Complex Made Simple

Exclusive: What the travel industry doesn’t want you to know about blockchain

The reason why you pay so much for travel is not the plane. It's a three-headed monster that is now meeting its nemesis

Almost all transactions between airlines, hotels, service providers and online travel agencies (OTAs) are carried out through a closed network called Global Distribution System (GDS) The goal is to create a more direct link between travelers and hotels, allowing for P2P interaction that dispenses with commissions, fees, and other costs associated with intermediaries German company TUI Group boasting 1,600 travel agencies, six airlines, and more than 380 hotels and 16 cruise liners, is putting its contracts on a private blockchain

The travel industry provides a massive playing field for participants. In 2016 the industry generated $7.6 trillion (over 10% of the global GDP) employing 1 out of every 10 people in the world.

The total people crossing borders while traveling  arrived at 1.23 billion people while global hotel & private rentals revenue reached  $170 billion, and global travel revenue with flying passengers is around  $530 billion, according to published reports.

But the number of steps required to plan a trip (dealing with airlines, booking hotels, finding activities, navigating airports) could be messy. In comes blockchain to the rescue, streamlining travel and deriving greater value.

Current Monopoly

Almost all transactions between airlines, hotels, service providers and online travel agencies (OTAs) are carried out through a closed network called Global Distribution System (GDS) leaves price control in the hands of very few intermediaries, according to Medium.com, an industry specialist, thus placing great barriers to entry of new players. 

Token.com says a GDS will typically charge a supplier a fee for being connected to its network which can range from $4 to $12 depending on the GDS as well as the type of booking. 

“The cost to airlines can be 20 times higher selling through indirect channels such as a GDS, than when selling directly to customers,” says token.com. 

Travel is expensive because GDS-middlemen can take as much as 20% of the profit from travel suppliers who in turn raise their fees.

Disruption needed

Blockchain technology can bring a big improvement to this outdated management system. 

An example of this is Winding Tree which is working with Lufthansa Group, Swiss International Air Lines, Air New Zealand and Austrian Airlines and offering a decentralized platform for travel agencies to trade directly with the hotels and airlines without intermediaries and paying the huge fees charged by the GDS, according to Medium.com.

"There are still a couple of things that need addressing before considering the scalability of blockchain for massive worldwide adoption in travel and tourism — the speed of transactions and the power of protection, which is inherent to the computational complexity that is used to make the transaction on the chain,” Xavier Lagardere, Vice President – Head of Distribution at Lufthansa Group, told AMEinfo.

Starting a Blockchain of events on the ground

OTAs tend to charge high fees and commissions from hotels looking to list on their sites and command large portions of hotel inventory.

Platforms like GOeureka seek to decentralize and disintermediate the booking process for hotels with blockchain’s decentralized ledger and their own token. The goal is to create a more direct link between travelers and hotels, allowing for P2P interaction that dispenses with commissions, fees, and other costs associated with intermediaries and OTAs,” says Medium. 

Blockchain technology facilitates an open source platform with a low barrier to entry where small market entrants can compete against big industry players with their own solutions.

… in the air

Airlines shy from sharing data on travel with each other, and airports now have to deal disparate information to show travellers, resulting in missed flights, unexpected delays, losses of baggage, and other problems, adding up in millions of dollars in unnecessary costs.   

Blockchain can streamline this travel process, such as the case for FlightChain, a platform developed by SITA where all information would be placed on the distributed ledger, removing the data silos hindering in the industry. 

…and at journey's end

When travelers reach their destination, intermediaries and enablers keep charging away or providing unreliable information which generates false promises, and gaping planning holes, leaving flyers stranded.

A company like Chozun offers events and recommendations for travelers using blockchain, forgoing the complex process of wading through reviews and trying to verify them. 

"Travel authorizsation systems like eVISA, Visa on Arrival, Electronic System for Travel Authorisation (ESTA), will continue to become more and more digital. Tours and sight-seeing will push the boundary of mobile technology as they look for additional ways to increase sales.  More adventurous photo shoots, capturing “once in a lifetime” video experiences, and crafted Augmented Reality experiences to enhance a more mundane tour," Benjamin Boesch, Head – Digital and eCommerce, VFS Global, told AMEinfo.

"The ticketing/check in/checkout process will continue to be transformed.  As biometric technology continues to be commoditized and pushed into the hands of travelers, the hospitality industry will be able to offer customers the ability to go directly to their room without the need for waiting in line to pick up a key, ability to travel internationally without having to be checked by a person, and allow payments without cash or card," he added.

The Crypto blockchain model

Using Cryptocurrencies and tokens serve to achieve: 

1-Lower transaction costs as there are no middlemen required to oversee the validity, legality, or accuracy of the transactions. 

2-Cheaper international payments, as there is no FX.

3Securer transactions using cryptographically hashed data.

4-Transparent entries that provide a permanent record of the flow of money through the travel life cycle.

5- Quicker settlements: Smart Contracts settle with both the buyer and seller within hours versus days.

6-Customer loyalty: tokens and digital wallets are a great way to easily provide and redeem loyalty points in multiple locations. 

7- Easy tracking of luggage movements

 

Image Courtesy of MindTree

"With blockchain, where everyone would share that information, you would be able to just query the blockchain and ask directly: 'Where's my bag?' and whether it's Air France in the CDG airport or with Emirates at the Dubai airport, on a France Dubai trip, you'll be able to get that information right away," Iris Taguet, Head of Blockchain Programme, Air France-KLM, told AMEinfo.

Projects in the travel market with the potential to disrupt. 

Travel Coin

Travel Coin is a self-sufficient Blockchain with a focus on travel ticketing, charging 1%, fees, significantly lower than market markups which can range between 20% and 30%. 

Travel Chain

Travel Chain is a decentralized platform for data exchange in the travel market where users submit their personal information and receive a benefit from it, using the Travel Token as the fuel that drives this ecosystem, compensating data sharers with custom-designed offers in accordance with their personal preferences.

Winding Tree

Winding Tree is a platform built on top of an open source blockchain platform that gives sellers cheap access to supplier inventory.  

TripEcoSys” 

World’s first largest decentralized platform that aims to combine a incentivized social travel blogging system, an exchange, a multi-signature wallet and a merchant payment gateway in one place. It uses the TripPay (TCH) token, an ERC20 compatible token based on Ethereum.

TUI Group

German company TUI Group boasting 1,600 travel agencies, six airlines, more than 380 hotels, 16 cruise liners, and other tourism-related ventures, that serves approximately 20 million customers, is putting its contracts on a private blockchain. 

The company uses BedSwap, a project using a blockchain-enabled system to maintain records of hotel bed inventories in real-time. 

Cool Cousin: seeks to turn users into de facto travel agents in their cities 

Fizzy: AXA is the first major insurance group to offer insurance using blockchain technology 

CryptoCribs: Blockchain’s version of AirBnB

Sandblock: Looking to radically change the loyalty landscape with its blockchain-based  platform

Loyyal: — Frequent Flyer Blockchain platform