The year 2017 was when the blockchain projects flourished, where ICOs raised billions. This year it was a total crash for cryptos, however the amount raised this year were double as the previous one. The blockchain projects promised more, although 71% of them lack working products. The debate was that blockchain is still in its infant stage, and many people need to submit their projects in 2019. And the travel industry is the only area where blockchain will see a rise.
Problems we face
The travel industry is a good fit which will benefit from blockchain. Many players are involved, and everyone one should collaborate seamlessly. If someone needs to travel, they look for airlines, hotel bookings, navigate airport, find activities and finally rent a car. They need to make sure to exchange their currency in order to shop at their destination.
The airlines and hotel management should collaborate, besides maintaining their respective websites and reservation systems. Many have found it essential to collaborate with Online Travel Agencies (OTAs) and Global Distribution Systems (GDSs) to visit more “supermarkets“ globally. Managing these systems additionally costs on the end customers, however there are many hidden charges involved.
For a single entity, we should consider the inefficiencies and transaction fees in the banking and finance industry, particularly when different entities from different countries are involved. The other problem is the integration costs and setup that are present when service providers required to synchronize their diverse and siloed databases. A regular travel-related monetary exchange involves many service providers, form GDSs and bed banks to destination companies and eventually point of sale players. As a third option, we have the GDPR and the importance of security and privacy. And the last we are left with problem of fraud, which costs the airlines over $1billion yearly.
At last, we are left with “invisible costs.” facilities like the GDS are high in cost, primarily for smaller players. This makes the entry barrier potentially higher for them, which represents that a lot of creative startups are left in the dark. Additionally, the information held by GDSs can be costly and isolated for hotel management, who could otherwise have many dispersal options. Priceline and Expedia have a duopoly of approx 93%, which is according to the AHLA Association affects the small business and the consumer choice in our industry, which represent about 60 percent of the available hotels in the U.S., who are facing difficulty in competing as a result of the gouging commission rates demanded by the OTAs.
Blockchain disrupts the duopoly
Blockchain eliminates the intermediaries and enables a decentralized system where various entities can communicate without the need to trust each other, abolishing a lot of excess. This has produced actual outcomes. But the minimal costs are just few of the blockchain advantages; there are many more.
Blockchain has an ideal solution for these type of cases with smart contracts. As the expert Alexandrov explains,”every booking is secured with smart contract until the movement of check-out. This establishes an unparalleled security for the traveller when compared with traditional bookings.
Obstacles and solutions
Anyhow, GDS companies state that they offer current pricing and more services for distribution than blockchain could ever have.
The other problem is the essence of cryptocurrencies: it presently has a learning cure and needs some further levels of technical understanding, which secures it from mass adoption.
With the absence of blockchain, the cost and complexity of invoicing, deposits, batch process and reconciliation methods could stretch commission and payment settlements during 30 and 90 days. Culhane appraises that for most huge enterprises, such savings could give rise to a full percentage point on their companies operating performance (EBITDA).
For the problem of “learning curve”, LockTrip is launched a model where users can make transactions with their credit card; the system will make the purchases automatically for the required tokens on crypto exchanges. Users might not sense that they are making use of cryptocurrencies as everything is secured backstage.
Predictions for 2019
By adopting blockchain, the industry benefits a lot; but it resembles the path that customers are taking. In accordance with predictions from Phocuswire, while booking.com and Expedia are trying to be one-stop destination for consumer travel purchases, they love to shop around. They love deals, they spend time reading reviews and they enjoy to get suggestions from their friends. These reasons make way for hundreds of searches across a broad range of websites and apps. The trend will be changing from centralized portals to find the best deals, and this is where blockchain can standout.