By Elias Beaino, executive vice-president of tabit
In 2020, Buy Now Pay Later (BNPL) solutions accounted for US$97 billion in e-commerce sales. These solutions allowed consumers to purchase goods and pay for them in instalments, making it easy to score a new pair of shoes or upgrade their laptops without huge interest or upfront costs. And as the BNPL industry continues to expand and transform the B2C space, it’s now making its way into B2B.
For hotel operators, this is huge. It means they have access to cash flow to maintain inventory, keep guests happy, and ensure their suppliers get paid in full. As the industry recovers from the pandemic, BNPL is a relatively untapped solution that hotels can capitalize on while they get back into the swing of things. In fact, it’s something many business owners are actively considering in a time when economic instability is making it challenging to know where costs are heading.
A recent survey by tabit and Angus Reid found that more than half (53 per cent) of Canadian business owners are considering new financing options, including ones where payments are made over time. It’s clear there’s a gap in the alternative-lending market in Canada.
It’s no secret that the hospitality industry has been one of the hardest hit by the pandemic. With everyone staying home, hotels have lost significant revenue over the past two years. For those that did survive, they face a new challenge — ensuring that the comfort and needs of their guests are met and enticing customers back to their facilities. This means maintaining inventory and, in some cases, upgrading facilities.
But their suppliers are in a tight position as well. As they bounce back from the lack of demand, suppliers need to keep their cash flow going to maintain a competitive advantage. BNPL is an excellent solution as operators and suppliers in the hospitality industry get back on their feet because issues such as staff shortages, low inventory, and poorly maintained facilities can cause irreparable damage to a hotel’s reputation, impacting future business.
Optimizing hotel inventory
Supply-chain shortages in hotels often mean sacrificing the comfort and experience of guests. One way to avoid this is to keep excess inventory on hand. With a surge in business expected throughout the industry, the focus for hotels should be on inventory optimization rather than just maintenance. BNPL solutions help support hotels in ordering inventory that not only meets current needs, but exceeds them. Logistics for businesses, such as the hospitality industry, often centre around a “just-in-time” strategy to manage supplies and inventory. With integrated, digital BNPL options, they can seamlessly transition into a “just-in-case” strategy, meaning they have a safety net to keep them afloat when extenuating factors such as supply-chain snags create problems. By having these additional products in-house, hotels can provide a consistent customer experience, allowing guests to enjoy comfort and convenience.
Digital BNPL solutions also allow hotel operators to integrate payments and structure workflows around inventory management. Operators can maintain organized inventory systems by automating workflows and reducing operational costs. These structured workflows ensure the inventory needs of the hotel and its guests are met. At the same time, the hotel’s suppliers benefit from increased sales and lower risk factors (such as late payments or revenue losses).
Another challenge hotels face right now is a staffing shortage. When staff is scarce, it’s difficult to maintain back-of-house processes and systems. By automating administrative processes, hotels can reduce the old — and inefficient — “paper and pen” style of management. BNPL solutions integrate all aspects of the payment process to reduce staff time on administrative tasks.
Finally, after over two years of minimal occupancy, many hotels need upgrades. Finding the cash to make these upgrades with limited revenue can be a real challenge. But as guests begin to book rooms, they expect their accommodations to include modern conveniences. If hotels don’t invest in upgrades to their rooms and other amenities, they risk losing business to their competitors.
As hotel operators know, renovations come with a lot of upfront costs. And, until hotels can start generating sufficient revenue, getting access to these funds poses another challenge. This is another way alternative financing, such as BNPL solutions, can support operators and provide them a new way to purchase materials, risk-free, for renovations on a structured payment plan. And while the supplier gets paid upfront, the operator is not required to pay for everything right away, making it a win-win for both sides. With upgraded facilities, hotels attract more guests, helping them pay back these costs.
An opportunity to bounce back for the entire industry
The hotel industry is at a tipping point. For those who have made it through the pandemic, the challenge of attracting guests still lies ahead. As hotels welcome these new guests, they need to work closely with suppliers to make sure they offer them the best experience possible. This means maintaining inventory and upgrading facilities, which requires a lot of capital.
Right now, hotel operators need a competitive advantage to attract guests, get good reviews, and keep a steady flow of visitors coming through until they recover. BNPL solutions for B2B businesses can be a strong solution to keep the supply chain flowing seamlessly between operators and suppliers, while ensuring the best possible experience for new guests. And it’s easier than you think — if you’re a buyer, talk to your seller about implementing solutions like this. If you’re a supplier, there’s many options available, including tabit, that can help strengthen buyer-supplier collaboration.