George Toumbev of NatWest Boxed shares how businesses can appeal to the evolving needs of today’s traveller
After a challenging few years, the travel industry appears to be on track for a full recovery in 2024. Research from McKinsey & Co found that travel isn’t merely an interest, but a priority.
In the UK, Abta’s Holiday Habits report for 2023-24 shows that holiday bookings have remained resilient amid wider economic and operational challenges. During a cost-of-living squeeze, data from Abta indicates that people would rather reduce other non-essential spending, such as eating out, leisure activities and clothes, before cutting back on a holiday.
People are still determined to travel and are not only seeking the best holiday offers but a choice and flexibility around how they pay. In this case, online travel agencies (OTAs) need to consider how they can best support customers in becoming financially confident enough to progress from browsing to booking the holiday they desire.
The role of embedded finance
While Britons have been keen to go on holiday they have been doing so in the midst of a cost-of-living crisis, with a third forecast to use credit to pay for their holiday and 86% planning to make cutbacks to accommodate travel.
Taking on significant debt upfront and sacrificing leisure activities, eating out, and shopping can lead to hesitation from consumers which may mean a missed opportunity for travel firms.
This is where embedded finance options such as ‘Save Now, Buy Later’ (SNBL) emerge as a strong alternative to traditional financing models, enabling customers to save incrementally towards a future travel goal. Offering consumers increased flexibility around how they pay – including saving up through regular instalments without incurring any debt – can help travel firms convert initial interest from customers into firm holiday bookings. Once the savings goal is reached, the customer completes and executes the payment leveraging the funds from their savings account.
Travel firms can also earn interest on their customer deposits with SNBL, creating a new revenue stream. However, this can only be accomplished with a bank-led embedded finance partner.
This alternative model can differentiate a brand from its competitors that may only offer Buy Now Pay Later (BNPL) finance, attracting customers who appreciate the emphasis on saving and enabling them to plan and budget for their travel experiences in advance.
Standing out on Sunshine Saturday
One of the most popular times for UK consumers to book a foreign trip or ‘main holiday’ has been dubbed ‘Sunshine Saturday’ – typically the first Saturday after New Year. Being directly after Christmas, booking at this time of year can put an additional strain on already overstretched budgets. SNBL then becomes attractive for many customers who prefer to avoid additional debt.
Similarly, it can help engage consumers at other times of the year. Another increasingly important date for holiday sales is Black Friday in November – with some operators reporting high sales activity over that period, coinciding with discount offers they were making at that time.
Offering this option means that travel firms can be ready to support consumers with saving for their holiday purchases whatever time of year they choose to book. With more than 62% booking their trip at least four months ahead (and 38% at least seven months prior), there are many benefits to using this in the run-up to their holiday.
Potential to unlock a new model
This new saving model presents OTAs and travel operators with a multifaceted opportunity to engage customers, enhance loyalty, and drive revenue over the longer term.
Structured savings plans keep customers motivated to reach their travel goals, and as they do so operators can suggest add-ons or complementary services such as relevant excursions, accommodation enhancements or travel insurance. The flexibility to adjust travel packages over the savings period can also allow businesses to tailor offerings and provide incentives for customers to upgrade and unlock additional experiences by committing to spend a little extra. The opportunities to personalise and differentiate the offering are huge.
Offering SNBL, in tandem with promotions and incentives, provides travel firms a strategic opportunity to increase customer engagement, helping them potentially sell more holidays and also increase the average value of each trip. The ability to spread the cost over time can give customers greater confidence in opting for higher-value trips and holiday add-ons that might otherwise seem out of reach.
Ultimately, by changing how people save, businesses can create compelling offerings that meet the evolving needs of travellers today.