This past November, Uber announced its much awaited monthly subscription service. Called the ‘Ride Pass’, the service allows users guaranteed set prices for a monthly fee. The service is available in Los Angeles, Austin, Orlando, Denver, and Miami and costs $24.99 a month in Los Angeles and $14.99 a month in the other four cities.
This is not the first instance of a ride hailing company launching a subscription service. Lyft – Uber’s primary competitor – launched one of its own earlier. Called the ‘All-Access Plan’, Lyft’s service costs $299 a month and gives users 30 rides worth up to $15 each. If a ride costs more than $15, the user pays the difference.
Subscription services for ride-hailing seem like the next logical step for the subscription economy. It’s a market that’s seen explosive growth (more than 100% a year for the last five years). And clearly we have gotten pretty used to the subscription way of life for most household daily items. From subscribing simple things in our lives like our meals (e.g., Blue Apron) to makeup (e.g., Birchbox) to movies (e.g., Netflix) and most things in between like Razors (Dollar Shave Club), goods (Amazon Save & Subscribe), fashion (JustFabFashion), it seems fair to say that we were ready for the subscription model to kick-in for some of the larger expense items, like cars. And Uber and Lyft did not disappoint.
I wonder though if the time is ripe for the model to kick-in for what I consider the holy grail of subscription: hotels?
What if you could pay a certain minimum monthly fee and book rooms at hotels like LaQuinta, Hampton Inn, Courtyard, etc.? Or an additional amount for some of the next tier of hotels like Sheraton, Westin, etc.? Or an even higher amount for sites like Ritz, Breakers, etc.? Or what if Airbnb were to offer its own subscription service for a minimum monthly amount?
It’s no secret that Airbnb and the traditional hotel industry have exerted tremendous competitive pressures on each other over the last several years. I wonder though whether the subscription economy model could be the next competitive edge each of them could have over the other.
But do hotels - or hospitality services in general - lend themselves well to the subscription economy?
From a consumer perspective, this would be awesome. You would think that the frequent traveler (whether self-financed or through her company) would jump on such a model. Not just them but even those who like to travel but hold back due to the high prices could also end up embracing this model.
But would the economics work for the companies providing the subscription model? How do you price such a model? How many people would need to sign up for such a model to be financially sustainable? Will space availability become an issue for those who do not subscribe? Would there need to be a cap on the max number of days someone can stay in a hotel with this model (after all, someone could theoretically just “live” at a place if it’s cheaper)?
This seems like a fascinating problem to crack. Given where the subscription economy is headed, I will not be surprised if this becomes a reality soon though.
What do you think? Do you think the hotel industry fundamentally has what it takes to succeed in the subscription economy? Why? Or Why not?
Nitin is the CEO of Mobile Doorman, a former Management Consultant at McKinsey & Company and Board of Trustees Member at the Naperville Public Library. He advises Company Boards, CEOs and BU heads on product strategy, growth and operations. He also has multiple US patents (5) for design and development of mobile, wireless and networking technology including a patent to extend smartphone battery life. Nitin holds a masters in Electrical & Computer Engineering from the University of Texas at Austin and an MBA in Marketing & Finance from the University of Chicago Booth School of Business.