New Tech On The Block
Blockchain technology offers several advantages to the hospitality industry including security and stability benefits
By Vinita Bhatia
The advent of a new innovation is often met with either excitement or indifference, which is how blockchain was also greeted in the hospitality business. This technology allows digital information to be distributed to a network, so that it is difficult to compromise and easy to verfiy. While other industries, like the finance and IT sectors have already started using it, the hotel domain has yet to adopt it.
We present perspectives from two industry professionals – Harish Chandra, IT director of Sarovar Hotels and Yue Wang, founder and CEO, PopulStay – about how blockchain technology has the potential to transform the various aspects of business in hospitality.
Can blockchain play an important role in the hospitality industry?
Harish Chandra: While the technology is still in its infancy, hotels, restaurants, airlines, travel agencies, and other hospitality businesses could improve their service quality, guest satisfaction and profitability by integrating it. As more hospitality businesses adopt blockchain technology, stakeholders in the hospitality industry will collectively benefit from its use. It can definitely improve the quality of services in tracking guest and food activities, providing a digital ID as well as managing airlines and hotel loyalty points.
Yue Wang: Blockchain has a fundamental technology and mindset to redesign the hospitality business. This is something that needs to be accepted.
How can this technology allow digital information to be distributed securely on a network in this industry?
Harish Chandra: Blockchain technology has the potential to revolutionise many aspects of technology, business and governance. Its trust-free, tamper-evident, and cryptographic security structure enables digitising fiat currencies, creating smart contracts, developing decentralised autonomous organisations, and more applications. For instance, when it comes to guest tracking, hotels can be instantly updated right from the time that a guest leaves their home for the airport to when they check in to the flight and even upon their arrival at the hotel. This tracking increases efficiency by reducing wait time during the check in process and increases guest satisfaction.
Similarly, tracking and monitoring foods is applicable to the restaurant industry, from supply chain beginning at the point of production. Thus, extending blockchain based supply chain management systems to restaurants could provide better quality control and food safety in restaurants. Restaurants could collaborate with their food suppliers to be involved in the blockchain platform that tracks and monitors the food. Furthermore, they can allow guests to check the origins of and routes taken by the food used to prepare their meals, via blockchain technology. Simply put, blockchain technology can facilitate trust in restaurants with regards to the quality of the ingredients used to prepare meals.
Another area of interest is loyalty programmes, which often create more problems than they solve. Hotels and airlines can build these on a blockchain platform and issue loyalty tokens as rewards to their guests.
Blockchain technology could also provide a solution to identity theft. In hotels and restaurants, costumers must often present their IDs as proof in order to pass security and check in to their hotel rooms, or consume alcoholic beverages. This makes them vulnerable to identity theft; not only by the person who is checking IDs but also other people around who might obtain important personal information. A solution to this exposure is storing these details on a blockchain platform and people can be given permissions to check and validate IDs.
Yue Wang, founder and CEO, PopulStay.
Yue Wang: Blockchain allows digital information to be distributed securely on a network, which is one of its biggest benefits that could be applied to any business. There are other aspects of technology, which include trustless smart contract operation and token distribution to motivate the community to work on consensus target. Additionally, the data is owned by users instead of any centralised organisation. This makes it a very public and transparent transaction. It is also important to note that worldwide the exchange fee for crypto payment is very low when compared with fiat currency.
Industries, such as BFSI, are adopting blockchain, which support crypto currencies like Bitcoin. What possibilities does the hospitality industry have?
Harish Chandra: Blockchain technology has several advantages to offer the hospitality industry, with the most obvious being the security and stability benefits. For instance, all data is decentralised and traceable, and the database can never go offline, or be removed through a cyberattack, which can be important when dealing with financial transactions.
Additionally, the technology could play a key role in simplifying actual payments. At present, this can be somewhat complicated, especially when dealing with overseas settlements. With this technology, the entire process can potentially be streamlined and made more transparent.
