Case Study: Inspirato - Revolutionalising travel with subscription-based luxury vacations.
In the past, digital subscriptions were mostly used by content providers and publishers, such as cable television and magazines. Nowadays, with the rise of eCommerce, there are subscriptions for everything in any industry. Different companies have incorporated a subscription model as either a way to support product sales - like Birchbox and The Willoughby Book Club or as the primary service and product offerings like Hello Fresh and MasterClass, which are exclusively subscription-based brands.
In the past, digital subscriptions were mostly used by content providers and publishers, such as cable television and magazines. Nowadays, with the rise of eCommerce, there are subscriptions for everything in any industry. Different companies have incorporated a subscription model as either a way to support product sales - like Birchbox and The Willoughby Book Club or as the primary service and product offerings like Hello Fresh and MasterClass, which are exclusively subscription-based brands.
In the past, digital subscriptions were mostly used by content providers and publishers, such as cable television and magazines. Nowadays, with the rise of eCommerce, there are subscriptions for everything in any industry. Different companies have incorporated a subscription model as either a way to support product sales - like Birchbox and The Willoughby Book Club or as the primary service and product offerings like Hello Fresh and MasterClass, which are exclusively subscription-based brands.
A 2018 study by McKinsey & Co. stated that the subscription eCommerce market had grown by more than 100% annually since 2013 and generated more than $2.6 billion in sales in 2016. About 15% of online shoppers have signed up for one or more monthly subscriptions. Without a shadow of doubt, this trend has been accelerated by the pandemic.
The subscription model became very popular because it allows businesses to grow their customer base while having a guaranteed revenue and providing value for money, curation and personalisation for consumers. Besides, they are very convenient as customers can receive their products without leaving their homes. Having tailored offerings for an affordable price is every customer's dream and a better way to have return customers than loyalty programmes.
But can travel and tourism adopt the subscription model? In the online travel industry, the subscription model can be more challenging because, unlike other businesses, travel is all about the experience. Despite this challenge, online travel businesses can adopt the model where people can subscribe to have a certain number of travel experiences per year, like tours. Brands like FinalPrice, OneGo and Flightpass offer subscription options for hotels and flights.
While there are many companies for subscription services, the first company applying this model in luxury travel was Inspirato. Founded by Brent and Brad Handler in 2011, Inspirato is a luxury hospitality club based in Denver that launched the Inspirato Pass. This membership allows customers to book up to 25 stays a year across the company's portfolio of 385 high-end vacation homes and 500 five-star hotels and resort partners in more than 240 destinations and book travel experiences like cruises - all for $2500 per month. The membership also features unlimited Bonus Trips that offers customers the possibility to book an unlimited number of trips from their Pass Trip List with more than 150,000 trips, within the next 30 days for £3,000 each trip or 60 days for $6,000 at flat per-trip pricing with no extra fees, taxes or nightly rates.
Initially, Inspirato's Club membership was $20,000 joining fee and $3,600 each year to continue, but this changed to a $600 enrolment fee and a $600 monthly charge, making it more accessible. After being closed for three months due to the pandemic, the company also changed Inspirato Pass' fees, removing the six-month commitment and adopting a cancel-at-any-time policy, which increased the membership retention fees.
In 2020, the company reported having a 30% higher booking activity year-over-year, and in 2021, it generated more than $1.2 billion in revenue. With the current success and growing market for luxury travel, the brand expects to reach $230 billion by 2025 just in the U.S.
Before Inspirato Pass was launched, there was an unbooked inventory problem in luxury hospitality. Unlike lower-level brands, luxury brands cannot offer discounted deals publicly as they could risk weakening their luxury reputation. Inspiratoresolves this problem by allowing these brands to make deals behind the scenes; after identifying unsold rooms through the database, the company liaises with the hotels and purchases inventory at lower rates. By selling at a discounted rate to Inspirato without revealing to the public how much is being discounted, the brands are able to keep their exclusivity and luxury status.
"Hotels have the big challenge of rate parity. They don't want their luxury brand to ever have a price out there that's not the same as the price on their website. But oftentimes hotels will have $1,500-a-night rooms available, which they can then sell to us [at a discount], because they'd like some revenue rather than none. And with Inspirato Pass, because there's no price shown at all, we're the only channel that offers them true opacity." - Brent Handler, Founder and CEO of Inspirato
This membership brings benefits for both the luxury brands and the consumers. Hotels can have access to a loyal membership base while guests have the opportunity to enjoy luxury rooms at discounted prices alongside one-of-a-kind personalised experiences exclusively provided by Inspirato. The innovative delivery of convenience, luxury and opacity is the unique selling point that makes the brand undisputed in the luxury market.
Inspirato is an excellent example of how the subscription model can be used in travel. However, knowing that the tourism industry is still recovering and travel continues to face restrictions, implementing a subscription-based model in a business could be quite challenging. With fewer people travelling and less often, it is unlikely for consumers to see the value over the long term to be willing to pay a monthly or annual fee. Having this business model means companies would rely on targeting a small but high-spend market.
For regular travellers like remote workers and digital nomads or business and luxury travellers, using travel subscription services could be beneficial, but it is still unclear how and if the model will blossom.
Feel inspired to learn more about subscription-based business model by following the stories of BeRightBack, a company that reinforces the idea that subscription models in travel are possible and can be accessible for any type of travellers. And by the story of Cuvée Privée, a example of how a small business can scale revenue and boost customer loyalty by leveraging on innovation and applying creativity to traditional subscription-based models.
Created for destinations around the world, this programme will provide the insight to help you become a sustainability leader within your organisation.
Designed to teach you how to master must-have tools and acquire essential skills to succeed in managing your destination or organisation, be ready to challenge all of your assumptions.
Designed to teach you how to master must-have tools and acquire essential skills to succeed in managing your destination or organisation, be ready to challenge all of your assumptions.
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