An Emerging Platform
Hospitality owners are constantly seeking new ventures and business models to adapt to the ever-changing industry. Given the current financial climate, both owners and guests are scrutinizing their disposable income and how it impacts their earnings and spending.
With the resurgence of cruise ship holidays and full package deals, it is clear that guests are looking for convenience and a hassle-free experience. So why aren’t hotels adopting the same model?
One just has to look at the statistics to see that there is method in their madness. According to the Cruise Lines International Association (CLIA), the global cruise industry is expected to carry a record 28.2 million passengers in 2023, up from 26.6 million in 2022. This represents an increase of 6% year-over-year. So what are they doing right?
All-inclusive, fully paid-up holidays can be paid off in instalments or over time. This is a business model that hoteliers could learn from, especially during quieter times when they need to fill their rooms.
WebChef will explore the “Pay as you go” business model in this blog post, discussing its advantages and disadvantages. We will also examine the “Subscription” traveler and how land-based hotel owners can expand their businesses through this model.
Subscription – Pay as You Go Stays
- Customers pay a monthly or annual fee for access to unlimited stays at your hotel(s).
- Subscription rates can vary depending on the type of room, the length of stay, and the number of locations included.
- Subscription members may also receive other benefits, such as discounts on food and beverages, early check-in and late check-out, and access to exclusive amenities.
- Customers pay a nightly rate for each night they stay at your hotel based on their credit limit.
- Nightly rates can vary depending on the type of room, the time of year, and the demand.
Rewards Program
- Customers earn rewards for staying at your hotel, whether they are on a subscription plan or paying as you go.
- Rewards can be redeemed for free nights, discounts on food and beverages, or other perks.
Example
| Subscription Type | Monthly Fee | Annual Fee | Benefits |
| Basic | R1,000 | R10,000 | Unlimited stays at standard rooms |
| Premium | R1,500 | R15,000 | Unlimited stays at premium rooms, plus early check-in and late check-out |
| Deluxe | R2,000 | R20,000 | Unlimited stays at deluxe rooms, plus early check-in, late check-out, and access to the executive lounge |
| Room Type | Weekday Rate | Weekend Rate |
| Standard | R500 | R600 |
| Premium | R600 | R700 |
| Deluxe | R700 | R800 |
| Tier | Nights Required | Benefits |
| Silver | 10 | 10% discount on food and beverages |
| Gold | 25 | 15% discount on food and beverages, plus early check-in and late check-out |
| Platinum | 50 | 20% discount on food and beverages, plus early check-in, late check-out, and access to the executive lounge |
A customer signs up for the Premium subscription plan, which costs R1,500 per month. This gives them unlimited stays at premium rooms, as well as early check-in and late check-out.
If the customer stays at the hotel for 30 nights per month, their average nightly rate would be R50 (R1,500 / 30 nights). This is a significant discount compared to the pay as you go rate for a premium room, which is R600 per night.
In addition to the discount on nightly rates, the customer also earns rewards for staying at the hotel. Once they have stayed for 25 nights, they will be upgraded to Gold status in the rewards program. This gives them a 15% discount on food and beverages, as well as early check-in and late check-out.
This hotel business model template shows how you can combine subscription stays and pay as you go stays in a way that benefits both you and your customers. Subscription members can save money on their hotel stays, and you can generate guaranteed revenue. By also offering a rewards program, you can encourage customers to stay at your hotel more often.
Of course, this is just a template. You can customize it to fit your specific needs and target market. For example, you may want to offer different subscription tiers, or different rewards for different levels of loyalty.
There are a number of hotels using the subscription business model, including:
These hotels offer subscription plans that give members unlimited or discounted stays at their properties. Some plans also include other benefits, such as early check-in, late check-out, and access to exclusive amenities.
The subscription business model has been successful for a number of reasons. First, it provides customers with a convenient and affordable way to book hotel stays. Second, it allows hotels to generate guaranteed revenue. Third, it can help hotels to build long-term relationships with their customers.
Here are some statistics on the success of the subscription business model in the hotel industry:
- Inspirato, a luxury hotel subscription club, has over 13,000 members and is growing at 18% per year.
- Selina, a co-living hotel chain, has over 35,000 members and is growing at 50% per year.
- Sonder, a short-term rental company, has over 50,000 active subscribers.
- CitizenM, a budget hotel chain, has over 500,000 members in its loyalty program.
These statistics show that the subscription business model is a growing trend in the hotel industry. It is a model that benefits both customers and hotels.
Overall, the subscription business model is a successful way for hotels to generate revenue and build long-term relationships with their customers. It is a model that is likely to continue to grow in popularity in the years to come.
While the subscription business model is still relatively new in South Africa, it is gaining traction as more and more travelers look for convenient and affordable ways to stay. It is also a good way for hotels to attract and retain loyal customers.
Pros of the subscription business model for hotels:
- Increased revenue: Subscription plans can help hotels to generate guaranteed revenue, especially during the off-season.
- Reduced customer acquisition costs: Once a customer has subscribed to a plan, they are more likely to stay at the hotel again and again. This can help hotels to reduce their customer acquisition costs.
- Improved customer loyalty: Subscription plans can help hotels to build long-term relationships with their customers. When customers feel valued and appreciated, they are more likely to recommend the hotel to their friends and family.
- Better capacity planning: Hotels can better plan for capacity and demand when they have a certain number of guaranteed bookings each month.
- Opportunity to upsell and cross-sell: Hotels can upsell and cross-sell additional services to their subscription members, such as spa treatments, restaurant meals, and tours.
- Improved brand awareness: Subscription plans can help hotels to increase brand awareness and attract new customers.
Cons of the subscription business model for hotels:
- High upfront costs: Hotels need to invest in marketing and promotion to attract new subscribers.
- Need to provide a high-quality experience: In order to keep subscribers happy, hotels need to provide a high-quality experience, including comfortable accommodations, good food and beverage options, and friendly service. This can be challenging, especially if the hotel is operating on a tight budget.
- Competition from other hotels: As more and more hotels adopt the subscription business model, competition will increase. Hotels need to find ways to differentiate themselves from the competition and offer subscribers unique value propositions.
- Risk of customer churn: Customers may cancel their subscriptions if they are not satisfied with the hotel’s experience or if they find a better deal elsewhere.
- Difficulty in pricing: It can be difficult to price subscription plans in a way that is both profitable for the hotel and attractive to customers.
Additional considerations:
- Target market: Hotels need to identify their target market and develop subscription plans that meet the needs of those customers. For example, a hotel that caters to business travelers may offer a different subscription plan than a hotel that caters to leisure travelers.
- Value proposition: Hotels need to clearly articulate the value proposition of their subscription plans. What benefits do subscribers get? How much money can they save? Why should they choose this hotel’s subscription plan over another hotel’s plan?
- Marketing and promotion: Hotels need to develop a marketing and promotion strategy to attract new subscribers. This could involve online advertising, social media marketing, and email marketing.
- Customer service: Hotels need to provide excellent customer service to their subscription members. This includes making it easy for customers to sign up for and cancel plans, as well as addressing any issues or concerns that customers may have.
Overall, the subscription business model can be a great way for hotels to generate revenue and build long-term relationships with their customers. However, it is important to carefully consider the pros and cons before implementing this model. Hotels need to make sure that they have the resources and capabilities to provide a high-quality experience for their subscription members.