Travel and Expense
Blockchain and the Future of the Travel Industry
Dr. Mark van Rijmenam is the founder of and a globally recognized speaker on big data, blockchain, and artificial intelligence, as well as a strategist and author of three management books. He spoke with us about how blockchain is poised to change the travel industry.
For readers who may be familiar with blockchain only from news about Bitcoin, how would you explain what blockchain is?
Blockchain is a database. But it is a database where data is only read and write. So instead of a regular database where you have read, write, and edit, once data is on a blockchain, it can no longer be edited. This means data on a blockchain is immutable and, therefore, verifiable and traceable. You can go back and see what happened in the past and see how a piece of data or product has moved over time. This offers you a single source of the truth where all the parties that are involved with the blockchain have access to the same information at the same time.
There are also different types of blockchains. You have a permissioned or private blockchain that requires approval to join – for example, five or 10 or 20 banks may share one blockchain, and they don't want other institutions participating in that blockchain.
On the other hand, we have permissionless or public blockchains, which means that you don't need to ask approval to join. You can just join, download software, download the blockchain, and get started. The best example of that is the Bitcoin blockchain where everyone can join a network and start mining transactions and contributing to the network.
Most important is that blockchain is a single source of truth where everyone has access to the same data. The data is immutable, verifiable, and traceable.
Where is blockchain having the biggest impact on the travel industry?
Blockchain is especially relevant when there are two things present. One is when a transaction is taking place. The second is when there's a trust factor in play, and that occurs primarily when you’re dealing with parties whom you do not know.
Where blockchain is having the biggest impact in the travel industry is where consumers connect with suppliers, like hotels and airlines. Because blockchain removes the need for an intermediary – in this case, an online travel agency or global distribution system – then suddenly, a consumer can purchase directly from an airline or hotel without the need of the complex system that we have currently in place.
If we remove the intermediaries in these transactions, how will that affect corporate travel managers?
Blockchain doesn’t remove the need for travel managers within an organization to offer services on behalf of the employee. The major difference is that a travel manager can book travel without a centralized global distribution system. There's still a system there, but it’s a fully automated, decentralized marketplace and there's no middleman taking a commission, which can be 15, 20, or even 25%.
So, blockchain will make the process more cost-efficient for sure, and if it's developed correctly in the future with smart contracts, it will also be easier to work with. For example, smart contracts could be used for travel insurance with an "If this, then that" statement. As an example, if there is a flight delay, the organization automatically gets a reduction in fees for travel. Currently, that process is very often difficult and annoying.
Where are we with blockchain in the travel industry today and where is it headed?
Blockchain in the travel industry is still in the early days, as it is in most industries. Although there are a lot of companies experimenting with it, there are very few industry-wide applications currently in use. In a recent blog post of mine, ?I talk about where I see the biggest changes coming.
- The first is the decentralized booking marketplaces, which we’ve already addressed here.
- Second is loyalty schemes. These can benefit by expanding the transparency, security, and interchangeability of rewards.
- The third area mentioned is identity services. In this case, passports and other documentation could be verified without releasing the traveler’s private information.
- Fourth, I talk about baggage tracking. Blockchain would allow all the different parties that handle luggage to centralize their information so everyone can see that same information at the same time.
- Finally, I talk about travel insurance, which we’ve already talked about a bit here as well.
You can also find many examples of companies experimenting with blockchain in their travel management programs in that blog.
In another blog post, ?one of the solutions I discuss is how blockchain can be used with airline companies to share one database for airport departure and arrival information. Today, all these players use their own databases.
If you can decentralize that using a private blockchain, then the departure airport and the arrival airport all have the same information at any moment in time. There you can see the benefits of having a single source of the truth using a decentralized platform.
What are the biggest hurdles to implementing blockchain solutions?
Blockchain is a difficult technology – the ecosystem is not yet completed. There's still a lot of development that needs to be done and needs to be researched. So that's one problem.
The second problem is related to that: The technology just isn't ready yet. That takes time, and the skills and the talent are still scarce. There's not enough talent to do the research and to build what is necessary to make to make this change.
And then finally, I think it's a cultural change, because it will require people to work in a different way. In the end, it's behavioral change that always takes the longest.
Do you have any final tips for travel managers who are interested in learning more about blockchain?
The most important thing is to be aware of the different technologies that are out there and how they are changing the work of travel managers and all employees. I like to say that we live in exponential times, because change is happening faster and faster than ever before. And being aware of those changes, being aware of these technologies, and understanding how these technologies affect your business is the first step in preparing a business for tomorrow.
