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November 2017, Amsterdam
Blockchain and travel: the plot thickens
There has been plenty of hype around blockchain, the technology that underpins cryptocurrencies like Bitcoin, but the application for travel is gathering momentum
When the head honcho of the largest leisure, travel and tourism company in the world comes out saying that he is betting on blockchain, it seems that the technology that underpins cryptocurrencies has moved beyond hype.
And TUI is not just talking about betting on blockchain – a decentralised registry of assets and transactions, which also powers cryptocurrencies like bitcoin or ethereum – it’s actually doing it. As CEO Fritz Joussen explained in a recent interview, last year the company sold its Hotelbeds bed bank for €1.19 billion because “we decided to fundamentally reorganise TUI Group’s entire hotel bed portfolio and place it on a blockchain”.
This is a quite bold and advanced move from TUI, which could challenge the tour operator model, says Joerg Esser, a theoretical physicist and former Thomas Cook executive, and one of the speakers on an upcoming panel in Amsterdam titled Blockchain: the next big disruptor.
Another speaker, Wilhelm Weber, partner at Swiss Hospitality Solutions, also believes in blockchain’s disruptive potential. “In the travel industry institutions such as OTAs or tour operators bridge the gap in trust between a buyer (traveller) and supplier (eg. The XY lodge, Botswana). Since travellers trust the institution enough to book with them and maybe even to prepay - these companies take quite a significant margin for this service. A blockchain-based system would allow the supplier to interact directly with the traveller at a far lower cost.”
So although “it might not sound spectacular, the beauty of the idea is that it allows trade in an environment where trust is given to the technology instead of the institution!”
So is TUI’s move bold and advanced, or a risky one that could jeopardise its own business?
According to Joussen, TUI’s strength lies in actual service provision, which today generates over 50% of profits. Internet companies – the likes of Google, Priceline and Expedia – on the other hand, are effectively commission-based media players. And, as Joerg Esser points out, “a focus on content and exclusive inventory is [today] where the investment community attributes most value”.
Clearly, Joussen seems confident that the move to blockchain is the right one and, initially, will help TUI internally by “creating enormous efficiency enhancements in managing our hotel capacity”. Going forward, he believes that within the decade blockchain technology will dominate the B2B landscape, and in the future could even “become the internet”.
(See this short video from TUI to explain what the technology does).
Other blockchain action
Though it’s still early days, and the technology’s development still immature, it is attracting product and capital investment, says IT research company Gartner, which argues that blockchain businesses will be worth $10bn by 2022.
Certainly, the opportunity hasn’t been missed by big and small IT vendors alike! Only last week, IBM announced a major blockchain collaboration with 10 food suppliers, including Nestle, Walmart and Unilever to name just three.
Little wonder then, that travel is also on IBM’s radar. IBM CEO Ginni Rometty has reportedly shown interest in the possibility of TUI spinning off its currently private blockchain to the tech giant, after reading one of Joussen’s interviews on the subject. And that doesn’t seem impossible, given that Joussen has publicly said that while TUI’s blockchain remains private for now, going forward he does not rule out that in the future it could also be available for use by third parties (something that a tech player would be better equipped to do). Interestingly, he has also said that TUI is planning to exit running its own data centres because “as a software engineer, the idea that we… should …directly compete with the cloud giants seems rather absurd to me”.
as a software engineer, the idea that we… should …directly compete with the cloud giants seems rather absurd to me
Another big tech name to enter blockchain in travel early is Microsoft. Late last year it announced a partnership with WebJet, Australia and New Zealand’s leading online travel agency, in what was said to be a “first-of-a-kind blockchain proof-of-concept solution”.
In an interview at the time, Webjet Managing Director John Guscic said that blockchain was a way to address the data discrepancies that arose in the hotel wholesale distribution chain, and had the potential to benefit all partners in the supply chain.
One interesting new player is loyyal, a “universal loyalty and rewards platform, built with blockchain and smart contract technology”. Driving loyalty is crucial to the travel industry, but it’s currently highly fragmented. By using a blockchain-enabled network, loyall argues that consumers could benefit by being able to access rewards from different companies and across industries in one digital wallet. Providers of loyalty, on the other hand, could offer more streamlined programmes without compromising data security and privacy.
As demand for blockchain increases, so does the need for specialists, and the Financial Times has described the market for recruiting blockchain engineers as “red hot”. Right now demand far exceeds supply, and specialists can command up to $250,000 a year!
Universities across the globe are beginning respond by launching dedicated courses of study, but progress in mainstream institutions has happened faster in the US. Only this year did Edinburgh University reportedly become one of the first in Europe to launch a blockchain course. Meanwhile in Asia, the National University of Singapore and the IBM Centre for Blockchain Innovation recently announced a collaboration to better equip students with skills to use the technology. Unsurprisingly, online courses are also mushrooming.
While academia plays catch up, smart travel companies have looked to acquisitions to meet some of the demand for talent. Last year, Airbnb, for one, acquired several top employees of ChangeCoin, a startup that created a micro-payments platform based on blockchain technology. At the time, Nathan Blecharczyk, Airbnb’s co-founder and the company’s chief technology officer, told CityAM that blockchains might allow Airbnb to share its user profiles with other companies.
Beyond the buzz
In 2017, it seems that blockchain has moved beyond buzz and, if Joussen is right, could “disrupt the asymmetry" that has allowed companies like Google, and the flight booking portals, to use “their privileged position as data collection points to gain monopoly-like profits”.
But will the technology really take out the likes of Expedia and Priceline, even Google, out of the game? Esser isn’t convinced. “Their pockets are too deep and both companies have proven their innovation and agility over the years,” he says.
Weber agrees: “Basically all distribution companies are potential candidates for blockchain. And, yes, hotel chains and groups could carve out the middleman. But we have seen that they were too slow for the internet so why should they be faster today....?”
To hear more about blockchain, the big disruptor, join us in Amsterdam (Nov 29-30) to hear more from Joerg Esser, as well as tech expert Wilhelm Weber from Swiss Hospitality Solutions