Unleashing the Power of Blockchain: Pioneering Sustainable Smart Tourism

The tourism industry is widely recognized as a dynamic and essential sector, playing a significant role in global economic growth, employment generation, and cultural interchange. Its multifaceted nature contributes to the socio-economic development of both developed and developing nations, making it a vital component of national and international economies. However, the unprecedented challenges brought by the pandemic have exposed various underlying problems and shortcomings that had been overlooked amidst the rapid growth of this industry, especially the lack of a common space for sharing data to improve evidence-based decision-making. In response to these challenges, the Organization for Economic Co-operation and Development (OECD)
published the “Tourism Trends and Policies 2022” report, which emphasizes the need for recovery through green and digital transitions. In recent years, the concept of smart tourism has emerged as a strategic
approach to address these challenges by leveraging digital technologies and innovative solutions. In parallel, blockchain technology has garnered increasing attention for its potential to revolutionize various industries, including tourism, through its decentralized and immutable nature. Therefore, inspired by the OECD’s comprehensive analysis of tourism trends and policies, this article aims to delve into the specific theme of smart tourism and blockchain technology.

Empowering Sustainability: Smart Tourism as a Catalyst for Positive Change

Currently, there have been not any universal definition of smart tourism. According to Gretzel and her fellows (2015), smart tourism is “a tourism system that leverages technology to optimize the efficiency, sustainability, and competitiveness of destinations and businesses”. In this context, the concept of sustainability and competitiveness assumes paramount importance in the tourism sector, where smart tourism seeks to achieve a harmonious balance between economic development, environmental conservation, and social justice through innovative solutions that benefit both tourists and local communities. On the other hand, Neuhofer and her fellows (2014) define smart tourism as a sophisticated and responsive framework that leverages data analytics and instantaneous feedback mechanisms to optimize the quality of tourist experiences and augment the competitive edge of destinations. This definition underscores the significance of employing data analytics and instantaneous feedback mechanisms in smart tourism. Through the collection and analysis of tourist data on behavior and preferences, destinations can customize their offerings to cater to diverse tourist segments and enhance their competitiveness. The diverse definitions of smart tourism highlight various facets of the concept; however, the ultimate goals are ensuring the tourism experience for both visitors and locals through the use of technology and innovative solutions.

In fact, in order to ensure the prerequisite for executing smart tourism initiatives and even provide benchmarks for evaluating their efficacy smart tourism, there are various facets to be taken into consideration. Drawing from the scholarly work of Otwicz and colleagues in their publication entitled “Dimensions of Smart Tourism and Its Levels: An Integrative Literature Review,” the image below herein depicts a comprehensive set of 14 dimensions that have been identified as integral components of smart tourism.

Source: Otowicz et al., (2022)

The present study has identified 14 dimensions that constitute a comprehensive framework for the planning, implementation, and monitoring of smart tourism projects across different levels. And among 14 elements, sustainability is among the most important factors constituting smart tourism. Therefore, it once again highlights that smart tourism plays as a catalyst for positive change in tourism towards the long-term sustainability.

Navigating the Challenges: Addressing Current Smart Tourism Issues

Although there has been recently a notable surge in interest in smart cities and smart tourism destinations due to their potential to enhance efficiency and sustainability, the integration of technology in these domains can also pose significant risks that require careful attention and mitigation. Some one common issues relating to smart tourism are data privacy and security, digital divide and integration.

Data privacy and security: While this type of tourism has the capacity to revolutionize the industry, privacy and security concerns arise with the interconnection of devices, sensors, and vehicles through the Internet (Dwivedi et al., 2019), because the significant quantity of data produced by smart devices has the potential to be misused, which can result in severe implications for both individuals and society as a whole. The potential threats to data privacy and security in smart cities and smart tourism destinations can be surveillance and tracking. To obtain and evaluate
personal data, smart tourism destinations usually employ video surveillance systems as sensors to provide real-time information on public transportation, traffic, emergency and personal safety, navigation, and access to tourist information, all of which offer value to users in terms of safety, convenience, and utility. However, their use in smart tourism destinations poses critical concerns over privacy invasion and surveillance. Especially, because tourists may not be fully informed about the collection and processing of their personal data, which could potentially result in violations of their privacy, especially if it is shared with third-party providers which can ultilize the data for purposes beyond what was initially
intended or shared with other parties without the knowledge or consent of data subjects. This circumstance can result in the data breaches since the data may not be sufficiently protected or controlled. This poses a significant threat as data breaches can occur for various reasons, such as human error, system vulnerabilities, and cyberattacks. And they can have severe effects on individuals, including identity theft, financial loss and reputational harm.

