Mat Domaradzki is a travel manager for ConsenSys, a blockchain technology company. The following guest column is adapted from his presentation during a September event held by the New Jersey chapter of the Global Business Travel Association.
A successfully managed travel program requires participation and mutual trust among many different parties. For employees, that trust erodes when they are not sure designated booking channels offer the best options. Travel managers often are not certain that travel management companies provide comprehensive reporting on their true spend. TMCs can’t be sure airlines, hotels and other suppliers accurately report client volumes and fully pay out commissions, overrides and segment fees. Suppliers offer large discounts to enterprises without always getting the expected business and loyalty.
Meanwhile, the travel industry has been experiencing disruption for the last decade — from the sharing economy and peer-to-peer economy to innovations like virtual payments — and there’s more disruption to come. Among the entrenched middlemen, major global distribution systems have been around for an average of 47 years and it shows in their user interfaces.
How can the industry get past its trust issues, ensure proper money flows, incorporate new-age suppliers and technologies and take advantage of innovation? Enter blockchain.
One misconception is that blockchain is synonymous with cryptocurrencies like Bitcoin and Ether when, in fact, it is a type of software built on decentralized protocols that enable these cryptocurrencies to exist. As corporations, governments and individuals are realizing, it can do so much more.
Blockchain technology can be considered the latest iteration of a ledger technology. Just like how a general ledger records financial transactions, blockchain — a distributed ledger — creates a way to track information. It’s distributed in that multiple copies of the same ledger exist across a vast network of interconnected computers. All those involved have access to the same information. The decentralized nature means no malicious actor can tamper with all the copies simultaneously, because transactions are only recorded if the network comes to consensus on what occurred.
A series of chronological blocks added to the ledger are irreversible, making data immutable (unchangeable) and creating a sequential chain recording every transaction.
In addition to providing a transparent “single source of truth” and being cryptographically secure, blockchain minimizes or eliminates the need for intermediaries. Industries can replace them with this layer of shared software.
The Ethereum blockchain allows for self-executing “smart contracts” that code the terms of an agreement into the blockchain. These smart contracts can represent complex business logic, pulling in third-party data and executing automatically once agreed-upon conditions are fulfilled by all parties involved. If certain provisions are not met, the contract will not be completed. Smart contracts offer the trust provided by third-party facilitators, meaning agreements are possible between separate, known or unknown parties without the need for costly external enforcement mechanisms.
Let’s look at two promising use cases.
It’s November, RFP season. A hotel offers the buyer a 10 percent rebate if the company books 1,000 room nights by March. That sounds great to the buyer, who knows the company easily will knock out at least that many by then, given all the conferences it attends in January and February.
Meanwhile, the wild and unruly business travelers are set loose. Some will stick to the script and book via Concur. Some will book through an online travel agency while others use their uncle’s favorite travel agent. A few book directly with the supplier.
Come March, when buyers and sellers discuss volume, the buyer is stoked because company data shows 1,200 room nights. But the hotel’s data shows only 800. What happened?
There are questions about data and sources. What counts as a booking? Time is lost to the tedious back-and-forth reconciliation of the numbers. Trust is lost in the tools used to track travel activity.
Smart contracts built on top of a decentralized database can help to solve this problem. In this scenario, travelers book across a variety of channels, with all bookings recorded on a single blockchain. Approved parties can confirm via the blockchain that these transactions occurred by using keys to access cryptographically hidden booking information. As per the smart contract “instructions,” the rebate is delivered to the buyer automatically as soon as the prescribed room night number is reached. Buyer is happy. Seller is happy because it knows the data is accurate. Trust is restored and everyone can focus on the fun stuff again.
Smart contracts provide complete flexibility in the length and timing of an agreement; the RFP season will be a thing of the past. They also allow for more possibilities. Maybe the buyer gets a bigger rebate if the company reaches room night targets more quickly, an outcome that appeals to both parties.
Current inventory management methods and restrictions also weaken trust among buyers, travelers and suppliers. Blockchain can help by giving suppliers better inventory management. Using a token exchange, they can sell products in a very granular way with real-time, dynamic pricing. Inventory in a token exchange market cannot be duplicated.
A corporate traveler books a hotel room one month in advance and secures a great rate. Forced to change plans at the last minute, the traveler cancels the hotel room on the day of arrival but before the company’s negotiated cancellation deadline of 6:00 p.m. The hotel held the room until 6:00 p.m., as required by the contract with the traveler’s company, and lost revenue for that night. As most hotel pricing changes are managed during business hours, the property may be unable to reprice the room for a last-minute sale. And it collected no cancellation fee because the traveler operated within the required window. The hotel lost trust in the transaction.
Blockchain can help create a hotel marketplace using tokens for each available hotel room across a multitude of booking windows.
The corporate traveler books the desired room at a price based on the window. If the traveler does not redeem the associated token by a designated time, a penalty can be assessed and/or the token can be returned and sold again with no loss to the hotel.
Using blockchain technology, the hotel can reprice tokens by the day, hour or even minute. The hotel regains trust in the transaction.
A corporate traveler books an airline ticket one month in advance. The airline overbooks that flight to protect revenue. The traveler is one of the last ones to check in for that flight and gets bumped. The flight departs with no empty seats and no lost revenue, but the traveler misses an important meeting. The traveler and the corporate buyer lose trust in this transaction.
To avoid such frustrations, blockchain presents an opportunity to create an airline marketplace with tokens for every available seat. Similar to the hotel solution above, airlines could reprice by the minute. Desirable seats would go up in price as inventory is used. This is a much more dynamic and lucrative pricing model than what airlines use today. And because airlines can only sell one token for each seat, they cannot bump travelers. Buyer and traveler trust is restored.
Blockchain Travel Solutions Today
Work is already underway to apply blockchain to travel. Here are a few initiatives:
• Incubated by ConsenSys, Smart Hotel Rate provides travel managers, hoteliers and TMCs with a real-time dashboard, email alerts and an issue resolution center which facilitate collaboration via a single source of truth for hotel bookings and ensure the accuracy of negotiated rates. In 2020, smart contracts will allow this foundation to expand to next-generation capabilities not possible today, such as adding advanced business logic to hotel contracts.
• Blockskye is working with ARC, United Airlines and an undisclosed United corporate account to use blockchain for channel-agnostic tracking of travel purchases.
• Winding Tree is the most lofty travel blockchain company. It’s ORG.ID solution helps travel companies expand their networks and drive bookings without a middleman.
• Arise uses distributed ledger technology to help hotels control the distribution of their inventory, prevent rate leakage and block rogue OTAs from undercutting them online.
• The Loyyal Product Suite incorporates blockchain technology allowing program operators to extend their partner network, expand marketing capabilities, and enhance program profitability.
• HRS Tests Blockchain For Corporate Hotel Negotiations, Check-In Procedures
• Blockchain Startups Take On Hotel Commission Processing
• Siemens Fixates On Ingenuity With TripLink, Blockchain, Hotel Sourcing Farmed To HRS
• Air Canada Puts Its Name Behind Blockchain