There’s been a lot of buzz about blockchain in recent years—a topic we summarized in our booking trends for 2018 post. Yet despite the hype, the majority of people don’t really seem to understand what blockchain is actually all about.
With huge potential and growing levels of investment, it’s a topic that demands closer attention. In the travel sector, blockchain technology shows a serious amount of promise, from revolutionizing loyalty programs and increasing security, to breaking up the reliance hotels have on OTAs.
All round, the applications are tantalizing, if not a little confusing. So to shed some light on the subject, the following post will take a closer look at what blockchain is and explore some of its core benefits to the travel sector.
What is blockchain?
According to the Harvard Business Review definition, blockchain is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.”
The technology basically offers a tamper-proof way of recording transactions, agreements and contracts. So rather than a single organization (such as a bank or broker) acting as a middleman, every transaction that takes place is shared and authenticated by multiple parties across multiple computers.
These transactions grow in a linear fashion as linked “blocks” (hence blockchain) and each transaction requires approval by all other users in the network. Once that approval happens, the transaction is then fixed and immutably recorded. It can’t be changed, and acts as a permanent record.
With that in mind, how can this be of use to the travel sector?
Applications in travel
In theory, all businesses can benefit from some of blockchain’s applications. But there are some fascinating possibilities being explored by various travel groups, hotels and airlines.
Below, we’ve outlined three key areas where blockchain may have a profound impact.
Guest loyalty programs and distribution
According to the 2015 Colloquy Loyalty Census, the average U.S. household participates in 29 different loyalty programs. But in reality, many consumers just aren’t engaged with these programs.
It’s not surprising. Trying to track and manage multiple loyalty schemes from different companies (all with unique incentives and conditions) is pretty arduous. The trouble is that engaging with all of these loyalty programs requires independently visiting each company’s own platform, which can be a major hassle.
But blockchain could change all that.
Experts from Deloitte have looked at how blockchain might be able to simplify loyalty programs by storing them all in a single digital wallet. This would allow a customer to access and redeem all of their airline, hotel and travel company loyalty points in one place.
In a blockchain-based world of loyalty, a customer flying from San Francisco to New York might redeem their airline loyalty points for an Uber from the airport. The same digital wallet could then be accessed to redeem their hotel loyalty points when they arrived at their accommodation.
As growing numbers of travelers seek instant rewards and simplicity, clunky loyalty schemes represent hassle and confusion. The likes of Travelkoin, Loyyal and Trippki offer a way to cater to this new traveler mindset. Fast and frictionless, their blockchain-based programs represent a new way to engage and retain customers through customized, easy-to-access rewards schemes.
Reducing the need for OTA-dependency
At present, countless hotels rely on OTAs such as Expedia and Booking.com for distribution. It’s a relationship of necessity—major OTAs provide mass exposure for hotels to reach larger audiences and capture more bookings.
The cost of this relationship, however, can be substantial. OTA commission fees average between 15%-25%, heavily eroding hotel profit margins. Blockchain offers a solution to this issue too, allowing transactions to take place without intermediaries.
Startups such as Winding Tree and Trippki are developing blockchain-based distribution platforms specifically for the travel industry. For hotels, this provides a new place to list their inventory and reduce paying costly intermediary fees.
Following on from Lufthansa Group and Air New Zealand, Nordic Hotels Group is the first hospitality group to test out Winding Tree’s merits. While the group’s director of future business, Christian Lundén, sees business-to-business as the most promising area right now, there’s a wider positive to consider.
Without third-party involvement, a hotel would enjoy higher profit margins, giving them greater flexibility on room rates. These savings could then be passed on to consumers, helping hotels to be more competitive. If blockchain-based platforms like Winding Tree demonstrate this decentralized model works, the current distribution landscape as we know it will be radically altered.
Enhanced security and data verification
Blockchain can also bring substantial changes to the way personal identification data is collected and accessed. Along with enhancing security, the wider benefit is that the door-to-door travel journey will be sped up considerably.
Consider how things stand currently. The typical traveler has to carry their passport, personal ID, and numerous booking forms with them, showing them multiple times as they check-in at the airport, pass through border control, and arrive at their hotel. Along with the security risk of carrying around sensitive documents, the repetition of these procedures is frustrating.
In particular, border security has been identified as one of the biggest traveler pain points. People are often forced to stand in lengthy queues, repeating checks and answering questions about countries they’ve visited numerous times.
To solve this problem, the World Economic Forum (a group comprised of 1,000 organizations, including private and public travel groups) has devised a blockchain-based solution, called the “Known Traveler Digital Identity Concept.”
In a nutshell, the concept is that travelers record a digital copy of their proof of identity on the blockchain. To do this, an individual scans their passport and biometric data (such as their voice or fingerprint) into a mobile-based app.
Once verified by a government authority, a person can then share their identity data with a border agency long before their travel dates. Security checks can then happen well in advance, vastly reducing queues at border control.
Airlines and hotels would also have instant access to this same biometric information — eliminating the need for their own paper checks on arrival. As the whole system speeds up, life becomes easier for travelers, airlines, hotels and border agencies alike.
For hotels, this would eliminate the need to see a guest’s passport and reservation details on arrival. Instead, the front desk could simply access the blockchain, see all the necessary data, and instantly verify a guest’s identity.
Platforms such as Civic, Further, uPort and Sovrin are each offering individuals and organizations the ability to conduct secure payments and store personal data using blockchain. In each case, ownership of data is shifted away from central organizations, helping to reduce fraud, eradicate payment disputes, and build new levels of trust.
A glimpse of the future
The application of blockchain technology in travel is still early in development. Yet the potential is dazzling. Beyond the benefits already outlined, future ambitions are lofty.
For instance, a recent Tnooz article reported how blockchain might be used to fund new flying urban taxis. If that sounds far-fetched, the first commercial flights are expected to start by the end of this year.
The full implications of blockchain on business still aren’t fully understood. But as the level of interest, research and investment grows, it’s clear that the entire travel industry could be in for some pretty dramatic changes ahead.
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