Afterpay for Accommodation – Could it lead to more bookings or longer stays?

Category: Thoughts

Accommodation providers traditionally offer two methods of payment, credit/debit or cash. But now there is a new payment option for operators to consider providing their customers: Afterpay.

Afterpay and related pay-later services allow customers to buy products and services on the spot, but pay them off over four equal fortnightly repayments. It’s a relatively new payment platform that consumers are flocking to, with 2.2 million people having made a transaction on the platform as of July 2018.

For the most part, Afterpay has been adopted for retail and luxury (hair & beauty) purchases. But, I think there is real scope for this service to be used across the tourism and travel industry by operators, not just the big players listed on the Afterpay website.

Afterpay consumer behaviour statistics

A recent study recently conducted by Mozo, reports several key findings that are interesting to consider for accommodation providers:

  • Nearly 50% of users said they spent more using Afterpay than using a debit or credit card;
  • 65% said the ability to make smaller payments influenced them to make purchases they wouldn’t usually make; and
  • 56% used Afterpay to purchase luxury items like clothing, pet accessories and car accessories.

Could Afterpay lead to an increase in direct bookings

If consumers are spending more with Afterpay and spending it on luxury items, then to me, it makes sense that it could be a perfect fit for accommodation providers.

Offering a service like Afterpay might be a difference between booking direct or via a 3rd party.

It looks like some booking engines offer things like payments plans, but I haven’t been able to find one that offers Afterpay or similar. While this is a step in the right direction, it doesn’t provide the service that consumers are used to, and as a result, the booking process can become more complicated than it needs to be.

I think there is a great opportunity for some of the market-leading booking engines to offer this service and give operators the chance to experiment with Afterpay bookings.

Could Afterpay lead to longer stays

The stats show that consumers are willing to spend more and are happy to make purchases they wouldn’t normally make when using services like Afterpay.

To me, this provides operators with a unique opportunity to market to customers earlier in their buying journey and encourage them to turn their travel dreams into a reality without having to hand over a lump sum of money.

And based on the spending behaviours of ‘afterpayers’, we can assume that they will spend more than a traditional booker. As they would be more likely to either upgrade their room to something more premium or will choose to stay for a longer period.

What about Afterpay’s PLAY

Afterpay has recently released a joint venture with LayAway Travel, an award-winning, fully-licenced travel agency, called PLAY.

According to their website, they explain the venture as:

PLAY adopts a traditional layby model in that customers are able to pick and book a curated holiday package and pay for it in full; in weekly or fortnightly instalments over a 2- to 12-month period, before they travel.

This is a step in an interesting direction for Afterpay. For example, with their traditional service, they empower retailers to maximise their customer’s lust for buying, but with PLAY they are curating holiday experiences through LayAway Travel.

It will be interesting to see if Afterpay has any further plans to expand into the travel/holiday space in the future. It would be a shame for them to focus their efforts just on travel agencies and not investing in working with booking engines to enable operators to use the service.

Summary

Afterpay services would provide accommodation operators with an opportunity to generate higher value direct bookings. However, successful implementation of such services will rely on booking engines getting on board and offering this as a payment option for their systems. Until then operators will need to explore other payment plan features of their engines to experiment with ‘book now – pay later’ services. Watch this space over the next few years.

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