Blockchain is the latest innovation to take over vacation planning. It’s expected to disrupt the industry as much as when Expedia, Airbnb, and Priceline took vacation planning online. German company TUI Group, the world’s largest tourism company, is also the world’s pioneer to integrate blockchain into the travel industry. In fact, the company’s chief executive, Friedrich Joussen, has such belief in the technology and its probability of replacing the services of companies such as Expedia, that TUI Group sold Hotelbeds in 2016 for $1.6 billion to get the company out of the travel aggregator business.
TUI Group With 1,600 travel agencies, six airlines, more than 380 hotels, 16 cruise liners, and other tourism-related ventures, TUI Group is an international tourism group that serves approximately 20 million customers. It currently houses all of its contracts on a private blockchain; however, company leaders believe their blockchain platform could be made public so that agents and customers could access it to book travel. Joussen said, “If you want to address 20 million customers individually, you need the most modern IT technology. So, the blockchain is not the internet, the blockchain is the next internet.”
How blockchain can manage travel inventory
Blockchain is an open, distributed database that is highly secure and is the underlying technology behind cryptocurrencies such as Bitcoin. Basically, it’s a computer file used for storing data that is duplicated entirely across many computers. Not one person or company controls the file. The data in the blockchain is encoded, and the only way to edit it is if you have the “key” to the block of chain you wish to edit or read. Historic data on the chain cannot be lost or corrupted. In addition to its uses in the financial world, blockchains are used whenever transactions need to be recorded securely such as in supply chains, shipping details, for government records, ownership rights, patient files, charitable contributions and more.
While TUI Group manages its internal smart contracts that can execute automatically with blockchain they eventually see how blockchain could be the foundation for a system that maintains real-time records as needed in the travel industry. For example, hotels that have extra inventory to sell could update the blockchain with that inventory and everyone could see the price and engage directly with the hotelier. Joussen was quoted in the Skift newspaper, as saying, “It’s cheaper, has a higher performance, and is accessible from everywhere – it’s a pure cost equation.”
The company’s BedSwap project uses a blockchain-enabled system to maintain records of hotel bed inventories in real-time. That bed inventory can then be offered across markets within seconds, and there is no need for an intermediary such as Expedia to manage the information. If this technology is rolled out to the industry, and anyone can view real-time availability of rooms or flights, Joussen predicts there will be millions in savings over the next several years.
While TUI has been busy building its own internal system to manage its bed inventory and toying with the idea of making it public, Winding Tree is another company working to develop a public decentralized travel ecosystem to distribute travel inventory. The two companies have had conversations, but Winding Tree believes its public version is more secure and its goal is to make a solution for the entire industry. If they succeed, anyone would be able to secure rooms on the blockchain without the intermediaries setting the rates. In this reality, it would be up to hotels and airlines to set commissions (how high or if any) rather than a third-party setting them.
Benefits of blockchain in the travel industry
As blockchain gets tested and trialed, there will be advantages to the travel industry. Here are just a few of them:
• A decentralized marketplace equals a democratized market.
• A blockchain system is controlled by all involved and cannot be manipulated.
• Cost savings and increased efficiencies will be realized since intermediaries are no longer part of the process.
• Blockchain provides an immutable and secure payment and data transfer platform.
• The cost to set up a blockchain system is minor compared to setting up and maintaining a system such as Expedia.
• Blockchain could enable an easy-to-implement loyalty rewards program.
Will you be transacting on the blockchain the next time you travel? Only time will tell. It’s certainly an intriguing possibility.