Natalie Osborn

Emerging Trends: Is Blockchain A Fit For Hospitality?

The hospitality industry has been subject to multiple disruptions over the last few years – from Internet bookings to changes in third party distribution to rate comparison sites and Airbnb. Is
blockchain the next disrupter to the hotel industry? To answer that question, we first need to understand what blockchain is and how it might be applied to the hospitality industry.

What is Blockchain?

A blockchain is a type of data store that can store anything of digital value. Every new transaction is stored in a “block” that gets added to a “chain” of existing records – hence the name “blockchain.” You can also think of blockchain as a linked list of linked lists. A typical blockchain duplicates data across an open network so that all parties in the blockchain can see updates at the same time. Updates are validated through a public verification process that ensures accuracy and security without the need for a central authority.

The most common items to store in a blockchain are digital currency, inventory transactions and legal documents. Blockchain transactions are created by an application called a client, or a wallet. These transactions are then collected by a miner and stored in a block. The block is then appended to the blockchain data store using a consensus algorithm. The consensus algorithm is simply a process in computer science that is used to achieve agreement on a single data value amongst a distributed process.

The more data that gets added to a blockchain, the more secure the blockchain becomes. Each new block builds on the shared accuracy of the previous block. Blocks are tamper-resistant because anyone who tries to edit the data would have to edit all of the previous blocks, as well as all of the blocks across the network. This improves the overall security of blockchain transactions.

So Where Did Blockchain Come From?

Blockchain technology has been around since the 90s. The cryptocurrency, Bitcoin, was the first full blockchain implementation. Bitcoin is a peer to peer digital asset and payment system that has no single point of failure. It was blockchain’s universal ledger and confirmation process that allowed Bitcoin to become successful. Prior to blockchain, digital currency systems failed because transactions could be copied, and users could spend the same money more than once.

There are several types of blockchains. Many started with the same code base but differ when it comes to cryptography or consensus technology. There is also a differentiation between public and private blockchains. Public blockchains, such as Bitcoin, are mostly found in the cryptocurrency arena and offer users the ability to use anonymous or pseudonymous identity. Private or permissioned blockchains exist behind company firewalls and use known identity.

How is Blockchain Being Used?

Blockchain solves many issues of privacy and security, so the use of blockchain is increasing anywhere data security is of concern. While blockchain can help prevent fraud, it doesn’t overcome lax security and poor data practices. Blockchain will, however, improve the security of transactions for people and “things” in real time. While in many cases, the use of blockchain technologies is still in the early stages, blockchain is actively being investigated as a new type of distributed data environment for many virtualized network systems applications. Let’s explore how other industries are applying blockchain.

Health Care

Transactions in a patient’s care cycle can include medical record updates, payment transactions or even phone calls to a nurse. When blockchain is used in a health care setting, each event generates a new “block” of information that’s complete, permanent and can’t be modified. This type of approach puts control of a patient’s private records in the hands of the patient, as opposed to in the hands of multiple health care providers.

Manufacturing and Supply Chain

Grocery supply chains have been early adopters of blockchain to improve food safety. Blockchain can allow complex supply chains –and all the items in them – to be tracked consistently and securely for all interested parties, including purchasers and regulators.

Financial Services

Banks can share parts of a blockchain with each other to keep track of suspicious activity and track the origin and flow of transactions. Emerging uses include blockchain for trade finance, global payments, securities settlement and commercial real estate transactions.

With validation and privacy at the core of blockchain technology, possible blockchain implementations for the insurance industry include smart contracts and smart claims processing. A private blockchain implementation can reduce fraudulent claims and allow all parties to the claim – insurers, providers and customers – to view accurate claim updates simultaneously.

Transportation

Blockchain can help coordinate routes and modes of transportation around cities. A blockchain network can work across bus, car, bike, train and other transportation partners to plan the best multimode route for customers, ensuring smooth transitions between vehicles and offering a single payment for users.

How Might Blockchain Help Hotels?

One of the promises of blockchain is that it can encourage more direct business to consumer interaction. For hotels this offers the potential of a clear and incorruptible path from the hotel to the guest. For hotels that get a high percentage of their reservations from a third party, this would mean more information about guests before they arrive at the hotel to check-in. That additional information could be used to personalize the guest’s stay experience as well as to better understand and re-engage with guests after they stay.

The other area where a clear path to guest data makes a difference is in guest loyalty tracking. With each transaction becoming a block and guest loyalty transactions linked to a chain of previous transactions, the accuracy and integrity of loyalty tracking would be dramatically improved. Tamper-resistant blocks make it easier to validate the true owner of loyalty points, as well as harder to falsify or edit records due to the nature of the open, distributed ledger that can record transactions in a verifiable and permanent way.

While it seems like many industries are ripe with possibilities for blockchain – it is still in the early days yet. Blockchain-based technologies will continue to expand into many industries and areas. The secure, decentralized nature of blockchain will make it a popular technology option for any system where security is important. Hoteliers should monitor use cases in other industries, to see where moving to a blockchain approach proves to be worth the investment. For now, I would encourage hoteliers to focus on applications of blockchain where validity, security and privacy are the goals, as it is here that this technology excels.

Natalie Osborn is senior industry consultant for SAS Institute’s Hospitality and Travel practice, and an 18+ year veteran of hospitality and hospitality technology solutions development, specializing in analytics and revenue management. Prior to joining SAS, Natalie was the director, product marketing for Minneapolis-based IDeaS Revenue Solutions, where she worked from 2000 to 2011. She is a frequent contributor to industry publications, speaker at industry conferences and is co-author of the SAS and Cornell Center for Hospitality Research blog, “The Analytic Hospitality Executive.” Contact Natalie.