Blockchain 101

WHAT IS IT?

Blockchain is primarily a database, a ledger containing a history of any information it was designed to store. In the travel sector this could be details of a corporate event, a flight, a hotel room booking, luggage tracking, loyalty programmes or traveller data. ‘Blocks’ or strings of information are built on top of one another in an immutable chain, which is secured by cryptography.

What makes blockchain different from other databases that are used by, say, airlines, OTAs or hotel chains, is the ledger can be made available to anyone. It’s also distributed, replicated and reconciled on thousands of computers around the world and doesn’t sit on a single server. To ensure the ledger is accurate, it’s verified by multiple players on the network. If you consider the four main global GDS’, this is a far cry from the centralised systems dominating the travel industry today.

The decentralised nature of blockchain means no single actor can tamper with all copies of the data simultaneously. This is because transactions are only recorded if the network comes to consensus on what has occurred.

Bitcoin and Ethereum are cryptocurrencies that use blockchain – this is what has made the technology famous. Crypto assets are already being used in the travel industry to reconcile payments. But their volatility means some in the industry prefer to use the term ‘distributed-ledger technology’, or DLT, in reference to blockchain. But we will use blockchain here since it is a widely known term.

WHAT ARE THE BENEFITS?

There are three big advantages to blockchain; a ‘single source of truth’ on travel data; high levels of security; and there’s no need for intermediaries. This makes it attractive for business travel where multiple fees are paid to third parties and there is opacity over bookings.

Blockchain makes it possible to trace 100% of a trip – every element of it can be theoretically coded on a blockchain, accounting for expenses to customer loyalty cards or personal preferences.

With blockchain you have the ability to collect data, build upon that data in real-time, and then independently and securely report information to any number of parties based on permission to access the online ledger.

Blockchain opens up the door to ‘smart contracts,’ where payments are made, or orders executed when there is a specific trigger. These could be extremely valuable for instantly refunding travellers when delays happen, loading loyalty cards or personalising trips based on traveller preferences.

The biggest advantage touted by those active in blockchain is the ability to cut out the middlemen of the travel industry, from global distribution systems to travel agencies. The idea of sharing inventory data directly to customers with no slicing or dicing of fees is seen as a significant benefit.

One number touted is that companies providing travel blockchain solutions could save users as much as 50% [1] on traditional booking fees.

The emerging parts of the technology have been related to cryptocurrencies that sit comfortably with some, but not with many others.

Brendan Martin, Reed & Mackay Head of Data and Business Intelligence

WHAT’S HAPPENING IN BUSINESS TRAVEL?

Currently, the business travel industry is characterised by countless bilateral contracts. This leads to significant reconciliation efforts and a reduction in speed and security. Blockchain hopes to change this. Applications are being developed specifically for the travel sector, but successful projects that are industry wide with significant adoption, in multiple markets, have yet to come to fruition at scale.

Critical mass adoption is vital for distributed-ledger technology to work. Blockchain is currently niche in business and managed travel, with many users still trying to align use cases to the technology [2]. From IATA’s Travel Pass to TUI’s private DLT for bed nights or Kuoni’s crypto-payments, many significant travel industry players are developing blockchain solutions (see User list).

USE CASES IN BUSINESS TRAVEL

Payment solutions using cryptocurrencies
Digital health verification
Airline bookings with corporate buyers
GDS commission reconciliation processes with TMCs
Airport security, biometric ID and digitised passports
Smart contracts offering travel delay pay-outs
Private blockchain for hotel room inventory management
NFT – Non-fungible tokens for hotel and airline bookings
Airline loyalty reward schemes
Offset carbon emissions with hotels
Certify sustainable business trips