Making sense of the blockchain blur in travel

Understanding what blockchain does, the likely use cases for the travel industry and implications for widespread disruption, remains something of a blur.

Speaking at EyeforTravel’s digital strategies event in Amsterdam this week, Joerg Esser a theoretical physicist, former group director at Thomas Cook and now partner at consultancy Roland Berger, outlined the essence of blockchain technology.

“Blockchain is a decentralised database, with inherent governance that, in the main, allows one to scale trust.”

Esser, who has been working with Lufthansa’s sales teams to better understand the implications of the technology, also stresses that it is important to distinguish between public and private blockchains, which is where some of this ‘blur’ arises.

Claiming to be the only ‘public permissionless’ blockchain for the travel industry’, Winding Tree has signed partnership agreements with Lufthansa and Air New Zealand, and is talking to hotels, including some major chains, with at least one announcement expected soon.

CEO and founder Maksim Izmaylov, who will be speaking at EyeforTravel Europe 2018, uses a simple analogy to explain the difference between the public and private. It goes like this:

“A private blockchain is like an intranet. Yes, you can build this for your company, and yes it does have value in that you can share resources and so on. But a public blockchain is what many very clever people are calling the new Internet. The Internet changed the world. Does an intranet change the world? No absolutely not. An intranet is not ground-breaking technology.”

For the record, all the travel and travel tech companies claiming today that they are absolutely into this new technology  – TUI, WebJet-Microsoft, Amadeus, IBM and SITA with Flightchain – are private blockchains. In fairness, however, TUI CEO Fritz Joussen hasn’t ruled out the possibility of making TUI’s private blockchain public.

Just because they are private, doesn’t mean they don’t have value. Esser says:

“Yes, they [private blockchains] are impressive, advanced databases but they are not in the corner where the huge disruption takes place and all the war stories emerge from.”

As with an intranet, these ‘private permissioned blockchains’ are still governed either by a person or an entity. What Winding Tree is proposing, however, is quite different; something that could fundamentally disrupt the future of travel distribution.

In a Winding Tree world the value lies in the fact that no single person or organisation owns the network, and that any transaction placed on it is immutable.

So, what are the possible use cases as it stands today?

Revolutionary disruption

Here we’re talking Winding Tree and its public permissionless blockchain. How this plays out is anyone’s guess, and there were many questions in Amsterdam, both from the panel audience and in networking sessions afterwards.

  • What exactly is its business model? Have any hotel partners been signed?
  • How will Winding Tree access hotel industry inventory, where and how will demand for it be met and by whom?
  • Can this really impact the big intermediaries, which spend hundreds of millions of dollars paying account managers to access hotel inventory?
  • What about smaller firms, like tour operators, which rely on intermediaries for their business – should they be worried?
  • Hashgraph – is this a viable alternative to a Winding Tree type blockchain?
  • Given the computing power and energy required to fuel such a network, are there issues around scalability and how will these be addressed?
  • Why does Winding Tree need its own currency like LIF, which, as bitcoin has proved, could be very volatile?

Private blockchains aka new-age ‘intranet’

Essentially these are to be used for supply chain management such as airline maintenance initiatives. Webjet-Microsoft is an early example of this and while it may not be wildly disruptive, it does, according to Esser, hold great value by easing efficiency in the supply chain.

Travel meets financial services

The complexity of financial transactions in the airline space is huge. Esser cites the example of a business traveller located in Russia booking a flight from London to Bali on a Dubai-based airline and paying with it from a US bank account. That transaction could take at best up to 15 days and at worst as many as 40 days, with fees skyrocketing in the process. Blockchain technology, with its smart contracts, would solve that problem.

On the issue of financial services, Paul Richer, panel moderator in Amsterdam and senior partner at Genesys Digital Transformation, wondered if a financial services blockchain for travel could disrupt the global distribution systems, which are currently backed by the so-called Billing and Settlement Plan.

In response, Esser says:

“IATA has announced the IATA coin as an initiative but how quickly that materialises remains to be seen. But the short answer is – yes.”

Very clearly, there is an awful lot that remains to be seen. Esser says:

“Quite frankly the economics around it have not yet been sketched out because WT is still in its infancy. It’s just not clear what future business models will look like.”

This, in itself, is fascinating to contemplate because doing business today means there is an organisation owned by a few, governing certain services, which, (hopefully) make money that is inherently private. Even within so-called peer-to-peer companies like Uber and Airbnb, there may be lots being ‘shared’ but the profit isn’t.

On this note, Esser concluded the panel by saying:

“Blockchain undermines the very nature of what an entity is, which is making money that is inherently private. It is yet to be seen where this goes and there are still some logical contradictions. But it’s an exciting area for sure.”

Related reading:

SITA partners with airlines and airports to explore blockchain

Amadeus offers its take on blockchain

Ad tech, blockchain and travel, a new area for disruption (or not)

Airbnb acquires a team of blockchain techies

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Pamela Whitby

About the Writer :: Pamela Whitby

Pamela Whitby is an independent writer, editor and researcher. She currently edits and writes for EyeforTravel.com on a part-time basis.

Her work has appeared in media outlets that include the BBC, Economist Intelligence Unit, Investor’s Chronicle, the Daily Telegraph, the Observer and News Desk Media. 

She has also consulted to various organisations, including the European Commission, has co-authored a book on South African’s renewable energy sector, and is the author of Is Your Child Safe Online?, a guide for parents.

Pamela grew up in Africa where she retains strong connections both personally and professionally. www.pamelawhitby.com

 

Comments

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  1. Yannis Moati

    IMO, 2 brilliant views of this technology are listed in this article:
    – intranet VS internet analogy. perfect metaphor!
    – BC model VS private cos. Indeed, it BC flies against the idea of keeping a business private.
    I can’t wait for BC to be fully developed (careful what you wish for?) and regret that ICOs got swiped aside, as it was the biggest driver for change. Now, we’re giving the establishment another breath of air. shame.

     
  2. Murray Harrold

    “a business traveller located in Russia booking a flight from London to Bali on a Dubai-based airline and paying with it from a US bank account” Why is that difficult? We agents do this everyday and have been doing so for the last – what?- 40 years?

    It would be helpful, if you wish those in travel to embrace this sort of technology if people would kindly explain things in simple terms. For example: ” Blockchain is a decentralised database” Yes, I get that bit and can grasp that but then it is spoilt by “…inherent governance that, in the main, allows one to scale trust.” – What the hell does that mean?

    If one stopped talking in riddle-speak, I am sure many in travel would find it much easier to grasp the concepts.

     
 
 

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