Web3 in Travel: Harnessing Blockchain Technology in the Travel and Hospitality Industries
Decentralization in Travel
Blockchain technology, known for its decentralized nature, is closely associated with the idea of a utopian internet, where the ideal version of the web can only be realized through decentralization. As a secure, transparent, and decentralized method for recording data, blockchain technology has immense potential for various industries, including ours. Blockchain technology can transform numerous industries by automating booking and payment processes, enhancing trust and safety, and promoting efficiency through smart contracts and identity verification. For example, blockchain can serve multiple purposes in travel, such as tracking and distributing rewards points, coupons, or other loyalty program benefits. It can also be employed for customer identity verification, fraud prevention, and improving supply chain management efficiency. Other potential applications include secure and decentralized customer identity management systems for storing and sharing customer information like passport and visa details, digital payments and transactions, luggage tracking, NFT rewards, tokenization, collaborations with crypto-artists, utility NFTs, and more. As 2023 is a year of rebuilding amidst uncertainty, hotels face numerous technological and organizational challenges that require prioritization. Blockchain is the future, and organizations must adapt by identifying the best vendors in this space and quickly deploying solutions with clear revenue prospects, anticipating mainstream customer adoption of Web3 technologies.
Web3 Generation and Hotels
Blockchain technology's marketing and branding aspects in the hospitality industry are particularly intriguing. Blockchain users form a tight-knit, sizable, and financially solid global community known for extensive traveling. By accepting cryptocurrency payments, for instance, hospitality brands can showcase their forward-thinking nature. Additionally, offering perks to collectors of specific NFTs, such as Bored Ape Yacht Club or CryptoPunks, can incentivize high-net-worth communities to develop brand loyalty. In the era of Airbnb, hotels can be perceived as outdated and impersonal. Targeting tech-savvy audiences and demonstrating an understanding of their needs can significantly boost a brand's image, making blockchain enthusiasts the ideal community to target.
Web3 = Value Creation
Blockchain technology enables hotels to bypass intermediate stages and transition directly to advanced tech solutions. Despite the historically slow adoption of new technology, blockchain offers hotels the opportunity to create value by restructuring distribution, controlling pricing, and increasing loyalty. For example, tokenized issuance allows hotels to control access to their inventory, while tokenized stock facilitates granular price control that is enforced at the point of purchase. This enables hotels to regulate the types of guests they accommodate and impact ancillary revenue. Additionally, tokenized stays can create a Proof-of-Stay, a verifiable online transaction that identifies each guest, their stay, and their reviews, eliminating the need for reputation management solutions and resulting in significant savings.
RNTs and Guest Verification and Personalization
Room Night Tokens (RNTs), a form of Non-Fungible Tokens or digital assets, can be minted for guests upon arrival and either burned or rendered inadmissible but retained once their stay ends. Hotels can create personalized designs for these NFTs, emphasizing their brand and providing guests memorable souvenirs. Furthermore, these souvenirs can prove loyalty in loyalty programs, with hotels offering incentives based on the number of RNTs a guest holds.
Account Ownership, Personalization, and Reputation
Web3 can address the fundamental issue of account ownership in the hospitality industry. Currently, travelers have separate accounts for each platform (e.g., Booking.com, Airbnb) owned by the respective platforms. Listings and reviews are built atop these accounts. However, if an account is closed or a platform shuts down, the listings and reviews disappear, diminishing the value of years of hard work. Web3 offers an alternative approach wherein a digital wallet grants account ownership to the user. Listings and reviews are connected to the user's account, not the platforms, allowing them to retain control. If a platform shuts down, the user's account, listings, and reviews are unaffected, as they are independent of the platform. Multiple platforms can simultaneously utilize the user's account, listings, and reviews with the user's permission. This model is already being explored in decentralized social networks, making it a technically feasible reality. Blockchain-based review systems are another excellent use case, as these systems can verify that only authentic customers leave feedback, ensuring that all changes are reflected in a secure, immutable record. This process significantly enhances the value of reviews.
