Non-fungible Token (NFT) Potentials in Tourism: Secondary Market for Hotel Bookings
Ahmet Faruk Aysan
Hamad Bin Khalifa University, Education City Ar-Rayyan, Doha, Qatar
Centre for Blockchain Technologies, the University College London, London, the UK
Email: aaysan@hbku.edu.qa
Ahmet S. Tunali
Department of Economics, Middle East Technical University, Ankara, Turkey
Email: tunali.ahmet@metu.edu.tr
Giray Gozgor
School of Management, University of Bradford, Bradford, the UK
Faculty of Political Sciences, Istanbul Medeniyet University, Istanbul, Turkey
Email: g.gozgor@bradford.ac.uk
Non-fungible Token (NFT) Potentials in Tourism: Secondary Market for Hotel Bookings
As many sports and music fans know, we countless times buy and sell tickets at the last moment, and every time we are amazed by the efficiency of this secondary market. However, unlike sports or concerts, there is no secondary market for the hotel industry (Ritchie and Jiang, 2019). However, since Airbnb emerged, online paid peer-to-peer accommodation is becoming a prominent way in the hospitality industry (Dolnicar, 2017; Dolnicar, 2019). Hence, scholars started to discuss the presence of cryptocurrencies in tourism as peer-to-peer payment methods (Onder & Treiblmaier, 2018; Treiblmaier, 2021 and 2022; Onder & Gunter, 2022). Nevertheless, the literature is devoid of Non-fungible Token (NFT) solutions, and secondary market discussions. Therefore, in this research note, we discuss an NFT solution for booking and reselling hotel reservations.
Despite of recent crypto meltdown, blockchain adoption in different sectors continues to improve as the NFTs are perceived to offer great potential in real economic activities (Park et al., 2022; Toufaily et al., 2021). The NFTs are often associated with digital artwork, games, sports collectibles and metaverse (Mazur, 2021; Wang et al. 2022). However, the real potential of the NFT lies in linking the tangible goods and services with the sole ownership rights, which the NFTs are actually for. NFTs prevent other people’s claims, questions, and challenges about ownership of an asset due to public ledger technology. Besides, they can be transferred effortlessly and inexpensively through blockchain technology (Valeonti et al., 2021). Certainly, solving the trust issue in the transfer of ownership is revolutionary in peer-to-peer trades and exchanges in practice, especially in secondary markets. (Regner, Urbach, & Schweizer, 2021)
A secondary NFT market for the hospitality industry could be a prominent example of real-life NFT use case. For example, Hotels can sell their rooms as an NFT to their customers while linking their services with transferrable ownership rights. Since an NFT can be bought and sold freely on the blockchain, the owner of the NFT could sell their right to stay in the room to another person in a free marketplace. The initial NFT owners may profit from these trades since the early-bird prices are usually more economical than the later calls.
The customers of hotel NFTs could have several purposes in mind in handling their hotel reservations through NFTs. One straightforward reason could be to sell their reservation at the market price such that they will not be subject to hotel reservation cancellation fees. Besides, people book in advance to benefit from lower hotel prices; when they cancel their reservation later, they must incur reservation cancellation fees. Even if reservation cancellation fees are minimal, the market prices of hotel bookings are often higher than the formerly reserved prices at the time of cancellation. However, in the current system, the customers are not allowed to take advantage of the price increases over time. This dimension could be sizable, especially recently with the upsurge in global inflation.
Unlike many markets, the hotel business practices are based on not allowing the customers to sell their bookings in the secondary market. However, when the customers can transfer their hotel booking ownerships through NFTs in the marketplace, they may also profit by buying in advance and selling in the secondary market. Hence suddenly, holiday planning may turn into a profitable business where the customers may also capitalize on the time spent searching for the best vacation options. In advance, many customers may be unsure about their travel times and plans considering many conditions in planning a vacation in the future. Nevertheless, with such hotel NFT options, the customers can book several options through NFTs and sell some of the bookings when their plans become more specific over time. This NFT option could also be good for the hotels considering that unobserved, potent demands of the customers are revealed in advance, and hotels can make their business plans accordingly. Besides, hotels do not need to refund and deal with such operations. Hence, they plan better in advance and reduce their cost while transferring some of this cost reduction to the buyers with discounts. Therefore, it is a win-win situation for both agents.