Digital divide: The digital divide refers to the unequal distribution of and access to information and communication technologies and the skills to use them (Hargittai, 2002). In the context of tourism, the digital divide can be understood through two distinct but interrelated lenses: access and use. Access pertains to the availability of digital technologies such as smartphones, computers, and high-speed internet. This lense is a multifaceted issue that is influenced by a range of social and economic factors, including socioeconomic status, geographic location, age, and education level. Such digital divide has significant implications for the tourism sector, as it may limit the ability of visitors from these social groups to access and utilize tourism services and information, thereby exacerbating the divide. On the other hand, use pertains to the degree to which individuals employ digital technologies to access tourism services and information. Therefore, the digital divide impacts smart tourism destinations in many ways. Firstly, unequal access to technology widens the gap between those who can benefit from smart tourism and those who cannot, hurting the competitiveness and potential revenue of tourism destinations. Secondly, this digital inequality worsens existing social and economic disparities, potentially marginalizing certain groups and leading to social unrest.

Integration: Smart tourism destinations are anticipated to integrate various stakeholders and technologies to accomplish their objectives. These stakeholders include government agencies, tourism businesses, visitors, and local communities. Nonetheless, the process of integrating these stakeholders and technologies may give rise to integration issues that can impede the efficacy and efficiency of smart tourism destinations. For example, integrating stakeholders in smart tourism destinations is challenging due to differing priorities and resources, which may potentially impede the success of integration efforts. Specifically, governments focus on sustainability, businesses on profit, tech providers on innovation, and tourists on convenience. Furthermore, integration issues can also arise in smart tourism destinations due to misalignment among different technologies and stakeholders, leading to information silos, duplication of efforts, and conflicting objectives. For instance, different government agencies or tourism enterprises may operate
in isolation, leading to inefficiencies and service gaps. Visitor use different digital technologies to plan and experience their trips, but if these technologies are not integrated, visitors may face difficulties accessing information or finding their way around the destination. No matter which way is used to explain the cause of integration issue in smart tourism destinations, the common negative consequences of integration issues in smart tourism destinations can be far-reaching, resulting in decreased efficiency, competitiveness and visitor satisfaction.

Revolutionizing the Tourism Sector: Blockchain as a Solution for Current Smart Tourism Issues

While smart tourism is considered as a catalyst for empowering sustainability in tourism industry, this sector itself is facing several issues which require to find solutions to resolve in order to reach the “absolute” sustainability. Taking into consideration existing technologies, blockchain holds potentials to revolutionize the tourism sector by solving current smart tourism issues.

Blockchain is “a distributed, public ledger of transactions that is secure, trustworthy, and self-auditing” (Swan, 2015).

Blockchain technology is a revolutionary innovation that enables secure and transparent peerto-peer transactions without the need for intermediaries. However, in fact there are some main characteristics of blockchain that are worth being memorized because these features have contributed significantly to the growing popularity of blockchain technology and its potential to disrupt various industries. They are:

Decentralization and distribution: The database is maintained and held by all nodes in the network. No central authority holds or updates the ledger, rather each node independently constructs its own record by processing every block (group of transactions), deciding if it is valid, then voting via
the consensus mechanism on their conclusions (OECD, n.d).

Immutability: Recorded data cannot be manipulated or modified after being accepted by the blockchain network (Hofmann et al., 2017).

Agreed by consensus: No block can be added to the ledger without approval from specified nodes in the network (OECD, n.d). A well-known consensus protocol is the Proof of Work (PoW) mechanism utilized in Bitcoin. PoW involves miners competing to solve intricate mathematical equations, and the first miner to solve the problem gets the privilege of appending a new block to the blockchain. Proof of Stake (PoS) is an alternative consensus
mechanism utilized by Ethereum and several other blockchain networks.

