The opportunities, challenges of blockchain in hotels
The opportunities, challenges of blockchain in hotels
16 AUGUST 2018 7:40 AM

If deployed correctly, blockchain technology can help hotel companies enhance security and “solve some business problems,” according to an expert on the technology.

REPORT FROM THE U.S.—Blockchain might be the technology buzzword du jour, but the typical hotelier might not be familiar with exactly what the technology is and what its application within the hotel industry might be.

Speaking during a Hospitality Financial and Technology Professionals webinar, Paul West, consultant with Hospitality Technical Services, said Bitcoin, the most prominent and recognizable use of the underlying blockchain technology, doesn’t showcase its potential usefulness with hospitality.

He noted blockchain—which is also referred to as a distributed ledger network—has the potential to add “efficiencies and solve some business problems, mostly related with data privacy, security and information sharing.”

Here are some takeaways from West’s presentation.

1. What is blockchain?
West offered as straightforward of a definition of the technology as possible, describing it as “a database of encrypted entries where each transaction is tracked as a common record to everyone on the network where no single entity is in control of the data.”

“And that’s something on the mind of many of us in the age of Facebook and Apple,” he said.

He also described block chain as “a shared and secure ledger of transactions.”

2. A higher level of security
In fact, there are multiple reasons why blockchain offers a greater degree of security, including the fact it requires “digital signatures,” and since information is stored in various places at once and checked against each other, it is harder for someone to make fraudulent changes.

“Within the peer-to-peer design of a distributed ledger network, some of that security is driven by consensus, which ensures the data is the same for all nodes on the network and in turn prevents malicious actors from manipulating the data,” he said.

3. A chance for competitors to share
One of the benefits to businesses, West said, is that it provides a platform for information sharing even among competitors that can ensure the data included is verifiably true.

“There is a more trusted method among competing entities to share and manipulate the same data with transparency,” he said.

West added that the systems are more efficient and help businesses cut costs on systems and cut down on the time spent dealing with them.

The technology also allows for the creation of “smart contracts” that automate the rules of relationships between companies, which he described as providing “an arbitrary, sophisticated business logic to define the rules of the game.”

4. Early adopters still face challenges
West noted that adoption of blockchain technologies aren’t without issues, and the still young technology currently faces a “lack of standards” and regulatory hurdles in some areas that prevent it from reaching its full potential just yet. Perhaps just as daunting as those issues, though, is what he referred to as a “general lack of knowledge on distributed ledger technologies,” which obviously stymie adoption.

“In any growing technology or infrastructure, you have to account for a learning curve of sorts,” he said. “Basically, it’s the same challenges and tasks you undertake in moving from any one infrastructure to another.”

He said the Organization of Standardization for Blockchain and Distributed Ledger Technologies is working to address some of those issues.

5. Several uses within the hotel industry
West laid out various different use cases for blockchain within the hospitality industry, including areas such as loyalty programs, supply chain management and “reconciliation, tracking and securing of wholesale rooms on the online distribution chain.”

That last point also ties to another possibility, which he described as the “removal of the middle-man commission fees” associated with organizations like online travel agencies.

In relation to using blockchain as an alternative to OTAs, he said that kind of disruption to industry norms is “looking like it could happen,” especially at independent hotels that pay higher commissions on OTA bookings.

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