At the beginning of this year, the market-research company Forrester made the following prediction about blockchain: “The visionaries will forge ahead; those hoping for immediate industry and process transformation will give up.” Loosely translated, the technology is going to continue to change industries — just not all at once.
Forrester also made a proviso, noting “There’s a real risk we’ll experience the beginning of a ‘blockchain winter.’” In other words, in the absence of “revolutionary developments,” big enterprises will lose interest, funding will dry up and the adoption of the technology will slow down dramatically.
Which brings us to the hospitality industry. “The hospitality industry is excited about these new technologies, but is grappling to find a real-use case that merits investment,” says Hemant Ameria, a travel-and-hospitality consultant for New Jersey-based Mindtree.
“Blockchain is fundamentally useful when the institutions and intermediaries are slow, problematic and have a trust gap — like banking, food safety, mining, et cetera,” he adds. “Hotels are in the business of delivering a memorable experience to their guests…at the moment, they have bigger challenges to handle.”
What is Blockchain?
Blockchain is a digital ledger, a method of conducting — and also validating and securing — transactions. Cryptocurrencies, such as Bitcoin, rely on blockchain technology. When a coin is exchanged, several independent parties must verify the transaction (a process known in some cases as “mining”). Once a block is added, it can’t be subtracted from the chain.
Though it’s a crude explanation, the entire process has a few advantages. First, it’s secure by design, meaning as the chain grows longer, it becomes more secure, because verifying new blocks typically requires knowledge of previous blocks. Second, it’s transparent, because the entire chain is visible to all parties involved in a new transaction; and it’s decentralized, meaning the exchange doesn’t rely on any single host or middleman in order to take place. Theoretically, anyone can do it.
What does it mean for hotels?
The applications in the hospitality industry are broad — spanning payment, supply-chain management, loyalty programs, customer-dispute resolution and even online-reputation management (by curbing phoney reviews, for instance).
Already, U.S.-based Travala has been dubbed “Airbnb on the blockchain” and claims to allow users to book more than half-a-million locations in more than 200 countries. Not only can users pay with dozens of common cryptocurrencies, but they’re also offered incentives to do so.
But, right now, the greatest potential for blockchain appears to be related to bookings and inventory management.
In recent years, the popularity of online travel agencies (OTAs) has surged. But, blockchain could create alternatives that allow customers to compare prices between hotels or bundle other travel services. It could create a new kind of travel ecosystem, where inventory could be updated in real time, which would, theoretically, be decentralized, public and not beholden to any single intermediary. And, while OTAs typically collect anywhere from 15- to 20-per-cent commission on a booking, a true public blockchain application wouldn’t.
Despite the hype, Ameria says most of the work in this particular industry remains experimental. “There are very few companies with the appetite to lead development of a utility that would benefit the entire industry,” he explains.
There are also other drawbacks to the technology. For example, transactions can be extremely time- and resource-intensive, especially as the demand increases. When Bitcoin’s popularity boomed, mining could take hours and while it now only takes an average of 10 minutes, this still may be an unreasonable period of time to wait to confirm a hotel reservation.
Plus the computing power required for mining is huge. In a single month, Bitcoin’s network consumed more electricity than the country of Hungary.
But, as with everything else related to this technology, these problems are subject to change. That change, again, will depend on whether those visionary companies are able to innovate in ways that will affect the larger players in the industry. Still, it seems reasonable to predict that as the technology matures and the networks grow, things will heat up again.
Written by Tristan Bronca