More travelers are booking trips using buy-now-pay-later loans, and hoteliers are taking note, beginning to offer the financing for guests booking directly thanks to third-party lenders. But not all hotels have integrated BNPL, leaving money from a new generation of travelers on the table, experts say.
Nearly a fifth of travelers were estimated by a NerdWallet report to be funding their summer travel by using BNPL. Credit cards still lead the way for booking payments, but offering BNPL is "all about opening the aperture," said Tom Botts, president of Flex Pay at Upgrade.
"This is how a generation of people want to pay," Botts said.
Buy now, pay later taking off in travel
BNPL has risen in popularity for consumers — and it's something that consumers are increasingly opting to use for purchases at every price point.
"Buy now, pay later is now associated with every brand out there," Botts said, explaining that shoppers are using it for everything from daily items to luxury items.
"It's really become much more of a mainstream product, and this is how people want to pay," he added. "There's nothing shameful about it. They're great, world-class customers. They're not any different than customers [who] would pay any other way."
Within the travel industry, hotels are among the slowest to adopt the new payment method. Online travel agencies, such as Expedia and Booking.com, have been offering BNPL for their prepaid rates for many years, said Botts, who worked for 15 years in hospitality at companies including Starwood Hotels and Miraval Resorts and Spas before becoming an early employee at Uplift, later acquired by Upgrade.
"Consumers clearly want that product, and it's important, I believe as an ex-hotelier myself, to make sure that consumers who want that option have that option by booking direct," he said. "Why would a hotel force a consumer to an OTA simply because they want to pay over time because the hotel isn't offering it on their own website?"
Companies like Unique Vacations, which attracts leisure travelers primarily, are especially affected by BNPL interest. The company integrated BNPL for its all-inclusive brands Sandals and Beaches in 2023, and William Tullmann, vice president of operations and revenue strategy, said it felt "almost behind the game" compared to the wider travel industry but still beat out much of the hotel industry.
"The one key consideration for us [was], 'Is this something our guest is asking for?' Talking with both loyal guests and the travel agent community, who we we have an excellent partnership with, we understood actually our guests were already using buy now, pay later, booking through other various channels," Tullmann said.
Tullmann said they wanted a partner that understood the hotel business and its revenue goals and nuances. Upgrade's Flex Pay fits that criteria, Tullmann said. Other BNPL players in the space include Afterpay, Affirm and Klarna, with each also active in other industries, and other hoteliers using Flex Pay include Choice Hotels and Wyndham Hotels & Resorts.
Who is the BNPL user?
Flex Pay is simple interest — it doesn't compound — and BNPL in general can be an alternative for travelers looking to separate travel expenses or avoiding another credit card, Botts said. The overlap between travelers with a co-branded credit card and those using BNPL is minimal, he added.
Offering BNPL opens up travel booking to a new set of travelers — ones that aren't in the mileage and rewards games.
Some of the hoteliers concerns included added complications at the front desk, which Botts said Flex Pay has addressed any issues in that space. But another concern is whether hoteliers even want to attract BNPL guests.
"There is definitely still the concern on the part of hoteliers of, 'Do I want these people in my hotel room? Are they going to spend money on ancillaries once they're here?' and some of those kinds of things," Botts said.
And that's where third-party lenders step in to de-risk the process for hoteliers.
"We want to make sure that people do have the financial resources to pay us back because that's just fundamentally important to being not only a responsible lender, but it's how our business is able to operate," Botts said.
A unique aspect of BNPL travelers is that they are less likely to cancel their bookings, something both Botts and Tullmann have observed. Tullmann said he was surprised to discover a cancellation reduction after implementing BNPL with Flex Pay.
"In travel, we run a fairly high cancellation rate, and we saw a significant drop in that for anyone that was using buy now, pay later financing," Tullmann said. "So this is actually almost now looked at as a channel in its own sense — that the clients act slightly different than than the bulk of our guests."
But that's not the only benefit Unique Vacations has seen since 2023. At first, Tullmann said the company simply added BNPL as an option at checkout, presuming that those that know, understand and use it already would opt for it.
This is now not something Tullmann nor Botts would recommend, as BNPL might change the how the consumer transacts.
"What buy now, pay later does is it allows people to start thinking about it as they're going through the booking process and understand the relative difference of a suite versus a regular room, or a six-night stay versus a seven-night stay," Botts said.
The business opportunity for BNPL integration
BNPL continues to be attractive for a younger generation, and Tullmann said Unique Vacations' business is already growing within younger travelers, so meeting consumers where they are was already important.
Also, with the company's popularity within the wedding and honeymoon side of the industry, Sandals, for example, is seeing more wedding-related consumers opting for paying for their trips over time.
Seeing the opportunities for BNPL, Unique Vacations is now tapping into the financing option as a marketing tool and revenue generator in itself and attracting guests who would otherwise use OTAs to book direct.
"The short answer is yes, 100% there is an advantage to your direct channels if you are offering buy now, pay later," Tullmann said. "There are certain ways that you can utilize it that will increase [direct bookings]."
Last November for Black Friday, Unique Vacations ran a campaign that offered 0% interest for well-qualified customers booking with BNPL. The company offset the costs for the campaign and Tullmann said it was the "most successful sales campaign we've ever run, in terms of booking performance."
"Even though we were practicing rate parity with an OTA or a tour operator, we had this extra lever that really helped us close business," he said. "And even for someone who may not have been interested in financing at that stage, when you present 0% on a direct channel, it changes the game. And we saw financing between $250 on two nights for two months, up to $25,000 on 24 months, so the full gamut."
Tullmann said they ran another similar campaign in the spring and plan to return the Black Friday special later this year. Even with offsetting the cost of offering the 0% interest, he said it was a successful campaign because they kept their rates the same but were able to incentivize customers with the financing.
"It's always hard to pinpoint attribution of what was someone's ultimate decision, but when all your metrics are up — your average order value, your bookings, your conversion — it points to it was additive," he said.
Unique Vacations' typical bookings offer consumers a chance to book with just an initial down payment with full payment due 60 days ahead of the stay. But Tullmann said now they are seeing interest in travelers looking to use BNPL even after that initial transaction.
"We have actually seen the adoption of customers calling in and asking if they can use buy now, pay later for their final payment," he said.
Now, Unique Vacations is integrating this option in some of its marketing and email notifications and has prepared its call center specialists to take BNPL payment.
Tullmann said he also sees an opportunity to offer upgrades or add-ons via BNPL for guests who have already booked. Weddings and other events could also be booked using BNPL potentially.
"I think the flexibility to choose the the amount that someone wants to pay is also critical," he said. "It may not always be the entire vacation. It could just be $1,000, it could be the last night or it could be paying for that upgrade. So, it's a very versatile tool."
Botts said BNPL will continue to become more prevalent in the hotel industry and beyond, and he's having continued conversations with the property management system companies to ensure integration.
"The ultimate nirvana is that I can pay for anything at a hotel using buy now, pay later the same way I can pay [with] my credit card," he said.