The Role of Blockchain Technology in the Travel Industry
Blockchain technology is the newest development in the world of online travel booking.
Bonny Simi, president of JetBlue Technology Ventures, says blockchain is what the Internet was in the 1990s. It is an exciting, new technology that has the potential to completely revolutionize the way the travel industry operates (and many other industries, for that matter).
So let’s take a closer look at blockchain technology, how it works and what changes it could bring in the future of travel.
What Is Blockchain Technology?
Have you heard some chatter about blockchain technology, but you aren’t sure exactly what it all means? You aren’t alone. To simplify this a bit, think of blockchain as a style of database that exists online. What’s cool about this is that records can only be added to it, but information can never be removed or changed.
The database is therefore always growing, as completed “blocks” are added to it – always in chronological order. This is why it is called “blockchain” – the blocks are added in sequence to form a chain.
Now, because this database is distributed between millions of computers, it is very reliable and extremely difficult to hack. Each computer in the network (known as a node) downloads a copy of the blockchain automatically. All of these transactions are broadcast, and every node creates its own updated version of every transaction that has happened. Pretty sophisticated, right?
The important thing to understand about this technology is that it can verify transactions with an indelible record. These can then be verified by the entire community, rather than one single centralized authority. It works kind of like Wikipedia – every time a Wikipedia entry is edited, the change is recorded and approved by the community so no one person controls the information.
This technology was originally developed as the accounting method for the virtual currency known as Bitcoin. However, the blockchain model (also known as distributed ledger technology) now appears in a variety of commercial applications. And this is just the beginning. There are really no limits to the industries and applications that blockchain could revolutionize.
Blockchain & the Travel Industry
Let’s talk for a minute about the potential blockchain has for the travel industry.
TUI, the largest tourism company in the world, recently announced that it is planning to move all of its data to the blockchain. It plans to use blockchain technology to track all of its internal contracts. The company is also launching an application called “Bedswap” to display real-time records of hotel inventories. The CEO of TUI Group, Fritz Joussen, believes that blockchain will pose a threat to traditional intermediaries such as AirBnB and Expedia.
An Australian company called WebJet has recently announced that they are creating a hotel distribution solution that is based on the Microsoft blockchain. And another startup using blockchain for travel is Winding Tree. They’re now connecting tourists directly to the travel suppliers via the use of an online platform. This style of decentralized travel distribution aims to make travel cheaper for customers, while more profitable for suppliers.
Here’s why blockchain is so revolutionary for the travel industry. The style of transaction used does not require transaction fees or barriers to entry. It puts small companies on the same playing field as larger ones, so everyone can compete.
It’s a game-changer!
You can imagine all of the travel offerings, such as flights and hotel room listings, floating around in the blockchain – accessible for individuals, enterprises and travel managers through an interface.
Transactions made in the form of “Lif” tokens can be used to make transactions without intermediaries. This means it will be up to the hotels and airlines to decide whether or not to pay out a commission.
Cutting Out the Middleman
It used to be that transactions needed to be approved by an organization with an established authority. Now, they can be approved by a computer code. This means no more middleman.
Cutting out this step of the traditional travel process means that destinations themselves can keep more revenues in the local economy. This is a major benefit to small economies in developing countries. It can also help avoid a monopoly.
This means that suppliers can distribute their inventory directly to customers, without having to pay the fees of intermediaries (sorry, middlemen!). Sellers of travel will be able to access their inventory on a single platform, without having to pay markup fees or experience any barriers to entry.
Plus, there is no need to have a team in the back office to maintain the electronic ledger of transactions. This will reduce costs significantly for travel agencies, airlines, hotels or other businesses in the travel industry as well as customers.
Blockchain & the Future of Travel
Blockchain technology will significantly disrupt the travel industry in a positive way. Eventually, all travel booking could be conducted via blockchain platforms. In fact, a blockchain company could eventually replace Uber, AirBnB and other major travel companies. After all, all these companies are middlemen taking commissions off of sales. Blockchain could also change the way that customers pay for travel. The possibilities of this technology are endless.
Throughout this revolution, however, travel agents will remain relevant. Blockchain technology will only make it easier to book travel transactions, so they can focus on other aspects of planning a trip. After all, a skilled and experienced travel agent offers a lot more than just booking assistance..
Do you have questions about blockchain technology, or how you can save on your next trip as a result of changes like this one? Contact us, and we’ll be happy to help!
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