New Economic Realities   //   November 21, 2022

Afterpay partners with Expedia for BNPL on flights, hotels

Travelers can now book up to $2,000 worth of flights and hotels on Expedia using Afterpay, as buy now, pay later services creep into more parts of consumer spending.

Afterpay, the BNPL service that was acquired by Block Inc. earlier this year, on Monday announced the new partnership with travel booking service Expedia Group. Travelers can finance their purchases by making four no-interest payments across six weeks.

The launch comes as other services say they are seeing record demand for BNPL for travel purchases and as travelers becoming increasingly budget-conscious.

Alex Fisher, Afterpay’s head of revenue for North America, said Expedia is the largest travel business to partner with Afterpay to date. Previously, it’s been used for flights, hotels and tourist attractions in Australia, as well as several hotels and travel options in the U.S. Company research earlier this year found travel and experiences were two categories where shoppers planned to increase their spending, so Fisher and the partnerships team went looking for a provider.

“We look at where consumers want us, where they want more flexible options, and then we look for the best partners in the space to to bring that to life,” she said. “We’ve seen the demand to have travel partners in the U.S. just grow dramatically as Buy Now Pay Later has just taken off in the market.”

Currently, electronics, apparel and furniture are the top areas for BNPL spending, according to a July 2022 study from the Motley Fool. But Afterpay is far from the only BNPL service to eye the travel space as a growth area. Affirm can be used to book with brands like Vrbo, Orbitz, Priceline and American Airlines. Uplift is a BNPL that specializes in travel services, with more than 300 partners including Southwest and Alaska Airlines.

The timing of the launch comes as budget-conscious consumers may be looking for new financing options: Destination Analysts, a travel market research firm, found this month that just 54% of Americans say travel is a budget priority for them, a 10-month low. In turn, Fisher and other BNPL experts say the usage of BNPL for travel could increase.

“I think there’s a broad understanding of the macro environment and the impact of that on consumers and their wallets,” Fisher said. “Afterpay is in a unique position to add value, both to the merchant but also, really importantly, to the consumer.”

Tightening travel budgets

Chip West, director of category strategy at marketing firm Vericast, said BNPL is taking off in part because consumers are looking for ways to finance big purchases at a time when their budgets may be stretched with high energy, housing and grocery costs.

There’s also a demographic appeal, he said. Millennials and Gen Z make up the predominant share of BNPL users and they also may lack the access to credit that could allow them to charge a trip.

“It offers the ability for them to purchase travel where they’re not going to get hurt, and they’re not going to be restricted with credit,” West said.

From a retailer’s standpoint, BNPL may drive up the amount someone is willing to spend, West said.

“Consumers, because they don’t realize all their spending at once, can say ‘I can actually spend more,’ and they are. It’s driving up the ticket,” West said.

For Expedia’s part, the Afterpay launch comes at a time of high travel demand. The company’s own research shows searches for travel during November and December were up by more than 60% year-over-year. Searches for travel next year are up by 65% year-over-year.

Christian Gerron, Expedia’s senior vice president for media and brand partnerships, said in an email to Modern Retail that Afterpay offers “a flexible way to pay for trips that fits within their budget.”

A growing sector

Tom Botts, chief commercial officer at Uplift, said demand is five times higher year-over-year during this holiday travel season, with active users up 311% year-over-year. The service expects to see $2 billion gross transaction value this calendar year, up from $650 million in 2021.

Yet it’s model is quite different than Afterpay’s no-interest and six-week payment plan. Uplift has a fixed finance cost for its purchases, but it offers customers several payment terms options upon booking if they want to stretch out their payment for six months, or 18 months, for example. Botts said this provides more flexibility for the customer.

“It’s affordable and it allows customers to pay for their travel over a period of time,” Botts said in an email.

With the demand for travel financing increasing, it’s likely that more travel options will be added to Afterpay in the future. Afterpay’s Fisher said that while Expedia is the largest travel partner for the service to date, the company hopes to add more in the future.

“It’s an area of investment for us,” she said. “And it’s area where we think, as folks get more used to Buy Now Pay Later in general, the demand will grow and the demand for experiences will grow.”