Transparency: By design, the fundamental principle underlying the design of blockchains is complete transparency, whereby all transactions, whether encrypted or hashed, are accessible to all participating nodes to enable validation (Christidis & Devetsikiotis, 2016).

Security: The security of blockchain technology is ensured by the use of robust cryptographic algorithms. To maintain the integrity and authenticity of transactions, every transaction on the blockchain is encrypted using a unique key generated by complex mathematical algorithms. This cryptographic key acts as a verification mechanism for the transaction

Traceability: Blockchain employs a distributed ledger that documents all transactions on a shared network of nodes, and every node retains a copy of the ledger. It also provides users the capability to track each transaction within the network starting from its source to its final destination.

Currently, there are significant implementations of blockchain technology in the tourism industry, such as enhancing travel booking, improving customer experience, ensuring transparent supply chain management, and facilitating secure and efficient payment processing, etc. In order to visualize the potential applications of blockchain technology inmtourism industry, in the research “Is blockchain technology a watershed for tourism development?” published by Kwok and Koh in 2019, provides a mind map depicting the overview key blockchain application in tourism.

Source: Kwok and Koh (2019)

It is clear that blockchain can be applied in tourism in various activities such as digital payment, loyalty program, identity management, etc. And in align with the development of tourism and blockchain, numerous companies are leveraging blockchain-based solutions within the tourism industry. Some noteworthy examples include Ariva Digital, Singapore Airlines KrisFlyer program, Winding Tree, etc.

Ariva Digital is a decentralized travel and tourism portal that operates on the Binance Smart Chain. It is a network that allows users to connect with global and local tourism service providers based on previous travelers’ experiences and reviews. Members can book their reservations with cryptocurrency and earn crypto money by sharing valuable content. Ariva is a digital payment system designed to facilitate hassle-free transactions in the global and local tourism networks. Its goal is to revolutionize the cryptocurrency industry by producing a cryptocurrency that is widely used in the tourism industry. Its ecosystem is quite diverse ranging from Ariva.World — the first Global Travel & Tourism platform integrated with cryptocurrency to Ariva Wonderland — a metaverse platform that offers a cutting-edge and boundless virtual travel experience and second life to users in the tourism industry.

The Singapore Airlines KrisFlyer is a pioneering blockchain loyalty program for frequent flyers. Members earn miles through flights, credit card spending, and more, storing them in a digital wallet. These miles can be redeemed for flights, upgrades, hotels, and perks. Blockchain ensures secure and transparent rewards management. It’s a milestone as the world’s first airline loyalty program using blockchain, setting an industry precedent.

Considering the core challenges encountered in smart tourism such as data privacy and security, digital divide and integration, the application of blockchain technology can address these issues. More details are elaborated as below:

Data privacy and security: The use of blockchain technology can provide a solution to the challenges associated with privacy issues resulting from the digitization of personal information of tourists, as it is considered a privacy-by-design solution (Milne, 2000). The decentralized architecture of blockchain makes it challenging for hackers to launch a cyber attack. Moreover, the encrypted data stored on the blockchain is protected from unauthorized access, and only authorized entities can access it. The transactions on the blockchain are transparent, ensuring that they are
legitimate and lowering the risk of fraud. Immutability guarantees that data is secure and tamper-proof. And smart contracts automate transaction verification and execution, mitigating the possibility of human error and ensuring secure and accurate processing. There are currently some examples about the application of blockchain to solve the data privacy and security issues. Take Digital Identity (Digital ID) as an example. Digital ID on blockchain establishes a secure and decentralized identity for individuals using public and private keys. The public key is pseudonymous, shareable, and linked to a unique address, ensuring secure transactions. Private keys control access to digital assets. This setup empowers users to manage their personal information securely. In smart tourism, blockchain-based Digital ID can safeguard the information of tourists, allowing controlled sharing for travel tasks and payments while reducing privacy concerns. This decentralized approach thwarts cyberattacks and fraud, ensuring encrypted, transparent, and traceable transactions.

