Finding uses for blockchain technology in the hotel industry

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by Christopher Curry

In the digital economy, hoteliers have started to embrace new technology to enhance the guest experience and streamline operations. Guests book rooms, order room service, make a reservation at the spa, and even access their rooms with mobile apps. Data collection provides insight into guest preferences to craft a more personalized experience. Artificial intelligence and chatbots allow you to adjust the room temperature or request maintenance by voice command.

But where does much-hyped blockchain technology fit in? At this point, the jury is still out. On one hand, a wave of startups say blockchain can transform booking, payment processes, loyalty programs, and marketing.

KeyoCoin is one. Formed in early 2017, the company is launching a blockchain-based universal travel rewards program as well as a travel concierge and booking app targeted at independent hotels.

“We will be their technology partner and they don’t need to know a thing about blockchain,” KeyoCoin CEO Adelle Demko says. “It will be set up on their dashboard for them.”

On the other hand, established industry players like global travel commerce platform Travelport are taking a deliberate approach to determine if and where blockchain has a use in their business operations.

“Our approach has been looking for suitability and not just fitting in blockchain for the sake of fitting it in because of the hype around the industry,” says Monty Doshi, Travelport’s director of architecture in the Asia-Pacific region. “I think it’s important from our perspective to ensure there is proper use case implementation of blockchain and not just use blockchain for the sake of using blockchain.”

In Travelport’s case, the company worked with IBM to look at use-case scenarios, including potentially putting content from smaller travel companies onto its platform.

In the end, Travelport decided the best short-term return on investment is using blockchain to solve inefficiencies in the commission payment process between hotels and travel agencies.

Those are just two examples of blockchain making inroads in the industry. To sort the hype from the reality, hotel and tech insiders offer additional insight on where blockchain is today and where they see it going.

Customer Payments

Blockchain is a decentralized digital ledger of transactions spread across a network of computers. Each transaction is linked to the previous one as a timestamped block, making it easy to follow money or inventory back to the starting point. It is difficult to tamper with because at least half the computers on the network have to agree a change or transaction is legitimate.

At this point, the best-known product of blockchain technology is cryptocurrency, particularly Bitcoin, the digital currency launched in 2009 to facilitate peer-to-peer transactions without a central bank.

Samantha Ahuja, an attorney with the firm Greenberg Traurig who specializes in hotel acquisitions, operations, development and management, says some hotels do accept cryptocurrency as guest payments to carve out a niche for themselves.

“I would not say it is becoming mainstream, but it is gaining traction,” Ahuja said. “More places are taking cryptocurrency as a form of payment. Vendors are accepting it. A handful of hotels see it as a unique opportunity to stand out and attract guests who want to use cryptocurrency as a form of payment. Every six months you see a couple more hotels signing on, but you don’t have the major brands yet.”

Ahuja says the price volatility of cryptocurrency and uncertainty over tax policy and regulations have more hotels in a wait and see mode, particularly in the U.S.

“It’s not mainstream yet because a lot of companies remain hesitant to trade in cryptocurrency or accept it as payment because of that volatility,” Ahuja says. “But I think you will see it gain more traction. Over the next 24 to 36 months, I expect to see a lot more guidance on how companies should treat it and use cryptocurrency.”

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Loyalty Programs and Targeted Marketing

Before Bitcoin, rewards points were the original digital currency, says Thom Kozik, the chief commercial officer at industry leader Loyyal and former vice president for global loyalty at Marriott International.

Kozik feels hotels should use blockchain to improve the management of a loyalty program instead of shifting to a model where guests earn cryptocurrency tokens as rewards.

The complex and costly IT processes of keeping track of the liability of unredeemed rewards, determining payments to vendors and partner companies in the program, and adding partners to a program, even for limited-time promotions, are all simplified, Kozik says.

“When you think about blockchain, all of that goes away because you are all now dealing with the same shared ledger,” Kozik says. “That’s what a blockchain is – a distributed ledger. There’s no reconciliation because we’re all looking at the same set of records. Also, when you go to a blockchain, something magical happens that never existed. You now have the ability to revenue-manage your liability. We’ve not been able to do that before. You have a tremendous amount of control over liability and how you work with partners.”

Kozik says for hotel ownership groups, blockchain also can create a new asset class by allowing them to trade or sell points between properties. At the same time, he does not expect major players such as Marriott or Hilton to embrace that type of relationship with competitors even as startups introduce cryptocurrency that could allow ubiquitous interchange between rewards programs.

What Kozik does foresee is more targeted marketing and promotional offers to guests and customers. That’s because the blockchain will automatically know when, where and how loyalty program members earn points, giving hotels insight into their habits and preferences without an intensive IT exercise.

“That will benefit the consumer, whose ability to do more things with those points is really limited by the legacy systems and approaches of these programs,” Kozik says.

KeyoCoin is taking a different approach, with a universal travel rewards cryptocurrency intended to give independent hotels and travel experience companies access to a rewards program and provide guests more ways to earn and redeem rewards.

“Under the current model for rewards points, they are not very inspiring for customers to earn,” says Demko, KeyoCoin CEO.

Guests can earn cryptocurrency rewards by booking through the mobile app, purchasing a cocktail at a rooftop bar, or even taking a picture of the Hollywood sign, Demko says. They also will be able to use the cryptocurrency rewards earned at any partner in the rewards program’s marketplace.

Booking

Right now, a handful of large online travel agents (OTAs) dominate the online booking landscape.

Hotels get better visibility through those OTAs but pay a commission in the range of 10-to-30 percent for every booking made through the site. That costs hotels a portion of their revenue and drives up costs for guests.

Winding Tree, LockTrip, Travala, and other startups are launching blockchain-powered booking platforms that allow guests to directly book rooms from hotels. The goal is to loosen the grip OTAs have on the hotel booking ecosystem and cut costs for hotels and guests.

Companies like KeyoCoin plan to use a cryptocurrency reward as an incentive to get customers to book through their mobile app instead of an OTA.

“We are very keen to offer an alternative to the OTAs and use travel rewards to disintermediate the OTAs,” Demko says.

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Speeding Up B2B Payments

In the B2B space, the shared digital ledger of transactions allows everyone involved to look at the same records, accelerating the process.

“Essentially blockchain becomes that source of trust instead of separate distributed data sources,” Travelport’s Doshi says. “It will streamline the process of reconciliation.”

Jen Plahm, a spokeswoman for Fenex, a blockchain-powered payment and services solution for the travel industry, says blockchain technology can be easily incorporated into a hotel’s ERP system to simplify and accelerate the process of paying vendors, suppliers, and travel agents.

“On blockchain platforms, the transaction token can hold way more information than traditional systems in a secure form,” Plahm says. “This will make the process of reconciliation and settlement much faster. Moreover, the payments can be tracked in real-time applications even though the settlement times are minimized to a maximum of two days.”

A Look Ahead

Looking ahead, Travelport’s Doshi says their mid- to long-term forecast sees increased use of blockchain as a form of payment and for inventory and order management. The idea that an entire trip will be booked and paid for from end to end by blockchain is a more long-term possibility, he says.

Ahuja, the hotel industry attorney with Greenberg Traurig, says blockchain will continue to gain a foothold.

“If you look at blockchain over the last three to five years, the evolution has been fairly constant,” she says. “The ability to process, to create, to transact has been growing. So, while it’s definitely not there today, it is on its way to mainstream usage. I think you do see it more internationally than domestically, but certainly the hospitality industry will be a beneficiary.”

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