How Could Blockchain Benefit the Hotel Industry?
Along with numerous changes occurring in different industries to adapt blockchain technology onto their current business, hotel reservations in the travel industry is indeed one where the technology can prove useful.
This piece will focus on the hotel reservation aspect of the travel industry and will be referenced as HRI(hotel reservation industry) from here onwards.
There will be two aspects of HRI that will be mentioned.
- Customer data — hotel reviews written by customers
- Hotel information — hotel existence information uploaded onto network
Regarding the two aspects of HRI, the following will be briefly discussed.
- Reasoning of implementing blockchain technology
- Obstacle faced upon implementation
- Decon’s mechanism to overcome the respective obstacles
Decentralizing Hotel Reservation Industry
HRI is growing at a fast pace, inevitably with the growth focused heavily on the giants of the industry. Travel agency giants have been attracting customers by providing a large network of reservation related information, convenient reservation methods, competitive prices and other perks improving customer experience.
Already, there are some ongoing projects which implement blockchain technology within HRI. The aim of blockchain-ing HRI is to decentralize the industry through lower entry barriers for service providers to increase competition and ultimately to drive the cost for customers down, all the while providing a reliable network where abusing is minimized(hopefully non-existent).
When blockchain-ed, HRI will experience developments. That being said, during the process there are definitely obstacles that must be overcome by projects in one way or another. If these obstacles are not overcome, the blockchain network cannot remain healthy, fair, transparent, while also pursuing sustainable and robust growth, let alone have a reliable kick-off/bootstrapping.
In this piece, two obstacles will be addressed and respective Decon’s best option mechanisms. Decon’s mechanisms are not perfect, but they are customizable comprehensive mechanisms that can overcome the obstacles.
- Fake Review Verification Obstacle, and D-REM
- Hotel Existence Verification Obstacle, and D-HIVM
Fake Review Verification Obstacle
Customer data like hotel reviews are centralized to Online Travel Agencies(OTA), and decentralizing through blockchain technology can provide a better customer experience. An obstacle that is faced during decentralization is the difficulty to verify the truth of reviews. Decon’s Review Evaluation Mechanism(D-REM) can verify the truth of reviews but also rank the quality of reviews through the wisdom of the crowd.
Broadly speaking, customer data centralization is one of the reasons why HRI giants/OTAs are the main beneficiaries of the industry growth. Customer data centralization happens due to hotel reservations happening through the OTA website rather than hotels’ websites. By having “possession” of customer data, OTA giants can attract more customers to use their website which can provide comparisons and evaluations of hotels by a third party(customers). The customer data focused in this piece will be hotel reviews written by customers.
By customers booking through OTAs, hotels rarely have opportunities to accumulate detailed customer data on their database. Some information the hotel would acquire are information such as name, birthdate, and often credit card information for deposits. However, other customer data like hotel review, hotel/room preference, frequency of hotel usage is difficult for hotels to acquire. Of course, the hotel can send emails asking for these data by filling out surveys, but rarely do customers reply or fill out these information, let alone providing honest and quality data. Even now, there are customer complaints of fake reviews of hotels that deceived the customers, which led to a unhappy experience.
The review must be true and of good quality in order to become an effective and crucial factor in HRI; only then would the review have an effective impact on the customer’s decision making process by providing the necessary correct information. Thus, good quality reviews ultimately becomes trustworthy tools to make the best decision for customers.
By blockchain-ing HRI, it is possible to store hotel reviews by customers onto the network rather than with each hotel website or OTA website. No single entity will have “possession” of customer data. Which will then decentralize power of hotel reviews so that other honest OTAs can compete to provide customers with a better experience through service and lower additional fees charged by OTAs. Also, hotels need not rely on few OTAs to negotiate fee structures or inevitably comply with their standards. For the customers who write reviews and verify the truth and quality of reviews, with blockchain technology they are able to receive closer-to-appropriate/fair compensation for them.
One of the customer data obstacles in implementing blockchain technology in HRI is whether or not the review is true or not; fake review verification obstacle. Despite implementing blockchain technology in HRI, the obstacle of fake reviews still exist. The network must have an mechanism in place that verifies the truth of the review, and as an additional factor, verify the quality of the review. Then, the network has a firm basis to grow into a fair and sustainable ecosystem.
Decon’s Review Evaluation Mechanism(D-REM) is a part of system architecture that can: not only verify the truth of reviews but also rank the quality of reviews through the wisdom of the crowd. D-REM can be applied to overcome the fake review obstacle in HRI, because it:
- does not require the network participants to trust an entity other than the crowd to ensure the truth and quality of reviews;
- is a mechanism that will ensure network participant behavior to evaluate the truth and quality of reviews.
D-REM is designed based on traditional incentive/penalty structure along with time limits, voting, and decentralized flow of tokens to ensure the behaviors of network participants. The mechanism seeks to prevent the uploading of fake reviews, and continuously testing the truth of the review while displaying the trustworthiness of the review to those reading it. Then only true or very reliable reviews are available for viewing.
