As the tourism industry looks to rebuild after the shock of COVID-19, priorities and approaches are being rethought and reinvented. Once again, the big opportunities for disruption appear to be digital.
Tourism is, by definition, a long-distance business – to qualify as a ‘tourist’, you must travel and stay away from home. Usually, that requires arranging, in advance, details of where you’re going and how you’re getting there, with confidence your arrangements will be ‘arranged’ as expected. This all requires intermediaries – travel agents, financial insurance and other border institutions – that together, help tourists and tourism operators find and trade, but most importantly, trust each other.
The rapid rise of online marketplaces and the burgeoning travel information available online has magnified the role of tourism intermediaries – think Trivago, Lastminute, TripAdvisor, Airbnb or Expedia. Tourists are confused about who to trust online, what information is reliable and how to securely book and pay. To address this issue, the digital platforms provide simple search and comparisons of online offers and prices, ‘one-stop’ transactions, and double-sided peer evaluation systems, that are evaluated by both hosts and guests.
These companies, however, don’t just make tourism transactions easy. Whoever uses these platforms leaves a digital footprint, which means that they also collect and control a vast cache of ‘tourism information’ describing the profile, behaviour and ‘transactional sensitivities’ of both tourism demand and supply – intricate comparative details of all the places to stay, things to do, ways to get there, and options to pay, what people like, when they like it and how much they like to pay for it, as well as competitors’ offers, prices and responses to consumer choices and purchases. By controlling this mind-boggling database of ‘tourist information’, these platforms have the power to predict, anticipate, direct and/or manipulate tourists and firms’ behaviour for their own benefit or of the benefit of others who are willing to pay them to access such information.
Despite such information control, many big players don’t provide physical services – they just offer convenient access to other operators’ services. Being intermediaries, these online marketplaces do not own and carry the risk of any physical asset (for example, planes, hotels, restaurants, taxis). They are asset light companies have high resilience in crisis periods and great flexibility to amend their business model to any changing market circumstances. The real-world beds, breakfasts and beach massages are generally provided by small to medium firms, often operated by people local to the destination.
Even the big tourism operators like hotel and restaurant chains compete in the information assets-based economy; their major asset is their ‘brand’ reputation and know-how to franchise and sell it to whomever is ready to commit capital to own and manage hotel and restaurant properties.
Unfortunately, while the sharing economy has partly democratised entrepreneurship, these small to medium operators still have to ‘pay’ – through marketing/distribution fees and commissions, on the one hand, and compliance on the other – for access to the data resources of market and competitors’ intelligence vital to their survival in a highly competitive, globalised world.
And, as the established big players control the data networks, they hold the controlling influence over tourism income and working conditions, through an algorithmic management process based on performance metrics of customer ratings, cancelation rates, and personal profile data.
In an access-based economy, micro-entrepreneurs do not get fired but they are simply deleted by the algorithm when their performance metrics fall below the threshold, for example in cases with high cancelation rates, or low customer ratings.
So, what if there was a way for the small to medium operators to establish secure, reliable networks, direct from to supplier to the customer, and control their own data? Could we cut the big intermediaries out, even the financial institutions? And would this lead to a fairer, more sustainable tourism model?
The blockchain alternative
There’s strong evidence that small to medium tourism operators deliver more sustainable services, in respect to impacts on both the natural and human environment, and because of this, there is growing interest in empowering this section of the tourism sector. This is specifically important in the post-COVID-19 tourism era, since the pandemic has accelerated the uptake of virtual tourism services by both tourists and firms, further extending the digital divide.
Blockchain and cryptocurrency technologies offer a potential avenue for rebalancing digital power in tourism, providing smaller operators greater control over their own businesses and the wider industry.
By offering alternative revenue options and a structure for sharing and verifying data independent from the tech giants and mainstream financial networks, blockchain technology can establish tourism networks in which tourists and end-providers hold the power.
Blockchain is a list of public records (called a shared distributed public database) where transactions between parties are stored chronologically. A bundle of transactions (a block) is sent to peers in the network for verification, then secured using cryptography; blocks together form a chain (the blockchain). Transaction data is decentralised, cross-checked, time stamped, and shared across a peer-to-peer network, meaning it is secure, traceable and transparent.
Blockchains form the basis of online cryptocurrencies, such as Bitcoin, and mean anyone can directly transact with anyone else – without intermediaries. Any actor can participate in transactions by monetising and ‘tokenising’ any resource they own, whether that’s tangible products (fr example, hotel rooms, wine, food) or intangible resources such as time, data, or knowledge.
From a tourism supply point of view, companies can use blockchain to automate and efficiently manage supply chains without intermediaries by controlling everything from procurement, bookings, and payments to customer communication, loyalty programs and promotion.
