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Bitcoin, Cryptocurrencies and the Travel Industry

Over the past few weeks, it’s been impossible to watch or read any financial news without being confronted by Bitcoin. At the time of writing, the world’s most famous cryptocurrency has seen a meteoric rise in value, up 161% ($10,567) in the last month alone. People are starting to take notice.

Whether or not you believe the whole cryptocurrency thing is a bubble or that something you can’t hold in your hand can’t possibly be worth that much, the technology is here to stay.

That technology is, essentially, blockchain. We’ve written recently on the potential that blockchain technology holds for the travel industry. Today we’re going to focus on the concept of a digital currency. How could this make travellers’ lives easier? How could travel companies benefit? And what developments are already underway in this space in the industry?

Could the travel industry’s early adopters of cryptocurrencies benefit in the long run?

If Bitcoin and its fellow digital alternatives are to move from the status of speculative vehicles to real-world game changers, they are going to need genuine use cases. As Bitcoin has grown more popular with investors, a few obvious weaknesses have come to the fore. These include the amount of sheer power needed to run the network and a lack of scalability options. This means that Bitcoin has moved beyond being a medium of everyday transaction, and is now more seen as a store of value: digital gold, if you will.

But blockchain, Bitcoin’s underlying technology, can be deployed in different ways – something proved by the various alternative cryptocurrencies gathering momentum in Bitcoin’s wake.

But let’s start with considering why travellers and travel businesses might choose to take a leap of faith into the unknown world of cryptocurrencies.

Read more: Prepaid Travel Cards Offer Agencies a Lucrative Revenue Stream

Speed, accessibility, savings and security

In a few short years, a technology could come to the fore that will release international travellers from the woes of currency exchanges, carrying large amounts of cash on hand, withdrawal fees and fraud. Decentralised ledgers, digital wallets and frictionless transactions could be the future. These are the founding tenets of cryptocurrency.

How Bitcoin and Alts could benefit travel companies and their customers

We know that Bitcoin is on the rise in terms of value, alongside other currencies such as Litecoin and Ether, the token used on the Ethereum blockchain platform. But importantly, we’re seeing this rise in value correspond with a rise in retailers and brands accepting cryptocurrencies as a form of payment.

As these digital currencies emerge as a genuine alternative to conventional banking and fiat currencies, their benefits are becoming accessible to ordinary people around the world.

One of those benefits is the ability to transfer money to another individual or company, without needing any kind of middleman. Bitcoin, Ether, Ripple, Litecoin: All can be sent between users without any banks or payment service providers charging a commission for the transaction. Having said that, a small fee is paid for every transaction to miners (or destroyed in the case of Ripple), whose computing power has to solve a complex puzzle in order to confirm new entries on the decentralised ledger.

So cryptocurrencies are not free, but to differing extents, all can move money around at a fraction of the price of conventional companies such as Paypal and Swift. They also tend to be faster, which goes some way to explaining why Ripple (XRP) is seen as Swift’s biggest competitor moving into 2018.

So that’s speed and fees covered.

What about security?

The whole point of cryptocurrencies is that they are founded on cryptography, puzzles that only computers can work out. Every transaction is also recorded on a decentralised ledger. There is no single point of weakness in the network, no vault that can be cracked. The mining community (or more accurately, their computers) confirm and record every transaction on the blockchain. Currency movements are recorded in hash functions with timestamps so that the data cannot be changed or tampered with.

It’s this reason that blockchain technology is offering all kinds of industries ways to enhance security and prevent fraud.

And finally, we come to accessibility. Did you know that a recent report from Mastercard found that over 130 million people in Europe have no access to traditional banking services? Sure, some of us take banks for granted, but that’s not the case for everyone.

On top of that, a lack of trust has developed between the public and the financial sector. Conventional banks are seen as profit-driven, not people-driven, and responsible for global economic problems. In that environment, the emergence of digital currency far from the reach of major institutions is attractive.

What does all of this mean for the travel industry?

Okay, we’re finally getting to the focus of this piece. How will cryptocurrency and all of its benefits impact the travel industry?

Established players in travel and tourism are already embracing the opportunities Bitcoin and alternative cryptos have to offer. Let’s take a look at some recent examples.

