In 2017, blockchain projects flourished, where ICOs managed to raise billions. 2018 was a crash year for cryptos, even though the sums raised this year were twice as high as the previous one. Blockchain projects promised a lot, however 71% of them still have no working products. The argument was that blockchain is still in its infancy, and many are supposed to deliver their products in 2019. And one of the best places to watch where blockchain will rise again is in the travel industry.
Problems we face
The travel industry is uniquely suited to benefit from blockchain. There are many different players involved, and all need to collaborate seamlessly. When someone wants to travel, they need to deal with airlines, book hotels, find activities, navigate airports and maybe rent a car. They will also have to change their currency so they can shop at their destination.
The hoteliers and airlines also need to collaborate (and compete). Besides running their own website and reservation systems, most of them have found it necessary to collaborate with Global Distribution Systems (GDSs) and Online Travel Agencies (OTAs) to land on more “supermarket shelves” globally. Running these systems adds to the costs on the end customers, but there are also many other hidden fees involved.
For one, we must consider the transaction fees and inefficiencies in the finance and banking industry, especially when different parties from different countries are involved. Another problem is the setup and integration costs that are involved when service providers need to synchronize their disparate, siloed databases. A standard travel-related transaction involves multiple service providers, from GDSs and bedbanks to end-service companies and eventually point-of-sale players. Third, we have the GDPR and the importance of security and privacy. Fourth, we have the problem of fraud, which costs the airlines $1 billion annually.
Finally, we have the “invisible costs.” Services like the GDS are costly, especially for smaller players. This makes the entry barrier significantly higher for them, which means many innovative startups are left in the dark. In addition, the data held by GDSs can be expensive and inaccessible for hoteliers, who could otherwise have more distribution options. Expedia and Priceline have a 93% duopoly, which according to the American Hotel & Lodging Association “hurts consumer choice and the small businesses in our industry, which represent some 60 percent of all the hotels in the U.S., who are struggling to compete as a result of the gouging commission rates charged by the [online travel agencies].”
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