Beyond bitcoin: Blockchain applications in hospitality
 
Beyond bitcoin: Blockchain applications in hospitality
06 JUNE 2018 1:15 PM

While blockchain adoption in hotels is still in the very early days, the industry has already seen some benefits from implementation in areas of loyalty, intermediation and relationship and identity management.

The casual reader of the financial press will see a wealth of hype-laden articles on the latest steep fluctuation in the dollar value of bitcoin or its cryptocurrency cousins, of which there are many.

Regardless of whether you perceive bitcoin and similar alternative currencies as mere arbitrage of the greater fool, the underlying concept and technology—blockchain—is more interesting.

Blockchains generally have several key attributes:

  • Data is stored in a chain of blocks, where each block contains an encrypted representation of the prior block in addition to the new transaction(s);
  • usually a distributed ledger system, where the identical data is stored in multiple locations, typically as peers;
  • once an entry is made in the ledger, it cannot be changed;
  • blockchains are encrypted; and
  • any participant can audit the chain.

Blockchains can be public (like bitcoin), private (as with TUI Group’s applications) or a hybrid. Each type of blockchain has different pros and cons according to the purpose of the blockchain.

A public blockchain is open to all and wholly decentralized, but consequently relatively expensive and slow to execute a transaction. Still, it serves well when there is no basis for trust between the participants.

A private blockchain, typically for applications internal to a company, is limited to approved participants and assumes trust. The cost and transactions latency issues go away, but the ledger might be limited to a single node. The hybrid or consortium model is more open than a private blockchain, with access controlled by the sponsoring consortium, and transaction validity is determined by consensual agreement across nodes.

“Smart contracts” represent an interesting capability of blockchains. Although the term pre-dates the development of blockchains and originally implied a broader meaning, one can think of them a taking a paper contract and embodying it in the blockchain, such that when transaction in block A (shipping of goods) is completed by receiving the goods (block B), the smart contract triggers the payment transaction in block C.

While we are still in the very early days of blockchain adoption in hotels, there are some promising areas of blockchain application for the hospitality industry:

  • Loyalty—Blockchain today represents a low-cost, low-friction way to enable different loyalty programs, point-awarding partners and point-consuming partners (“Earn & Burn”) to manage their transactions in a private or hybrid blockchain environment.
  • Distribution disintermediation—Hotels can publish their availability, rate and inventory information to the blockchain, and distributors and consumers can book against that image of inventory in any combination of public, private or consortium blockchain, again in a low-cost model.
  • Transaction costs reduction—Trading partners can use a public blockchain to settle accounts in a decentralized environment where no trust is necessary between participants, but transaction latency is a problem.
  • Trading partner relationship management—Potentially a broader capability that could be applied to any of the use cases above. Consider the ability of smart contracts to automate the administration of an agreement: When Wholesaler W sells its full allotment of rooms at Hotel H, the smart contract automatically offers Wholesaler W only BAR rates.
  • Identity management—A public or hybrid blockchain can store encrypted biometric and document content about an individual, such as fingerprints, photographs, passports and more to verify their identity as a condition of checking into the hotel, generally with the proviso that the individual controls who has access to view the content at any time.

We do not yet understand fully the potential applications of blockchain, but we do know that the development and adoption of these applications will be exciting and bring great opportunity to the marketplace. Hotel News Now readers who are attending HITEC 2018 in Houston are invited to attend a panel discussion on 18 June, titled “Blockchain: Today’s Fad or Tomorrow’s Future?” to learn more about this fascinating technology.

Mark G. Haley is managing partner of The Prism Partnership, LLC, a consulting boutique serving the global hospitality industry at the intersection of hospitality technology and marketing. For more information please visit http://theprismpartnership.com.

The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.

1 Comment

  • Max Starkov, Founder & Director at HEBS Digital June 6, 2018 2:42 PM Reply

    Distribution disintermediation: I am highly skeptical that at this stage blockchain technology can be used successfully for travel and hotel inventory distribution, and here is why:

    a) Legacy inventory management and distribution systems in hospitality: Deep integrations/two-way APIs are needed between any blockchain platform with legacy systems like PMS, CRS, Hotel Switches, GDS and Channel Managers in order to build real-time hotel inventory availability and pricing connectivity with hotel chains, mid-size and smaller brands, independents.

    b) Hotel supply: Gaining access to hotel inventory is a major barrier to entry in online travel. It’s all about reach: How will a blockchain booking system get access to 750,000 hotels to match the reach Booking.com already has? Or Expedia’s 685,000 hotels? How long would it take for a blockchain player to establish the deep hospitality industry expertise and relationships, developed by the OTAs for over 20 years now?

    c) Instant reservations: Most of the hotel reservations today require instant confirmations for all website, mobile app, voice channel, OTA and GDS bookings. Due to the very definition of blockchain, each transaction must be verified by the “miners” of the blockchain distributed network. Unfortunately, “instant” and “confirmation” do not go hand in hand for any blockchain technology application.

    d) Highly fluid inventory: Hotel inventory is highly “fluid” and riddled with transient reservation changes and no shows, re-bookings, group cancellations, etc. Many hotels experience reservation changes and no shows to the tune of 15%-30% of occupancy on any given night. This inventory “fluidity” is in stark contrast to the permanent character of any blockchain transaction.

    e) Transactions vs content: Hotel reservations require more than simple verifications by blockchain miners. Hotel reservation systems, in addition to carrying real-time hotel inventory availability and pricing, serve as huge depositories of content: rate information and descriptions, booking terms and conditions, hotel and room amenity descriptions, visual content: photos, videos, floor plans, etc.

    The list goes on and on.

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.