a way for consumers to navigate inflation while still making high-ticket purchases. In the US, Alaska Airlines launched its Flight Pass programme in February 2022. The subscription allows consumers to pay a monthly fee and to access round-trip flights between several cities on the west coast. Itaú Bank in Brazil also launched a similar subscription in 2022, partnering with travel intermediary CVC to help Brazilians budget for travel purchases.

Subscriptions integration with traditional loyalty programmes

Hospitality providers are experimenting with how to integrate subscription services into their loyalty ecosystems. One popular option has become the creation of a “top tier” subscription option within a loyalty programme. US salad chain Sweetgreen took this approach in April 2023 with the launch of Sweetpass+ that offers members discounts on salad purchases and priority customer support. It acts as an extension of the larger Sweetpass, Sweetgreen’s general loyalty programme.

Uber, meanwhile, has taken a different approach. The mobility provider replaced its free loyalty programme with a monthly subscription, Uber One, in August 2022. Uber’s cancellation of its free loyalty programme coincided with significant growth of its subscription service.

Uber One membership doubled to 12 million subscribers in 2022, up from six million in 2021

Source: Uber One annual report

Adding a subscription as a top tier to an existing loyalty programme offers hospitality providers multiple benefits. They can cast a wide net with their free loyalty programme while drawing incremental revenue from subscribers. These dual benefits have made the top-tier subscription option the most popular method for incorporating subscriptions into loyalty ecosystems. Should experiments like Uber One demonstrate greater profit potential, however, more providers could move away from the free programme model.Subscriptions Chart 2.svgIncorporating subscriptions into loyalty ecosystems also addresses one of consumers’ biggest complaints about loyalty programmes: the value of rewards. In Euromonitor’s Voice of the Consumer: Digital Survey, 2023, rewards not being valuable and it taking too long to receive a reward ranked as the top barriers to participating in a loyalty programme. While subscriptions require consumers to invest upfront, they gain immediate access to benefits and discounts, which may take longer to accrue in a traditional loyalty programme. Perception of benefits is critical in building customer loyalty. Subscriptions perform especially well against this metric, with a clear line between the price paid for the programme and discounts earned on purchases.

Subscriptions offer risks and rewards

Hospitality subscriptions began growing in the Americas as a response to the pandemic in 2021 and 2022. The continued expansion of these services in 2023, however, indicates that they have strong growth potential beyond the post-pandemic recovery period. In spring 2023, Wizz Air and Accor in Europe both announced new subscription programmes. The replication of hospitality subscriptions outside the Americas region supports the success of these programmes and indicates that additional hospitality providers are likely to introduce their own programmes.

Companies that introduce subscriptions should consider the performance of these programmes in the Americas. While many have found success, subscriptions with overly complicated terms and redemption rules have underperformed against expectations. And with an increasing number of subscription options, the risk of subscription fatigue for consumers also rises. To manage these challenges, new hospitality subscriptions must have a clear value proposition to recruit new members.

Read our report The Growth of Subscription Loyalty Programmes in the Americas for more analysis on and best practices for hospitality subscriptions.

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