Digital divide: The centralized nature of tourism industry favors big players, excluding smaller entities in underdeveloped areas. However, with the invention of blockchain technology, it offers a solution by enabling decentralized systems, reducing reliance on intermediaries. Precisely, blockchain can enable secure and transparent transactions without the
need for a middleman, thereby reducing the dependence on centralized entities and lowering the costs associated with accessing financial services. This empowers small businesses to connect directly with travelers, ensuring secure transactions, trust, and economic growth in untapped regions. Furthermore, the impacts of blockchain extend to regional and national levels, especially in developing areas like Africa. The growing crypto market in this region stems from its unbanked population, cross-border transaction needs, and accessible mobile technology. An illustrative instance highlighting the potential of blockchain and cryptocurrency in promotinglocal tourism can be seen in the case of El Salvador, which recently became the first country to recognize Bitcoin as a legal tender. The adoption of Bitcoin as legal tender in El Salvador has resulted in a significant increase in the tourism industry of this country, as reported by Morena Valdez, the Minister of Tourism. The industry has experienced a growth of over 30% since the implementation of the Bitcoin law in September 2021 (Helen Parts, 2022). The adoption of Bitcoin as legal tender in El Salvador has had a noticeable impact on the inflow of tourists, particularly from the United States.

Integration: The tourism industry faces fragmentation due to separate systems and technologies among stakeholders, hindering data sharing and efficient operations. Therefore, one of the most critical factors that the tourism industry can consider when implementing blockchain technology is creating a global database that can provide the most accurate and unbiased information about the suppliers and market users (Demirel et al., 2021). Blockchain technology enables tourism businesses, service providers, and government agencies to collaboratively share real-time information, including travel itineraries, reservations, and reviews. The database can be accessed and modified by authorized parties within the network, guaranteeing that all stakeholders have access to the most up-to-date and accurate data. For instance, blockchain-enabled platforms can integrate flight, hotel, and tour package bookings, facilitating seamless communication between service providers and enabling real-time updates for travelers. There are several real-world examples demonstrating the application of blockchain to solve integration issues in smart tourism. For instance, in the year of 2016, the Dubai government launched the “Dubai Blockchain Strategy” with the aim of becoming the world’s first blockchain-powered city by 2020 (Smart Dubai, n.d). One example of the implementation of this strategy in the tourism industry is the Dubai Tourism Blockchain Marketplace in 2018. The Dubai Tourism Blockchain Marketplace planed to add an “additional distribution channel for hotels” (Molly Jane Zuckerman, 2018) by 2020, connecting all tourist organizations involved in planning a trip.

EU’s Smart Strategies: Promoting Blockchain and Smart Tourism

The adoption of blockchain technology has been steadily increasing across various industries worldwide. According to market research reports, the worldwide blockchain technology market size reached USD 5.85 billion in 2021, and it is projected that the market will expand substantially and account for as much as USD 1,235.71 billion by 2030 (Statista, 2022), representing a 211-fold increase from 2021. In 2025, blockchain technology is expected to become a central component of business operations in the hospitality and tourism industry (Treiblmaier, 2021). However, there is a dearth of regional-level regulations, policies, or strategies within the European Union (EU) specifically aimed at promoting blockchain-based smart tourism. Nevertheless, by examining the existing regulations, policies, and strategies endorsed by the European Commission — an integral part of the EU executive — alongside the European Council, significant opportunities emerge for the widespread implementation of blockchain technology to facilitate the advancement of smart tourism.

Tourism industry: The current promotion of tourism within the European Union (EU) exemplifies a comprehensive approach aimed at presenting the abundant cultural, historical, and natural legacy of its member states. Significant initiative includes the EC Tourism Pathway for Tourism, devised by the European Commission (EC), represents a significant initiative geared towards steering the tourism sector towards sustainable and responsible practices. And within the latest document published in February 2022, the EU want to mainly focuses on accelerating the green and digital transition and increasing the long-term resilience of the tourism sector (European Commission, 2022). Specifically, the digital transition aspect from the approach of European Commission revolves around enhancing the practice of data sharing, thereby facilitating the emergence of innovative tourism services and fostering the improved sustainable management of destinations. Aligned with this overarching vision, the distinctive characteristics inherent to blockchain technology, including decentralization and immutability, are widely regarded as pivotal factors contributing to its enhanced feasibility. Furthermore, The European Union (EU) places considerable emphasis on the digital transition within the context of the tourism sector, as evidenced by initiatives such as Europe’s Digital Decade and the European Data Governance Act (European Commission, n.d — a). Europe’s Digital Decade outlines ambitious targets for 2030, aiming to bolster digital capabilities across diverse industries, including tourism. Notably, blockchain technology occupies a prominent position as a catalyst for multi-country projects within these targets (European Commission, n.d — b). This inclusion underscores the transformative potential of blockchain in revolutionizing the tourism industry by facilitating trust, transparency, and secure data exchange. Furthermore, the European Data Governance Act seeks to establish harmonized and interoperable data spaces throughout the EU (European Commission, n.d — c), thereby facilitating crossborder data sharing while ensuring privacy, security, and compliance. These strategic endeavors effectively illustrate the firm commitment of European Commission to harnessing digital technologies, including blockchain, to fortify the digital infrastructure, data management practices, and global competitiveness of the tourism sector.

