There is a lot of discussion about Blockchain and how it will change, disrupt and
revolutionize business. I think we are currently moving from the innovators
phase towards a solid early adopter faze in the innovation curve. More and more
discussion groups and forums are being set up and are an indication supporting
Currently the focus of blockchain technology is mainly on the financial
institutions. Blockchain has the potential to disrupt their current business
models quite a bit. However, blockchain technology can disrupt or innovate (I
prefer the term innovate above disrupt) any business model that is based on
exchange and the need of a ledger to manage this. So for all other industries the
Blockchain Technology is still in the innovators phase and for financial services it
can be considered to already be in the early adopters stage.
Blockchain in the Travel Industry?
Having been active in the travel industry for more than 17 years I am also
looking into the possible effects and opportunities of Blockchain Technology. As
part of a Destination Marketing Organization (DMO), I collaborate a lot with
companies that are now slowly looking at Blockchain and trying to determine
what it means for them. One of these sectors is the “Tour Operating” business.
There are still “traditional” tour operators selling holiday packages through
traditional sales chains. And for a couple of years now, the OTA’s (Online Travel
Agencies). Let’s call them all TO’s in the rest of this article. Both their business
model is basically based on re-selling existing accommodation stock owned by
others, marking it up and selling it for a profit. Most of them do not own any
accommodation stock, with the exception of some, which are now opening
up/purchasing their own accommodations, and administering them within their
brand umbrella. Currently their business models are based on them offering a
“trusted” platform where the accommodations can offer their products and
consumers can purchase these. The TO’s act as a trusted middleman and charge
a commission for this service.
Many people might ask, but why would you go via a TO when you can book
directly? The TO’s make it easier for consumers to get access to a large amount of
accommodation offerings in one shot. And compare rates on just one platform,
reducing complexity. Rather than doing a one by one check directly with each
accommodation. And as indicated earlier in this article, the larger TO’s have
managed to get a guarantee on the best rates for the accommodations, even
compared with a direct sell by the accommodation itself. In exchange the TO’s
guarantee a to sell a certain volume, which provides security for the
accommodation. This sometimes includes the agreement that even the
accommodation itself cannot offer a direct customer a better rate.
If TO’s provide ease and security, why look into Blockchain?
Blockchain has the potential to alter the way hotel accommodation inventory
will be distributed and sold in the next few years. 3 years ago I witnessed a panel
discussion between a large OTA, Global Hotel brand and a boutique hotel brand.
The topic was whether the Hotels have given OTA’s too much power and lost
control over their own profit margins. In a nutshell, the smaller Boutique hotels
had little trouble in maintaining control over their own inventory and sales vs.
the OTA compared to the larger Hotel Brands. The latter have about 40% of their
sales come in via OTA’s. They would like to increase direct sales and with that
their profit margins. But the economy of scale offered by the OTA’s are too large
and too complicated to replace or neglect. And to avoid the risk of losing a
certain 40% of sales they prefer the status quo.
You can ask any hotelier, and they will tell you that in an ideal world they would
only have direct sales. But currently it is a bit too complicated to realize.
Another discussion point of the current distribution via third parties (TO’s) is
that one never knows with 100% certainty what room type you will get. I have
experienced it more than once that at check-in I got a different room category
than what I have booked, and the explanation was always that the TO has
informed me wrong, that the room I was given is the room that is part of the
contract between the hotel and the OTA. What happens next is a back and forth
and discussion on who is right or wrong. In one case I figured it out, and the
hotel sold my confirmed room to a large group booking. Obviously they got more
margin, and they “upgraded” me to an adjacent apartment complex (with no
amenities and services at all, just a nice apartment). Blockchain technology can
put an end to all of this as everyone knows what is being exchanged and it cannot
be altered without the knowledge of the other party involved.
In my opinion, three things will determine the success of Blockchain in the
- Willingness and speed of investment in Blockchain Technology
- User friendly access for the end consumers
- Regulation & Legislation
The last point is something that unfortunately is out of our control. Lobbyists,
politicians & people that can exert a great amount of influence heavily influence
this. Hopefully we will not get too much of this……