Major airlines (Air New Zealand and Lufthansa), big hotel chains (Marriott) and tour operators (TUI) use blockchain and smart contracts to procure and sell services in an automated and direct way with their business partners . Equally, blockchain has enabled smaller tourism providers, like Webjet and start-up Trip.io, to handle bookings, transactions and payments without intermediaries such as banks or credit card companies. In doing so, they also gain access, ownership, control and commercialisation of transaction and profile data.
Another smaller travel agent, TravelbyBit, has used blockchain to empower unknown tourism destinations like Agnes Water and 1770. By accepting digital currency, TravelbyBit has provided its Australian businesses access to a new customer base: the large market of people who own Bitcoins but do not know where to spend them.
Blurring the business lines
By converting information to a tradable asset everyone can be a business. From a demand perspective, blockchain technologies empower tourists to participate in the tourism value chain and conduct transactions in a more equal and direct way. Blockchain supported tourism transactions let tourists establish the authenticity of tourism suppliers and offerings, book without intermediaries (and related transaction costs), and control and tokenise their information assets such as travel reviews and transaction data.
Blockchain based platforms that provide users with a personal information management system can help them develop, maintain and transfer their identity and reputation across platforms, freeing them from the influence and lock-in effects of companies like Facebook and Google and being empowered to transact in an ad hoc way with whoever and in whatever platform.
Sharing economy platforms such as BeeNest and Cool Cousin allow locals and tourists to own and monetise assets such as travel reviews and accommodation. On these platforms, citizens can rent their idle resources, such as guiding time and accommodation services, by trading directly with tourists using the cryptocurrency of the platform. Tourists and residents can also monetise peer reviews, gaining tokens they can later exchange for online services, and every user owns his profile data and transaction data, instead of the platform controlling it all.
Tourism companies also use blockchain to support and enrich their rewards programs, with customers earning points in cryptocurrency, which can be traded in blockchains for other transactions. This benefits customers, who are not locked in to earn and use points only within specific loyalty programs, while the tourism company (instead of the company owning the loyalty scheme) transacts directly with customers and ‘controls’ loyalty and transaction data.
Other (tourism) companies willing to participate in blockchain loyalty schemes can easily do so by accepting tokens to sell their products through the scheme, without lock-ins or lack of data ownership. Examples of such blockchain loyalty schemes include the Singapore frequent flyer program and Loyyal, a third-party loyalty program.
Companies can also directly buy personal data from customers willing to sell it in return for more personalised services, without intermediaries and platform economies like Google, Facebook and Twitter. In this way, companies reduce the unknown ‘waste’ of marketing budgets related to user accounts (particularly fake user accounts or questionable influencer accounts), and control how, where and when their online marketing content is undoubtably being shown, rather than rely on the saying of ‘platform’ advertising companies.
Access to finance and visibility of supply chains
Cryptocurrencies have allowed small or new operators who cannot easily access traditional financial funds and intermediaries to use the crowd to fund and sell their entrepreneurial ventures. For example, Great Keppel Island has used an initial coin offering (ICO) as a fundraising mechanism to develop the resort. An ICO is a cryptocurrency-based equivalent of an initial public offering, which seeks to raise capital investment from the public as they become shareholders of an organization. The resort has monetised its assets (rooms to be built) enabling its funders to get preferential bookings and prices to own, book and/or sell accommodation.
Similarly, Openvino – the world’s first open-source, transparent winery – is tokenising bottles of wines to raise capital and fund its operations without financial institutions. Blockchain was also used to certify the organic nature of the final wine at all stages of supply chain, from grape growing and picking, to fermentation, logistics, storage and final sale. Consequently, the winery has also managed to build customer trust, engagement and loyalty by ensuring authenticity and quality of product.
Similar supply chain applications are used in the tourism industry to ensure the authentic nature of tourism offerings such as sustainable tours, organic food in restaurants and ecolodge operations.
A new approach for a new tourism landscape
Overall, blockchain applications in tourism provide more consumer power, enabling small and big players to equally participate and compete in the tourism value chain, with less dependency on intermediaries and centralised authorities. Data is democratised, controlled, owned and monetised by ‘creators’, reducing information asymmetries in transactions and participation in the economy.
Of course, the approach is not without challenges, including the fact that blockchain requires a huge amount of energy to ensure it can operate 24/7, and it’s still not widely understood or accepted by many industry operators. Nonetheless, blockchain can ensure sustainability by supporting social welfare through reduction of information asymmetries, authentication of people and resources across the supply chain.
It also supports economic welfare through democratisation of entrepreneurship, ownership, control and monetisation of data. In this way, as operators look for new answers to reimagine tourism in a challenging post-COVID environment, blockchain can help tourism become a vehicle of sustainable development by changing economic and power structures.