As the summer travel season heats up, more travelers are fighting off stubborn inflation by paying for their vacations with alternative payment methods. Hopper Lead Economist Hayley Berg joins Wealth! to discuss travel trends as consumer wallets are under pressure.
"We're really seeing generational shifts in how people are thinking about paying for these bigger ticket items," Berg explains. While older generations have traditionally paid for their vacations with credit cards, more than 30% of Gen Z and millennials are using alternative payment methods like "buy now, pay later."
Berg explains that buy now, pay later is a great option for travelers making larger purchases. She highlights that this payment option is actually the norm in other parts of the world, like Latin America, despite being a rather new method in the United States. The economist adds that buy now, pay later "makes many destinations and experiences more accessible for travelers who have a smaller budget," as demand for bucket-list destinations like Paris, London, and Rome increases.
"We're still seeing deal-seeking behavior and price sensitivity, so travelers aren't just blowing their budget on something that they can't quite afford out-of-pocket," Berg says of consumer behavior.
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This post was written by Melanie Riehl
Video Transcript
Well, sticking with the travel industry, inflation, anti budgets don't seem to be too much of a concern for Americans this summer.In fact, travelers seem to be fighting off stubborn inflation by paying for their summer vacations with alternative payment methods.In some instances like B NPL known in your it is buy now pay later for more on this.I'm joined by Haley Berg, who is the Hopper lead economist, Haley, always a pleasure to grab some of your time and thanks so much for joining us here on Yahoo Finance.Uh You know, as we think about how people are paying for travel, how is that different even year over year from what we saw last year, you know, we're really seeing generational shifts in how people are thinking about paying for these bigger ticket items.Traditionally, the path has been, you start with a debit card, you build a little wealth, you open a credit card.But for gen Z and millennials, more than 30% of travel purchases are actually coming from alternate payment methods like buy now pay later.So they're expanding their travel wallets with these different methods at a rate more than double what we see from Boomers and even Gen X.And so with that in mind, how are they tapping into perhaps even the ability to pay in increments over time as well on travel buy?Now pay later is great for travelers who are making a bigger travel purchase.And what's interesting is it's actually the one of the number one ways that travelers in Latin America pay for travel and big ticket items.So it might be newer to North America, but this is the norm in other parts of the world.But it's a great way to take a big ticket item like a 5 to 7 night stay at a hotel, which could be over $1000 and spread the payments for that travel over time.So you don't have to go so far out of pocket that in turn makes many destinations and experiences more accessible for travelers who have a smaller budget.Is there a good rule of thumb though that people should still be keeping in mind when it comes to how much they're kind of breaking up or how much they're paying up front.Uh And I ask that because at a certain point, the trip just doesn't become feasible or, or, you know, it, it just doesn't seem like it's good money that's being spent if you're breaking it up to the same extent that you might be a mortgage for a trip.Absolutely.The good news is that though we're seeing the adoption of these payment methods that do help travelers spread payments.We're still seeing deal seeking behavior and price sensitivity.So travelers aren't just blowing their budget on something that they can't quite afford out of pocket.In fact, we're seeing that even though most travelers are expanding their travel budget this year, about 75% of our users at Hopper planning to spend the same or more, almost half of them are going to take more trips.So they're expanding that travel budget a little bit but packing more into it, which means that they have to be looking for sales and promotions, booking at the right time, doing those deal seeking behaviors that make the price more affordable.Certainly where where are some of the top locations that you've seen travelers still really be willing gung Ho to spend on this year?You know, Paris, London and Rome are always the top three destinations at this time of year.They are destinations, people dream of their lifetime or bucket list trips.So we're seeing a tremendous amount of demand to those destinations, but more often than not, some of the more interesting trending destinations that we're seeing are being driven by these younger generations of travelers and those are destinations in Portugal, the south of Spain, Alaska destinations.Much more off the beaten track than what we typically see from the traditional American family going on a bucket list vacation, Haley Berg Hopper lead Economist Haley.Thanks so much for taking the time here today.I really appreciate it.Great being with you as always.