Since 2018, Brazilians and the dollar value are living in a roller coaster of feelings going from love to hate constantly. While until the first semester of 2017 the Brazilians were used to pay around BRL 3 for one dollar, from the second semester of 2018 until now they are paying around BRL 4. In the last two months, the lowest value of the dollar in the country was BRL 3,92.
It seems to be a small difference at a first look, but imagine to pay around BRL 400 for something that costs USD 100 and you were used to expending BRL 300 for have it. It can make a huge difference in the travel budget.
Now you must be thinking that the higher costs are making Brazilians to give up traveling abroad, right? Wrong!
Although the high in the dollar value, 6.5 million of Brazilians traveled in 2018, according to data of the Brazilian Association of Tourism Operators, an increase of 17% in relation to the Brazilian traveler’s number in 2017. 22,9% of all those travelers visited international destinations, which means an increase of 23,3% in the relation of Brazilians traveling abroad in 2017.
Besides that, the favorite destinations of Brazilians keep being in North America, which had an increase of 45% in Brazilians boardings in 2018.
That’s right. The international travels became more expensive for Brazilians because of the currency instability and they are traveling more since that. How can it be possible? The answer is more simple than you think and can be explained in just one word: installments.
What do installments means and how it works?
Installments are a payment method that allows the customer to split the total amount of purchases in monthly parcels. But if you think that this is a modern habit, you are wrong even before the beginning of internet and ecommerces, Brazilians already used to split their purchases total value in 2, 3 or even 12 months.
According to a study presented in EBANX Summit in 2018 by Rafael Lazzarin and Sarah Nicolau, Product Analysts at EBANX, the habit has begun on the 50’s when the “crediário” win popularity among Brazilians. At that time, to allow that consumers have more purchase power, especially for expensive products, the client could create a registration on physical stores that allows them to have access to the option of splitting up their purchases in this store.
After so many years, the habit was getting more and more popular in the country, as you can see by the statement of a Brazilian consumer in the following video:
“I can buy more thing when paying by installments”, said Lore Nightingale, the Brazilian consumer interviewed in the video and it is is no exaggeration to say that she represents the major part of the consumers of the country, considering that 64% of Brazilians believe paying in installments is the only way for them to have the desired product.
The fact is that Brazilians love installments and if you wanna know the full story about it, you can find it in this complementary article.
Installments are a must-have for Brazilian Travel Market
“Many Latin American customers are not used to saving money, so installments are a MUST-HAVE for them”, that’s what Alina Lin, an expert in Latin America market from SHEIN, said in an interview for LABS. And we couldn’t agree more. But the statement of the retail expert is also a true story for the travel industry?
LABS and the Product Analyst of EBANX, Rafael Lazzarin, analyzed data from some international travel companies and we have the answer: installments are a game changer to selling travel and experience services for Brazilians.
As we said earlier, the United States still being one of the main destinations for Brazilians travelers, even with the high value of the dollar. But for bringing it into the market reality, we analyzed a travel company expert in selling travel to this destination for Brazilians and discover that almost 50% of their purchases made credit card included installments, considering that paying in 6 monthly splits is the favorite option, representing around 20% in each period since 2018.
That means that Brazilians don’t give up traveling, even when the USA became an expensive destination, but for not compromising a great part of their income in one only travel purchase, they are counting with the alternative to split the total value monthly to not compromising all their income and credit card limit for one only purchase.
This behavior gets even stronger for purchases made between October until December when a lot of Brazilians are taking or planning their vacations. In 2018, in this period 54% of the volume of purchases made with credit cards were with installments. And not only by the number of purchases but for the total amount, this same period when installments achieve their biggest volume of transactions this method turn to be also the most profitable way to selling with credit card. 57% of the total amount achieved between October and December of 2018 was by using installments, which means that as highest is the total value of the purchase, the higher are the probabilities that Brazilians choose installments as the payment method.
For the entertainment market, installments proof itself even more important to keep the business profit during currency instability in Brazil. When they are planning a trip, Brazilians are used to save money for the airplane tickets and accommodation earlier, tickets and the events they are going to in the final destination came as a second matter. But doesn’t have to be this way. Brazilians want to live all these experiences, they only need the right payment method to do it.
The study shows that Brazilians don’t stop living this kind of experience because of currency instability, but they are planning more. Those who understand it faster, are winning the market. As a proof of it, the EBANX researches about this matters shows that a merchant who sells tickets in USA for Brazilians tourists has increased their total number of credit card transactions in 35.13% between July of 2018 until March of 2019, mostly because of installments purchases.
In this case, the purchases that were made with credit card without installments represent around 20% of the total volume against around 80% of transactions with installments, from each 6 monthly splits is the favorite alternative whose had already represented 55% of all purchases made between the months of April and June of 2018. This was the highest rate achieved for 6 splits purchases in this merchant since last year, but at the same time by the end of 2018, 10 monthly splits start to being representative to the final results.
A game changer in unstable moments
The high value of the dollar in Brazil is a fact that has a direct impact on the costs of international travels for Brazilian travelers. On the other hand, the dream to visit the USA keeps speaking louder, especially at this moment when the middle class is rising in the country. The balance is to offer the method that they prefer to pay for it, in this case, installments.
As Karl Sauvant, of Columbia University’s Center on Sustainable Investment, said in an interview for LABS, Brazil is a hub for profitable investments, now and in the future. But like in any other market, you need to know what are the right way to play in the first division. Are you ready?
Highlights of the LABS and EBANX’s study
- Brazilians don’t give up traveling because of dollars value, they are only planning it more.
- The volume of purchases made with installments reached 54% for the travel company studied.
- Installments don’t represent losing monthly profit, on the contrary, it can be more profitable than payments in one time. 57% of the total amount achieved by the company studied were of installments purchases.
- For companies of experiences like tickets and events, split the total amount into long terms (6 to 10 months) can be a good way to scale your results in Brazil, just like the company studied is doing.