Problems of the tourism industry:
Five large travel companies control the majority of the tourism market. The two largest of them, OTA (Online Travel Agencies) and Priceline Group and Expedia Inc., control 95% of the market share for online travel agencies in the United States. Amadeus, Sabre and Travelport, which are included in the three largest global distribution systems GDS (Global Distribution Systems), have 99% of the total market share of indirect assets for the air transportation market.
Dominant market players don’t have an economic incentive to introduce innovations especially as there are only two dominant intermediaries in the hotel sector, and three in the airline sector. Budding travel companies find it difficult to compete with the giants and as a result, they are forced to join the network monopolies.
Because of monopoly, data is stored centrally, which increases the risk of hacker attacks.
In 2017, InterContinental Hotels Group (IHG) was attacked, and their customers’ data was stolen. Although the company said in February that the attack affected only about a dozen hotels, in fact POS terminals were infected in over 1,000 of their establishments. The group consists of a number of hotel brands such as Holiday Inn, Holiday Inn Express, InterContinental, Kimpton Hotels and Crowne Plaza.
Currently, the tourism industry spends a lot on verification. Personal traveler information often passes through many hands, starting from the site where they made the booking, and ending with the airlines, payment systems, airports, governments, border control authorities and others. In a centralized system this is not only costly, but also poses a threat to confidential data.
A booking of one international flight may be associated with a multi-currency transaction passing through several countries. When booking a flight from New York to Barcelona via Reykjavik, a traveler will pay the ticket price in U.S. dollars, although a portion of the ticket cost will be exchanged for Icelandic Krona, and another portion for Euros.
The total cost of a ticket also includes the airport and baggage security, government taxes, boarding fee, charges for passenger service and more.
Besides guaranteeing full payment for intermediaries’ services, applications based on a blockchain platform can solve other problems. For instance, the reconciliation process currently can take up to a month, and all this time the service providers and clients are ‘on the hook’, unable to prove that service was actually rendered and for the right amount.
Webjet annually reserves around 750 thousand rooms for its customers around the world. Every 10th booking requires varying degrees of manual intervention, and for one in 25 cases, agents and other service providers do not receive payment for work done.
Problem: When booking airline tickets and hotels, the client is obliged to fill in almost duplicate information. If they travel frequently, this data has to be filled in very often. Travelers can make a mistake and miswrite their name (a typing error) when booking the ticket and this will cause problems at the airport and they may be denied boarding. If they notice the error in time, they will have to contact the airline, cancel the ticket, and book it again. Additionally a lot of time at the airport is spent on “document inspection” and personal identification. Airports have to maintain huge staff numbers for flight check-in.
Solution: Once a person has gone through an identification process in the system, they receive a code to access their data, which stored in a blockchain. The data in the blockchain cannot be changed or compromised, and thus can be trusted.
The highly trustworthy and immutable nature of a blockchain also makes it ideal for improving the way travelers are identified during their journey. Travelers’ IDs are required at booking, when changing a booking, at security, the boarding gate, duty free shopping and at the hotel. Imagine how much easier travel would be if you didn’t need to use a passport at all these points in the journey. It is possible that with blockchain technology proving a traveler’s identity will be almost frictionless.
Mishandled baggage costs the aviation industry billions each year and is the source of significant traveler frustration. The challenge isn’t easy to address as bags on their journey from A to B, and sometimes even C, are handled by a number of parties, including the airline, and airport and ground handling firms. Modern systems have improved this by reconciling baggage handling data directly from departure control applications. However, blockchain may still offer advantages.
A shared distributed ledger, used by all actors within an airport and between different airports, would allow a bag and its ownership details to be automatically logged on a blockchain. This would share baggage data records between different parties, and make it much easier to track bags as they move with a traveler during their journey.
According to the Luggage SITA 2017 report, in 2016 the number of lost bags was 5.73 bags per thousand passengers, which is 12.25% fewer than the previous year, and the lowest rate in history.
Problem: although different airlines have their own loyalty programs; their core of bonus miles is almost identical. However not everyone can use these bonus miles: they expire if not used, and you can’t buy a ticket with another airline’s bonuses.
Solution: if there was one cryptocurrency for the whole tourism industry, then the loyalty systems could also use this cryptocurrency, a tourist token, in partner loyalty programs.
How it looks: The customer buys a plane ticket and gets a bonus of 5 tourist tokens. When he/she books a hotel, there could be a discount for 5 tourist tokens, as long as the airline and the hotel share the same loyalty system. The client doesn’t have to spend the 5 tourist tokens, they might also save them for the next trip or transfer them to someone else.
It’s about to become reality:
The SIA Group's KrisFlyer frequent-flyer programme will launch a world-first - a blockchain-based digital wallet for an airline loyalty program. This will unlock the value of KrisFlyer miles, and allow everyday spending at retail partners.
Since everything will be recorded into a blockchain, the reconciliation process between airlines and travel agencies will become easier. Any reconciliation will happen much faster, as everyone will have access to a single data register.
In the future, many payments could be fully automated with smart contracts. For example, if a blockchain receives information about 1 million sold tickets, the commission fee would be paid simultaneously to the travel Agency by a smart contract.
Or if the flight is delayed, a smart contract will detail the insurance compensation paid by the insurance company to clients.
Applications on the CREDITS blockchain platform will facilitate tourism services in all respects, making it cheaper, quicker, and more convenient for users and for the new business models that are emerging in the tourism industry.