Could a ‘freemium’ model of holidays paid for by advertisers mean some lucky travellers no longer pay for their own holidays anymore? This really could work, all that’s needed is a brave entrepreneur to kick-start the model, argues Roman Townsend from Belvera Partners
A significant amount of the services we consume everyday are totally free: Google or Bing, Facebook and Instagram, using WhatsApp, and of course mainstream TV and radio. These aren’t public services or altruistic providers, they’re businesses that live off advertising.
But could a holiday ever be totally and utterly free, paid for by advertisers and with zero cost for the traveller? As outrageous as this might seem, there are plenty of precedents for free holidays. FAM trips are the traditional way to tempt travel agents and tour operators to sell a property or experience, as are social media influencer tours. Meanwhile luxury brands often take wealthy target audiences away for the weekend, sports car manufacturers being an example. And corporations often invite important clients away for all-costs covered, week-long ‘retreats’ under the pretense of a conference that is really an excuse for boozy partying in luxury resorts in exotic locations far, far away.
But to make normal holidays free for ordinary people? Martin Eade from travel technology booking engine provider Vibe comments “years ago timeshare promotors used to give away free travel products, for example hotel stays or tickets to Disney, if you just signed-up for one of their sales presentations”. Whilst Mark Ross-Smith from StatusMatch, a tech provider to airline loyalty schemes, points out that “airlines have been giving people free travel products in the form of points redemptions for years in return for hitting spending thresholds, and there’s high-end credit card companies that offer free hotel nights just for holding the card. This is kind of the same thing just in reverse”.
Ultimately this is simply a question of whether or not an advertiser is prepared to cover the cost of someone’s holiday in return for the advertising opportunity: the airline, hotelier, transfer company or restaurant owner don’t care who actually pays – as long as someone pays. Advertisers pay big bucks for your data already, so why not to have you there in person in the form of a holiday?
As long as the traveller is their target audience, then the holiday format presents an enormous amount of opportunities for advertisers to sell, sell, sell. Several hours on an airplane, the hotel room, the transfer, the restaurant spaces, and more – all of which right now have a very limited amount of advertisements placed within them. Imagine the possibilities on a cruise ship, where no one can leave the boat and spends a lot of time watching performances ripe for branded moments.
Barry Klipp from InterLnkd – who’s engine matches fashion and beauty brands and products with holiday bookings, to provide OTAs and airlines with a new stream of ancillary revenue – believes this is something that could be on the horizon: “selling the holiday itself is not the only way to generate revenue, there are other income potentials and we offer one by driving a revenue stream from cross-selling FMCG goods ahead of the travel date. Could that alone pay for the whole holiday? Clearly not, but it’s an example of how you can be on your way towards covering part of that.”
In the opinion of Alex Barros from revenue management experts BEONx, nowadays many hotels need to rethink their business model anway, “the days of focusing on RevPAR are over, hotels need to think about maximizing revenue from the whole guest experience such as concierge services or the restaurant – one way to do that might be to give the room away for free, like casinos do already to high-rolling gamblers.”
How might this economic model work then? Assuming that no actual tour operator or travel provider is going to be brave enough do this for themselves yet, essentially what would happen is a company would be set up whose objective is to attract enough advertisers to cover the cost of a holiday and then find travellers who fit the desired advertising profile. With those funds they then book a charter plane all-inclusive holiday for the group and maximise branding opportunities throughout that experience – including not just adverts, but also tour reps who are trained to sell the products of the sponsors.
Given that some all-inclusive package holidays can start from just a few hundred pounds, that’s not such a big advertising budget to attract. And if you’re thinking “yes but a person paying a few hundred pounds for a holiday isn’t worth that much in advertising terms”, then think again: a supermarket might pay a fortune for such audiences if they felt they could convert them to their brand.
The technology required to match advertisers to travellers – using big data techniques – now exists as long as the ‘Freemium holidays’ company has enough demand from a wide range of socio-economic and demographically relevant travellers. And can you imagine such a company not being inundated with people prepared to offer them their data in return for a free holiday?
Spencer Hanlon from B2B travel payments provider Nium highlights that many travel providers or tour operators give up to as much as 3% of their revenues over to handling payments, due to old-fashioned financial infrastructure: “if there’s no payments from the consumer side of things, that drastically reduces the financial transaction costs – all that’s left is one lump-sum B2B payment to the supplier that with modern technology should be almost unnoticeable as a transfer cost. You’re 3% of the way there already.”
It is also possible that destination marketing organizations might step in sometimes to give free or discounted holidays. Carlos Cendra from travel intelligence provider Mabrian comments “a destination that wants to attract a new visitor profile could be interested in partnering with such a platform as they’d have certainty that the travellers are their target market. In fact, we constantly see how destinations invest millions in what are called ‘co-marketing agreements’ with airlines in order to co-finance inbound seats during low-season.”
There are a lot of other industries out there that might want step-in to offer parts of the package directly too. Katie Crowe from travel insurance provider battleface comments “financial services organisations are always keen to encourage you to switch to their services, some of which can be very high margin like pension products, and one way to do this is through promotions directly to their target audiences. What better complement to a holiday than an insurance policy promotion?”.
For now it is possible to imagine at the very least some kind of discount holidays model – in fact, as we´ve seen above, to some extent this is happening already – where part of the costs are subsidized by advertisers before we move to a 100% free model. Who knows, if this ‘freemium holidays’ model proved profitable one day we could even reach a situation where – in order to compete for travellers – someone even pays people to go on holiday? All we need is someone to actually step forwards and do this. Volunteers?
Roman Townsend is the Managing Director of Belvera Partners, a PR consultancy for the travel technology industry