Indeed, some drawbacks exist for the hotels already working close to full capacity. The current system exploits the consumer surplus through time by charging different prices to customers depending on their urgency of booking the hotels. However, hotels operating in a more competitive market environment like holiday resorts with similar characteristics are expected to be more willing to use NFTs, considering that they are less able to differentiate their prices from other hotels.
This system is somewhat working in practice with the agency agreements. Tourism agencies are booking the rooms with significant discounts and selling them later to their customers with premiums. In a sense, Hotel NFTs are vehicles to eliminate these intermediaries (tourism agencies) and reduce this mechanism to function even among individuals.
Another benefit can occur in crypto-enthusiastic travelers. According to El Salvador’s Minister of Tourism, Morena Valdez, the number of tourists visiting the country has increased by 30% since accepting bitcoin as a legal tender in June 2021. (Quiroz-Gutierrez, 2022) Also, Google searches for “El Salvador” increased significantly (see Figure 1). Since this is a great marketing opportunity, plenty of hotels may join the NFT rush to promote their hotels.
Hence, some anticipant entrepreneurs notice the potential in this area. Indeed, a luxury hotel in Venice, Ca’ di Dio, sold one of its rooms as an NFT in 2021 (VRetreats, 2021). Also, according to the Wall Street Journal, Casa de Campo Resort & Villas, a hotel located in the Dominican Republic, signed an agreement with a platform called Pinktada and started selling its rooms as an NFT (Grant, 2022). In addition, some startups called Crystabaya Stayopen aim to establish an NFT marketplace by working with hotels (Crystabaya, 2022; Stayopen, 2022). However, these can only be called baby steps since the hotel industry is generating over $550B yearly revenue. In contrast, only a few hotels have yet realized the importance of the NFT (STR, 2020).
Given that these examples are startups that serve for a tiny sample or have not yet been fully used, potential problems have not yet been encountered. For example, questions like how to prevent mass purchases due to bots in concerts and sports competitions or whether the hotel industry frowns on the secondary market for its rooms with NFT since blockchain provides anonymity to customers are yet to be answered. However, these impediments can be solved, and we discuss that NFT may increase the efficiency of hotel bookings.
We suggest NFTs are even more revolutionary than cryptocurrencies since NFTs are attempting to solve a more fundamental problem of proving ownership and transferring ownership rights. Property rights are historically even older of a concern in the markets than the concerns about the central banks’ interventions that Satoshi Nakamoto, through Bitcoin, is trying to address. NFTs have often affiliated with digital assets through digital art, gaming, and other digital collectables. However, the real potential of NFTs lies in linking the ownership of tangible assets, goods, and services with direct sales and secondary sales in the markets. This process is still loading, and with this draft, we attempt to contribute to NFT revolutions by proposing hotel NFTs that will open the hoteling business to the secondary market where all market participants including the customers can profit. NFT ecosystem is reloading. We are convinced that our NFT solution will help the ongoing discussions of the NFT usage in the tourism industry.
Conclusions
Hence, some anticipant entrepreneurs notice the potential in this area. Indeed, a luxury hotel in Venice, Ca’ di Dio, sold one of its rooms as an NFT in 2021 (VRetreats, 2021). Also, according to the Wall Street Journal, Casa de Campo Resort & Villas, a hotel located in the Dominican Republic, signed an agreement with a platform called Pinktada and started selling its rooms as an NFT (Grant, 2022). In addition, some startups called Crystabaya Stayopen aim to establish an NFT marketplace by working with hotels (Crystabaya, 2022; Stayopen, 2022). However, these can only be called baby steps since the hotel industry is generating over $550B yearly revenue. In contrast, only a few hotels have yet realized the importance of the NFT (STR, 2020).
Given that these examples are startups that serve for a tiny sample or have not yet been fully used, potential problems have not yet been encountered. For example, questions like how to prevent mass purchases due to bots in concerts and sports competitions or whether the hotel industry frowns on the secondary market for its rooms with NFT since blockchain provides anonymity to customers are yet to be answered. However, these impediments can be solved, and we discuss that NFT may increase the efficiency of hotel bookings.
We suggest NFTs are even more revolutionary than cryptocurrencies since NFTs are attempting to solve a more fundamental problem of proving ownership and transferring ownership rights. Property rights are historically even older of a concern in the markets than the concerns about the central banks’ interventions that Satoshi Nakamoto, through Bitcoin, is trying to address. NFTs have often affiliated with digital assets through digital art, gaming, and other digital collectables. However, the real potential of NFTs lies in linking the ownership of tangible assets, goods, and services with direct sales and secondary sales in the markets. This process is still loading, and with this draft, we attempt to contribute to NFT revolutions by proposing hotel NFTs that will open the hoteling business to the secondary market where all market participants including the customers can profit. NFT ecosystem is reloading. We are convinced that our NFT solution will help the ongoing discussions of the NFT usage in the tourism industry.
