Embedded lending and the travel sector’s return

After a turbulent few years, the travel industry is returning to pre-pandemic levels, but platforms across the sector need to diversify to sustain growth. Embedded lending offers travel platforms new revenue streams while providing fast access to funding to enhance the industry’s SME network.

How embedded lending is empowering SME growth 

While the big airlines and online platforms may be the most recognised industry brands, SMEs are the heartbeat that keeps consumers traveling. And as demand soars, these critical companies often seek financial support to survive and thrive. For example, PwC revealed in 2023 that one in four SMEs in Europe reported severe difficulties in accessing finance.

As many businesses in the travel sector now rely on platform giants like Booking.com and Expedia, embedded lending empowers SMEs, giving them easier routes to working capital and funds to manage operations effectively, keep up with demand and maintain their reputation to encourage repeat business.

Key benefits of embedded lending for the travel industry

The importance of embedded finance and lending is being seen in hospitality, especially for restaurants and food delivery apps, while ride-sharing companies are starting to embrace the technology. This trend is influenced by seasonality and economic fluctuations, the growth of on-demand services and the need for seamless payment experiences. With travel and tourism’s close connections with hospitality, travel companies have similar opportunities to leverage embedded lending solutions.

For travel platforms:

• Product diversification and new revenue opportunities: offering financial services creates new revenue streams and increases profitability.
• A stronger SME network: supporting SME growth strengthens partnerships, deepens relationships and increases customer lifetime value.
• Future-proofing and digital transformation: integrating embedded lending solutions enhances platform capabilities, including greater data insights and frictionless in-app experiences and journeys.

For SMEs:

• Fast access to business finance: quick loan approvals and simplified financing enable SMEs to fund new equipment, improve infrastructure, accelerate expansion and increase marketing/advertising spend.
• Improved liquidity and cash flow (especially in peak seasons): working capital from loans or cash advances helps travel businesses meet seasonal spikes in demand, capitalize on opportunities and ease cash flow.
• Enhanced operational efficiency: embedded lending allows businesses to be more nimble and efficient, thanks to fast access to funds and flexible repayment terms.
• Increased growth and market reach: entering lending partnerships with travel platforms can help SMEs to reach new audiences and drive more sales, offering options like BNPL (buy now, pay later) and insurance. 

The importance of fast and easy access to finance for SMEs in travel

Easing access to financing is crucial for SME success. However, many experience challenges when seeking loans from banks and traditional financiers, including lengthy application processes, stringent eligibility criteria, and other hurdles. Embedded lending breaks down barriers to access.

This has prompted more travel and hospitality platforms to incorporate embedded lending solutions to support business customers, giving them easy access to finance and simplifying applications, approvals and repayments. 

In a 2024 interview with Hotel Management Network, Jakob Pethick, Chief Commercial Officer at YouLend, spoke about the growing demand for embedded lending in sectors like travel and hospitality:

‍“Both small businesses and their platforms are expressing tremendous demand for our product. Small businesses often struggle to access financing—it’s either very slow or they can’t get it at all. Meanwhile, hospitality platforms are increasingly looking to solve the financing problem for their underlying business customers to support growth and secure loyalty.”

Use cases in the travel sector

The travel industry has been ahead of the curve with modern payment trends, as companies must coordinate with various operators across the globe and manage efficient cross-border payments. Now embedded lending can build on the sector’s financial transformation.

Here are some compelling use cases for embedded lending in the travel industry:

• Small loans for hotel upgrades: short-term funding for hotel owners to revamp decor, upgrade facilities and improve service levels. 
• Revenue-based financing for travel operators to manage seasonal demand:  lines of credit and merchant cash advances are revenue-based finance options that help agents arrange trips in advance,  such as flights, hotels and other expenses, and ease cash flow, repaying loans as a percentage of card sales.
• BNPL solutions: incorporating BNPL enables partners and customers alike to pay in installments, boosting conversions and increasing order value.
• Integrated insurance solutions: airlines and service providers enable users to take out policies within the booking process for a streamlined platform experience.

The YouLend’s Impact: 25% growth in sales

Embedded finance is a crucial lifeline for businesses. Jakob Pethick outlines the impact of YouLend’s solutions on the hospitality sector:

‍“YouLend-backed SMEs in hospitality have reported, on average, a remarkable 26% increase in sales within six months of receiving funding.”

This success demonstrates the crucial role embedded finance and lending can play in empowering small businesses.  Pointing to the future, Jakob says we’re “just scratching the surface of how we can place financing solutions into the hands of every small business around the world.” 

Embrace embedded lending to keep travel businesses moving

There are huge opportunities for leveraging embedded lending solutions in travel. The technology can keep the sector moving in the right direction, strengthening the ecosystem and giving SMEs financial support at the right times to deliver quality services. 

‍YouLend is a leading provider of flexible embedded lending solutions that increase financial inclusion and enable organizations to offer seamless funding services directly through their platforms and apps.

Explore our embedded finance and lending solutions and see how we can help drive your future success in the travel industry.   

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