Blockchain technology supports the creation and management of NFTs, providing further opportunities for the travel and hospitality sectors. For example, NFTs, representing ownership of digital assets, can be used to tokenize travel coupons or support experiential tourism and the "tokenization of emotions." Additionally, NFTs and blockchain can streamline processes in business travel, such as notarizing expenses or travel contracts, controlling compliance through smart contracts, and using fungible tokens for corporate payments. Unfortunately, hotels need to be faster to adapt to new technologies. They were once pioneers, but hotel technologists became entrenched in on-premise and unwieldy tech solutions. Today, they are cautiously exploring cloud-based alternatives due to their heavy legacy. As a result, the hospitality industry has considered technology an enabler rather than a value creator, which needs to be corrected.
Tokenized inventory distribution allows hotels to open their distribution channels worldwide while still controlling access. Hotels can determine the type of guests they attract, and granular price control can be enforced in every transaction, empowering hotels to manage floor and ceiling prices for primary, secondary, and tertiary sales of tokens. Blockchain can programmatically implement these controls, saving legal, accounting, and settlement time and resources. In addition, tokenized stays can solve reputation management and loyalty distribution problems. Proof-of-Stay, a verifiable online transaction that identifies each guest, their stay, and their reviews, can eliminate the need for costly reputation management software. The travel and hospitality industry stands out as a significant sector without a secondary market for reselling unused reservations, despite the prevalence of resale markets for various consumer goods. This is mainly because travel bookings are considered service contracts rather than goods. Therefore, transforming these bookings into non-fungible tokens could represent a significant innovation and a critical milestone for the industry. Currently, there is a win-lose situation between hotels and travelers when it comes to booking reservations. Travelers desire flexibility, and hotels seek immediate and guaranteed cash flow. However, this is not achievable with the existing rate system (Refundable vs. Non-Refundable). A win-win situation can be created by leveraging NFTs and blockchain technology, making prepaid non-refundable bookings resellable. This shift would establish the first-ever secondary market for travel bookings, where individuals can buy and sell reservations similarly to how physical goods are traded on platforms like eBay. Decentralized marketplaces may follow a similar trajectory as ticketing platforms, where most people now opt for third-party services like Ticketmaster rather than primary markets for booking concerts or sports events. For example, if a hotel sells a room for $200 and a significant event takes place, the price for that night could increase. If a traveler who purchased the room resell it for $500, both the hotel and the reseller benefit, creating a virtuous circle of value.
Blockchain technology's open and perpetual nature enables hotels to store and access information like never before. As previously discussed, some examples include:
- Secure Payments: Blockchain can develop transparent and secure payment systems that bypass intermediaries like banks or credit card companies, reducing transaction costs and enhancing consumer data security;
- Loyalty Programs: Blockchain technology allows customers to accumulate and redeem rewards securely and transparently, reducing the cost of running loyalty programs and increasing customer engagement;
- Identity Verification: Blockchain enables brands to establish secure, decentralized identity verification systems, replacing paper passports and traditional identification methods, streamlining check-in procedures, and reducing the risk of identity theft;
- Supply Chain Management: Hospitality operators can better track inventory and manage logistics by developing more open and efficient supply chain management systems;
- Smart Contracts: Blockchain facilitates the creation of smart contracts, automating processes such as booking and payment, eliminating intermediaries, and increasing efficiency.
In conclusion, integrating blockchain technology in the travel and hospitality industries can transform these sectors, fostering secure and transparent transactions, personalized customer interactions, and creating a secondary market for travel bookings. Moreover, blockchain technology can lower barriers to entry for smaller operators, improve efficiency, and offer unique experiences to travelers, all while maintaining a solid customer-centric focus. By embracing blockchain and Web3 technologies, the travel and hospitality industries can position themselves for a more innovative and prosperous future.