16 Nov How Fintech will Drive the Travel Industry’s Recovery
The pandemic challenged leisure travelers and travel brands in a way few events have done before. It was during this time that travel anxiety surged and revenue plummeted, highlighting the
need for flexibility and assurance on both sides. Travelers are prioritizing the ability to change their minds or their plans; in fact, 43% of Hopper users ranked flexibility, or the ability to change plans without penalty, as the most important factor when booking a trip. But airlines and travel companies? They are searching for a solution that increases margins, decreases risk and drives conversion. Developed in 2018, Hopper’s fintech suite of products are doing just that. From disruption protection services to products that generate revenue before the customer even books, financial technology has the potential to drive substantial gains across the industry.
The Role of Fintech in Travel
Traditionally, revenue streams in travel consist of accommodations, airfare, tours, cruises and cars, and efforts to add new monetization models through added fees and services have often seen push back from customers. An alternative approach is to create a brand new sector of the travel industry – a fintech sector, that is AI-driven and dynamically priced. Fintech ancillaries and prediction technology allow travel brands to monetize the exact flexible options that customers are looking for.
Hopper is leading the way in bringing this technology to market. First deployed in the Hopper app, the company’s fintech products include Price Freeze, which allows customers to freeze prices for up to 14 days, to Change for Any Reason, which gives customers the ability to instantly change the date, time, and even airline of the flight for any reason up to 24 hours prior to departure. As a result of the pandemic, travelers are more keenly aware of the risks that come with booking travel, and solutions to this stress are increasingly valuable. According to Hopper, almost 60% of customers purchase at least one fintech product when making a booking and on average travelers are willing to spend 15% more upfront on their tickets for flexible options. And travelers can’t get enough, as 79% of fintech users will repeat their purchase. The product market fit is clear – this fintech increased Hopper’s revenue 100% year-over-year despite the pandemic, and today 50% of the company’s revenue comes from these fintech products alone.
Driving Travel’s Recovery
Hopper is not a standalone use case – fintech margins have significant potential for the entire travel industry. If all travel distribution channels (airlines, hotel, banks, GDS, OTA, Metas, etc.) offered fintech products based on dynamic pricing, it could increase the total consumer spend for the sector by billions. According to some estimates, this could be as high as $200 billion annually. And while travel brands look to increase bookings as travel resurges, some brands are also looking to get a piece of this new pie.
The key to fintech success in the travel industry is speed, relying on the cloud for scalability over the next year will help companies start to see their share of this new revenue stream. This is what led Hopper to announce Hopper Cloud, the company’s B2B initiative that enables any travel company to easily scale fintech with pre-built integrations. Further, Hopper takes on all the financial risk so companies never need to worry about cash flow impacts of market disruptions or negotiating reinsurance to keep the balance sheet. But that’s not all – in addition to the fintech products, Hopper Cloud also allows customers to seamlessly tap into the world’s largest multi-sourced travel marketplace. In just a few clicks, travel companies can stand up a world-class travel agency, or can elevate and expand an existing travel company by seamlessly adding new categories.
Meeting New Traveler Expectations
Consumer behavior has changed and the added stress around purchasing airfare in the past year shines light on the need for in-depth and tailored fintech offerings. Furthermore, flexible payment options, like buy-now-pay-later that have become common in the retail industry, have set higher expectations for the level of control customers want while purchasing all goods and services online. As such, fintech should be considered a must-have for travel brands that want to remain competitive in the modern market.
As the industry rebounds after a detrimental year, new emerging technologies will define the modern travel experience that customers now expect. If brands are able to serve these needs while also creating opportunities for incremental spend, there is the potential of industry growth worth billions of dollars. Fintech is uniquely positioned to both redefine the traveler’s journey and significantly aid in the industry’s recovery, just when brands need it most.