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May 2019, London
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Blockchain: hotel settlement could be the first big win, says Travelport
In the B2B space, Travelport says the bottom line is money, while for startup KeyoCoin it's about solving the consumer adoption puzzle with 'gamification'. Pamela Whitby reports
In his typical straightforward style, Mike Croucher, a travel industry veteran and now the chief architect at Travelport says: “Blockchain was overhyped. Everybody wanted to say they were doing something.”
Croucher, who in an interview with EyeforTravel last year said blockchain was ‘no more than a database,’ is referring to how the blockchain in travel PR wheel has been spinning over the past two years. Across industries, the market for blockchain is forecast to to be worth nearly $14-billion by 2022, according to global intelligence firm Netscribes and, unsurprisingly, travel wants a piece of this.
Since 2016, there has been a raft of announcements including the launch of numerous blockchain white papers and initial coin offerings. Among the more high profile: Microsoft-WebJet’s first proof-of-concept blockchain solution; TUI’s move to bet on blockhain; Sita LAB’s Flightchain white paper; and Winding Tree’s decentralised travel platform. Elsewhere, countless travel start-ups have made promises about how blockchain could re-imagine everything from identity and security to loyalty and more.
One of the problems is that travel start-ups in the blockchain sphere almost always underestimate the challenge of getting the big players - hotel chains, airlines and so on - to participate
One of these is KeyoCoin, a universal travel rewards programme, which has secured some high-profile advisors including Dan Marchese, the architect of the TripAdvisor-Viator app, and Rick Savage, head of social media at Apple. Matt Baer, KeyoCoin's CEO and co-founder, argues that among the biggest problems to date have been "non-existent consumer adoption" and the fact that "there is still not “a single travel token in the top 200 of CoinMarketCap”.
One of the issues is that when it comes to travel start-ups in the blockchain sphere, says Roland Berger consultant Joerg Esser, a regular EyeforTravel moderator, is that “they almost always underestimate the challenge of getting the big players - hotel chains, airlines and so on - to participate.”
So, is it any easier for the big technology players experimenting with blockchain – among those, global distribution systems (GDSs) like Travelport, Sabre and Amadeus? All three have been actively pursuing concepts in the blockchain space, and are proceeding cautiously to establish meaningful and viable use cases.
Arguably, Travelport, which already serves a huge, and valuable travel ecosystem, and has proof-of-concept studies with technology partners IBM and TCS, is ahead of this pack. According to Croucher, these studies were recently presented at World Travel Market, and there “was a lot of interest from companies wanting to be on the chain”.Travelport has also recently contributed to a government white paper on possible applications for blockchain in business.
But Travelport isn’t trying to reinvent the wheel and Croucher is pragmatic: “If you are on a greenfield site and implementing a new business model that doesn’t exist today, creating it and expanding it is relatively easy – you know where you are. When you are trying to disrupt within an existing ecosystem, then it is necessary to consider how a new technology fits in with the processes and workflows of any current business model.”
He continues: “It is about using the technology inside that ecosystem to ensure that it continues to prosper and grow, take costs out and become more efficient. That is where my focus lies, rather than growing a disruptive business model on the side.”
That's not to say that Travelport isn't watching moves by blockchain in travel start-ups.
How priorities shift and change
So, what are Travelport’s ‘meaningful’ blockchain projects in an industry, which tends to move at a glacial pace? Last year, as EyeforTravel reported, Travelport worked with IBM in the garage stage on a proof of concept for putting low-cost, long-tail content for tours and activities onto a blockchain. However, although there has been a lot of interest, Travelport has not yet invested to take that to the final stage.
Croucher explains why: “You still have to have the right business case; you still have the cost of infrastructure and marketing and everything else that goes with taking it to market.” Without this, it is impossible to make the transition to a new technology in the most cost effective way, or to get the right ROI implementation strategy in place.
What tends to happen in any innovation project is that initially the focus is on a core element that can be the first minimal viable product to go to market. However, as companies innovate further, inevitably priorities shift and change; they may even recognise that their initial thinking was flawed. For example, kicking all rent-seeking travel intermediaries into the long grass might sound nice on paper, but the reality is somewhat complicated.
What Travelport discovered, says Croucher, was this: “Putting low-cost content onto a blockchain [like inventory for tours and activities] is still a very valid and a good idea, but as we explored further we noticed that the smart contract element, especially the ability to settle hotel commissions, was a much bigger part of the problem than we had imagined.”