Although more blockchain than cryptocurrency, Fritz Joussen, CEO of industry giant TUI Group, recently outlined the firm’s belief that Blockchain technology would become a fundamental part of business in the next decade. He also revealed that the company has launched its own project based on the technology called BedSwap. The system allows TUI to move its hotel inventory to different points of sale depending on the demand.

And then there’s another industry heavyweight, Expedia.com. The OTA introduced the option for customers to make Bitcoin payments for hotel bookings halfway through 2014. It’s a matter of time before flights and other major purchases are also available to cryptocurrency holders.

Across the Pacific, Japan’s HIS Co Ltd recently announced compatibility with Bitcoin for payments. The company started by launching the payment option at 38 of its stores in Tokyo. The aim is to increase the number of participating outlets further. As part of the move, the company offered special bitcoin tour packages.

That’s a few examples of industry giants taking cryptos seriously. Smaller agencies are doing so, too. Take Malta’s Bitcoin Adventures. Originally set up to raise the profile of Bitcoin in Malta, the slightly strange company’s first customer was a Japanese tourist who arranged a three-night stay paying with cryptocurrency.

Thailand has had an up and down relationship with Bitcoin, banning it in 2013 only to reverse the decision a year later.  Plenty of the country’s tourist hubs have embraced the currency, including the Pattaya Beer Garden, which sees major benefits of accepting Bitcoin, including a lower risk of credit card fraud.

Another travel startup, UK-based TamTam Travels, has an interesting business model based on cryptocurrency and blockchain technology. The company’s membership portal offers discounts on benefits and services around the world.

As part of a pre-launch last year, the blockchain travel startup offered discounted packages on memberships, with additional rewards of its ‘native’ blockchain currency – called the JIO Token – for purchasing memberships.

TamTam Travels accepted a number of cryptocurrencies for its launch including Bitcoin, Dogecoin, Ether and Litecoin.

Our final example comes from TripAlly, a travel/tech startup using cryptocurrency to end the financial pain of international roaming. Instead of paying a fortune for local data, TripAlly aims to provide mobile internet without borders. How? The startup will provide their service as a mobile application that will allow you to access foreign mobile networks for data. Hooray.

But what has that got to do with cryptocurrencies? Well To raise funds to get the company off the ground, TripAlly held an ICO, an Initial Coin Offering; a crowdfunder with the cryptocurrency community. In return for donations, backers have received Ally tokens, which can be spent on the roaming service provided by the company.

Mainstream adoption in the travel industry is inevitable

In the past few weeks, cryptocurrency trading application CoinBase has been one of the most popular apps across Android and Apple download charts. This is not just because people are seeing cryptos as speculative vehicles. It’s also because the technology promises a new way of doing things.

With that in mind, it seems inevitable that cryptocurrencies will become a more common part of our day to day lives. Some of these digital currencies have been around for a while, too. Bitcoin came to light in 2009, yet it still comes as news to many. It’s been a slow journey, but Bitcoin and other Alts are gathering momentum.

The world of travel appears to be open to working with the concept of digital money. The blockchain technology at its foundation is already revolutionising all kinds of processes.

Mass adoption is on the horizon. So perhaps the travel industry’s early movers will reap the rewards when cryptocurrencies become the norm.

How Blockchain Could Transform the Travel Industry

When we hear the word Blockchain most of us will react in two ways. The first is by drawing some vague connection to Bitcoin and other cryptocurrencies. The second is simply a knowing shrug: it’s important but pretty complicated so we just smile and nod! So today we’re going to try to untangle the complicated mess that is Blockchain. Then we’ll move on to discover how the technology could potentially impact the travel industry.

Beginning with Bitcoin

Blockchain technology rose to prominence in 2011 as more people became aware of Bitcoin, a digital currency based on the technology. After a huge spike in the price of Bitcoin, the public sat up and took notice. The promise of Bitcoin was that through using Blockchain technology, its users could take advantage of a new type of payment mechanism: Truly anonymous, free and secure purchases.

