Chief executive of Europe's largest OTA group, Dana Dunne, spoke to Travolution about the challenges of the firm's five-year transition and growing its Prime membership despite the CPOVID pandemic
Subscription pivot puts eDreams ODIGEO in same stable as Netflix, Amazon and Costco
European OTA group eDreams ODIGEO is now benchmarking itself against the world’s biggest digital subscription services like Netflix due to the success of its Prime membership.
In an end of year trading update this week, the Opodo parent announced that Prime has hit 2.9 million members and revenue from them now accounts for more than 50% of its total.
On average the OTA makes €88 of revenue per Prime member although this is expected to fall to €80 as it moves towards its target of 7.25 million members by 2025.
Speaking to Travolution Dana Dunne, chief executive, said the company has completed the challenging transition from a transaction-based model to a subscription based model.
“We've been at this for five years, even though we didn’t really make it public because we realised how difficult it was,” Dunne said.
“We wanted to use that time to create a competitive advantage, to build up a moat. So it's now been five years, and it has been really difficult.
“I'm not exaggerating when I say just about every system, and every process of the company had to be changed.”
Dunne said its financial reporting is now aligned with how the likes of Netflix reports its numbers with cash marginal profit and cash EBITDA as key measures of performance.
He said while the eDreams subscription model is similar to that of Netflix, Spotify or Amazon, it more resembles that of the “grandfather” of the sector, the US supermarket chain Costco.
And he said more recently founded subscription businesses, like Zwift in the personal fitness sector, have shown how the model can be applied in a wide range of business sectors.
“There are a number of segments that do really well in subscription that aren't like Netflix, where there's a new film or content every single day, and they have been really successful,” said Dunne.
And he added the fact that eDreams has been able to add new members throughout the pandemic at scale demonstrates that subscriptions can work in travel.
“We have grown our subscription and people have renewed subscriptions in the most dire moment for the travel industry for the past 50 years or maybe even 100 years.
“We've had renewals and we've had growth, and we've been adding a half a million customers every three months.
"So it does bode very well for us and shows that people do want to subscribe because they get real value from our programme.”
Dunne said the shift to Prime has required a complete change in the way eDreams is structured and deals with its customers.
“Transaction versus subscription are two very different mindsets, two different ways of working.
“We've had to go through and grow and learn through the five years with our employees about changing to the mindset of subscription.”
He added: “Just a simple email CRM [Customer Relationship Management] system, we had to completely change it, because you have subscribers and non-subscribers.
“The way in which you want to interact with a subscriber is very different than the way in which you want to interact with a non-subscriber.
“You have an onboarding email, you have a renewal email, on and on and on, and there are different needs for a regular newsletter, so you have to change your whole system and processes.
“In transaction-based businesses you get your money from the booking, so there's a booking ID, a transaction ID, and then you link all of your cash in the financial reporting system to that transaction.
“What do you do when a customer sends you that new renewal fee but there's no transaction, there's no booking? What do the accounting systems do with this cash?
“You have to change everything, your contact centre, your business intelligence systems, because you now have to look at things on a customer level. You can't look at things at a transaction level.
“It takes years and years to do it. That's why we used the five years to transition and now have done it. It's a massive undertaking.”