References
Crystabaya (2022). The First Tangible NFT that Connects the Physical World to Metaverse! retrieved from https://crystabaya.io/
Dolnicar, S. (2017). Peer-to-peer accommodation networks: Pushing the boundaries. Goodfellow Publishers.
Dolnicar, S. (2019). A Review of Research into Paid Online Peer-to-peer Accommodation: Launching the Annals of Tourism Research Curated Collection on Peer-to-peer Accommodation. Annals of Tourism Research, 75, 248–264.
Grant, P. (2022, May 24). Hotels Using NFTs to Create a StubHub for Lodging Reservations. the Wall Street Journal, retrieved from https://www.wsj.com/articles/hotels-using-nfts-to-create-a-stubhub-for-lodging-reservations-11653393601
Onder, I., & Gunter, U. (2022). Blockchain: Is it the future for the tourism and hospitality industry?. Tourism Economics, 28(2), 291–299.
Onder, I., & Treiblmaier, H. (2018). Blockchain and tourism: Three research propositions. Annals of Tourism Research, 72(C), 180–182.
Park, A., Kietzmann, J., Pitt, L., & Dabirian, A. (2022). The Evolution of Nonfungible Tokens: Complexity and Novelty of NFT Use-cases. IT Professional, 24 (1), 9–14.
Quiroz-Gutierrez, M. (2022, February 23). El Salvador Says Tourism is Up 30% Since it Made Bitcoin Legal, but the Country is still on the Brink of Economic Disaster. Fortune, retrieved from https://fortune.com/2022/02/23/el-salvador-bitcoin-law-tourism-up-30-percent-imfsenate/#:~:text=El%20Salvador%20says%20its%20experiment,lot%20more%20to%20the%20stor
Ritchie, B. W., & Jiang, Y. (2019). A Review of Research on Tourism Risk, Crisis and Disaster Management: Launching the Annals of Tourism Research Curated Collection on Tourism Risk, Crisis and Disaster Management. Annals of Tourism Research, 79, 102812.
Regner, F., Urbach, N., & Schweizer, A. (2019). NFTs in practice–non-fungible tokens as core component of a blockchain-based event ticketing application. ICIS 2019: Non- Fungible Tokens as Event Tickets, Munich, Germany
Stayopen (2022). Stay Pass NFT. retrieved from https://stayopen.com/nft/
STR (2020). 2019 Global Hotel Study: An Unprecedented, Worldwide View of the Hospitality Industry. Washington, DC: CoStar Group.
Toufaily, E., Zalan, T., & Dhaou, S.B. (2021). A Framework of Blockchain Technology Adoption: An Investigation of Challenges and Expected Value. Information & Management, 58 (3), 103444.
Treiblmaier, H. (2021). The Token Economy as a Key Driver for Tourism: Entering the Next Phase of Blockchain Research. Annals of Tourism Research, 91, 103177.
Treiblmaier, H. (2022). Blockchain and Tourism: Paradoxes, Misconceptions, and a Research Roadmap. Tourism Economics, forthcoming, https://doi.org/10.1177/13548166211013276
Valeonti, F., Bikakis, A., Terras, M., Speed, C., Hudson-Smith, A., & Chalkias, K. (2021). Crypto collectibles, museum funding and OpenGLAM: challenges, opportunities and the potential of Non-Fungible Tokens (NFTs). Applied Sciences, 11(21), 9931.
VRetreats (2021). Ca’ di Dio Places an Exclusive First Night on Auction with NFT. Retrieved from https://vretreats.com/en/ca-di-dio/nft/
Mazur, M. (2021). Non-Fungible Tokens (NFT). The Analysis of Risk and Return. Available at SSRN 3953535.
Önder, I., & Gunter, U. (2022). Blockchain: Is it the future for the tourism and hospitality industry?. Tourism Economics, 28(2), 291–299.
Önder, I., & Treiblmaier, H. (2018). Blockchain and tourism: Three research propositions. Annals of Tourism Research, 72(C), 180–182.
Wang, Q., Li, R., Wang, Q., & Chen, S. (2021). Non-fungible token (NFT): Overview, evaluation, opportunities and challenges. arXiv preprint arXiv:2105.07447.
