A New Trend in Travel Financing

Hotels are increasingly adopting Buy Now, Pay Later (BNPL) options to attract a new generation of travelers, though many are still hesitant to integrate this payment method.

The hospitality industry is witnessing a shift in payment preferences as more travelers opt for Buy Now, Pay Later (BNPL) loans to fund their trips. While credit cards remain the dominant payment method, BNPL is gaining traction, particularly among younger consumers. According to a NerdWallet report, nearly 20% of travelers used BNPL for their summer travel, prompting hoteliers to consider offering this option. However, not all hotels have embraced BNPL, potentially missing out on revenue from a new demographic of travelers.

Rising Popularity of BNPL

BNPL has become a mainstream payment option across various industries, with consumers using it for both everyday and luxury purchases. Tom Botts, president of Flex Pay at Upgrade, noted that BNPL aligns with how many people prefer to pay today. Despite its growing popularity, the travel industry, particularly hotels, has been slow to adopt BNPL compared to online travel agencies like Expedia and Booking.com, which have offered it for years.

Integration Challenges and Opportunities

Hotels face several challenges in integrating BNPL, including concerns about potential complications at the front desk and whether BNPL users will spend on additional services during their stay. However, third-party lenders mitigate these risks by ensuring borrowers have the financial resources to repay their loans. Unique Vacations, which integrated BNPL for its Sandals and Beaches brands in 2023, found that offering BNPL reduced cancellation rates, indicating a potential benefit for hotels.

Understanding the BNPL User

BNPL users often differ from traditional credit card holders, as they may not participate in mileage and rewards programs. Offering BNPL can attract a new segment of travelers, expanding a hotel’s customer base. Flex Pay, a simple interest BNPL option, provides an alternative for those seeking to manage travel expenses without adding another credit card.

Business Implications and Marketing Potential

For hotels, integrating BNPL is not just about meeting consumer demand; it also presents a marketing opportunity. Unique Vacations has leveraged BNPL as a tool to drive direct bookings, offering promotions like 0% interest for qualified customers during peak sales periods. These campaigns have proven successful, with increased bookings and average order values.

Future Prospects and Strategic Implementation

As BNPL becomes more prevalent, hotels are exploring ways to integrate it into their marketing strategies and customer interactions. Unique Vacations, for instance, is incorporating BNPL options into email notifications and call center operations. The flexibility of BNPL allows hotels to offer upgrades or add-ons, enhancing the guest experience.

Botts predicts that BNPL will continue to grow in the hotel industry, with ongoing discussions about integrating it into property management systems. The ultimate goal is to make BNPL as accessible and seamless as credit card payments, offering guests a versatile and appealing payment option.

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