Yue Wang: Crypto payment is a low-hanging fruit in many industries including the hospitality industry, which requires payments from all over the world. Among the different verticals in the hotel business, I am especially positive about the home sharing economy and loyalty programme in industry adopting blockchain, since it naturally requires a P2P transaction and privilege for high profile and loyal customers.
The hospitality industry has not been the first mover in many technologies – be it messaging, CRM, database management. Will it accept blockchain faster and anytime soon?
Yue Wang: I don’t think this technology will evolve very soon in the hotel industry. We need to be patient and wait for it.
Harish Chandra: The technology is global – a product or a service that is identifiable by an ID stored in the blockchain searchable by the Distributed Application (DAPP) can be tradable anywhere in the world. Digital currency like Bitcoins and Ethereum are already popular in India and industries are developing application over blockchain technology. Thus, the acceptance of blockchain-based services will be higher in countries like India.
Harish Chandra, IT director, Sarovar Hotels
Have you seen any applications of blockchain in the hospitality industry so far?
Harish Chandra: Winding Tree is a decentralised travel distribution network built on top of Ethereum platform, which connects buyers and sellers via a set of smart contracts and open-source tools in a non-rent-seeking manner without taking a transaction fee. It offers a decentralised alternative to GDS and OTA distribution with a reduced cost of distribution and more packaging flexibility than traditional platforms. The network connects suppliers (hotels, airlines) and sellers (travel agencies) to a single marketplace, so suppliers can put their availability and price information in the database, where sellers can easily discover it. The latter can then buy that inventory and pay instantly. These interactions are designed to be performed automatically without human intervention.
Yue Wang: Yes, a good example is decentralised home sharing community. So far, it has been doing well and supported by major crypto fund.
Is this technology ideal for large hotel chains, or can smaller chains and independent hotel brands also adopt it?
Harish Chandra: Both large and smaller chains can gain from it. Large hotel chains can deploy it as a private blockchain and can take advantage of information and resource sharing, movement of inventories. On the other hand, smaller hotel chains can join as a member to a blockchain group in the same industry to get the benefits from the group.
Yue Wang: Smaller hotels have more chance to benefit from a technology like blockchain.
How can hotels justify the investment for this technology? Is it on the basis of revenue it will garner the hotel as compared to the investment, or on how it will gain a competitive edge?
Harish Chandra: The topmost benefit is the customer satisfaction. It is definitely going to boost the revenue. Thus it has advantage on the both aspects.
Yue Wang: Usually, implementing this technology will cut the operation cost and improve the guest experience. Due to non-transparent information sharing among the group, often decision makers end up making expensive judgements. However, by combining transparent data with Big Data analysis, they can improve their decision-making capabilities while improving their customer’s user experience.
What specific challenges will the application of blockchain resolve in hospitality and tourism?
Harish Chandra: As the blockchain ecosystem evolves and different use cases emerge, organisations in all industry sectors, particularly tourism, face a complex issues. The principal challenge associated with this technology is a lack of awareness and understanding of how it works, which is hampering investment and its exploration. The problem with many current approaches, though, is that they remain stove-piped: organisations are developing their own blockchains and applications to run on top of them. In any sector, different organisations have different standards.
The other issue is lack of broad visualisation of the proposed solution. It requires a new approach as it removes the dependency on the middleman. Since this is a new technology and the awareness level is low, the lack of skilled manpower is a major concern. The industry is still operating on the market place concept and offering solutions based on buyers and sellers.
Yue Wang: There are some instances like a decentralised smart lock, which will save the security challenge of smart lock that is used a lot in hospitality. Currently, a lot of centralised managed smart lock systems are vulnerable to attacks.
How does the adoption of blockchain encourage direct interaction between guests and hoteliers?
Yue Wang: As long as the trust cost is reduced, it is very likely that the cost of the middleman will be minimised. For the platform we built, we have reduced the service fee from 18% to 3%, which is significantly lower when compared with average.
Harish Chandra: Blockchain platform enables the service provider to reach to the end customer directly, which creates value to the customer interns of money and better service. Thus the role of middleman will be diminished.