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Growth in Subscription Services Could Impact Travel Spend

by Richard D'Ambrosio / November 26, 2019
Growth in Subscription Services Could Impact Travel Spend

Content streaming, like Netflix or Hulu, is the most popular paid subscription, with 25% of Americans signing up. Photo:  DANIEL CONSTANTE / Shutterstock.com. 


Travel advisors should keep their eye on U.S. consumer debt loads, because if they rise, travel could be the first discretionary expense that Americans will cut to balance their household budgets – to the detriment of their own health and well-being.

Lexington Law surveyed 1,000 Americans this year and found that 21% of Americans would first give up traveling when in debt or on a stricter budget. The next expense to go would be dining out (20%), followed by purchasing new electronics (16%), non-dining fun activities (14%), and new clothes (11%). Subscription services would be canceled by only 8% of the survey’s respondents.

In a blog post on the Lexington Law website, the company noted how low monthly subscription rates (e.g. $9.99) are appealing to Americans because while they potentially add up to thousands of dollars a year, the upfront costs appear so much lower than a few thousand dollars budgeted for a vacation.

“Americans likely prioritize travel last since associated costs, like flights and accommodations, can quickly add up,” according to the report.

But Lexington Law cautioned readers that “limiting travel and vacation time throughout the year takes a bigger toll on people than they realize — even if they save money in the short term.” They cited a Psychology Today story about the mental health benefits for travelers, which include: strengthening relationships, boosting happiness, enhancing creativity, and relieving stress.

“These are all signs that Americans should think twice about the long-term consequences they’ll likely face when making choices for the short term, like skipping out on travel and vacation to save some money,” Lexington Law wrote in their blog.

At the same time that Americans add monthly expenses, their overall budget commitments to paying down debt are growing, too.

The impact of consumer debt
Consumer debt hit a record $13.86 trillion in the second quarter of 2019, according to the New York Federal Reserve, the 20th consecutive quarter for an increase, and up $1.2 trillion over the previous record high of $12.68 trillion in the third quarter of 2008.

In 2018, McKinsey & Company published a survey of 5,093 U.S.-based respondents, 4,057 of which were online shoppers who had spent at least $25 online in the past month. Their study showed that 15% of online shoppers have subscribed to an e-commerce service over the past year like Blue Apron and Dollar Shave Club. Some 46% of respondents subscribed to an online streaming-media service like NetFlix.

“E-commerce subscribers tend to be younger urbanites with money,” McKinsey said in a blog post about their research. Compared with the general U.S. population, they are more likely to be 25-44 years old, to have incomes from $50,000-$100,000, and to live in urban environments in the Northeastern U.S. Sixty percent of subscriptions were purchased by women, McKinsey found.

Meanwhile, Waterstone Management Group surveyed 2,500 Americans in 2018 and found that 84% grossly underestimate their monthly tech spending. They surveyed 2,500 Americans, asking them to think briefly about their spend on “recurring monthly expenses associated with digital services, devices and subscription boxes.”

People guessed they spent $79.74 a month, on average. But when they were prompted to consider recurring monthly expenses across 21 categories, their actual spend was closer to $240 a month.

“Clearly, most Americans are unaware of how much they spend on subscription services,” Waterstone said in their blog about the research.

Consumer subscriptions may be hard to cancel
According to a separate recent report, Lexington Law believes about one third of the U.S. subscribes monthly to at least one service, while 17% subscribe to more than one (mostly for their ease of use and convenience), though pricing appears to impact younger subscribers, more than older ones.

The Lexington Law survey of more than 2,000 people found that 68% of Americans who purchase at least one subscription service reported convenience and price as their reason for purchasing and maintaining those monthly subscriptions. (Content streaming, like Netflix or Hulu, is the most popular paid subscription, with 25% of Americans signing up.)

The company found that for each decade of age increase after age 45, price sensitivity declines 20% on average, as older subscribers are willing to pay for that convenience.

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