The excitement in Bitcoin was partly driven by the interest in something completely new, as well as the opportunity available for early adopters to ‘mine’ their own Bitcoins – perhaps the digital equivalent of printing money. But how exactly are Bitcoin and Blockchain related?

Put simply, Blockchain is the technology and methodology underpinning Bitcoin. Blockchain can be understood as a database. But it’s no ordinary database. It’s decentralized and encrypted by design and shared across a network of stakeholders. The result is a distributed ledger that can record transactions across multiple computers. This distribution ensures that all transactions are verified by consensus, allowing the flow of digital value to be stored, organized and certified in a transparent and secure way.

Take a look at the video below from Amadeus:

What makes Blockchain unique?

There are a number of factors that come together to make Blockchain a unique and exciting technology. And they go way beyond digital currencies.

Transparency and immutability

We’re living in strange times and there are plenty of people out there talking about alternative facts and half-truths. With Blockchain, there’s no room for misinformation. Once an entry is registered on a public blockchain, it’s there for the world to see. Because it needs the consensus of users to get onto the public ledger and cannot subsequently be altered, everyone can see a time-stamped version of ‘the truth’.

For this reason, plenty of people out there believe that Blockchain technology is ideal for registering ownership of assets such as houses, cars or financial holdings.

Security

Security is built into the Blockchain process. The consensus mechanism has a very high threshold for cryptographic security. Without this, it would be impossible to maintain the integrity of a ledger shared between multiple parties. This level of security is key when sensitive information and transactions are being sent around the world

Blockchain is decentralised

It’s difficult to say how important blockchain’s decentralised nature really is. In terms of payments, the idea is that middle men – those who take a commission off the top of financial transactions such as Paypal – can be avoided.  However, in certain industries, private Blockchains with a more centralised structure can work. The main advantage to having a decentralised database is that there is no single point of failure. If the network is attacked, it’s much more resilient.

Data integrity

If there’s one point about Blockchain that we need to hit home, it’s about this idea of consensus. Because a transaction is processed on all computers in the blockchain, the algorithm ensures that there is a consensus regarding the validity of every transaction. This means that Blockchain data is always complete, accurate, trustworthy and widely available. It’s a shared record of the truth.

Efficiency and cost reduction

One major advantage of Blockchain technology is the promise to improve efficiency and reduce costs for stakeholders. With it, there’s no need to rely upon bulky, centralised record-keeping entities. Hooray!

So those are a few a few key aspects to Blockchain technology. And it all sounds very interesting, right? But now you’re wondering how exactly this technology links into the travel industry? How can the world of travel use Blockchain?

Blockchain in the travel industry

Before we properly delve into Blockchain and its application in the travel industry, we need to fast forward in time from Bitcoin to the rise of another cryptocurrency and now all-around computing platform, Ethereum. Ethereum is a public Blockchain that came to prominence in 2015. Although it has its own cryptocurrency, Ether, it also provides a platform for businesses to build applications based on Blockchain technology.

Arguably its biggest gift to the world has been the introduction of Smart Contracts. What exactly is a Smart Contract? Well, in this case it’s smartness is all about automation, and it wouldn’t be possible without the Blockchain.

These Smart Contracts can automate a range of business dealings between parties without the need for human intervention. Why is this of interest to the travel industry? Well, consider an industry which has a high amount of commission based business. Market aggregators in travel, for example, could stand to benefit. With Ethereum it’s becoming possible to hardcode the stipulations of an agreement between parties into a self-executing blockchain program. For simplicity’s sake: Let’s say “If I hit X in revenue, automatically send 2.5% of X to Y. In travel, commissions between hotels and aggregators could be settled automatically. No more annoying invoices, no more late payments, no more cash flow worries.

Moving on from smart contracts

In a recent report, consultants Amadeus outlined five ways that Blockchain could impact the travel industry in the near future. At the moment, even while the technology is experiencing plenty of exposure and publicity, it’s at an early stage in its development. There don’t appear to be any Blockchain systems being put to use in the travel industry today. But there’s no doubt that the potential is there. Take a look at these possible use cases.

Improving loyalty schemes

We’ve all had experience with loyalty schemes before. But in the travel industry, you can barely book any kind of trip without being bombarded by them. Hotels, booking websites, airlines, retailers… all have different schemes that are a key part of driving return business and keeping customers engaged.

