Finding massive success in the retail industry in the months following the onset of the pandemic, another sector has now set its eyes on BNPL.
At the peak of the pandemic in 2020, when customers across the region found themselves strapped for cash, Buy Now, Pay Later (BNPL) companies stepped up with a solution for the insatiable consumerist spirit. Companies like tabby, Spotii, Postpay, and others offered customers a new way to pay for goods and services.
As the name suggests, consumers no longer had to immediately put forward the required amount upfront, nor did they have to opt for costly instalment plans. BNPL offered the best of both worlds: acquire the product or service now, and pay later through zero-fee, zero interest instalments.
Finding massive success in the retail industry in the months following the onset of the pandemic, and continuing to do so well into 2021, becoming the fastest growing e-commerce payment method globally, another sector in the region has taken notice, potentially finding a lifeline in this new payment scheme.
Palazzo Versace Dubai becomes the first luxury hotel in the GCC to offer a BNPL service
Palazzo Versace Dubai, a renowned luxury hotel in the emirate, announced this week that it has signed a partnership with Spotii, a UAE-headquartered BNPL startup that was recently acquired by Australian BNPL firm Zip for $16.25 million.
The hotel is the first in the region to introduce this option on all experiences. Launched on June 1st, Palazzo Versace Dubai now offers guests who book stays, dining and spa experiences, or shop at the Versace Home store located in the hotel to pay in four interest-free instalments via Spotii.
“We are already seeing travel open up further and believe BNPL can provide consumers a way to make the most of their luxury vacation while sticking to their budgets,” said Ziyaad Ahmed, COO and Co-founder, Spotii.
A much-needed recovery
At a time when the hospitality sector has been devastated, BNPL or any other potential lifeline is likely to be welcomed with open arms.
While the UAE hotel industry is expected to continue its recovery in 2021, with the average hotel occupancy rates across the country nearing 63 percent in Q1, according to initial data released by the local tourist authorities, these figures will be nowhere near historic year-on-year levels. Still, BNPL solutions could play a role in providing some reprieve towards overall recovery.
“BNPL offers can help the travel industry recover quicker,” Gregor Amon, Co-founder and Managing Partner at Hotel Data Cloud, a UAE-based startup that consolidates up-to-date hotel descriptions on its cloud database, told the Abu Dhabi SME Hub. “It will allow for more impulsive bookings, giving clients instant gratification when they have the wish to travel. We at HDC have witnessed over and over that if the client has the possibility to make a fast, educated booking decision, it benefits the traveller and the industry alike.”
Nicolas Mayer, global industry leader for Tourism & Hospitality at PwC, said in an interview with Khaleej Times that the recovery of the tourism and hospitality industries will be dependent on how fast tourism destinations and tourism source markets rebuild trust in each other.
“That trust would of course be strengthened by positive results in vaccination campaigns, but it also depends on the ability of national authorities to align with agility, and on the private sector to work together positively and transparently towards rebuilding trust in commercial relations,” Mayer explained.
Once this mutual “trust” is established, the next step would be to rapidly attract consumer interest. In that regard, BNPL could be a highly effective tool in garnering this interest.
“We can already see that the unique selling points of a hotel no longer focus solely on location – it focuses on the flexibility the guest has in terms of bookings and cancellations, the type of experience the guest will receive when staying at the hotel and of course their safety,” Mayer stated.
The synergy between BNPL firms and hotels is not new
While the hotel industry adopting BNPL services is a first for the GCC, this has been something the international market has been dabbling in for a few years now.
Uplift, a US-based BNPL firm, focuses its services on the travel industry, serving over 150 international brands. Through its myriad partnerships, Uplift has achieved 72% growth in monthly transaction revenue in Q4 of 2020 and recently announced that it secured a $68 million credit line.
According to the company, its BNPL solutions are helping to lay the foundation for the travel industry's strong recovery in 2021.
"Buy Now, Pay Later is not a new concept and has already proven its value internationally. It will be the economic kickstarter needed to ignite the travel industry," said Uplift's CEO Brian Barth.
Naturally, the pandemic had a major role in the industry’s change of heart towards BNPL.
Colin Smyth, VP & GM, Travel, at Flywire, told news site PYMNTS that pre-COVID-19, travel players didn’t really feel BNPL was something they had to offer.
“Business was booming, profits were record-breaking, and BNPL was nice to consider, but not so much a need to have for travel operators doing just great without it,” the news site noted.
“Then 2020 happened, the industry crashed and burned, and the great recovery has left a lot of players battered, bruised and feeling a whole lot more open-minded about the future of BNPL in the travel vertical.”
While the synergistic future of BNPL and the hotel industry is still up in the air, hotels are likely to take all the help they can get as the world gets back on its feet.