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Harnessing Blockchain potential in Travel

Blockchain is a development that Amadeus has been watching, and engaging with, for some time now. The innovation foresight paper produced by Amadeus is designed to help shed light on the many different areas of the travel industry, where blockchain is beginning to have an impact, in addition to providing a window into the wider development of the blockchain industry itself.

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Ask even the most technically-savvy expert to succinctly explain blockchain and it is a bit like trying to solve a Rubik’s cube. The reason for that is that there are several dimensions to the concept including technological, business, economic and, many believe, even social.

What is clear is that this emerging technology holds tremendous promise to change the way we can ‘exchange value’ digitally. Just as the internet’s design has allowed us to exchange information very easily and quickly, so blockchain could open the door to a new iteration of computing that allows ‘value’, often financial, to be exchanged between businesses, governments and individuals.

Despite blockchain technology being much discussed, in reality the technology remains at a very early stage in its development. For example, we believe there are no live systems in production today in the travel industry. However, the industry is in an experimental phase with various actors investigating potential use cases for the technology and much progress is being made.

Making loyalty schemes more user-friendly

Today’s loyalty schemes have evolved over time, mostly based on proprietary technology and the basic concept of rewarding travellers for their continued purchasing of a travel product. Loyalty schemes have become a key marketing tool for hotels, airlines, credit card companies and retailers.

The challenge for the traveller is often the complexity of redeeming loyalty points. Although some schemes have forged partnerships allowing points to be widely redeemed, it is still true that in general an airline loyalty point can’t be used beyond booking flights. This can be frustrating for travellers and is also a problem for the industry. Any unspent loyalty points must reside on an airline’s balance sheet as a liability, which can hamper capital raising and investment.

Improving baggage tracking with blockchain

Mishandled baggage costs the aviation industry many billions each year and is the source of significant traveller frustration. The challenge isn’t a simple one to address given a bag is handled by several actors, including the airline, airport and ground handling firms on its journey from A to B, and sometimes even C. Today’s systems have improved by reconciling baggage handling data directly from departure control applications. However, blockchain may offer advantages.

A shared distributed ledger used by all actors within an airport and between different airports, would allow for a bag and its ownership details to be automatically logged on a blockchain. This would deliver baggage data records shared between different actors and make it much more straightforward to track bags as they move with a traveller throughout their journey.

Simplifying settlements in the travel value chain

The travel industry operates in a value-chain based on collaboration and therefore many areas of the industry rely on settlements between parties. Consider a hotel booking where an aggregator, OTA and the hotel need to settle cash and commissions based on pre-defined agreements. Today, this is an extremely complex process and the introduction of blockchain based smart contracts could automate settlements in many areas of the industry. Being able to instigate a trusted execution facility between a travel provider and travel intermediaries promises reduced cost, enhanced efficiency and faster reconciliation at scale.

Improving identity management in travel

The highly trustworthy and immutable nature of blockchain also makes it ideal for improving the way travellers are identified during their journey. Traveller IDs are required at booking, when changing a booking, at security, the boarding gate, duty free shopping and at a 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 blockchain technology can deliver a much more frictionless experience for proving a traveller’s identity.

Recommendations for the travel industry

It is likely that as blockchain technology continues to develop it will gradually make its way into existing industry applications. A big bang switch to the technology is unlikely, despite its promise.

Therefore, depending on your place in the industry, it isn’t likely your firm will need to take specific action to benefit from blockchain and much will depend on technology partners integrating the technology into their systems.

However, we would recommend travel companies all look at five areas:

1              Understand: The pace at which decentralised technology is moving is significant and it’s prudent for firms of all types to build the knowledge and capabilities to understand its impact. This is particularly important when it comes to gaining senior management buy-in for possible projects further down the line.

2              Explore: At this stage in the evolution of blockchain nobody has all the answers. We recommend arranging workshops and consulting with experts in how data technologies apply to travel in order to investigate how the technology could theoretically be deployed.

3              Collaborate: Blockchain is inherently a system that requires collaboration between industry partners, and even competitors, for its true value to be realised. Take the potential for enhanced settlements in travel as an example. This requires players to remain open and collaborative.

4              Experiment: If the right opportunity presents itself then conduct a trial, perhaps alongside a technology partner, to build awareness and understanding within the organisation.

5              Recruit: As with other emerging technology fields such as cybersecurity, the pool of blockchain technical talent is limited today. If decentralisation is likely to be important to your organisation then the time to secure the right talent and relationships with technology partners is now. It might not make sense for many travel firms to hire technical experts given the pressures of delivering on core business but business people able to liaise with technical partners are also challenging to find. Competition for such skills from sectors such as financial services is already fierce.

Loyyal: transforming loyalty programmes with blockchain

Loyyal is a San Francisco based startup focused on applying blockchain and distributed ledger technology to improve today’s loyalty systems. The company has developed its platform on IBM Fabric, offering a permissioned environment for program operators to manage program currency and logic amongst partners.

Today, if a scheme wishes to partner with another there is a complex and costly set up procedure as well as an ongoing file transfer and settlement process happening in the background. For a traveller wishing to transfer points between airlines in the same alliance it can often require a phone call and may take up to six weeks. The Loyyal platform seeks to address this challenge by improving interoperability between schemes. All loyalty schemes can share its single ledger on blockchain, which makes transferring a traveller’s points simple, fast and cost-effective.

Loyyal is currently working with an international airline in the Middle East showing the benefits of such interoperability. In addition, real-time invoicing and payment between partners executed automatically using blockchain-enabled smart contracts is in scope of this pilot.

In the future, Loyyal’s vision sees travellers accessing loyalty points in real-time. Imagine landing from a long flight and having points credited to an app immediately that could then be used to pay for a ride sharing service from the airport. Interoperability will increase to such an extent that a loyalty scheme for an independent hamburger restaurant could easily integrate with major schemes, reducing friction, improving the consumer experience and encouraging commerce. In essence, enabling access to the ‘long-tail’ for loyalty schemes.

In addition, any points issued via Loyyal technology are unique, are registered on the blockchain and can therefore be tracked. They are no longer just a ‘point’ like any other. This means scheme providers can collect much more powerful data on how travellers spend points via partner schemes. For example, an airline could see how a passenger spends points with a luxury retailer and send a personalised offer to their mobile phone for a lounge experience. Or if someone is buying beachwear in winter issue an offer for a beach holiday.

Similarly, Loyyal is enabling its loyalty schemes to offer micro-cost redemptions which are cost prohibitive using existing technology, say a film on a flight or digital assets for in-game purchases. This will encourage travellers to redeem points at rates that will be low enough to shift the focus from breakage to customer satisfaction and ‘loyalty’.

Destinations are also interested in applying blockchain technology. Smart Dubai, a government entity with the vision of making Dubai the happiest city on Earth, is working with Loyyal on how it can incentivise behaviour. For example, can people be rewarded with points for driving during non-peak times or can people be incentivised to pick-up litter. Again, the vision is to achieve interoperability and use low cost point issuance and transfer using automated rules.