Blockchain Startups Target Travel Distribution

By | May 9, 2017

Blockchain digital ledger technology could be used for loyalty programs, corporate contracts, payment, expense management, airport processing, traveler identity and maybe even travel policy and compliance. Innovators also are betting on distribution disruption.

With tests beginning in about three weeks, Blockskye aims to shift the power in distribution “back to hotels and airlines” by enabling them to design and privately offer rates to specified customer groups. Its inventory system works with “our online partners to publish your rate to their private groups,” according to the company’s site. Existing partners segment the market into such groups as corporate employees traveling for leisure, small and medium enterprises, or conference-goers.

Blockskye is aiming to begin distributing this year through partners including private hotel booking site OutofOffice.travel. It’s starting with air and hotel transactions in an internal database that mirrors what’s in a global distribution system.

The company’s “open source passenger name record” allows authorized entities to add data before and after travel in keeping with the key benefit of blockchain — an immutable, auditable, secure, accessible record of truth.

Blockskye CEO and co-founder Brook Armstrong said during a Monday interview that the company’s initial focus will be on “extremely granular market segmenting.” As an example, he mentioned the “last-minute purchaser” who frequents Hotel Tonight. “Hotels need 10 times more of this capability than they have,” he said.

Although segmentation by corporate account is not in the initial plans, there’s no reason to think Blockskye or another entity would not build that in.

“Blockchain eliminates unnecessary middlemen, but some middlemen are necessary,” according to an Armstrong blog post. “Corporate travel records require pre- and post-transaction processes to allow for policy compliance, security rules and increasingly sophisticated post-transaction reporting demands.”

Also in pre-launch mode, Winding Tree echoes the “cut out the middleman” language in its materials. It’s talking about Google and meta-search sites. It’s hoping to create a minimum viable product — an alternative form of travel distribution — by year-end.

Blockchain

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The two companies’ financial models differ. Blockskye would charge suppliers a per-transaction fee at a fraction of the typical cost.

Winding Tree isn’t interested in transaction fees. It expects to sell reporting and optional extensions, charge for technical support and consulting, and levy fees on sales of its cryptocurrency.

Education and awareness are big challenges, but that’s not all. These initiatives require infrastructure. Without massive scaling, a blockchain-based distribution system would be too slow. This requires adoption. It’s a chicken-and-egg problem.

Greg Abbott, senior vice president of travel and hospitality at tech consultancy DataArt, was skeptical that startups can tackle such challenges on their own. “Blockchain is a sea change for our industry,” Abbott said. “We’re at the very early days. It’s a shrewd move for an entrepreneur, but I believe it will require large-scale companies that offer blockchain as a service.”

Asked by email about this point, Armstrong wrote that Abbott “is 100 percent correct.” That’s why Blockskye is “partnering with both Microsoft Azure and a leading Etherum development group, in a partnership to be formally announced in the coming weeks.”

Like Microsoft, IBM offers blockchain-as-a-service. Other big firms including American Express are getting involved.

Winding Tree co-founder Maksim Izmaylov also recognized the hurdles. “The hardest problem by far, because of the nature of it, is to bring critical mass together,” he said. Izmaylov runs a startup called Roomstorm that helps airlines find hotel rooms after cancellations or other disruptions. Last year, he founded the Travel Tech Con conference.

“We need users and adopters on both sides of the marketplace,” he said. “The core project is open source. The goal is to be the internet for the travel industry but we don’t want to build everything. We want other people to build identity solutions, property management systems, travel agency interfaces.”

According to a Winding Tree white paper, “Easy access to the platform would mean that many more individuals and organizations will be building these interfaces, competing on features and price, which will lead to vast improvements in quality of these interfaces and adjacent products and services, including back office.”

Some of Winding Tree’s ideas for reaching scale are obscure for the typical businessperson. For example, Winding Tree is interested in crowdsourcing computing power. It may raise funds through a token sale. It’s planning to use a state channel to enhance scalability.

If you’re hoping you don’t need to know more details, you’re right. These blockchain inventory and pricing systems do not necessarily require travelers or agents to interact with different software.

“The users of the platform, like travel agents or front desk managers, do not have to know that what powers the system in the background is the líf token,” notes the paper. Líf is Winding Tree’s cryptocurrency. There are hundreds of these, Bitcoin being the most famous. Ether is the currency of Ethereum.

Blockskye also is starting a non-profit industry group called the Global Travel Blockchain Alliance. GTBA would be “a global, multi-stakeholder governance organization with the jurisdiction to adjudicate disputes and address failures in the GTBA travel-inventory blockchain.”

Blockskye is owned by Armstrong and longtime corporate travel executive Michael Share. Other investors are “coming on board,” said Armstrong.

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Author: Jay Campbell

Jay Campbell in 2004 created travel business newsletter The Beat, in 2006 co-founded Travel Procurement magazine and in 2010 integrated them into Northstar Travel Media's BTN Group. He served as editorial director until 2013. Jay made his travel industry media debut in 1993 at the Air Travel Journal of Boston while earning his undergraduate degree in journalism at Boston University. More on LinkedIn.