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Blockchain technology, or distributed ledger technology, has been a frequent and popular topic in travel for some time now. While it still remains in the early days, akin to the internet in the 1990s, we still strongly believe that the technology holds promise for the travel industry.
Much has changed since we hosted our Blockchain in Travel Summit, where we convened industry insiders and blockchain experts to discuss all aspects of blockchain. For context, when we held the summit back in March 2019, the total crypto market capitalization was $130 billion. Today, the industry has pushed past $2 trillion. That’s over 15x growth in just two short years.
So, what’s the state of play with blockchain in travel today? Has the blockchain’s ability to increase transparency, lower costs, and instant traceability “taken flight”? Let’s dive into some of the projects bringing blockchain to travel.
Blockchain for operations
There are three primary areas that blockchain technology can support airline operations — streamlining processes, improving supply chain management, and reducing payment fees. Airline operations are complex, require many partners, and are mission critical, making it ripe for distributed technology. However, given the scale of incumbent platforms, the change will take time.
Operational processes: Blockchain technology has the potential to unlock a new world of smarter, more efficient operations for airlines. If every department and external vendor had the ability to work from the same data set, labor-intensive processes would not only be seamless, but airlines would have more control over sharing that data across traditionally disparate systems.
What does this look like in practice? Today, AirAsia uses Freightchain to optimize cargo revenues. Freightchain matches airlines with shippers and utilizes digital contracts to enable real-time bookings and fast settlement to optimize cargo capacity usage.
In another example, Deepair leverages smart contracts and real-time settlement so that airlines can augment ancillary revenues by cross-selling content across interline partners. Secure data on the distributed ledger means that these offers can be personalized, at scale, without sacrificing security or violating privacy.
Supply chain: Airlines can also enhance visibility into their global supply chain by tracking components on the blockchain. Capabilities like inventory management and procurement are augmented with greater transparency, tracking, and control of critical aircraft parts or operational inventory.
VeriTX is a digital supply chain for aircraft parts that verifies the origin and authenticity of inventory to ensure compliance with regulations and quality standards. The system also uses 3D printing to reduce the time that an aircraft is out of service by streamlining on-demand printing of verified digital parts.
Payments: Travel companies spend millions each year on payment processing. The settlement times are also lengthier, due in part to the global nature of the industry and the number of payment methods available. Payments can be faster, less costly, and more secure with distributed ledger technology
UATP, an airline-owned payment network partnered with BitPay to enable payments in cryptocurrency. While crypto has not become a popular means of payment in travel just yet, these payment rails are a requirement for serious adoption.
Blockchain for distribution
Airlines, hotels, property managers, and other accommodation providers often struggle with profitable distribution, as it requires a delicate balance between commission-free direct bookings and tapping into the global reach of the most recognized online travel agencies (OTAs) like Expedia and Booking.
In the case of OTAs, an airline typically goes through a global distribution system (GDS) company such as Sabre or Amadeus, which distributes air and hotel plus ancillary products to the OTAs before the final product reaches the end consumer.
This multi-layered process is highly inefficient for both the airlines and customers and is ripe to be streamlined utilizing distributed ledger technology.
To optimize profitability, providers are pushing for more direct bookings. Today, Blockskye is partnered with United Airlines to provide a direct booking solution for business travelers. This distributed platform allows travelers to book directly with the airline, resulting in higher margins for the airline from both the price of the ticket and the reduction of fees associated with the GDS and OTA.
OTAs are also evolving to include travel marketplaces that accept cryptocurrency. Travala allows customers to book over two million accommodations on its platform and is partnered with Binance to allow customers to book trips directly from the exchange. Booking from Binance Pay provides crypto holders the ease of using a single wallet and more options to utilize tokens.
Blockchain for identity
As it has in other industries, COVID-19 has acted as an accelerant, pushing the adoption of blockchain-based identity. This has been one of the most visible and active applications of blockchain in the industry:
- IATA’s TravelPass, which uses the distributed ledger technology from Evernym to secure user identities, is being used by Etihad Airways.
- Aruba has also built a health app with SITA and Indicio.tech, which allows visitors to share health data privately and securely.
- Germany is hosting a pilot across 120 hotels to use decentralized digital IDs to allow employees from German corporations to check-in. This is one of the most prominent pilots to date in using device-stored digital IDs in travel.
- Amadeus integrated IBM’s Digital Health Pass to enable secure and seamless health data verification.
What’s next?
Blockchain’s ability to provide scalable, secure, transparent, and traceable data makes it an ideal solution in travel. The industry’s complex infrastructure is perfect for blockchain technology, as it can streamline processes and systems spread across geographies, companies, and even industries.
The challenge ahead is what every emerging technology — and the startup ecosystem surrounding it — faces: adoption. There must be a critical mass of both users and companies piloting the technology. Otherwise, there won’t be significant learnings to improve systems and pave the way for widespread adoption.
Yet, even with the groundwork required to put the blockchain to work in travel, we remain bullish on blockchain’s role in travel. As we navigate global governance, private vs public blockchains, and regulations, the industry will find its path towards enabling a new way to transact, interact, and engage. These questions will be answered with actual usage. That’s the inflection point where travel finds itself: with ongoing pilots, the lessons learned are being translated into better products primed for global service.
