Blockchain — An Enabler for Cheaper Travel?

Blockchain has the ability to transform nearly every aspect of the travel journey, making transactions simpler, more affordable, and more trustworthy, for both suppliers and consumers. One start-up that has these goals in their sights is Winding Tree, who aim to disrupt the travel distribution industry with their blockchain-based platform. Let’s find out how they are attempting to be the enabler for cheaper travel.

What is Winding Tree

Winding Tree is a decentralised travel distribution platform that is built on top of the Ethereum blockchain. The platform will aim to connect suppliers (hotels, airlines etc.) and sellers (travel agencies) to a single marketplace independent of intermediaries or middle-men.

Winding Tree will be integrated directly into the reservation system of travel suppliers enabling them to put availability and price information into a decentralised database, where it will be easily discoverable by sellers via a simple API. Sellers will have the ability to buy that inventory and pay for it instantly. All these transactions are designed to be performed automatically, without human interaction.

Blockchain is the enabler for the Winding Tree platform, with its key innovation being the concept of decentralised and unhackable trust, without the need for a trusted third party.

Similar to how Bitcoin is a financial system without one central authority, such as a bank or a government, Winding Tree is applying a comparable logic to the travel industry using the universal smart contract platform that Ethereum provides.

The only fees on the platform are the transaction costs to execute the smart contracts, which are used to incentivise miners to give computational power to the network. This will be a fraction of the cost currently charged by intermediaries such as Expedia and Booking.com.

It’s the first open source project in the travel-space and the first truly decentralised blockchain solution.

Problems With Travel Distribution

Today’s travel distribution architecture is very inefficient with only a handful of players controlling the majority of the market, but suppliers and intermediaries are able to offset all costs on the consumer.

When you book a hotel on Booking.com or a flight with Expedia, you are not buying directly from the hotel or airline. In the travel ecosystem there is you the traveller, the suppliers who are the airlines, hotels, car rental companies etc, and then there can be a number of different middlemen that can sit in between.

Winding Tree is attempting to disintermediate the middlemen by offering a decentralised alternative to GDS, Aggregator and OTA distribution and facilitate direct bookings via the travel agency.

Their vision for doing this is through an open platform with a few simple rules for data exchange between suppliers and buyers of travel.

Partnerships

Winding Tree has done a good job in signing up some large industry players so far, especially on the airline side with carriers including Air Canada, Air France — KLM, and Lufthansa all supporting Winding Tree with the development of their platform by testing the technology and providing feedback.

The airlines will be integrating their Direct Connect API with Winding Tree’s public blockchain, which will allow Winding Tree to process each of the airline’s bookings without a third-party intermediary, thereby reducing distribution costs for the airline.

The hard work sits with Winding Tree to read that data, translate it and process transactions against it. If they can get this working, then the airlines get the bookings and save on distribution costs.

The Nordic Choice Hotels chain, were the first company to place real-live data on the Winding Tree platform — some of the rooms from their Hobo hotel in Stockholm were made available on the Winding Tree Test Net where Nordic Choice used Winding Tree’s smart contracts to test the system. They plan to roll it out into production in the first half of 2019.

A lot of these suppliers came together at the Winding Tree hackathon in October to collaborate and share ideas. This is quite unusual, especially for teams from major airlines, to sit down and write open source code alongside travel startups and industry software vendors. It appears to have been a success with participants openly exchanging expertise, providing feedback and contributing to each other’s hacks.

Ethereum Platform (And Its Challenges)

Winding Tree will be deployed on the Ethereum blockchain, which is a public, open-source platform that allows developers to build and deploy decentralised applications.

Building their platform on Ethereum presents potential challenges for Winding Tree including scalability, transaction fee fluctuations and privacy concerns. To overcome these challenges Winding Tree plan on using what are called state channels.

A state channel is a channel which sits on top of the blockchain, but that is cryptographically linked to it. Transactions going through the state channel are anonymous, aren’t impacted by scalability problems and do not incur network fees.

Suppliers like airlines obviously don’t want their availability and pricing to be made public, so every new request opens a state channel with the supplier where they can feed the agent or traveller pricing, inventory and availability responses to their requests as if they were receiving a request through their direct website, yet the requestor gets responses from multiple airlines or hotels with one call.

Conclusions

Winding Tree is a very ambitious project, which if successful could really disrupt the travel industry. They have made very good progress in a short amount of time but their success is not going to happen overnight as direct integrations to airline and hotel reservation systems can be complex.

There are still some big challenges to overcome not least of all with airlines who will likely take some convincing to store their data on the Winding Tree platform, even if it is just a subset of their inventory. Getting airlines to invest in, and adopt a new protocol after it has has already taken them a number years to adopt IATA’s New Distribution Capabilities (NDC) will also be a challenge.

These challenges aside, airlines and hotels would both argue that travel distribution is in desperate need of disrupting with suppliers always keen to reduce GDS and OTA fees. The partnerships Winding Tree have managed to secure to date show that there is an industry demand for a decentralised travel distribution platform like Winding Tree.

Winding Tree has the team, the advisors, the funding and the partnerships to give it a good go. If it is successful, although the end traveller will never see Winding Tree, the net result is they will pay less for their travel, which is an idea we can all get behind.