Travel Industry Eyes Blockchain Potential for Fees, Delays, Lost Bags

April 20, 2018 Updated: April 20, 2018

Blockchain technology has the potential to shake up the travel industry by giving airlines and hotels a way to bypass controlling intermediaries like Expedia or Amadeus and gain better access to customer data.

Major players including Lufthansa and citizenM hotels are partnering with startups and talking to large corporate clients about whether they can do group bookings via blockchain instead of using middlemen, who charge up to 25 percent of ticket or room prices in fees.

Blockchain, which functions as an online record-keeping system maintained by a group of peers rather than a central agency or authority, also offers new business opportunities in tracking bags and flight delays.

Because transaction data is openly available and not controlled by any one party, blockchain offers an opportunity to build new platforms that can connect travel providers and customers more directly and replace decades-old technology.

“We see a lot of business potential from the very nature of blockchain being decentralized by construction, removing the middleman by design. That looks very fruitful potentially,” Xavier Lagardere, head of distribution at Lufthansa Group Hub Airlines, told Reuters.

The travel industry joins financial, mining, energy trading firms, and others in looking at the potential for blockchain technology when it comes to simplifying processes, cutting out middlemen or tracking goods.

One travel blockchain company that has partnered with major players including Lufthansa, Air New Zealand, and Netherlands-based citizenM hotels, is Swiss non-profit Winding Tree, whose distribution platform is so far targeting companies rather than consumers.

It allows airlines and hotels to publish available inventory to customers without needing systems that aggregate data on flights and rooms, and could, therefore, allow them to avoid the fees they currently pay for the use of such systems.

Currently, such systems are provided by intermediaries like global distribution systems (GDS) providers Sabre, Amadeus, and Travelport, whose real-time inventory technology is used by travel agents or corporate travel bookers, or consumer-facing online travel agencies (OTA) like Booking Holdings and Expedia Group.

Reducing commission fees is an ongoing battle, as is access to customer data, with some airlines complaining that they don’t get passenger contact details from third parties, crucial when delays occur.

Winding Tree CEO Maksim Izmaylov said the travel intermediaries may have to adjust their business models as a result of the new technology, mainly by rethinking their fees.

“Those big companies don’t have to go away, but the rules of the game are changing,” Izmaylov said, adding that Winding Tree wanted to collaborate with the intermediaries, too.

He said OTAs could be forced to drop their fees to around 5 percent, from current levels of 20 to 25 percent.

GDS companies have put on a brave face, saying they offer more services and real-time pricing for distribution that blockchain technology couldn’t provide.

“There will always be a need for someone to aggregate offers and enable multi-sourced shopping. I don’t think blockchain resolves that,” Philip Likens, director of Sabre Labs, told Reuters. His comments were echoed by representatives of Amadeus, Travelport, and technology company SITA.

Tony Hird, VP Enterprise Business Architecture at Travelport, also said transactions using blockchain were not as fast as traditional methods.

“You can’t have a real-time environment if you have to wait 10 minutes for the transaction to be committed,” he said.