One thing that came to our mind was a review that can receive incentive due to being true, but absolutely worthless; “there was a sink in the bathroom”. Hence, among the true reviews, the quality can also be evaluated with this mechanism. The quality can be in terms of detail of review, time of applicability among other qualities. Decon took all types of challenges to D-REM into account when designing this mechanism to evaluate the quality of the reviews to provide the customers with the best information available through the wisdom of the crowd.
Hotel Existence Verification Obstacle
Fake hotel information can be a nuisance, and implementing blockchain technology can ensure a better judgement reward/punishment for any abuses of fake hotel information. There is a difficult obstacle in the implementation of blockchain technology, to verify the real world hotel information that is posted on the network and the rewarding/punishing the appropriate verifiers/abusers. Decon’s Hotel Information Verification Mechanism(D-HIVM) can prevent abuses of fake hotel information with a decentralized judgement system that shapes participant behavior.
Customers sometimes face inconveniences or are disappointed when hotel information turns out to be mistaken. Numerous types of problems can happen related to fake hotel information like fake hotel inventory, information(breakfast, bed, bathroom, wifi, service charge, etc.), and others. The fake hotel information focused in this piece will be the existence of hotels in the real world. For existing hotels, verification of hotel information is relatively easier than verifying the same information for newly built hotels.
Fake hotel information issue lies with new hotels that do not have such brand power nor strong verification method other than online information. The certainty of verification decreases for new hotels that are not part of a chained-brand like Marriott International, InterContinental Hotels Group, Hilton Worldwide, just to name a few. Customers can visit the hotel website for additional assurance to ensure that a new hotel that the customer is considering does indeed exist and can be reserved with a guarantee of existence by the famous chained-brand.
Nonetheless, the issue is not with the brand hotels, but with new hotels that are not part of a chained-brand. Identifying such postings of hotel rooms and wrong/fake hotel information is one thing, but to bring about a just outcome of such finding is another thing.
When blockchain-ed, HRI project can have a mechanism to verify the hotel information, but it is difficult to propose a better truth verification method than non-blockchain methods. Mostly because, blockchain technology as a whole faces an oracle problem of uploading information of a real-world asset onto the blockchain network with 100% truth verification. However, with blockchain technology, there is a possibility of transparent responsibility information sharing to judge where and whom the abuse of fake information occurred through a shared ledger that records the information on the network. As a result, the participants involved in the process can also be rewarded or punished for their respective actions on a blockchain network.
One of the fake hotel information obstacles in implementing blockchain technology in HRI is whether the existence of hotels can be verified on the blockchain network; hotel existence verification obstacle. Although, wondering whether the hotel or hotel inventory is fake is not a major concern of customers when making hotel reservations, it is a major concern for projects that wish to implement blockchain technology onto HRI.
Decon’s Hotel Information Verification Mechanism(D-HIVM) is a mechanism that can apply non-blockchain verification methods for hotel existence, verify the source of abuse, and encourage the behavior of participants away from abusing through proper incentive/penalty structure. This is possible because there is:
- a third-party participants who will use non-blockchain verification methods to ensure the network reliability with correct incentives to do so;
- a record of information regarding all transactions including the abuse;
- a proper incentive/penalty structure that can reward and penalize any party that could be involved in an abuse.
D-HIVM is designed based on a traditional oracle structure along with clear steps of uploading information onto the network, distributed responsibility for different phases of the information verification, and appropriate token economic structure to ensure the judgement result of the abuse. The mechanism seeks to identify any fake hotels that have been uploaded onto the system through a reporting feature and a third party that will conduct a thorough investigation into the report.
The verification from the investigation is designed in such a way that prevents abuse of the third party verifiers. Upon verification, the abusers will be identified through record of transactions. Then the reward and punishment will occur accordingly. Once a carried out, the hotel existence can be closer to 100% verification, or until further reports.
Decon identified a case where additional valid fake hotel reports can happen; “Out-of-business Hotel(OBH)”, if a hotel is no longer in business. The mechanism can still detect and judge an abuse of an OBH. Decon took into account different aspects of this verification method that can create room for abuse and developed it further to create an optimal mechanism.
The result of the implementation of this mechanism will allow honest behaviors regarding uploading hotel information onto the network. Which will ultimately create a safer environment for customers.
The essence of system architecture mechanisms D-REM and D-HIVM can be applied to other businesses that wish to implement blockchain technology while applying real world aspects. The system architecture is not just for HRI.
The goals of Decon’s mechanisms mentioned above are to create a economic architecture with appropriate market forces and game theoretics that will ensure a healthy, fair and transparent network that is sustainable while being decentralized.
Decon is building an expertise in designing mechanisms customized for each type of projects with various businesses as our partners.
