Blockchain technology: travelling in the right direction
Best known as the backbone behind the bitcoin cryptocurrency, blockchain technology holds some promise of disruption to the travel industry - but not yet. Andrew Hennigan reports
Bitcoin is seen by most people simply as a convenient way to make secure payments without worrying about currency exchange or passing through a trusted intermediary. But the underlying distributed database that makes bitcoin possible – blockchain technology – could impact businesses in many other more interesting ways. Three possibilities are that it could:
Enable new peer-to-peer services that challenge the business models of companies like Uber or Airbnb
Simplify hard-to-manage schemes like loyalty points
Embed ‘smart contracts’ into the blockchain so that they work automatically – one of the more intriguing possibilities
These smart contracts might sound far-fetched, but this is something that is already available - at least at the proof of concept stage. A German startup called Etherisc has developed an app called Flight Delay that uses the open-source Ethereum blockchain platform to fully automate the underwriting and payouts of flight insurance policies.
Embedding ‘smart contracts’ into the blockchain so that they work automatically is one of the more intriguing possibilities
“The customer just enters the flight number and pays a small fee, and as soon as the flight is delayed the payout is automatically transferred to her account,” says co-founder Stephan Karpischek.
Once this app is deployed and properly configured it works fully autonomously, with no interaction or maintenance needed from an operator. What is more, says Karpischek, the app could easily be integrated as an add-on service for a ticketing system or travel portal, and his company is already discussions with airlines and travel service providers.
But rather than the idea of ‘auto-magical’ self-executing contracts, the fundamental appeal of blockchain builds on its intrinsic security and the promise of creating shared infrastructures.
“Blockchain is a new technology that comes with a lot of promises,” says Katherine Grass, Head of Innovation and Ventures at Amadeus IT Group. As a distributed database it is more redundant and, as a result, is potentially more secure than a traditional one in a single location. “People can’t just go in and change the data without consensus from all players,” she says. Interoperability is another promise that could be extremely valuable in the travel industry. “This means that the blockchain could potentially help build an infrastructure that can be used by many different players in the industry.”
[With blockchains] people can’t just go in and change the data without consensus from all players
Katherine Grass, Head of Innovation and Ventures at Amadeus IT Group
In Australia the travel company Webjet already started experimenting with this approach in 2016, working with Microsoft’s Azure Blockchain-as-a-Service platform to build out a chain of smart contracts for hotel room bookings.
“We have built a consortium model where buyers and sellers across the hotel distribution chain can participate, upload their smart contracts for bookings onto the blockchain and ‘handshake’ between the buyer and seller of the room,” says Graham Anderson, CIO of the Webjet Group.
Consortium members use workflows built into the chain to streamline their reservation and settlement processes between each other. “We have started with our Sunhotels and Lotsofhotels being members of the consortium,” Anderson says. “This gives us the opportunity to continue scaling the business while keeping ours costs as low as possible and, of course, learning real-life applications of how this technology can transform a set of businesses in the distribution chain.”
Blockchain is already making an impact in other travel industry applications. A New York startup called Loyyal, for example, is applying blockchain technology to create a universal platform for loyalty and rewards using blockchain’s smart contract capability. The company already has a commercial application in a scheme created to boost tourism in Dubai by deploying a large-scale loyalty platform that allows points to be earned and redeemed dynamically at any participating location.
Work in progress
Most experts agree that blockchain will be disruptive, but not everyone is convinced that this is imminent – even among the early adopters. “There are not many applications that have made their way into the mainstream yet,” admits Webjet’s Anderson. “We see lots of opportunities and applications but it is some way off.”
Regulatory uncertainty and fear of change make it hard for many companies to act in this space
Grass also describes blockchain infrastructure as a ‘work in progress’. “There are a lot of issues around building a commercial system on top of an untested infrastructure. This is a problem everyone is facing and not just in the travel industry,” she says.
Webjet’s Anderson agrees that there are still issues to solve. “Building up the appropriate ecosystem around the blockchain is the hardest challenge,” he says.
So, what needs to happen now? According to Anderson, the solutions need to plug in easily so they can be implemented with as little overhead as possible. When this is achieved, travel companies will be able to focus on the benefits of the technology rather than the technology itself.
But there are other obstacles too. “Regulatory uncertainty and fear of change make it hard for many companies to act in this space,” says Karpischek, who admits that “a lot of education will be needed to get managers and decision makers to see the potential”.