Smart tourism: Smart Tourism represents an EU initiative that has been effectively implemented by the European Commission, with its funding currently allocated under the COSME Programme. Stemming from its precursor, the Preparatory Action proposed by the European Parliament, Smart Tourism serves as a strategic framework for the European Commission to promote the development of intelligent and forward-looking tourism practices. The European Commission employs a multifaceted approach, leveraging awards and outreach activities, in its efforts to foster the growth of smart tourism. Within this framework, two noteworthy competitions have been launched to advance smart and sustainable tourism within the EU, with a particular focus on enhancing networking opportunities, strengthening destinations, and facilitating the exchange of best practices. These competitions, namely the European
Capital of Smart Tourism and The European Green Pioneer of Smart Tourism (European Commission, n.d — d), play a crucial role in recognizing exemplary achievements in European cities as tourism destinations across several key categories. For instance, the European Capital of Smart Tourism recognizes excellence in sustainability, accessibility, digitalization, cultural heritage, and creativity. Meanwhile, the European Green Pioneer of Smart Tourism, a successor to EDEN, applauds smaller destinations for successful green transition strategies promoting sustainable tourism.

Blockchain industry: The EU wants to be a…

“leader in blockchain technology, becoming an innovator in blockchain and a home to significant platforms, applications and companies” (European Commission, n.d — e).

Due to its potential and versatility, the European Commission has demonstrated strong support for blockchain technology, substantiated by the formulation of a comprehensive strategy. This strategy encompasses the establishment of a pan-European public services blockchain known as the European Blockchain Services Infrastructure (EBSI). The EBSI comprises a network of interconnected nodes operating in a peer-to-peer manner. The responsibility of operating at least one node in the EBSI network lies with each member of the European Blockchain Partnership (EBP). Initially implemented within the public sector, the EBSI infrastructure is envisaged to be subsequently interoperable with platforms in the private sector, thereby facilitating seamless collaboration and integration across sectors. Furthermore, the European Union (EU) has demonstrated proactive efforts in developing a comprehensive legal and regulatory framework pertaining to blockchain technology. For instance, the Markets in Crypto-Assets Regulation (MiCA) has been introduced with the aim of safeguarding consumer interests and ensuring the integrity of cryptocurrency exchanges. This regulation encompasses a wide range of entities involved in the crypto-asset ecosystem, including issuers of crypto-assets, service providers, digital wallets, and exchanges. By implementing such measures, the EU seeks to provide robust protection for consumers while fostering a secure and regulated environment for the operation of crypto-assets. Another significant example is the currently launched initiative — the European Blockchain Sandbox. It is spearheaded by the European Commission, serves as a dedicated platform for fostering
innovation and exploring the potential of Distributed Ledger Technologies (DLT) in a safe and confidential environment. This project aims to facilitate regulatory dialogue and address legal and regulatory obstacles associated with decentralized technology solutions, including blockchain, thus promoting increased legal certainty.

Conclusion

In conclusion, while the European Union is already taking steps to promote smart tourism and blockchain technology, further efforts are required to establish tailored regulations and policies that address the specific needs of this emerging field. By doing so, the EU can position itself as a leader in blockchain innovation, fostering sustainable and inclusive tourism practices while ensuring data privacy, security, and interoperability. The integration of blockchain technology in smart tourism has the potential to shape a future where travelers enjoy enhanced experiences, destinations thrive, and the tourism industry as a whole contributes to a more sustainable and responsible world

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