How Blockchain Will Disrupt the Hotel Industry
There’s been a ton of press around “the blockchain” and the popularity of cryptocurrencies like Bitcoin and Ethereum. This is why we’re here to give you a clear rundown of what blockchain is and how it will change the hotel industry very, very, soon.
First, explain what the blockchain is
A blockchain is a report that is created from a series of calculations. It can contain numbers, text or any other type of data
This coding breakthrough — which consists of concatenated blocks of transactions — allows competitors to share a digital ledger across a network of computers without need for a central authority. No single party has the power to tamper with the records: the math keeps everyone honest.
To give you a real-world example, this post explains it like this:
A group of accountants is in a meeting creating a financial report for the company they work for.
All of the accountants in the meeting are equal in status, have the same set of knowledge and are involved in the same conversation. To make sure the final report is accurate, they’ve decided that each accountant should perform financial calculations on their own copy of the report first.
Once they have all completed their calculations they will swap reports and compare results. If some of the results don’t match up, the accountants have agreed to choose the result that the majority of them believe is true.
When the accountants have come to a consensus about which calculation results to include in the final report, they update their own report copies so they are all exactly the same. The final report is the final version of the blockchain.
What value does blockchain technology bring to the hotel industry?
- Decentralization
- Scalability
- Reliability
What’s the status quo?
1. Problem now:
Today, competition is fierce in hotel distribution. Online Travel Agencies (OTAs) ruthlessly protect access to their room and rate information with overreaching contracts and aggressive litigation. In the last few years, massive consolidation in the OTA space has created even higher barriers to entry in the industry.
2. Current duopoly:
Right now, after massive consolidation in the online travel space, two companies (Priceline and Expedia) now facilitate 95% of all bookings in the US. As a result of this duopoly, commission rates have continued to rise and hotels now pay anywhere from 15–30% in commissions for each booking made.
3. Today’s distribution networks SUCK:
The existing distribution networks are made up of legacy players with centralized systems. Many of these services are single points of failure in the network, relying on outdated technology and protocols to relay information between hotel systems and distributor’s databases.
Who will Arise and end this problem?
An answer that we at The Refiners have for you.
Arise, a startup from Fleet #3, is building a new network that connects hotel systems directly to third parties, making the exchange of information between hotels and the ecosystem of products around them effortless. They want to lower the barriers to entry in the hotel technology space.
As new players have entered the market, most fail within a few years because they can’t get enough real-time information to compete with the big players.
Companies building on the Arise network will get running much faster thanks to blockchain technology. They estimate saving over 70% of their development time when compared with current centralized systems.
Plus, with one connection to the Arise network (using the blockchain), these companies will now have access to all the hotels regardless of the management system the hotel uses.
So what are companies doing nowadays?
The current model for companies is to build to a different database, an API, and a data format with each hotel system that they want to connect to…
Arise will help any player who enters the distribution market with a groundbreaking product to connect to hotel systems, making it easy to gain access to the information required to compete with the big OTAs.
How will Arise do it?
Their solution…a new network that everyone can access.
The blockchain is the perfect foundation for this new network because it’s decentralized, distributed, and no single party has the authority to decide who gets access. Think of it like the highways we all use today.
This new Arise network will be open for anyone to build new products and services around like cars built to drive on the roads; this isn’t possible today with old infrastructure technology.
With Arise, hotels and distributors can work together risk-free because commission payouts are automated on the blockchain. This opens the door to new revenue management strategies for hotels, making it easy for distributors and hotels to start working together in a trustless way for the first time ever.
Their network will allow any product or service, which are connected to the network, to become available to all hotels, instantly.
Cool thing is, hotels choose whether they want to use these products and services or not.
Here’s an example... The Blockchain and Smart Contracts
According to this article on Forbes, blockchain and smart contracts essentially enable companies to create ecosystems that support their business processes.
Aside from making their companies more efficient through automation, blockchain adoption provides trust that the technology brings to these processes.
Think of this process as risk-free; a win-win alternative.
The blockchain allows all parties to be transparent and immutable. This not only encourages compliance and accountability among parties, but reduces customer hesitation and improves overall customer experience since all transactions are verified.
Smart contracts are what will allow hotels and distributors to work together risk-free; the commission processes are fully automated on the blockchain.
Arise will be the entity to facilitate the relationship between hotels and innovative companies.
“Companies can establish business relations, streamline contractual and legal procedures via smart contracts and conduct cryptocurrency transactions in a safe and easy manner. It allows entrepreneurs to embrace all the advantages of blockchain technology without the necessity to develop or adjust them on their own.” - Vladislav Kirichenko, the Russian CEO and co-founder of Jincor
When will this tech be available for widespread use?
Arise is currently testing their new network infrastructure internally, and will be launching their own distribution product on top of their network in Q2 2018.
Once they’ve proven blockchain can work for hotels with their own product, they will open up their network for third parties to build on top of.
Final words:
We hope that this post was able to give you a clear idea of what the blockchain is and how technology, if used creatively, will enable third-party companies (aka startups like us) to build innovation any industry; like how Arise is for the hotel industry.
If you have any questions about Arise’s network or about how others can benefit by using their technology, please share your thoughts in a comment below. Please like and share this with your friends and colleagues who are also obsessed with blockchain technology!
Know any interesting international startups looking to scale? Drop us an email at contact@therefiners.co. We’d love to chat.
This blog post was originally posted on The Refiners
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Keenan Koizumi is the Program Manager and Community Manager at The Refiners. Since 2016, Keenan has helped 48 foreign founded startups successfully enter the U.S. market and create a brand in Silicon Valley.
The Refiners is a Seed Fund Program based in San Francisco. Founded by three entrepreneurs devoted to helping foreign startups thrive in the bountiful, yet complex environment of Silicon Valley. We believe brilliance is evenly distributed across the world, but opportunity is not. This is why we aim to equip (exclusively) foreign start-ups with the tools necessary to expand their startup’s vision on a global scale and leave a footprint in the U.S. Follow us on Twitter here.
