NFT Nights (2): Enter NFT Availabilities
What if we take availabilities and magically add the property of liquidity to them?
Let’s imagine the following scenarios:
Scenario 1: Simple booking
- You want to book the night of August 15th in a villa, it costs $500 on an OTA.
- You see the same night at the same villa at $450 on an NFT marketplace. You own some crypto, and you buy it. Now you own the NFT.
you now own a transferable digital contract which gives you, or anyone else, the right to stay at the property at a certain date.
- August 15th comes, you go to the villa and stay. The villa manager gets the money.
- You saved $50 and the villa manager saved on the OTA commission. It’s a win win. Except for the OTA. The OTA here loses as it’s out of the loop.
Scenario 2: Simple cancellation
- You are still not 100% sure you will be able to travel, the villa is not available with a free cancellation policy, and you are afraid it will be booked by someone else.
- You buy the NFT and keep it until the day your boss decides about your holidays. The day comes, and unfortunately you won’t be able to travel, so you put the NFT on sale and get your $450 back.
- The villa manager doesn’t really care: the final sale was made months ago.
Of course the NFT specified clearly that a name change was possible, that the price was for max 4 people and that the minimum age of the group was 25 years old.
If the NFT was purchased by a group of six 20-years-olds, the NFT is void.
The owner made her own rules and the NFT buyers must respect them.
They can resell it.
Important note:
We are in the brainstorming phase, so I don’t have all the answers.
I hope this article sparks an industry-wide discussion and we figure out how to best adopt this new technology.
Scenario 3: The Speculators
- You are a travel speculator. Your business it to hunt for bargains on the internet, buy them cheap, and sell them high.
The night at $450 in that villa looks cheap to you.
There’s still some uncertainty about Covid-19, and the owner, in your opinion, has underpriced it. Your projections tell you that July and August 2021 travel will boom: Covid-19 cases will be down, there will be vaccine passports and revenge travel will be in full swing. You project a $600 per night price for the villa and buy the NFT. - Right after the purchase, you put it for sale at $600.
- A month later someone buys it, and you made a $150 profit.
You’ve done this on hundreds of nights in different markets contributing to the liquidity of these assets and to price discovery.
Of course, you may be wrong and no one buys it at that price, in that case you lower the price until someone does.
If no ones buys it, you contact the owner and offer it back at a loss.
After all she may not want to get potentially damaging “cheap” guests who paid $100 for the night.
Or she may take the risk and hope for a no-show.
Remember: she already has the money as it was paid for at the beginning, no matter what the price action is after that.
In order to avoid that situation, the NTF may have a “minimum acceptable price” condition, and if it changed hands for less than that price, it’s void.
It’s the blockchain, so all transactions are public.
I am not sure if this makes actually sense but, hey, I am not sure about much at the moment.
I just have a strong feeling that we’re on the right track.
Worst case scenario for you? You lose all the money.
You are a speculator and this is part of your risk calculations, you are making the money elsewhere.
If your speculations go all wrong you’re out of the market.
Or maybe the NFT had the following condition attached: “The owner guarantees to buy back this NFT at 50% of the price, up to a month before arrival”, which makes it more valuable.
Collateralized NFT
The above scenarios probably gave you an idea of the main dynamics of NFTs, namely their liquidity.
You probably have some questions, for instance “What if the villa manager refuses to honor the NFT?”, meaning she refuses to accept the NFT from the last buyer.
In a future scenario, this kind of disputes will be regulated by decentralized courts, as Kleros or the Booking DAO itself — but let’s keep it simple for now.
Before the issuance of the NFT there’s one important step I haven’t talked about yet: the villa manager and Trips Community make an agreement.
Trips will act as a trusted third party in the first experiments.
Trips generates the NFT and sells it on the market, thus removing all the complexity for the manager.
In case the manager does not honor the booking, Trips sends the money back to the NFT holder (and probably stops the cooperation with the untrustworthy manager).
This opens a few more scenarios:
Some guests will be fine with the risk of not getting to stay at the place, which is the same risk they take when they book directly and sometimes even through an OTA.
Other guests won’t take the chance and buy a collateralized NFT: in a 10% collateralized NFT, the guest gets back the initial NFT value + 10%.
So if the initial price was $450, they get $495 and will book something else with that money.
The collateral is paid by the villa owner who, in this way may want to attract more NFT bookings.
10% is less than she pays to the OTAs, and she’ll get it back when she honors the booking.
A collateralized NFT costs more to the guest, who pays for the extra safety.
We may even think about blockchain insurance products, with the aim to replace the need to put down the collateral and free up liquidity.
But we’re getting ahead of ourselves here.
Who Keeps the Money in the meantime?
Trips here acts as an escrow service.
The money may go in a Gnosis Safe whose multi-signature owners will be respected people in the travel industry, in the same way we did for the Trips treasury.
In this way, the counterparty risk is greatly reduced, as there needs to be collusion between many players in the industry to take the money.
Another option is to let the Booking DAO take care of it and vote when money needs to be moved.
We will see, the first experiment won’t probably include these structures, so we can launch it quickly.
The NFT lives on the blockchain
Right now the best places to sell the NFTs are marketplaces (we’ll get to those later), but the NFT does not live on the marketplace: it lives on the blockchain, and it can be moved only by the NFT owner, via a wallet.
We can thus imagine a scenario where the same NFT is sold on three different marketplaces and the manager’s website at the same time.
Scenario 4: Open NFT
The possible scenarios are many, let’s see one more:
- The NFT is sold at $450, and it’s put immediately back on the market at $500. That signals that the buyer is ready to sell if the price is right.
- Based on this information the manager decides to keep the date open on her website and all the OTAs, and increases the price to $600.
- A booking comes in on the property website at $600.
- The manager buys the NFT back for $500 and doing so, it voids it.
In this way she first made a sale at a basic price, securing some future cash flow, and then managed to increase the margin on the already made sale.
But what if the NFT is not on the market when she needs it?
Then she’s in bad luck, she will need to refuse either the NFT booking or the direct booking.
She should have minted an Open NFT, which gives the buyer the right to stay only from, e.g., a week before arrival.
Until that moment it’s just an option.
As a consequence it’s a bit cheaper.
Each manager will need to figure out the best properties of the NFTs she mints.