Some are more successful than others. But all depend on outdated systems and principles, with the majority simply offering points in return for purchases. The problem with this method is that points are often left unspent, with travellers frustrated by the lack of leeway and the restrictions on what those points can be spent on.

Sure, some schemes are more flexible than others and allow a wide range of redeemable goodies. But plenty of points out there are left unspent and may even be listed on a travel company’s balance sheet as a liability. And we don’t want that.

blockchain in the travel industry

Blockchain startup Loyyal.

One great example of how Blockchain could improve this situation is California startup Loyyal. The company’s loyalty and rewards platform was built with blockchain and smart contract technology to reduce fragmentation in the loyalty business and make it easy for businesses to partner. The result is a secure system that gives customers more value from their loyalty schemes, eventually even in real-time.

Read more: How Travel Startups can Compete with Established Marketplaces

Improving baggage tracking

As much as the travel industry has developed in recent years, a few age-old problems still linger. One of these is the worst nightmare of any traveller: lost luggage. Lost or damaged bags cost the travel industry a huge amount every year, not to mention the traveller complaints and damage to reputations that comes with it. And the process of tracking it down can be even tougher than losing it in the first place. In part this is due to responsibility for the luggage shifting throughout your journey, from the airline to the airport to ground handling firms.

That’s where Blockchain comes in. It could offer a shared, distributed ledger used by all those within and between airports that at some point have control over baggage. The system would allow for a bag and its ownership details to be automatically logged. These records could be shared among everyone concerned to improve accountability and, most important of all, track down lost luggage.

Automating and simplifying settlements between operators

Remember when we mentioned Smart Contracts before? We know more than most about how the travel industry is dependant on an intricate mixture of operators, service providers and OTAs. There’s a complex set of relationships between those parties, with money moving between them all of the time.

Read more: Travel Marketplace Pricing Strategy: Where to Start

Smart Contracts based on a Blockchain system could change the way those relationships are managed for the better. For example, let’s think about a traveller booking a hotel room. In the background, there’s an aggregator, perhaps an OTA and the hotel itself. Eventually, they will need to settle cash and commissions based on agreements already in place. With Blockchain this process could be automated and executed in a way that maximises efficiency and cuts costs for everyone involved.

Revolutionising identification

One of the most exciting potential Blockchain uses in travel is in the realm of identification. We have all experienced the endless showing of IDs and passports throughout a travel journey, from booking to boarding to airport security to hotel check-in.

In future, the trustworthy and immutable nature of blockchain could transform the way travellers are identified throughout the course of a journey.  Imagine a trip that didn’t require this at every stage. Blockchain technology could offer travellers a more frictionless experience in the coming years. Startups such as Civic are already pioneering in this space.

How Travel Companies Can Kickstart the Blockchain Revolution

Blockchain startups are beginning to spring up in all kinds of industries, and you can bet that travel won’t be far behind. Our is an industry in which innovation is rife and competition drives progression. With that in mind, what should travel companies start doing now in order to ride the inevitable Blockchain wave?

According to Amadeus’ latest report on the matter, there are five steps that should be taken by industry stakeholders.

The first is to appreciate the pace at which decentralised technology is moving. This requires an understanding of what it’s all about and its potential impact on the industry. If senior management is going to buy-in to future projects that involve Blockchain, they need to be educated now, not later.

The second step is to explore Blockchain’s potential even further. Nobody yet knows the extent to which it could impact the travel industry. There are bound to be more innovations and use cases that come to light aside from those mentioned above.

The third step will be new to many in the travel industry: collaboration. By definition, Blockchain is a system that requires collaboration between partners and competitors in order to work.

The fourth step is to, as with any emerging technology, experiment. Opportunities may present themselves to conduct trials and test Blockchain in a real-world scenario. Why not take the initiative and see where it takes you?

The fifth and final step that Amadeus recommends for potential Blockchain adoptees is to recruit with the technology in mind. Understandably there’s a shallow pool of talent out there with the knowledge and skills to turn potential into reality. But working with technology partners and hiring the right people could go a long way towards successful implementation in the future.