Putting low-cost content on a blockchain is still a very valid and a good idea, but as we explored further we noticed that the smart contract element, especially the ability to settle hotel commissions, was a much bigger part of the problem than we had imagined
Having now worked through the business case, Croucher believes a more mission-based settlement programme seems to be the most feasible blockchain to go to market. The reason is that the business case meets three essential requirements and serves both travel suppliers and intermediaries. It:
a) Solves the problem of commissions going unpaid and cumbersome paper-based systems.
b) Creates value by making the entire value chain more efficient and cost effective; there is much less chasing to be done.
c) Can be monetised because of the underlying, existing commission structure.
Travelport’s first concept (long-tail content for tours and activities) solved a problem and created value, but the struggle was how to monetise it. Although Crouch believes that won’t be too difficult to do so in the future, “we have decided to go with the settlement piece first, and then build the content around it later, because the two overlap quite heavily”.
Right now, Travelport is working with partners, both suppliers and users – hotels, hotel chains and travel agencies - to pull that together for a first implementation, expected to be live before the end of the year.
While the initial focus is on hotels, Croucher believes blockchain is interesting for the wider travel market, and will eventually also address airline settlement, which remains a cumbersome process.
The battle for blockchain continues
A lot of the rhetoric around blockchain has been fighting talk - about levelling the playing field and reducing dependence on third parties. However, Travelport, itself an intermediary, is taking a somewhat different line. In fact, the solution it is developing with IBM will, in the first instance, help the online travel agencies to rake in commissions, which often go unpaid, more quickly and efficiently.
As a free EyeforTravel white paper, released this week, reveals, OTAs are seeing growing competition from all angles – from Google with its Hotel Paid Ads product, and from the concerted direct drive by the chains, to drive direct bookings. The cost of acquisition is rising and there is growing pressure on margins. Quoted in the white paper is Gopakumar Menon, VP – Distribution & Revenue Management, Highgate Hotels, who says: “We are making them [the OTAs] aware that just as they are watching us, we are also watching them. We are letting the OTAs know that we are as serious as they are and our direct business is very important.”
Today, companies in all corners of the travel industry are eager to reduce the cost of processing travel so they can spend more on engagement and cracking the customer experience, which is where today’s battles will be won. This is crucial for hotels too, and Travelport believes that its blockchain could replace their laborious and often offline processes to make it more accurate and efficient for all players in the network.
Solving the consumer puzzle
While Travelport and others are very much focused on the B2B benefits of blockchain, KeyoCoin’s Baer is on a mission to solve the consumer adoption puzzle.
“This has been a nagging issue for many companies and is one of the reasons we baked a unique travel challenge system into our platform, where consumers can get involved without buying anything but simply by promoting our travel merchants. We believe the elements of - ‘fun, free, and value’ will be key to early adoption in the blockchain and cryptocurrency space,” Baer says.
KeyoCoin, which is expected to launch towards the end of 2019, will be a “true utility token”. It can be earned by taking part in free travel challenges (the ‘gamification’ aspect), used to purchase a travel product like a tour or hotel or redeemed in its growing travel marketplace.
We believe the elements of - ‘fun, free, and value’ will be key to early adoption in the blockchain and cryptocurrency space
According to Baer, the marketplace has products that are live in fiat currencies across the US and South America, with Asia going live during the first quarter of the year. In addition, the first beta version of the hotel marketplace has launched and currently has approximately 150,000 hotels on the platform including "everything from major brands, to boutique hotels, and everything in-between".
There is certainly a use case for rewards that the consumer understands. As Baer says: “You can’t share them, there is no liquidity, there is siloed redemption, they are bound by a lot of restrictions, and there are billions of dollars a year that are going unused.”
Get that right, and he believes that KeyoCoin could be the catalyst for bigger things. “Our growing hotel marketplace is an important step in our mission to disintermediate the travel industry, while fighting the high commission war that OTAs have waged against independent travel providers,” says Baer.
Fighting talk, indeed!
Check out the agenda for the EyeforTravel’s upcoming Digital Strategy Summit (May 21-22) hear more about the evolving distribution landscape from brands including Highgate Hotels, Ryanair, Accor, NH Hotels, Finnair, Google and more