Khalid Ladha, strategic alliances director at BlockX Labs, a Toronto-based product-development lab, takes us through the blockchain basics and he explains what this technology actually is as well as looking at opportunities for the hotel industry, in terms of distribution, reporting and transactions.

So what is a blockchain again…?

To me (Khalid Ladha right), blockchains are a method to resolve the long-standing issue of different entities (things like organizations, people, and/or banks) co-ordinating their transactions in an accurate, trustless way.

That sounds like a dry statement, until you read it again and realize that pretty much everything you do involves either an organization, people, and/or banks. Solving this problem allows us to move away from economic models involving middlemen and centralized third parties, instead taking us toward a more egalitarian and trustless model.

Blockchains are a part of a data structure family known as Distributed Ledger Technologies, or DLTs. DLTs focus on removing risk from a central point of failure. Instead, transaction data is moved to an environment where it is replicated, shared and synchronized across a fully distributed network.

Blockchains accomplish this by using something known as a consensus algorithm. Using consensus algorithms (i.e. Proof of Work, which is what Bitcoin uses), blockchains verify and confirm an agreed upon version of what actually happened, or what the truth is for the actors in the network.

There are different varieties of blockchains (i.e. permissioned vs permissionless), and the definition is constantly evolving as the technology matures and the space continues to grow. Truthfully, I’d say focus less on the technical definition and more on understanding practical use-cases for your organization.

How can blockchain be used by the hotel industry?

There are a number of ways blockchain technology will be adopted by the travel tech industry. One example is ‘tokenized’ loyalty programs. Using these, a traveller would, for example, be able to convert their Delta SkyMiles into Hilton Honors points at a moment’s notice, provided both tokenized loyalty programs are built in a compatible format.

More than likely, a piece of infrastructure known as an ‘Exchange’ will sit in the middle of this. The exchange will convert your current loyalty points into whatever other point category you’re after. If it’s a centralized exchange, there may be a marginal fee. If it is a decentralized exchange, the conversion will be essentially free. All you’ll need is your smart device to scan a QR barcode, sending your newly-received points to the ‘wallet’ of whatever hotel, airline or OTA you are transacting with.

Alas, it is worth pointing out that travel is no different to any other vertical (i.e. financial services) experimenting with this technology. Application ideas that are end-user facing are abundant, but it is the core infrastructure that needs development and engineering attention before these product dreams can become a reality.

Besides distribution, how could blockchains be used in, say Asset Management or Revenue Strategy?

I think corporate reporting is due for an absolute revolution. There are technologies out there now where firms can ‘anchor’ their data from their systems to a blockchain, ensuring accuracy. Phrased another way, blockchain technology will allow for unassailable truth in reporting, moving away from the self-reporting honour system that many of the major hotel business intelligence services use today, into an era of blockchain-anchored truthful reporting.

The fact that excel sheets delivered mid-month (sent to you by a company that you voluntarily submit your data to, and then pay to get back) are still the norm in comp-set reporting is ludicrous. Duetto has done an amazing job driving this industry forward into a SaaS real-time model. Now, by moving to an anchored system predicated on blockchain technology comp-set data will one day soon become truly factual and on-demand accessible, just like your budgets are using ScoreBoard today.

What about security concerns? How safe is my data or cryptocurrency?

Under the assumption that we are referring to a public blockchains, the risk is minimal. The crucial lesson here is that your risk doesn’t come from crypto-assets, your risk comes from how you manage and store those assets. This is because the real danger comes in trusting centralized third parties.

We have seen a number of highly-touted and formidably funded companies enter this space, and many are doing amazing work, providing cutting-edge security and custodial solutions to their clients (enterprise and retails), some backed by the biggest VC funds in the world. That doesn’t mean you should trust them blindly though. Many of their business models are antithetical to the entire purpose of DLTs, which is to distribute risk. In crypto, who or what services and products you trust is everything.

In an ironic twist, the safest place you can keep your crypto-assets is offline, in something known as a hardware wallet. This is an air-gapped computer (meaning it has never touched the web) that is about the size of a USB drive. So why does this matter? Because in crypto, when you trust the wrong centralized third party you can lose it all. Just ask the users of Mt. Gox.

How does cryptocurrency come into this?

We’ve also already seen pilot programs in this space (such as between Coinbase and Expedia), where OTAs have offered to take crypto-assets as payment for travel. This is just one more example of OTAs leveraging their technological expertise when compared to traditional brands.

What will be really interesting though is how this is handled on the back-end by hospitality firms once they start actively investigating and innovating in the space alongside new start-ups. For example, Hotel Brand X might be happy to accept cryptocurrencies if it means they get repeat business from a guest direct, versus from a paid channel. But Brand X might also not want to hold crypto, and instead wants to immediately convert it to fiat currency in USD, GBP or wherever the property is located.

Or to make things even more complicated, Hotel Brand Y might want to keep the crypto-assets but recognizing that cyber-security is not their core competency, they don’t want to be a custodian of their own funds for fear of cyber-attacks. They could instead outsource that wallet management to a third-party, a blockchain SaaS start-up that specializes in dashboards for crypto-reporting and custodial solutions. The possibilities for innovation are endless.

How long before blockchain becomes mainstream?

It already is, just ask your surprisingly young co-worker that you think is bright. Besides… you read all the way to the bottom of this Q&A didn’t you?

Sarah McCay Tams, Director of Content, EMEA

Sarah joined Duetto in 2015 as a contributing editor covering Europe, Middle East & Africa (EMEA). In 2017, she was promoted to Director of Content, EMEA. An experienced B2B travel industry journalist, Sarah spent 14 years working in the Middle East, most notably as senior editor – hospitality for ITP Publishing Group in Dubai, where she headed up the editorial teams on Hotelier Middle East, Caterer Middle East and Arabian Travel News. Sarah is now based back in the UK.

www.duettocloud.com